Real Estate Glossary

* Local laws, as well as custom and use in various areas or regions of the country, may modify or completely change the meanings of certain terms defined.

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A

Abstract (Of Title) - A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.

Acceleration Clause - Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.

Adjustable rate mortgage loan (ARM) - A type of alternative mortgage instrument in which the interest rate adjusts periodically according to a predetermined index and margin. This adjustment results in the mortgage payment either increasing or decreasing.

Adjusted basis - The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Adjustment date - The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Interval - For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

Adjustment period - The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

Administrator - A person appointed by a probate court to administer the estate of a person who died intestate.

Agreement of Sale - Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

Amenity - A feature of real property that enhances its attractiveness and increases the occupant’s or user’s satisfaction although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings and other recreational facilities.

Amortization - A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.

Amortization schedule - A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.

Amortization term - The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months.

Amortize - Reduce a debt by regular payments of both principal and interest.

Annual percentage rate (APR) - A rate which represents the relationship of the total finance charge (interest, loan fees, point) to the amount of the loan.

Annuity - An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.

Application - A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.

Application Fee - The fee charged by the lender to the borrower for applying for a loan.

Appraisal - An expert judgment or estimate of the quality or value of real estate as of a given date.

Appraised value - An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.

Appraiser - A person qualified by education, training, and experience to estimate the value of real and personal property.

Appreciation - An increase in value; the opposite of depreciation.

Assessed Value - The valuation placed upon property by a public tax assessor for purposes of taxation.

Assessment - The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assessor - A public official who establishes the value of a property for taxation purposes.

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 Loan - These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.

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 a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Assumption of Mortgage - An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage. Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

Attorney-in-fact - One who holds a power of attorney from another to execute documents on behalf of the grantor of the power. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage. Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

B

Balance sheet - A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon mortgage - A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at the end of the term.

Balloon payment- The unpaid principal amount of a mortgagee or other long-term loan due at a certain date in he future, usually the amount that must be paid in a lump sum at the end of the term.

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 a trust, estate, or a deed of trust.

Bill of sale - A written document that transfers title to personal property.

Binder or "Offer to Purchase" - A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded. Broker (See Real Estate Broker).

Binder, insurance - (See Insurance Binder).

Blanket insurance policy - A single policy that covers more than one piece of property (or more than one person).

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.

Borrower - One who receives funds with the expressed or implied intention of repaying the loan in full.

Bridge loan - A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.

Broker - (See real estate broker)

Building code - Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Building Line or Setback - Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes or by zoning ordinances.

Buy down - Money advanced by an individual (seller, builder, etc.) to reduce monthly payments for a home mortgage either during the entire term or for an initial period of years.

C

Call option - A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

Capital expenditure - The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital improvement - Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Caps - A limitation on the interest rate increase of either the periodic or lifetime rate or both for an adjustable rate mortgage.

Cash Out - A loan transaction in which the borrower receives funds at the time of closing.

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.

Certificate of deposit - A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period. 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 Occupancy (CO) - Written authorization given by a local municipality that allows a newly-completed or substantially-completed structure to be inhabited. The issuing of a CO means that: the home is SAFE, SOUND & SANITARY, and has matches the PLANS & SPECIFICATIONS given to the Appraiser at the beginning of the Loan Process.

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 certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

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).

Chattel - Another name for personal property.

Claim - An amount requested of an insurer, by a policyholder or a claimant, for an insured loss.

Clear title - A title that is free of liens or legal questions as to ownership of the property.

Closing or Close of Escrow - The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Closing Costs - The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. This is a typical list:

The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs.

Closing cost item - A fee or amount that a homebuyer must pay at closing for a single service, tax, or product.

Closing Day - The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Cloud (On Title) - An outstanding claim or encumbrance which adversely affects the marketability of title.

Co-Borrower - An additional borrower on a loan. A co-borrower's obligation on a loan are the same as all other borrowers.

Coinsurance - A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.

Coinsurance clause - A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.

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 the 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.

Commission - Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price--6 to 8 percent on houses, 10 percent on land, mobile homes, businesses and commercial real estate.

Commitment Letter - A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

Common areas - 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 cooperative 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 corridors of buildings, parking areas, means of ingress and egress, etc.

Common area assessments - Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common law - An unwritten body of law based on general custom in England and used to an extent in the United States.

