Glossary Of Terms

abandonment: The voluntary surrender of owned or leased property, without designation of a successor as owner or tenant.
abatement: A reduction in amount. For example, a city that agrees to abate a company’s taxes, agrees to reduce the company’s indebtedness.
abstract plant: A geographically filed title information used for title examinations, such as copies of previous attorneys' opinions, abstracts, tax searches and copies or take-offs of the public records. (Title Resources, for example, has an in-house abstract plant with “sovereignty” records, that is, property records dating back to the time Texas became a state.)
abstract: A written summary of all the proceedings, transactions, conditions and public records affecting the title to a property. A title company reviews an abstract to find any problems affecting the title to the property. All such problems must be cleared before a buyer can obtain a clear title to the property.
abut: One piece of property is said to abut another when part of their boundaries adjoin each other. The owners of such properties are called abutters.
acceleration clause: A provision in a mortgage giving the lender the right to demand payment of the entire balance of the loan if a monthly payment is missed, or upon the sale of the land.
acceptance: Consent to enter into a contract and be bound by its terms.
access: The right to enter and leave a property from a public way, such as the right to enter and leave the property over lands belonging to another.
accommodation recording: When a title company provides the county recorder with records of a property merely as a convenience to a customer and without assuming responsibility for the validity of the title.
accretion: The gradual addition of soil to land by natural processes like wind or water. (See alluvium.)
acknowledgement: When a person executing a legal document goes before an authorized officer (usually a notary public) and affirms that they have voluntarily signed the document. Acknowledgement is required to record legal documents, such as deeds of trust.
acre: A tract of land equal to 43,560 square feet.
ad valorem tax: Taxes against a property, assessed by the value of the property.
additional principal payment: Payment by a borrower over and above the scheduled principal amount to reduce the balance on the loan.
adjacent: Nearby, but not necessarily adjoining properties; generally used to describe the situation of properties in relation to each other.
adjoining: Properties having boundaries in common: touching or contiguous.
adjustable period: The length of time between interest rate changes on an ARM. (See adjustable rate mortgage.)
adjustable rate mortgage (ARM): A mortgage in which the interest rate is adjusted periodically depending on a stated indicator, like the current Treasury bill rate. Most ARMs will have a limit on the amount the rate may vary. (Also called a “variable rate mortgage,” “flexible rate mortgage,” “re-negotiable rate mortgage,” and “adjustable rate loan.”)
adjusted basis: The original cost of a property, plus the value of any capital expenditures for improvements, minus any depreciation.
adjustment date: The date on which the interest rate changes for an ARM. (See adjustable rate mortgage.)
adjustment interval: The time between changes in the interest rate of ARMs. Common intervals are one, three or five years. (See adjustable rate mortgage.)
adjustment period: (See adjustable period.)
administrator: A person appointed by a probate court to settle the affairs of person who died without a will. The term is “administratrix” if such a person is a woman. (See intestate.)
administrator’s deed: A deed which conveys the property of someone who died without a will.
adverse possession: Way in which an individual legally acquires title to a property by maintaining exclusive and continuous use of the property for a period of time prescribed by state law. (Also known as “notorious possession.”)
affiant: One who swears to the statement in an affidavit. (See affidavit.)
affidavit: A written statement made under oath before a notary public or other judicial officer.
affirmative coverage: Provisions insuring against loss due to specific risks generally not covered by policies; for example, loss due to violation of usury or truth-in-lending statutes or restrictive covenants.
affordability analysis: A detailed analysis of an individual’s ability to afford purchasing a home based on income, liabilities, available funds, type of mortgage seeking, closing costs expected, etc.
agent: A person who acts on behalf of another for a fee. In real estate, the term usually refers to a person with a real estate license working under the authority of a real estate broker.
agreement: A legally binding contract made between two or more parties.
