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A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z ARM (Adjustable Rate Mortgage) Adjustable-rate mortgage loan features an interest rate that moves up and down as market conditions change. ARMs usually offer a lower initial interest rate, but your mortgage payments may change periodically (usually semiannually or annually). Rate changes are based on an index such as the one-year Treasury Index or the cost-of-funds index (COFI). Some ARM can be convertible. Abstract of Title A history and compilation of legal documents pertaining to a parcel of real estate. Acceleration Clause A clause in a Deed of Trust or note that accelerates or hastens the time when the debt becomes due. For example, most deeds of trust of loans contain a provision that the note shall become due immediately upon the sale or transfer of title of the loan, or upon failure to pay an installment of principal or interest. This is also called a "due on sale" clause. Affidavit of Title A written statement, made under oath by a seller or grantor of real property and acknowledged by a notary public, in which the grantor: (1) identifies him - or herself and indicates marital status; (2) certifies that since the examination of the title on the date of the contract no defects have occurred in the title; and (3) certifies that he or she is in possession of the property (if applicable) Agent An authorized person who manages or transacts business for another. Laws governing real estate--especially relating to agents--vary considerably from state to state. While some standardization has been achieved, it is best to check the particulars in each state. Buyer Agent: An agent who represents the buyer in a real estate transaction. A buyer agent may be paid by the buyer, seller, or listing agent at closing, provided all parties consent. Dual Agent: An agent representing both parties in a transaction. In almost every state, dual agency is illegal and unethical without the written consent of both the buyer and the seller. Listing Agent: The agent who represents the seller. Selling Agent: The agent who obtains a buyer. A selling agent may represent the buyer, or may be a subagent of the seller. Subagent: A salesperson that works for an agent. ALTA American Land Title Association Since any lending institution funding a loan for the acquisition of property wants assurance of good title on the property, there is a special policy prepared for the benefit of the lender known as ALTA Policy. Amenities Features that enhance the value or desirability of a property. Amortization Schedule for repayment of a loan, including interest and principal, by a series of regular installment payments. Home loans are typically amortized over 15 to 30 years. Amortize To pay a debt in periodic amounts until the total amount, including any interest, is paid. Application Fee Often nonBrefundable, this is the fee charged by the lender to cover a portion of the costs of processing a loan application. Appraisal A professional opinion of the market value of a property. Sometimes, an appraised value may be dependent upon certain improvements or repairs being made. Appreciation The amount of increase in property value APR Annual Percentage Rate The total yearly cost of a loan stated as a percentage of the loan amount: Includes such items as the base interest rate, primary mortgage insurance, and loan origination fee (points). Use the APR to compare various loan programs, as all lenders are required to use the same guidelines in determining APR. Assessed Value Value placed on a property by the tax assessor for property tax purposes. Assessment An official valuation of property for tax purposes. Payments made by condominium or cooperative owners for their share of building maintenance expenses. Assumable Mortgage A mortgage that can be taken over, assumed, by the buyer when a property is sold.
Balloon Mortgage A mortgage that offers lower interest rates for a shorter term financing, usually seven years, and requires final payment or refinancing at the end of the term. Balloon Payment The final payment, usually a lump sum that is due on the maturity of the mortgage. Beneficiary One for whose benefit a trust is created. (2) In states in which deeds of trust are commonly used instead of mortgages, the lender (mortgagee) is called the beneficiary. Blanket Payment One mortgage which covers more than one property Borrower One who borrows funds, with the express or implied intention of repaying the loan in full, or giving the equivalent. Breach of Contract Failure to perform a contract, in whole or in part, without legal excuse. Broker An independent businessperson who sets real estate office policies, hires employees, determines their compensation, and supervises their activities. Buy Down Payment of additional points to lower the interest rate of the loan.