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 - A abbreviation for comparable properties used for comparative purposes in the appraisal process; facilities of reasonably the same size and location with similar amenities; properties which have been recently sold, which have characteristics similar to property under consideration, thereby indicating the approximate fair market value of the subject property.

Compound interest - Interest paid on the original principal balance and on the accrued and unpaid interest.

Condemnation - The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

Condominium - Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.

Condominium conversion - Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium hotel - A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.

Construction loan - A short-term, interim loan for financing the cost of construction. 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 as well as from other sources.

Contingency - A condition that must be met before a contract is legally binding.

Contract - An oral or written agreement to do or not to do a certain thing.

Contract of Purchase - (See agreement of sale)

Contractor - In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

Conventional Mortgage - A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)

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 time.

Convertible Arm - An adjustable-rate mortgage 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.

Cooperative Corporation - A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.

Cooperative Housing - An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Cooperative mortgages - Mortgages related to a cooperative project.

Cooperative project - A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.

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.

Co-signer - A person who signs a legal instrument and therefore becomes individually and jointly liable for repayment or performance of an obligation.

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, borrowings, 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.

Coverage - The amount of protection, usually expressed in a percentage of the total claim amount, an insured receives under a certificate.

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 life insurance - A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.

Creditor - A person to whom money is owed.

Credit report - A report to a prospective lender on the credit standing of a prospective borrower or tenant. Used to help determine creditworthiness.

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.

Cure - A loan that is removed from a delinquency status with no loss to the insurer.

D

Deed - A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also deed of trust, general warranty deed, quitclaim deed, and special warranty deed.)

Deed-in-lieu - A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."

Deed of Trust - Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.

Default - Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.

Deferred Interest - (See Negative amortization)

Deficiency Judgment - A court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan. Deficiency judgments are not allowed in all states.

Delinquency - A loan in which a payment is overdue but not yet in default.

Deposit - (See Earnest Money)

Depreciation - Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

Discount Points - (See Points).

Documentary Stamps - A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State. The State of Maine refers to this as a transfer tax. (See Transfer Tax)

Dower - The rights of a widow in the property of her husband at his death.

Down payment - The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the down payment amount and will acknowledge receipt of the down payment. Down payment is the difference between the sales price and maximum mortgage amount. The down payment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the down payment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the down payment and to pay interest and expenses incurred by the purchaser.

Draw System - Scheduled payment of money to a builder during the phases of home construction. Between each draw, the appraiser must inspect the home to ensure that construction is proceeding as planned.

Due-on-sale Clause or Provision - A type of acceleration clause, calling for a debt under a mortgage or deed of trust to be due in its entirety upon transfer of ownership of the secured property.

Due-on-transfer Clause or Provision - This terminology is usually used for second mortgages.

E

Earnest Money - The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

Easement Rights - A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.

Effective age - An 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. Effective gross income.

Eminent domain - The right of a government to take private property for public use upon payment of its fair value.

Employer-assisted housing - A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.

Encroachment - An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

Encumbrance - A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.

Endorser - A person who signs ownership interest over to another party. Contrast with co-maker.

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 a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.

Equity Loan - A loan based on the borrower's equity in his or her home. Prior to closing; also, an account held by the lender into which a homeowner pays money for taxes and insurance.

Escrow - Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.

Escrow account - The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.  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 disbursements. The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow payment - That portion of a mortgagor's monthly payment held by the lender 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.

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.

Exclusive right to sell (Listing) - A written contract giving a licensed real estate agent the exclusive right to sell a property for a specified time. The owner agrees to pay a full commission to the broker even though the owner may sell the property.

Executor - A person named in a will to administer an estate.

F

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 price at which property is transferred between a willing buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent data and neither of whom is under any compulsion to buy or sell.

Federal Deposit Insurance Corporation (FDIC) - Provides insurance of accounts for institutions whose deposits were formerly covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).

Federal Home Loan Bank Board (FHLBB) - A regulatory and supervisory agency for federally charted savings institutions, which oversees the operations of the FSLIC and FHLMC. This agency was abolished by the Financial Institutions Reform, Recovery and Enforcement Act of 1989. (See FIRREA.)

Federal Home Loan Mortgage Corporation, Freddie Mac (FHLMC) - A private corporation authorized by Congress, which became an independent, stockholder-owned government corporation with the passage of FIRREA. FHLMC promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secondary market and selling securities backed by those mortgages in the capital market.

Federal Housing Administration (FHA) - A division of HUD. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA does not lend money.

Federal Housing Authority (FHA) Loan - Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).