agreement of sale: A written agreement whereby the purchaser agrees to buy a property, and the seller agrees to sell that property, within the terms and conditions set in the agreement. (Also known as an “agreement to convey,” a “long form security agreement,” a “contract of purchase,” a “purchase agreement,” “offer and acceptance,” “earnest money contract,” “sales agreement,” or a “real estate installment contract.”)
agreement to convey: (See agreement of sale.)
alluvion: (See alluvium.)
alluvium: Sand, clay or silt gradually deposited ashore by moving water. Soil deposited in this manner (such as a sand bar) is considered part of the property; also referred to as “alluvion.”
amendment: Changes to an agreement altering part of an agreement without changing the essence of the agreement.
amenity: A feature of property which increases the occupant’s satisfaction, although it is not essential to the property’s use, such as a scenic view or recreational facilities.
amortization: Periodic payments made to reduce the principal a debt. Each payment includes both principal and interest monies.
amortization schedule: A schedule showing a breakdown of principal and interest included in each of the payments to be made throughout the life of the loan.
amortization term: The amount of time required to pay off the mortgage loan, usually expressed as a number of months. For example, for a 30-year mortgage, the amortization term is 360 months.
annual mortgagor statement: A report sent to the borrower each year showing how much was paid in taxes and interest, as well as the remaining mortgage loan balance.
annual percentage rate (APR): An interest rate reflecting the cost of a mortgage as a yearly rate, which is likely to be higher than the stated note rate or advertised rate on the mortgage, since it takes into account point (loan origination fee) and other credit cost.
annuity: An amount paid at regular intervals, usually on a guaranteed dollar basis.
application: A form used to apply for a mortgage loan. Lenders use the information on the application to decide whether or not to give the loan, and if so, the amount of money they will lend.
application fee: The fee charged by the lender to the borrower for applying for a loan. (Some lenders apply the cost of the application fee toward certain closing costs.)
appraisal: A report from an independent third party detailing the estimated value of a property. Legally, an estimation of the value of the property by two interested persons of suitable qualifications.
appraised value: An estimate of a property’s fair market value, in the opinion of an appraiser, based upon the appraiser’s interpretation of facts and beliefs, as of a specific date.
appraiser: A person qualified to estimate the value of real property and personal property.
appreciation: Increase in the value of an unchanged property. The opposite of depreciation.
approved attorney: An attorney whose opinion is acceptable to a title company as the basis for issuing a title insurance policy.
appurtenance: Anything so attached to the land or used with it that is physically outside a designated property, but is still considered a part of it, and would pass to the purchaser. For example, a garden, easement, or right-of-way, or water rights.
APR: (See annual percentage rate.)
ARM: (See adjustable rate mortgage.)
as-is agreement: An agreement in which a property is sold without warranty, exactly as it is at the time the contract is signed.
assessed valuation: Property value established for taxation. (Assessed valuation does not necessarily correspond to market value.)
assessment: Tax imposed landowners to pay for specific public improvements (sewer lines, sidewalks, street paving, etc.), usually according to established rates.
assessment ratio: Usually expressed as a percentage, an assessment ratio is used to differentiate between a property’s assessed valuation and the portion actually used to compute a tax. If, for example, a city applies a 50 % assessment ratio to its taxable property, then a property with an assessed valuation of, say, $200,000 would be taxed at $100,000.
assessment rolls: The public record of taxable property.
assessor: A public official who evaluates a property for tax purposes.
asset: Anything of monetary value that is owned by a person, including real estate, personal property, bank accounts, stocks, mutual funds, and so on.
assignee: Individual to whom a transfer of interest is made, such as the assignee of a mortgage or contract.
assignment: Transferring an interest (such as a loan secured by a mortgage) from one person to another.
assignor: One who makes an assignment.
assumable loan: Loans which may be passed from a seller of a home on to the buyer. The buyer “assumes” all remaining payments. (Also called an “assumable mortgage.”)
