history of an individual piece of property, and traces the ownership
of that property from the time if the first recorded transfer to present.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
Abstract of Title: A summary of the public
records relating to the ownership of a particular piece of land. It represents a
short legal
history of an individual piece of property, and traces the ownership
of that property from the time if the first recorded transfer to present.
Acceptance: Consent to an offer to enter into contract.
Adjustable-Rate Mortgage (ARM): A mortgage that allows the interest rate to be changed periodically.
Adjustment Date: The date on which the interest rate changes fro an adjustable-rate mortgage (ARM).
Adjustment Period: The period that elapses
between the adjustment dates for an adjustable-rate mortgage
(ARM)
Agency: A legal relationship in which an owner-principle engages a broker-agent in the sale of property or a buyer principle engages a broker-agent in the purchase of property.
American Society of Home Inspectors (ASHI): A professional trade association that provides
training and education in home inspections. Members must meet
qualification requirements to join.
Amortization: The gradual repayment of a mortgage by periodic installments.
Amortization Term: The amount of time required to amortize the mortgage loan. The Amortization term is expressed as a number of months. For Example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Annual percentage rate (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the mortgage amount.
Application: A form, commonly referred
to as a 1003 form, used to apply for a mortgage and to provide
information regarding a prospective mortgagor and the proposed
security.
Appraisal:
An evaluation of a piece of property to determine its value.
Appraiser: A person qualified by education, training, and experience to estimate the value of real property and personal property.
Appreciation: Increase in value due to any cause.
Asbestos: A mineral fiber used in some building materials such as flooring siding, insulation and roofing. It is presently banned for most uses in real property.
Assessed Value: The valuation placed on property by a public tax
assessor as the basis of property taxes.
Asset: Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
Assignment: The transfer of a mortgage from one person to another.
Assumable Mortgage: A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
Assumption of Mortgage: An agreement whereby the buyer assumes responsibility for a mortgage owed by the seller,
Assumption Clause: A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
Assumption Fee: The fee paid to the lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Balance Sheet: A financial statement that shows assets, liabilities, and net worth as of a specific date.
Balloon Mortgage: A mortgage where the amount financed is not fully amortized over the period of the loan. When the loan becomes due, a large sum or "balloon" payment is required to satisfy the mortgage.
Bankrupt: A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
Bankruptcy: A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.
Before-tax Income: Income before taxes are deducted.
Beneficiary: The person designated to receive the income from trust, estate, or a deed of trust.
Binder: A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Biweekly Payment Mortgage: A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrows bank account. The result for the borrower is a substantial savings in interest.
Blanket Mortgage: The mortgage that is
secured by a cooperative project, as opposed to the share loans
on individual units within the project.
Bond: An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
Breach: A violation of any legal obligation.
Bridge Loan:
A short-term mortgage made until a longer-term loan
can be made;
it's sometimes used when a person needs money to build or
purchase a home before the present one has been sold.
Broker: A person licensed by a state real estate commission to act independently in conducting a real estate brokerage business. Although requirements vary from state to state, an individual must usually have at least one year of experience in the industry and pass an examination to earn a broker's license.
Buy down Mortgage: A temporary buy down is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payment during the first few years of a mortgage. A permanent buy down reduces the interest rate over the entire life of a mortgage.
Building Codes: State and local laws that regulate the construction of a new property and the rehabilitation of existing property.
Call Option: A provision in the
mortgage that gives the
mortgagee the right to call the mortgage
due and payable at the4 end of a specified period for whatever
reason.
Cap: The maximum amount an interest rate or monthly payment can change. either at adjustment time or over the life of the mortgage.
Capital Improvement: Any
structure or component erected as a permanent improvement to real
property that adds to its value and useful life.
Cash-out refinance: A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
Certificate of Eligibility: A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.
Certificate of Reasonable Value (CRV): A document issued by the
Department of Veterans Affairs (VA) that establishes the
maximum value and loan amount for a VA mortgage.