Federal Housing Finance Board (FHFB) - It oversees the credit functions of the twelve regional Federal Home Loan Banks.

Federal National Mortgage Association, Fannie Mae (FNMA) -  A government-sponsored corporation, owned solely by private investors, created to provide support to the secondary market for FHA and VA mortgages and conventional mortgages.

Fee Simple - An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. The greatest interest a person can have in real estate.

Fee simple estate - An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

Fiduciary - A person in a position of trust and confidence for another.

Finance Charge - The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.

Finder's fee - A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

FIRE (Financial Institutions Reform, Recovery and Enforcement Act of 1989) -  An act signed into law in August 1989, by President Bush that restructured the thrift regulatory an insurance system.

Firm commitment - A lender's agreement to make a loan to a specific borrower of a specific property.

First mortgage - A mortgage having priority over all other voluntary liens against certain property.

Fixed installment - The monthly payment due on a mortgage loan.

Fixed-Rate Mortgage (FRM) - A mortgage in which the interest rate does not change during the entire term of the loan.

Fixture - Personal property that becomes real property when attached in a permanent manner to real estate.  (Hardwired lighting fixtures, doors, windows, garbage disposal, nonmobile dishwasher and such are considered fixtures.)

Flood insurance - Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Foreclosure - A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.

Forfeiture - The loss of money, property, rights, or privileges due to a breach of legal obligation.

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.

Full Recasting - Setting the P&I payments to the level that will fully amortize the loan's outstanding balance over the remaining term using the fully indexed accrual rate at the recasting point.

Fully Indexed Accrual Rate - The interest (accrual) rate resulting from the index at closing (or at another point in the loan) plus the lender's full spread, rounded as prescribed in the loan documents (often to the nearest 1/8th of 1%).

G

General Warranty Deed - A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Good Faith Estimate - An estimate of charges, which a borrower is likely to incur in connection with a loan closing.

Graduated Payment Mortgage - Residential mortgage which has monthly mortgage payments that start at a low level and increase at a predetermined rate.

Grantee - That party in the deed who is the buyer or recipient.

Grantor - That party in the deed who is the seller or giver.

Gross Monthly Income - The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.

Growing Equity Mortgage (GEM) - A fixed rate, graduated payment mortgage with small initial payments that increase each year so that the loan pays off in a shortened term, usually 15 years.

H

Hazard Insurance - Protects against damages caused to property by fire, windstorms, and other common hazards.

Holdback - That portion of a loan commitment not funded until some additional requirement such as rental or completion is attained. In construction it is a percentage of the contractor's draw held back to provide additional protection for the interim lender, often in an amount equal to the contractor's profit.

Homeowner's Insurance - An insurance policy that combines liability coverage and hazard insurance.

Homeowner's Warranty - A type of insurance that covers repairs to specified parts of a house for a specific period of time.

Housing Ratio - The ratio of the monthly housing payment to total gross monthly income. Also called Payment-to-Income Ratio or Front-End Ratio.

U.S. Department of Housing and Urban Development (HUD) - Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.

I

Income property - Real estate developed or improved to produce income.

Index - An economic measurement that is used to measure periodic interest rate adjustments for an adjustable rate mortgage.

Initial Borrower Interest Rate - The rate on which the borrower's first payment is calculated.

Initial Borrower Payment Rate - The annual interest rate used to calculate the borrower's initial cash payment.

Initial interest rate - The original interest rate of the mortgage at the time of closing.

Inflation - An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Installment - The regular periodic payment that a borrower agrees to make to a lender.

Installment loan - Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.

Insurable title - A property title that a title insurance company agrees to insure against defects and disputes.

Insurance - A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Insurance binder - A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured mortgage - A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Interest - A charge paid for borrowing money. (See mortgage note)

Interest accrual rate - The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.

Interest rate - The percentage of an amount of money which is paid for its use for a specified time. Usually expressed as an annual percentage.

Interest Rate Cap - A provision of an ARM limiting how much interest rates may increase per adjustment period.

Interest rate ceiling - For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest rate floor - For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Investment property - A property that is not occupied by the owner.

Investor - A person or institution investing in mortgages.

Involuntary lien - A lien imposed against property without consent of an owner.  Examples include taxes, special assessment, federal income tax liens, mechanics liens and materials liens.

IRA (Individual Retirement Account) - A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.

J

Joint tenancy - A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.

Judgment - A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.