assumable mortgage: A mortgage loan which allows a new home buyer to take over the obligation of making loan payments with no change in the terms of the loan. The lender must be notified and agree to the assumption after requiring the buyer to qualify for the loan. The seller should obtain a written release from the lender stating he or she is no longer liable to make the mortgage payments.
assumption transfer fee: A fee assessed by the lender to the buyer to assume an existing loan.
assumption: One person agreeing to pay a debt originally incurred by another.
attachment: Legal seizure of property as a means of forcing payment of a debt.
attorney in fact: An individual holding power of attorney from another, allowing him or her to execute specific legal documents such as deeds, mortgages, etc., on their behalf.
attorney's opinion: A statement by an attorney as to the validity of a title after investigation of the history of the title as recorded in the public records. (Title Resources has an onsite attorney to expedite any legalities in the closing process.)
attractive hazard (nuisance) doctrine: The legal principle which requires a property owner to exercise reasonable care to protect the public from hazards on his property, such as a swimming pool.
avulsion: The sudden, natural transference of land from one person’s property to another’s without a formal change of ownership; for example, when the course of a stream or river changes. (See accretion and alluvium.)
back ratio: Ratio of monthly housing costs (principal, insurance, taxes, interest) plus any other regular monthly payments, to gross monthly income. Used by lenders to evaluate an applicants qualification for a loan. (Lenders typically allow a back ratio between 32 and 45 percent.)
balance sheet: A financial statement showing assets, liabilities, and net worth on a specified date.
balloon note: A form of promissory note calling for a minimum payment of principal and the payment of interest at regular intervals. Requires a substantial final “balloon” payment of all remaining principal at the end of a specific time period—usually five to seven years. (Also known as “balloon mortgage” or “balloon payment mortgage.”)
balloon mortgage: (See balloon note.)
balloon payment: A final loan payment by prearrangement—one that is larger than any preceding installment—usually paying off the loan balance. (See balloon note.)
bankrupt: A person declared insolvent by a formal court proceeding. The person's assets are then dispersed to creditors by a court appointed trustee.
bankruptcy: A legal proceeding in which debtors are relieved of liability for their debts after surrendering all their assets to a court-appointed trustee for division among the creditors. The individual typically files for Chapter 7 (all debts wiped out) or Chapter 13 (establishing a payment plan to creditors). A bankruptcy remains on an individual’s credit report for seven years.
basic title: Title to an area from which a subdivision or development will be made. For example, the title to a farm acreage which has been subdivided would be the base title.
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.
bequeath: The transfer of personal property through a will.
bequest: A provision in a will providing for the distribution of personal property.
betterment: An improvement to real estate, such as the addition of a building.
bill of sale: A written document passing title of personal property from one person to another..
binder: A preliminary agreement securing the right of a buyer to purchase property according to specific terms within a specified period of time. The commitment contains all information included in the preliminary title report, plus a list of the title company's requirements to insure the transaction. It also includes the standard exceptions from coverage that will appear in the policy. A nominal sum of money (known as an “earnest money deposit”) usually accompanies the agreement as a sign of the buyer’s good faith. Usually a title insurance policy issued on construction loans for six months, which may later be extended up to 36 months. (Also called a “preliminary certificate,” a “commitment,” or an “offer to purchase.”)
bi-weekly mortgage: A mortgage requiring 1/2 the normal monthly payment every two weeks. Over the course of the year, 26 half payments are made which is equivalent to 13 full mortgage payments, allowing the buyer to save substantial interest.
blanket insurance policy: Policy covering more than one piece of property (or more than one person). Often used for an entire subdivision. As individual lots are sold, a partial reconveyance from the blanket mortgage is usually obtained.
bona fide purchaser: One who buys property in good faith, for fair value, without fraud.
bond: A sum of money given to a court to guarantee against a loss. For example, an owner may remove a lien on a property by posting a bond. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
book value: The value of an asset as shown in personal or corporate financial records.
breach of contract: A violation of any legal obligation. Failure (without legal excuse) of one of the parties to fulfill a contract or promise made as a surety against fraud, theft, etc.