Certificate of Title: A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
Chain of Title: The history of all of the
documents that transfer title to a parcel of real property,
starting with the earliest existing document and ending with the
most recent.
Change Frequency: The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
Clear Title: A title that is free of liens or legal questions as to ownership of the property.
Closing: The final step in the sale and transfer of ownership of a property. The title is transferable from the seller to the buyer; the buyer signs the mortgage and pays costs of settlement, any one due the seller and purchaser are paid.
Closing Costs: Fees and expenses, not including the price of the home, payable by the seller and the buyer at the closing (e.g., brokerage commissions, title insurance premiums, and inspection, appraisal, recording, and attorney's fees).
Closing Cost Item: A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of a individual closing cost items such as originations fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.
Closing Statement: A financial statement rendered to the buyer and
seller at the time of transfer of ownership, giving an account of
all funds received or expanded.
Cloud on the Title: Any condition which affects the clear title to real property.
Collateral: An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
Collection: The efforts used to bring a delinquent mortgage current and to file necessary notices to proceed with foreclosure when necessary.
Co-maker: A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
Commercial Bank: A financial institution authorized to provide a
variety of financial services, including consumer and business
loans (generally short-term), checking services, credit cards,
and savings accounts.
Commission: The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.
Commitment Letter: A formal off by lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."
Common Area: Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners association (or a cooperatives project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common as common corridors of buildings, parking areas, means of ingress and egress, etc.
Community Home Improvement Mortgage Loan: An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.
Community Property: In some western and
southwestern states,
a form of ownership under which property
acquired during a marriage is presumed to be owned jointly unless
acquired as separate property of either spouse.
Comparables: Properties similar in size and character to the one being bought or sold.
Condominium: Ownership of a unit only, rather than of the entire building with the land.
Condominium Conversion: Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Consideration: Anything of value to induce another to enter into a contract (i.e. money, services, a promise).
Construction Loan: A short-term, interim loan for financing the cost of constructio0n. The lender makes payments to the builder at periodic intervals as the work progresses.
Consumer Reporting Agency (or bureau): An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository's well as from other sources.
Contingency: A condition that must be satisfied before a contract is binding.
Contract: An
agreement to do or not to do a certain thing.
Conventional Mortgage: A fixed rate, fixed term mortgage not insured by the federal government.
Convertibility Clause: A provision in some adjustable -rate mortgages (ARMS) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.
Convertible ARM: An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
Cooperative (CO-OP): A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Corporate Relocation: Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
Cost of Funds Index (COFI): An index that is used to
determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the weighted-average cost of
savings, borrowing, and advances of the 11th District members of
the Federal Home Loan Bank of San Francisco.
Covenant: A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
Credit: An Agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
Credit History: A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.
Credit Report: A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. See Merged credit report.
Credit Repository: An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
Debt: An amount owed to another.
Deed: A
legal document conveying title to a property.
Deed-in-lieu: A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Deed of Trust: The document used in some states instead of a mortgage; title is conveyed to a trustee.
Deed (quit claim): A deed that transfers only that title or right to a property that the holder of that title has at the time of the transfer. It does not warrant a guarantee a clear title.
Default: Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Delinquency: Failure to make mortgage payments when mortgage payments are due.
Department of Housing and Urban Development
(HUD): A U.S. Government agency
established to implement certain federal housing and community
development programs.
Deposited: A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
Depreciation: A decline in the value of property; the opposite of appreciation.
Disclosure Laws: State and federal regulations which require sellers to disclose such conditions as whether a house is located in a flood plain or whether there are known defects in or affection the property.
Down Payment: The part of the purchase price of property that the buyer pays in cash and does not finance with a mortgage.
Due-on-sale provision: A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
Earnest Money: A portion of a down payment given to the seller by a potential buyer indicating the buyer's intent to complete the purchase of the property.
Easement: A right to use the land of another.
Effective Age: A appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
Endorser: A person who signs ownership interest over to another party. Contrast with co-maker.
Encroachment: A condition that limits the interest in a title to property such as a mortgage, deed restriction, easements, unpaid taxes, etc.