Judgment lien - A lien on the property of a debtor resulting from the decree of a court.

Judicial foreclosure - A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.

Jumbo Loans - Jumbo or non-conforming, is a term used to describe a loan that does not conform to Fannie Mae or Freddie Mac guidelines. The typical Jumbo loan exceeds the maximum loan amounts described above.

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L

Late charge - The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.

Land contract - A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer. This financing vehicle is often used when property is sold on a small down payment.

Lease - A written document containing the conditions under which the possession and use of real or personal property are given by the owner to another for a stated period and for a stated consideration.

Leasehold estate - A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Legal description - A property description recognized by law which is sufficient to locate and identify the property without oral testimony.

Lender - An institution that makes loans to borrowers on real estate.

Lessee (tenant) - The person or persons holding rights of possession and use of property under terms of a lease.

Lessor (landlord) - The one leasing property to a lessee.

Liabilities - A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability insurance - Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.

Licensed Mortgage Broker - The licensed person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. A firm or individual bringing the borrower and lender together and receiving a commission. A mortgage broker does not retain servicing.

Lien - A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials or labor.

Lifetime Cap - A provision of an ARM that limits the total increase in interest rates over the life of the loan.

Lifetime payment cap - For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

Limited partnership - A partnership that consists of one or more general partners who are fully liable and one or more limited partners who are liable only for the amount of their investment.

Line of credit - An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid asset - A cash asset or an asset that is easily converted into cash.

Loan - A sum of money loaned at interest to be repaid.

Loan Commitment - Formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.

Loan origination - The process by which a mortgage lender brings into existence a mortgage secured by real property.

Loan Processing - (1) A System by which a Buyer is evaluated for loan approval. The system compares the stated income, debt, savings and credit against documentation provided by the buyer (or alternative Federal documents). Calculations of Debt-To-Income, Loan-To-Value, Net Worth, Cash Reserves and Compensating Factors are used to develop and Underwriting Opinion. (2) The system of structuring a Buyer's financial situation and documentation in such a way that an Underwriting Opinion can be reached.

Loan Servicing - The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Loan submission - A package of pertinent papers and documents regarding specific property or properties. It is delivered to a prospective lender for review and consideration for the purpose of making a mortgage loan.

Loan-to-value ratio (LTV) - The relationship between the amount of the mortgage loan and the appraised value of the security expressed as a percentage of the appraised value.

Lock - The period, expressed in days, during which a lender will guarantee a rate.

Lock-in period - The time period during which the lender has guaranteed an interest rate to a borrower.

M

Margin (Spread) -  The number of basis points a lender adds to the index to determine the interest rate of an adjustable rate mortgage (fully indexed accrual rate).  The amount the lender adds to the index to determine the Fully Indexed Accrual Rate.

Marketable Title - A title that is free and clear of objectionable liens, clouds or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Master association - A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.

Maturity - The date on which the principal balance of a loan, bond or other financial instrument becomes due and payable.

Merged credit report - A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your credit.

Metes and bounds - A description in a deed of the land location in which the boundaries are defined by directions and distances.

Money market account - A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.

Money market fund - A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

Monthly Housing Expense - Total principal, interest, taxes and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.

Monthly payment mortgage - A mortgage that requires payments to reduce the debt once a month.

Mortgage - A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government-insured or loan-guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.

Mortgage Banker - A company that originates mortgages exclusively for resale in the secondary market.

Mortgage Broker - An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Mortgage Commitment - A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgagee - The lender in a mortgage agreement.

Mortgage Insurance Premium - The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.

Mortgage Life Insurance - A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

Mortgage Note - A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Mortgage (Open-End) - A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure.

Mortgagor - The borrower in a mortgage agreement.

Multidwelling units - Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

Multifamily mortgage - A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.

N

Negative amortization (Deferred Interest) -  A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization

Net cash flow - The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

Net Effective Income - Gross income less federal income tax.

Net Worth - The value of all assets, including cash, less total liabilities.

No cash-out refinance - A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

Non-liquid asset - An asset that cannot easily be converted into cash.

Note - A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note rate - The interest rate stated on a mortgage note.

Notice of Default - A formal written notice to a borrower that a default has occurred and that legal action may be taken.

O

Offer to Purchase - A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Office of Thrift Supervision (OTC) - Charters federal thrifts, serves as the primary federal examiner and regulator of federal and state-chartered savings associations and administers laws governing savings and loan holding companies.