bridge loan: A form of second trust, typically used when the buyer is unable to sell his/her house, but needs money to close the transaction on the house he/she is buying. The loan is then paid off when the buyers current home is sold. Also known as a “swing loan.”
broker: A middleman or licensed agent who, for a commission or fee, buys or sells property in behalf of others. The broker may locate and show properties, advertise properties, assist in contract negotiations, etc. (The word “agent” is sometimes used interchangeably with “broker,” but in actual practice, an agent works for a broker. Only a licensed “broker” may act in behalf of a buyer/seller in a real estate transaction. An “agent” may act in behalf of the broker, but all documents must be signed by a broker. The broker is legally responsible for the agent’s action in a real estate transaction.) (See buyer’s broker and seller’s broker.)
budget: A detailed plan of income and expenses expected, to provide guidelines for managing future expenses and investments.
buffer zone: An area providing a physical transition between two properties used for contrasting, often conflicting, purposes; for example, a wooded area between a residential neighborhood and an industrial park.
building code: Local regulations controlling the design, construction, and materials used in construction for safety and health standards.
building contract: An agreement between a buyer and a building contractor, with the terms relative to construction of a proposed home or building.
building line: A line fixed by zoning powers to regulate locations of buildings within a given property. (Not to be confused with property line.) (See setback.)
building restrictions: Covenants—usually as minimum requirements—stating the uses, manners and ways in which buildings may be built on a certain property.
Bureau of Land Management: The government branch in charge of managing public lands.
buydown mortgage: Lowering an interest rate for a period of time by paying additional points to the lender. The lower rate may apply for the full duration of the loan or for only first few years, allowing a borrower to get a loan for which they might not otherwise not qualify. The lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. Payments are initially low, but increase when the subsidy expires.
buy-back agreement: An agreement specifying conditions under which the seller agrees to repurchase the property, usually for a stated price and within a stated time limit.
buyer’s broker: One hired by a buyer to locate a property for purchase. The broker negotiates with the seller's broker for the best possible deal for the buyer. (By law, all brokers work for the seller, unless that have a signed agreement with the buyer to act as their “buyer’s agent.”)
buyer's market: A market in which there are more houses for sale than there are potential buyers. Housing prices are therefore generally lower, providing a better deal for buyers. (See seller's market.)
call option: A provision allowing the lender to call the mortgage due and payable at the end of a specified period for whatever reason.
cap: A provision of an adjustable-rate mortgage (ARM) limiting how much an interest rate or monthly payment can change—either at each adjustment or over the life of the mortgage. Caps are usually quoted as a pair of numbers, such as 2/6. The first number indicates how much a loan may adjust at each adjustment period; the second number indicates how much a loan may adjust over its lifetime.
capital expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value. Also known as "capital improvement."
capital gains: Profit earned from the sale of real estate. A seller may defer taxes on the capital gain of his/her primary residence by buying a higher priced residence within two years.
cash-out refinance: A refinance transaction in which the amount of money received from the new loan exceeds the total money needed to repay the existing first mortgage, closing costs, points, and the any outstanding subordinate mortgage liens. In other words, the borrower receives additional cash that can be used for any purpose.
caveat emptor: This legal term translates “let buyer beware,” meaning the buyer must examine the property and buy at his/her own risk. For example, when a property is offered in an “as is” condition with no guarantee of quality or condition.