Cal-Vet Loans Real estate loans available to armed forces veterans from California, at low interest rates. CAP Limit on the amount an adjustable rate mortgage may increase or decrease during specific intervals and over the term of the loan. This safeguard protects the buyer from dramatic changes in monthly payments. Capital Gain Taxable profit derived from the sale of a capital asset. The capital gain is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing cost, fixing up expenses, capital improvements, allowable depreciation, etc. CRS (Certified Residential Specialist) A professional designation awarded to experienced agents who complete an advanced course of study in residential real estate and demonstrate proficiency in sales and production. CRS Designees are members of the Residential Sales Council, a not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS®. Chain of Title The chronological order of conveyances of a parcel of land, from the original owner to the present owner. CLO (Computerized Loan Origination) A computer network of major lenders that allows agents to initiate mortgage applications in their office. HUD has approved the procedure as long as 1) full disclosure is made of the fee; 2) multiple lenders are displayed on the computer screen to give borrowers a basis for comparison; 3) the fee charged is a dollar amount rather than a percentage of the loan. Closing Is the act of transferring ownership of a property from the seller to the buyer. Usually the last step in buying a property. Documents are signed, the balance of the loan costs are calculated, funds are disbursed and the transaction is completed. Closing Costs Expenses (such as loan fees, title fees, appraisal fees, insurance premium, land survey, recording fees, mortgage application fees, etc.), over and above the price of the property, incurred by buyers and sellers in transferring ownership. Also called quot; settlement costs & quot. Closing costs may be paid by the buyer, the seller or shared by both. In some cases, all or a portion of these costs may be included in the financing amount. Cloud on Title An invalid encumbrance on real property, which, if valid, would affect the rights of the owner. For example: "A" sells lot 1, tract 1, to "B". The deed is mistakenly drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or, if necessary, by court action. CMA (Competitive Market Analysis) A method of determining the value of a property by comparing the prices paid for similar properties. Code of Ethics A written standard of ethical conduct embraced by the NATIONAL ASSOCIATION OF REALTORS®, a trade organization of more than 700,000 members representing all branches of the real estate industry. Collateral The property used as security for a loan and is subject to seizure if the borrower defaults Commission Compensation paid to a real estate agent (usually by the seller) for services rendered in connection with the sale, exchange, or lease of property. Condominium (Condo) Individual ownership of a portion of a building, with common areas shared by all owners. Maintenance fees called "assessments" are paid to the condominium association to maintain, repair, or improve the property. Consideration Anything which is, legally, of value, and induces one to enter into a contract. Construction/end Loan A mortgage that finances the construction of a home and converts to permanent financing when the home is completed. It allows buyers to deal with only one lender, file only one credit application and pay only one set of closing costs. Contingency A condition that must be met before a contract is legally binding. Conventional Loans A loan secured by investors, but neither insured by the FHA nor guaranteed by VA. Both fixed rate and adjustable rate loans are available with conventional financing. Convertible ARM Some ARMs include a provision allowing conversion to a fixed-rate mortgage at specified times, typically during the first five years of the loan. Some lenders charge a premium for this option, find out the exact conversion terms and costs from your lender. This will help you decide whether this is a cost-effective option. Conveyance The Transfer of ownership of real property from one person to another Co-operative (Co-op) An arrangement in which a corporation made up of residents owns a building. The buyer owns a proprietary lease, rather than real property, and a corresponding number of shares in the corporation. Counter Offer A new offer as to price, terms, and conditions, made in response to a prior, unacceptable offer. A counter offer terminates an original offer. Covenants, Conditions and Restrictions (CC & R’s) A term used in some areas to describe the restrictive limitations which may be placed on property.
Deed A legal document transferring ownership of a property from one party to another. Default Failure to fulfill the obligations of a loan, such as failing to make payments Disclosure Report Residential real property disclosure act, effective since October 1, 1994. Is an act relating to disclosure by the seller of residential real property. The purpose of this report is to provide prospective buyers with information about material defects in the residential real property. Discount Points or Points Amount paid to the lender when a loan is originated to account for the difference between the current market-determined cost of interest and the actual lower interest rate of the loan. Each point is equal to one percent of the original loan amount. Points may be paid by either the buyer or seller. Disposable Income Income, usually monthly income, left over after fixed obligations and living expenses for that period of income are paid. Down Payment The part of the purchase price, which the buyer pays in cash and does not finance with a loan. Dual Agency California law permits a real estate licensee to potentially act as a dual agent, that is, represent more than one party to the transaction. A licensee may legally act as a dual agent only with the written disclosure and informed consent of consumer in form required by law.
Earnest Money An amount of money, deposited by a buyer under the terms of a contract, that is to be forfeited if the buyer defaults but applied on the purchase price if the sale is closed. Easement The right to use the land of another for a specific limited purpose. Examples include utility lines, driveways, and Ingress and Egress. Easements can be temporary or permanent. Eminent Domain The power of the state to take private property for public use upon payment of just compensation. Encroachment The physical intrusion of a structure or improvement on the land of another. Examples include a fence or driveway over the property line. Encumbrance Any lien, liability or charge against a property. Equity The market value of a property minus the amount of any existing loans or liens. Escrow Account A separate account for accumulating the portion of your monthly payments that will pay future taxes, insurance, fees, assessments and so forth. Depending on your lender and the financing you select, an escrow account may be required. Escrow Agent A disinterested third party appointed to act as custodian for documents and funds during the transfer from seller to buyer. Escrow Payment The portion of the monthly mortgage payment held by the lender to be applied to real estate taxes, hazard insurance, and/or mortgage insurance Exclusive Listing A written agreement in which the seller appoints only one agent to market the property for a specific period of time. If the owner sells the property himself, he is not required to pay a commission.