Original principal balance - The total amount of principal owed on a mortgage before any payments are made.

Origination - The process of originating mortgages. Solicitation may be from individual borrowers, builders, or brokers.

Origination fee - A fee or charge for the work involved in the evaluation, preparation and submission of a proposed mortgage loan.

Originator - A person who solicits builder, brokers, and others to obtain applications for mortgage loans. origination is the process by which the mortgage lender brings into being a mortgage secured by real property.

Owner financing - A property purchase transaction in which the property seller provides all or part of the financing.

Owner Occupied - "Owner Occupied" means the property is the owner's primary residence.

P

Payment Adjustment Period - The length of time (typically a year) between changes to the AML borrower's P&I payment.

Payment Buy down - Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.

Payment Cap - A limit on the amount the payment can be changed at the end of each Payment Adjustment Period.

Payment Discount - In a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers.

Periodic payment cap - A limit on the amount that payments can increase or decrease during any one-adjustment period.

Periodic rate cap - A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Personal property - Any property that is not real property.

PITI (principal, interest, taxes, and insurance) - The principal and interest payment on most loans is fixed for the term of the loan; the tax and insurance portion may be adjusted to reflect changes in takes or insurance costs. Note: In cases where the buyer puts down less than 20% of the Sales Price, Mortgage Insurance may be required as part of the Total Monthly Payment (PITI).

Planned Unit Development (PUD) - A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Plans and specifications - Architectural and engineering drawings and specifications for construction of a building or project, including a description of materials to be used and the manner in which they are to be applied.

Plat - A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Plot - A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land and easements.

Points - Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are charged by a lender to raise the yield on his/her loan at a time when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited from paying points on HUD or Veterans' Administration guaranteed loans, however sellers or ANYONE ELSE (borrowers parents or etc.) can pay. On a conventional mortgage, points may be paid by either buyer, seller or other and even split between them.

Power of attorney - A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time. 

Preclosing - A transaction preceding the formal closing, often used to settle outstanding issues (survey, pest inspection, hazard insurance, flood insurance (if required), with the formal closing shortly thereafter.

Prepayment - Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.

Pre-qualification - The process of determining how much money a prospective homebuyer will be eligible to borrow before application.

Prime rate - The interest rates that banks charge to their preferred customers.

Principal - The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.

Principal balance - The outstanding balance of a loan.

Private mortgage insurance (PMI) - Insurance written by a private company protecting the mortgage lender against loss by a mortgage default.

Promissory note - A written promise to repay a specified amount over a specified period of time.

Public auction - A meeting in an announced public location to sell property to repay a mortgage that is in default.

Purchase Agreement - (See agreement of sale).

Purchase money transaction - The acquisition of property through the payment of money or its equivalent.

Q

Qualifying Ratios - Guidelines applied by lenders to determine how large a loan to grant a homebuyer.

Quitclaim Deed - A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See deed)

R

Radon - A radioactive gas found in some homes that in sufficient concentrations could cause health problems.

Rate Caps - (Also called "Interest Rate Caps"). A limit on the amount of which the interest rate charged to the borrower can be changed.

Rate lock - A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.

Real Estate Broker - A middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

Real Estate Owned (REO) - A term frequently used by lending institution as applied to ownership of real property acquired for investment or as a result of foreclosure.

Real Estate Settlement Procedures Act (RESPA) - A Federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.

Real property - Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals and the interest, benefits and inherent rights thereof.

Realtor - A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Recission - The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent.

Reconveyance - The transfer of land from one person to the immediately preceding owner. It is used when the performance of debt is satisfied under the terms of a deed of trust.

Recorder - The public official who keeps records of transactions that affects real property in the area.

Recording - The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

Redemption period - That period of time in those states where it is allowed in which a foreclosed mortgagor has to buy back his property by paying principal amount and interest and fees.

Refinancing - The process of the same mortgagor paying off one loan with the proceeds from another loan.

Rehabilitation mortgage - A mortgage created to cover the costs of repairing, improving and sometimes acquiring an existing property.

Release of lien - An instrument discharging secured property from a lien.

Remaining balance - The amount of principal that has not yet been repaid.

Remaining term - The original amortization term minus the number of payments that have been applied.

Repayment plan - An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."

Replacement reserve fund - A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

Resolution Trust Corporation (RTC) - Formed to resolve thrift failures over the next three years and dispose of their assets and liabilities.

Restrictive Covenants - Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

Revolving liability - A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.