CC&Rs: Covenants, conditions, and restrictions. (See conditions and restrictions and covenants, conditions and restrictions.”)
certificate of deposit index: An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. (See adjustable-rate mortgage.)
certificate of deposit: A document written by a bank or other financial institution as evidence of a deposit, for which a specified interest rate within a specified time period will be paid. (See adjustable rate mortgage.)
certificate of eligibility: A document issued by the federal government to qualified veterans entitling them to VA guaranteed loans for homes and businesses. Certificates of eligibility may be obtained by sending the form DD-214 to the local VA office along with VA form 1880.
certificate of occupancy: A certificate stating a home or building complies with health, safety and building codes and is approved for occupancy by the local building inspector. Lenders normally require a certificate of occupancy prior to closing. Some home insurance policies will not pay claims for damage to a property not approved for occupancy.
certificate of reasonable value (CRV): An appraisal issued by the Department of Veterans Affairs (VA) establishing the maximum value and loan amount for a guaranteed VA mortgage.
certificate of title: Issued by a title examiner (or attorney) stating the condition of the title on a specific property.
certificate of veteran status: A document given to veterans or reservists who have served 90 days of continuous active duty (including training time), and obtained by sending DD 214 to the local VA office with form 26-8261a, allowing veterans to obtain lower down payments on certain FHA insured loans.
Certified Residential Broker (CRB): A certified broker
chain: A term of land measurement that is 66 feet in length.
chain of title: A term applied to the past series of transactions and documents affecting the title to a particular parcel of land; the successive ownership history of title to a tract of land. Each deed or other instrument effecting a transfer of the title is called a “link.”
change frequency: The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
chattel: Personal property.
claim: An adverse right or interest asserted by an individual in the property owned by another person. Claims may arise from unpaid debts or taxes, as well as from hidden title defects such as fraud, forgery, missing heirs, etc.
clear title: Title to a property which is not encumbered or burdened with defects, encumbrances, or claims. Most lenders will require a clear title before closing on a property.
close of escrow: The date the documents are recorded and title passes from the seller to the buyer and the title insurance becomes effective.
closing cost items: A fee a home buyer must pay at closing for individual items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement. (See HUD-1.)
closing costs: Fees paid by the borrower (and/or seller) when property is purchased or refinanced, possibly including a loan origination fee, points, appraisal fee, mortgage insurance premium, title search, title insurance, survey, taxes, deed recording fee, attorney's fee, amount paid into escrow, and credit report charges. Closing costs vary around the country. A real estate agent normally provides an estimate of closing costs.
closing day: The day on which 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 statement: (See HUD-1 statement.)
closing statement: The financial disclosure statement accounting for all of the funds received and accepted at the closing.
closing: The final procedure in the real estate process is a meeting of all parties involved in a property transaction during which pertinent documents are signed and transferred and funds are disbursed. (Also called a “settlement.”)
clouded title: A term indicating the existence of a possible claim or encumbrance which, if valid, affects the legitimacy of a title to a property. (See clear title and encumbrance.)
cluster housing: A method of subdivision in which separate housing units are situated in groups, leaving open spaces as common areas.
coinsurance: Two or more policies of title insurance issued by different insurers, each covering a portion of the same risk. Together the policies would provide total coverage.
collateral: What the lender will accept as security for a loan. An asset, such as a home or car, which guarantees repayment of the loan. (Collateral for a mortgage is usually the property itself.)
collection: The efforts used to bring a delinquent mortgage current and to proceed with foreclosure if necessary.
co-maker: A person signing a promissory note along with the borrower, guaranteeing the loan will be repaid. (See endorser.)
commission points: (See points.)
commission: Money paid for the services of a broker or real estate agent, usually a percentage of the property’s sale price.
commitment: (See binder.)
commitment to insure: A report issued by a title company, or its agent, showing the condition of the title, and committing the title company to issue a policy upon satisfaction of the requirements set forth in the commitment.
commitment letter: A formal offer by a lender stating the specific terms under which it will lend money to a property buyer. Also known as a “loan commitment.”
common areas: Those portions of a planned unit development (PUD) or condominium project's homeowners' association used by all of the unit owners, who share expenses for care and maintenance. Common areas include swimming pools, tennis courts, other recreational facilities, common corridors, parking areas, etc.
common area assessments: Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional monies to defray homeowners' association expenses for caring for the common areas of the project.