Fair Credit Reporting Act A federal law giving one the right to see his/her credit report so that errors may be corrected. A lender refusing credit based on a credit report must inform the buyer which company issued the report. The buyer may see the report without charge if refused credit. Fannie Mae (Federal National Mortgage Association) Fannie Mae purchases home mortgages, thus serving as a source of funds for mortgage lenders. It is a privately owned corporation whose shares are traded on the New York Stock Exchange, but it is subject to the strict supervision of the secretary of the U.S. Department of Housing and Urban Development (HUD). Federal Fair Housing Law Refers to Title VIII of the Civil Rights Act, and stipulates that discrimination based on race, color, sex, familial status, handicap, religion, or national origin is illegal in connection with the sale or rental of most dwellings. FHA (Federal Housing Administration) A federal agency established to improve housing standards and conditions. The FHA provides mortgage insurance to approved lending institutions. FHA Financing A loan insured by the Federal Housing Administration (FHA) and made by an approved lender in accordance with the FHA's regulations. FHA requires that the property being purchased meet certain minimum standards. This mortgage may be easier to qualify for than a conventional mortgage, but it also has a lower maximum loan limit that varies depending on the average cost of housing in a given region. FHA loans require the borrower to pay mortgage insurance premiums (MIP) if down payment is less then 20%. Fixed and adjustable rates are available with FHA loans Financial Index An agreed upon basis for making interest rate changes on an adjustable rate mortgage. One example of a financial index could be the change in cost of U.S. Treasury Bonds. Fixed Rate The interest rate does not change during the entire term of the loan. Fixtures An item of personal property attached to real property so that it cannot be removed without damage to the real property. It then becomes a part of the real property. Flood Insurance Insurance that compensates for physical property damages resulting from flooding. It is required for properties located in federally designated flood areas. Foreclosure The process by which a lender sells property securing a loan in order to repay the loan. Under a Deed of Trust, foreclosure is by public auction after appropriate advertisement. A Mortgage may require the lender obtain Court approval prior to sale. Freddie Mac (Federal Home Loan Mortgage Corporation) A federally chartered corporation established to purchase mortgages in the secondary, or resale, market. Freddie Mac's policies are designed to serve the needs of savings and loan associations. It is subject to oversight by the U.S. Department of Housing and Urban Development (HUD). FSBO For sale by owner Ground Lease The owner grants a long-term lease of the land (usually 99 years) and allows the lessee to build and use the land as agreed. At the end of the term, the land and all improvements revert to the owner. Guaranty A pledge made by one person (the guarantor) to ensure that another person (the obligor) will fulfill an obligation to a third party (the obligee).
Hazard Insurance Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc. depending upon the terms of the policy. Homeowner’s Association An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. (2) An association formed by the builder of condominiums or planned developments, as required by statute in some states. The builder’s participation as well as the duties of the association is controlled by statute. Homeowner’s Insurance Includes the coverage of Hazard Insurance plus added coverage such as personal liability, theft away from the home (items stolen from the insured’s car), and other such coverage. Homestead Deed A declaration filed in the land records that an individual is asserting his homestead exemption. That exemption allows one to protect up to $5,000 in assets (plus $500 per dependent) against the claims of creditors. HUD (U.S. Department of Housing and Urban Development A federal department active in a variety of national housing programs including urban renewal and public housing.
Improvements Additions intended to increase the value of a property. Ingress and Egress Applied to Easements, meaning the right to go in and out over a piece of property but not the right to park on it. Initial Interest Rate The interest rate charged for the first six or 12 months of an adjustable rate mortgage (before the first interest rate adjustment) Inspection An examination of a property by the buyer, agent, title insurance company, or other interested party. Insurable Title Title subject to a defect or claim, which a title insurance company is willing to insure against. Compare, Marketable Title. Interest Rate Cap Limit on the amount an adjustable rate mortgage may increase or decrease during specific intervals and over the term of the loan. This safeguard protects the buyer from dramatic changes in monthly payments. Intestate An estate without a Will.
Joint Ownership Agreement An agreement between owners defining their rights and responsibilities. The agreement could be between an investor and an occupant or among occupants. If an investor is involved, the investor does not take depreciation deductions and none of the occupant’s payment is deemed rent for tax purposes. We always recommend a written joint ownership agreement when unmarried parties acquire property. Joint Tenancy An undivided interest in property, taken by two or more joint tenants. The interests must be equal, occurring under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenant, rather than to the heirs of the deceased.