Equal Credit Opportunity Act (ECOA): A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
Equity: The value of real estate over and above the liens against it. It is obtained by subtracting the total liens from the value.
Equity Mortgage: A mortgage based on the borrowers' equity in their home rather than on their credit worthiness.
Escrow: The placement of money or documents with a third party for safekeeping pending the fulfillment or performance of a specified act or condition.
Escrow Account: The account in which a mortgage service holds the burrower's escrow payments prior to paying property taxes.
Escrow Analysis: The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.
Escrow collections: Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.
Escrow Disbursement: The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
Escrow Payment: The portion of a mortgagor's monthly payment that is held by the sevicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.
Estate: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual.
Eviction: The Lawful expulsion of an occupant from
real property.
Examination of Title: The report on the title of a property from the public records or an abstract of the title.
Fair Credit Reporting Act: A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Fair Market Value: The Highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Fannie Mae: Nickname for Federal National Mortgage Corp. (FNMA), a tax paying corporation created by Congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.
Fannie Mae's Community Home Buyer's Program: An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low-or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
Federal Housing Administration (FHA): An agency within the Department of Housing and Urban Development (HUD) that administers loan guarantee programs and loan insurance programs to make more housing available.
Fee Simple: The greatest possible interest a person can have in real estate.
FHA Insured Mortgage: A mortgage under which the Federal Housing Administration insures loans made, according to its regulations, by approved lenders.
Finder's Fee: a fee for commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
First Mortgage: A mortgage that is the
primary lien against the property.
Fixed Rate Mortgage: A loan that fixes the interest rate at a prescribed rate for the duration of the loan.
Flood Insurance: Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Foreclosure: Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.
Freddie Mac: Nickname for Federal Home Loan Mortgage Corp. (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
Fully Amortized ARM: An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
Good Faith Estimate: An Estimate of charges which the borrower is likely to incur in connection with a settlement.
Graduated-Payment Mortgage: A mortgage that starts with low monthly payments and increases at a predetermined rate.
Growing-Equity Mortgage: A mortgage loan in which the
monthly payments
increase by a specific amount each year, with the
"Overpayments" applied to the principle.
Hazard Insurance: Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
Housing Ratio: The ratio of the monthly housing payment in the total (PITI - Principal, interest, taxes, and insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.
HUD: The U.S. Department of Housing and Urban Development.
Index: A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used induces include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI)
Installment Debts: Long-term debts that usually extend for more than
one month.
Investor: The holder of a mortgage or the permanent lender for whom the mortgage maker services the loan. Any person or institution that invests in mortgages.
Joint & Survivorship Deed: (Also known as "Warranty deed creating tenants in common with right of survivorship") Upon death of one of the owners, title to the interest transfers "by contract:" to survivors.
Lease Purchase Agreement: Buyer makes a deposit for the future purchase of a property with the right to lease the property in the interim.
Lien: A
legal claim against a property that must be paid when the
property is sold.
Lifetime Cap: A provision of an ARM that limits the Highest rate that can occur over the life of the loan.
Loan-to-Value Ratio (LTV): The relationship between the amount of a home mortgage and the total value of the property. Lenders may limit their maximum mortgage to 80-95 percent of value.
Lock-in-Rate: A commitment made by
lenders on a mortgage loan to :lock in" a civilian rate
pending mortgage approval. Lock-in periods vary.
Margin: The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period. A representative margin would be 2.75%
Market Value: The highest price a buyer will pay for a property and the lowest price the seller will accept.
Mortgage: One type of document used to make property the security for the payment of a loan.
Mortgage Broker: An individual or company that obtains mortgages for others by finding lending institutions, insurance companies, or private sources to lend the money, may also make collections and handle disbursements.
Mortgage Disability Insurance: A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.
Mortgage Insurance:
Insurance written by an independent
mortgage insurance
company protecting the mortgage lender against loss incurred by a mortgage
default. Usually required for loans with an LTV of 80.01% or higher.