common law covenants: Includes: covenants against encumbrances; covenants for further assurance (a promise to rectify all title deficiencies); covenants of good right and authority to convey; covenants of quiet enjoyment; covenants of seisin; covenants of warranty. (See title covenants.)
community driveway: A driveway jointly owned, used and maintained by two or more persons.
community land trust mortgage option: An alternative financing option allowing low-income home buyers to purchase housing improved by a nonprofit Community Land Trust, and to lease the property on which the home stands.
community property: (1) A category of property, existing in some states, in which all property acquired by a husband and/or wife during marriage is owned in common by the husband and wife (except property specifically acquired by either spouse as separate property). (2) The document establishing a condominium and describing the property rights of unit owners. State statutes prescribe the exact contents of this document. (Known in some states as a “master deed.”)
community property: Any property purchased by a husband and wife with community funds.
Community Seconds®: An alternative financing option for low-income households where an investor purchases a first mortgage which is subsidized by a second mortgage. The second mortgage is issued by a housing agency, foundation, or nonprofit organization. Payment on the second mortgage—which carries a very low interest rate—may be deferred. Part of the debt may be even forgiven incrementally for each year the buyer remains in the home.
company loan: Loan by employer to assist in relocation of an employee. Usually a short term loan.
comparables: Comparable properties which are like the property under consideration—similar in size, location, and amenities—which have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property. Also commonly called “comps” or “comparative market analysis.”
comparative market analysis: Compares the selling prices of homes in an area, allowing a real estate agent to arrive at an estimate of the value of a property.
compound interest: Interest paid on the original principal balance and on accrued and unpaid interest.
condemnation: (1) The taking of private property by a municipality for a necessary public use through court proceedings, with just compensation paid to the unwilling owner. Condemnations are used by governments to acquire land for streets, storm drains, schools, freeways, etc. (2) Declaring a structure dangerous because of violations in housing, health or safety codes. (See eminent domain.)
conditions: A proviso in a deed or will changing or terminating the title of the purchaser if certain specified events occur.
conditional commitment: A lender's document agreeing to make a loan—if certain specified conditions are met prior to closing.
conditions and restrictions: Designating the ways in which land may not be used and providing penalties for failure to comply. Commonly used by land subdividers on newly platted land. (See covenants, conditions and restrictions.)
condominium: An individually-owned housing unit in a multi-unit building, wherein commonly used property such as stairs, sidewalks, swimming pools, etc., are owned jointly.
conforming loan: A mortgage loan for up to $300,700 in the continental United States. (Alaskan and Hawaiian limits are higher.)
conservator: (See guardian.)
consideration: The price or subject matter included in a contract; which may be in money, commodity, exchange or transfer of personal effect. Anything of value used as an incentive to enter a contract.
construction disbursement service: A direct payment plan for disbursement of construction loan and equity funds through the title company—to subcontractors and suppliers—upon approval of the owner, general contractor, and lender.
construction loan: A short term loan made to finance the actual construction of a home or commercial building. The lender pays the builder in increments as the work progresses. When construction is completed a “take out” or “permanent loan” is used to pay off the construction loan.
contiguous: Properties with boundaries that touch each other at any point are contiguous.
contingency: A condition which must be met before a contract will be legally binding. For example, home purchasers often include a contingency specifying the contract is not binding until the purchaser obtains a satisfactory report from a qualified home inspector.
contour map: A topographical map with contour lines indicating site elevations.
contract for sale: A real estate contract between the buyer and the seller conveying title after certain conditions have been met. It is a form of installment sale. (Also know as a “contract of deed.”)
contract: A legally binding agreement between two or more parties.
contractor: One who contracts to erect homes or buildings, or to remodel and improve existing structures. There are contractors for each phase of construction
conventional loan: A loan secured by a mortgage or deed of trust for which the loan-to-value ratio is within an acceptable range for that particular lending institution. Any mortgage not insured by FHA or guaranteed by VA. A conventional loan may be conforming or non-conforming.
conversion clause: A provision in some or balloon or ARMs loans enabling the buyer to change to a fixed-rate loan, usually within a specified timeframe.
conversion: In real estate, most commonly describes a change in property use to a different use or form of ownership, such as the change of rental apartments into condominiums.