Leverage The use of borrowed money to purchase property Lien A charge or claim by one party on the property of another as security for the payment of a debt. Property is said to be encumbered by a lien and the lien must be removed to clear title. Lis Pendens A legal notice recorded to show pending litigation relating to real property, and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation. Listing A written agreement between a property owner and a real estate broker authorizing the broker to find a buyer. Loan Commitment A written promise by a lender to make a loan under certain terms and conditions. These include interest rate, length of the loan, lender fees, annual percentage rate, mortgage and hazard insurance and other special requirements. Loan Package The file of all items necessary for the lender to decide to give or not give a loan. These items would include the information on the prospective borrower (loan application, credit report, financial statement, employment letters, etc.) and information on the property (appraisal, survey, etc.) LTV Loan to Value Ratio The ratio of the mortgage loan principal (amount borrowed) to the property's appraised value. On a $ 100,000 home, with a mortgage loan of $ 80,000, the loan to value ratio is 80%
Maintenance Reserve Money reserved to cover anticipated maintenance costs. Market Value The price a property will command on the open market. Maturity The date on which a mortgage or note becomes due Mechanic’s Lien The right of an unpaid contractor, laborer or supplier to file a lien against property to recover the value of his work. MLS (Multiple Listing Service) A means by which agents are informed of the properties offered for sale by other agents. Mortgage A legal document pledging property as security for the payment of a loan. Mortgage Banker A company that originates mortgages exclusively for resale in the secondary market Mortgage Broker An individual or company that for a fee acts as an intermediary between borrowers and lenders. Mortgagee The lender of money or the receiver of the mortgage document. Mortgage Insurance An insurance plan that protects the lender if the borrower does not repay a loan. Mortgage insurance is required when a homebuyer makes less than a 20% down payment at the time of purchase. Private mortgage insurance (PMI) covers conventional (fixed-year, fixed-rate) loans. The Federal Housing Administration charges a mortgage insurance premium (MIP) on FHA loans. Mortgage Pre-Approval Service A service offered by many lenders that allows you to qualify for financing before finding property to buy. Mortgagor The borrower who pledges his property to the Mortgagee as security for the loan
NATIONAL ASSOCIATION OF REALTORS® A trade organization serving over 700,000 members from all branches of the real estate industry. Members subscribe to a strict Code of Ethics that governs their conduct. Negative Amortization Negative amortization means the mortgage balance is increasing. This occurs whenever your monthly mortgage payments are not large enough to pay all of the interest due on your mortgage. Because payment caps limit only the amount of payment increases, and not interest-rate increases, payments sometimes do not cover all of the interest due on your loan. This means that the interest shortage in you payment is automatically added to your debt, and interest may be charged on that amount. Notary Public One authorized by law to acknowledge and certify documents and signatures. Note A written promise to pay a certain amount of money at a certain time and at a certain interest rate. Notice of Default A notice filed to show that the borrower under a mortgage or deed of trust is in default (behind on the payments).
Offer A proposal to purchase property at a specified price and terms. Open House The common real estate practice of showing "For Sale" homes to the public during established hours. Origination Fee A fee charged by the lender for making a real estate loan - usually a percentage of the amount loaned, such as one percent. Not to be confused with an application fee. Owner of Record The person named in the public record as the owner of a property or mortgage.
Personal Property Any property that is not designated by law as real property. Piggyback Loan A loan made jointly by two or more lenders on the same property under one mortgage or trust deed. A 90% loan, for example, may have one lender loaning 80% and another (subordinate) lender loaning the top 10% (high risk portion). PITI Principal, Interest, Taxes, Insurance Stands for principal, interest, taxes, and insurance - the components of the monthly loan payments. Plat A map showing the division of a piece of land with lots, streets and, if applicable, common area. PMI Private Mortgage Insurance Insurance written by a private company that insures repayment of the loan balance to the lender in the event of default by the borrower. Usually required for homes financed with less than a 20 percent down payment. Points or Discount Points Amount paid to the lender when a loan is originated to account for the difference between the current market-determined cost of interest and the actual lower interest rate of the loan. Each point is equal to one percent of the original loan amount. In most cases, points may be paid by either the buyer or seller. Power of Attorney An authority by which one person (principal) enables another (attorney-in-fact) to act for him. (1) General power — authorizes sale, mortgaging, etc. of all property of the principal. Invalid in some jurisdiction. (2) Special power — specifies property, buyers, price and terms. How specific it must be varies in each state. Preliminary Title Report A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued. Prepaid Items Those expenses of property that are paid in advance and will usually be prorated upon sale, such as taxes, insurance, rent, etc. Prepayment Penalty A penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due. Pre-qualification The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for. Principal The dollar amount borrowed when a mortgage is obtained Principal Balance The remaining balance due on a loan Proration To divide (prorate) property taxes, insurance premiums, rental income, etc, between buyer and seller proportionately to time of use, or the date of closing. Public Records Usually at a county level, the records of all documents which are necessary to give notice. The records are available to the public. All transaction for real estate should be recorded.