Right of first refusal - A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before they offer it for sale or lease to others.

Right of ingress or egress - The right to enter or leave designated premises.

Right of survivorship - In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

Right-of-way - A privilege operating as an easement upon land, whereby a land owner, by grant or agreement, gives another the right to pass over land. Also knows as easement.

S

Sale-leaseback - A technique in which a seller deeds property to a buyer for a consideration and the buyer simultaneously leases the property back to the seller, usually on a long-term basis.

Sales Agreement - (See agreement of sale)

Sales Contract - Another name for a sales agreement, purchase agreement, agreement of sale and etc. Not to be confused with a land contract, which is a conditional sales contract.

Satisfaction of mortgage - The record able instrument given by the lender to evidence payment in full of the mortgage debt. Sometimes knows as a release deed.

Secondary financing - Financing real estate with a loan, or loans, subordinate to a first mortgage or first trust deed.

Secondary mortgage market - The market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are just originated, and packaged for delivery to the secondary market.

Seller-Provided Funds - (Also called "Seller Contributions or Concessions"). Seller-provided funds include all transaction cost paid by the seller except the real estate agent's (or brokers) fee/commission.

Servicer - The party who has entered into an agreement with the insured to service a loan.

Servicing - The duties of the mortgage lender as a loan correspondent as specified in the servicing agreement for which a fee is received. Consists of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquency loan follow-up and loan analysis.

Settlement Costs - (See Closing Costs)

Single Premium - A premium, which provides coverage for more than a year.

Special Assessments - A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.

Special Lien - A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien.

Special Warranty Deed - A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.

Spread - (See Margin).

State Stamps - (See documentary stamps) State of Maine charges a Transfer Tax.

Survey - A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.

T

Takeout commitment - A promise to make a loan at a future specified time. It is commonly used to designate a higher cost, shorter term, backup commitment as a support for construction financing until a suitable permanent loan can be secured.

Tax - As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public.

Tax Lien - A claim against property for the amount of its due and unpaid taxes.

Teaser Rate - Similar to a Payment Discount, but implies either an unusually large initial rate discount or an attempt by the lender to lure an otherwise unqualified borrower into the mortgage.

Tenancy - A holding of real estate under any kind of right of title.

Tenancy At Will - A holding of real estate that can be terminated at the will of either the lessor or the lessee, usually with notice.

Tenancy by entirety - The joint ownership of property by a husband and wife where both are viewed as one person under common law that provides for the right of survivorship.

Tenancy in common - In law, the type of tenancy or estate created when real or personal property is granted, devised or bequeathed to two or more persons, in the absence of expressed words creating a joint tenancy. There is no right of survivorship.

Tenant-stockholder - The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy agreement.

Term - The period of time between the commencement date an termination date of a note, mortgage, legal document or the contract.

Third-party origination - A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Title - As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.

Title Company - A company that specializes in examining and insuring titles to real estate.

Title Insurance - Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.

Title Search or Examination - A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.

Total Debt Ratio - Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.

Total expense ratio - Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.

Trade equity - Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.

Transfer of ownership - Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership.

Transfer Tax - The State of Maine charges $2.20 per $500 of the amount the real estate is transferred for (rounded up to the nearest $500). Seller and Buyer each pay half. (i.e. if the subject property sells for $100,200 then the total amount of Transfer Tax due is $442.20; the Seller pays $221.10 and the Buyer pays $221.10). Other states may refer to this as State Stamps or Documentary Stamps.

Treasury index - An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.

Trustee - A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. (See deed of trust.)

Truth-In-Lending (TIL) - A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.

Two to four-family property - A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

U

Underwriting - The analysis and matching of risk to an appropriate rate and term.

Unencumbered property - A property the title to which is free and clear.

Unsecured-loan - A loan that is not backed by collateral.

Usury - Charging more for the use of money than allowed by law.

V

Variable rate mortgage - A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and terms agreed upon in the note.

Vested - Having the right to use a portion of a fund such as an individual retirement fund.

Government Loans FHA / VA - Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).

Department of Veterans Affairs (VA) - An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

W

Warehousing - The holding of a mortgage on a short term basis pending either a sale to an investor or other long term financing.

Warranty deed - A deed in which the grantor or seller warrants or guarantees that good title is being conveyed, as opposed to a quitclaim deed that contains no representation or warrant as to the quality of title being conveyed.

Wraparound mortgage - A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

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Z

Zoning Ordinances - The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.