Mortgagee: The lender of money or the receiver of the mortgage.
Mortgagor: The borrower of money of the giver or the mortgage document.
Negative Amortization: An increase in the outstanding balance of a mortgage resulting from the failure of periodic debt service payments to cover required interest charges on the loan.
Non-conforming Loan: Also called a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, Loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium. The current non-conforming loan limit is, 601 and above
Note: A written promise to pay a certain amount of the mortgage.
Origination Fee: A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.
Owner Financing: A property purchase transaction in which the property seller provides all or part of the financing.
Planed Unit Development (PUD): A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcel.
PITI: Principle, interest, taxes and insurance -- the components of a monthly mortgage payment.
Points: Charges levied by the mortgage lender and usually payable at closing. One
point represents 1% of the face value of the mortgage.
Prepaids: Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.
Prepayment Penalty: A fee paid to the mortgagee for paying the mortgage before it becomes due. Also known as pre-payment fee or reinvestment fee.
Principle: Amount of debt, not including interest. The face value of a note or mortgage.
Private mortgage insurance (PMI): Insurance issued to a lender by a private company to protect the lender against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan-to-value ratios. The borrower pays the premiums.
Promissory Note: A written contract containing a promise to pay a definite amount of money at a definite time.
Qualifying Ratios: The ratio of your fixed monthly expenses to your gross monthly income, used to determine nhow much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, cars, loans, or credit card payments.
Radon: A colorless, odorless gas
formed by the breakdown of
uranium in subsoil's. It can enter a
house through cracks in the foundation or in water and is
considered to be a health hazard.
Rate Cap: A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
Rate Lock-in: A written agreement in which the lender guarantees the borrower a specific interest rate, prvided the loan closes within a set period of time.
REALTORŪ and REALTORŪ -Associate: Registered collective membership marks that identify real estate professionals who are members of the National Association of RealtorsŪ and who subscribe to its strict Code of Ethics.
Rebate: Compression received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower. Loans with rebates often carry higher interest rates than loans with "points" (see above).
Refinancing: The process of paying off one loan with the proceeds from a new loan using the same property as security.
Rent with Option: A contract which gives one the right to lease property at a certain sum with the option to purchase at a future date.
Residential Mortgage Credit Report (RMCR): A Report Requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application>
Savings and loan association (S&Ls): Depository institutions that specialize in origination, servicing, and holding mortgage loans, primarily on owner-occupied residential property.
Savings Bank: A financial institution organized to hold individual depositors' funds in interest-bearing accounts and to make long-term investments, such as home mortgage loans.
Second Mortgage/Second Deed of Trust/Junior Mortgage or Junior Lien: An additional loan imposed on a property with a first mortgage. Generally a higher interest rate and shorter term than a "first" mortgage.
Seller Carry Back: An
agreement in which the owner of a property provides financing. often in
combination with an assumed mortgage.
Severalty Ownership: Ownership by one person only. Sole ownership.
Shared equity mortgage: A home loan in which an investor is granted a share of the equity, thereby allowing the investor to participate in the proceeds from resale.
Survey: The process by which a
parcel of land is measured and its area ascertained.
Tenancy in Common: Ownership by two or more
persons who hold an undivided interest without right of
survivorship. (In the event of the death of one owner, his/her
share will pass to his/her heirs.)
Title: A document that's evidence of ownership.
Title Defect: An outstanding claim or encumbrance on property that affects marketability.
Title Insurance: Protection for lenders and homeowners against financial loss resulting from legal defects in the title.
Title Search: An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.
Total Debt Ratio: Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-income Ratio or Back-End Ratio.
Truth-in-Lending Act: A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.
Veterans Administration (VA): A government agency that provides services to eligible veterans of the armed forces. Among other programs, it guarantees mortgage loans made by private lenders to veterans.
Variance: A special suspension of zoning laws to allow the use of property in a manner not in accord with existing laws
Zoning Restrictions: Local municipal ordinances that classify property according to specific uses such as single family, residential, commercial, industrial, multi-family, etc.
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