Qualified Buyer Buyer who has demonstrated the financial ability to afford the asking price of a home. Prequalifying with a lender can expedite the home buying transaction. Quitclaim Deed A deed releasing whatever interest you may hold in a property but making no warranty whatsoever.
Rate Guarantee The lender's guarantee, usually for a specified period of time, that the interest rate in effect the date you apply for a loan (or at the time of approval) will be the final rate on your loan when closed. REALTOR® A registered trade name that may only be used by members of the NATIONAL ASSOCIATION OF REALTORS®, an organization with over 700,000 members who represent all branches of the real estate industry. REALTORS® subscribe to a strict Code of Ethics which governs their conduct. Refinance Replacing an existing loan with a new one to get a lower rate, switch from one loan type to another, or convert equity to cash. A refinance loan will involve various loan fees, just as with any other mortgage. Reconveyance An instrument used to transfer title from a trustee to the equitable owner of real estate, when title is held as collateral security for a debt. Most commonly used upon payment in full of a trust deed. Also called a deed of reconveyance or release. Recording Filing documents affecting real property as a matter of public record, giving notice to future purchasers, creditors, or their interested parties. Recording is controlled by stature and usually requires the witnessing and notarizing of an instrument to be recorded. Recording Fee The amount paid to the recorder’s office in order to make a document a matter of public record. Residential Sales Council A not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS®. The Council awards the Certified Residential Specialist (CRS) Designation, to experienced members who have completed an advanced course of study in residential real estate. RESPA Real Estate Settlement Procedures Act A consumer protection law that requires lenders to give borrowers advance notice of closing cost. Right of Survivorship The right of a survivor of a deceased person to the property of said deceased. A distinguishing characteristic of a joint tenancy relationship.
Secondary Mortgage Market The lender will frequently sell his loan to an entity in the secondary mortgage market. This secondary market has nothing to do with second mortgages; instead, it consists of government or private associations that buy loans from primary lenders. Often the loans are bought and grouped together in a pool for resale. The best known of the participants in the secondary mortgage market is FANNIE MAE, the federal national mortgage association. Fannie Mae buys and sells both first and second mortgages. GINNIE MAE tends to favor FHA and VA loans since they are stable loans but also buys conventional mortgages Second Mortgage An additional mortgage that is subordinate to the first or primary mortgage. In case of default, the second mortgagee receives funds only after the first mortgagee is paid Simple Interest Interest computed on principal alone, as opposed to compound interest. Special Assessment Lien assessed against real property by a public authority to pay costs of public improvements (sidewalks, sewers, street lights, etc.), which directly benefits the assessed property. Specific Performance An action to compel the performance of a contract, when money damages for breach would not be satisfactory. Statement of Identity Also called Statement of Information, a confidential form filled out by buyer and seller to help a title company determine if any liens are recorded against either. Very helpful when people with common names are involved. Survey A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Tenancy in Common An undivided ownership in real estate by two or more persons. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exists. Term The number of years before a loan is paid in full; 15 to 30 year terms are most common for home mortgages. Title A legal document evidencing a person's right to ownership of a property. Title Insurance Insurance to protect the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of property. Title Option An attorney's opinion of a title, based on an Abstract of Title Title Search An examination of the public records to determine whether the current title is clear or defective. Town House Also known as a row house, generally refers to a type of dwelling having two floors, with the living area and kitchen on the first floor, and the bedrooms on the second. Town houses share a common wall between units. Transfer Tax State or local tax payable when title passes from one owner to another.
Underwriting The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's credit worthiness and the quality of the property itself
VA (Veterans Administration) A federal agency designed to help veterans enter the housing market. VA Loan A loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans are made to honorably discharged veterans or their unremarried widows or widowers. Such loans require a minimal or no down payment and offer lower interest rates. Fixed and adjustable rates are available with VA loans.
Walk-Through A final inspection of a property before it changes ownership. Warranty Deed A legal document used to convey title Additional Reference Guides:
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