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: (See convertibility clause.)
convey: The act of deeding or transferring title to another.
conveyance: A written document by which title to property is transferred from one party to another, most commonly a deed. (See convey.)
co-op: A type of apartment housing in which each tenant owns shares in a corporation that owns the apartment building. A resident does not own his unit, but owns stock in the corporation, entitling him to occupy the unit. Also know as “co-operative,” “co-operative apartment,” and “co-operative housing.”
cooperative mortgages: Usually refers to the multifamily mortgage covering the entire project, but may also describe share loans on individual units.
cooperative project: A building owned by a corporation or trust which sells shares of stock representing the value of a single apartment unit, with a proprietary lease used for shareholders as evidence of title.
co-ownership: Two or more people sharing ownership of a property.
co-signer: A person assuming joint liability with another by signing documents (e.g. loan promissory note). A co-signer is not necessarily a co-owner.
cost of funds index (COFI): An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. (See adjustable-rate mortgage.)
cotenancy: Ownership of the same particular parcel of land by more that one person. (See tenancy in common.)
counter offer: Rejects an offer while striving to keep negotiations open.
courier fee: Fee paid to have various closing documents and papers delivered or picked up.
covenant: (1) An agreement or contract between two parties in which one party gives the other certain promises and assurances, such as covenants of warranty in a warranty deed. (2) A clause in a mortgage that obligates or restricts the borrower and which can, if violated, result in foreclosure. (See common law covenants.)
covenants, conditions and restrictions: Commonly called CC & R's, the term usually refers to a recorded declaration setting forth certain covenants, conditions, restrictions, rules or regulations established by a subdivider or other landowner to create uniformity of buildings and use within tracts of land or within groups of lots. The restrictions also can be established by deed. CC & R's are also sometimes referred to as "private zoning."
credit history: A record of an individual's repayment of debts, allowing a lender to know if the buyer pays his debts in a timely manner.
credit life insurance: A type of insurance which will pay off the mortgage debt if the mortgagor dies before the loan is fully paid.
credit rating: Borrowers are rated by lenders according to their risk profile—as letter grades such as A-, B, or C+—based on current and previous debts, payment history, foreclosures, defaults, bankruptcies and charge-offs.
credit report: The loan applicant's payment history regarding installment loans. A credit report will also include information found from public records, such as tax liens and judgments.
credit reporting agency (or bureau): An independent organization which prepares reports used by lenders to determine a potential borrower's credit rating. The agency obtains data for these reports from a credit repository as well as from other sources.
credit repository: An organization that gathers, records, updates, and stores financial and public records.
credit: An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
creditor: A person to whom money is owed.
CRV: Certificate of Reasonable Value
cul-de-sac: A form of subdivision in which houses are grouped around a closed turning area on a dead end street.
debt: Something owed to another; an obligation to pay or return something.
debtor: One who owes a debt.
debt-to-income ratio: The ratio, expressed as a percentage, calculated by taking a borrower's monthly payment obligation on long-term debts and divided by the gross monthly income. (See housing expenses-to-income ratio.)
decree of distribution: A probate court decree determining how the estate of a decedent shall be distributed.
dedication: The acceptance of private land donated for public use by authorized public officials.
deed: A legal document transferring the title of real estate from the seller to the buyer. If default occurs under the Deed of Trust, the trustee has the authority to sell the property and apply the proceeds of the sale to the debt.
deed of trust: Instrument used to secure a loan on real estate, much like a mortgage. However, in a deed of trust there are three parties involved
deed restriction: A clause in a deed that specifically limits the use or occupancy of the real estate or the type, size, purpose or location of improvements to be constructed on it. (See covenant and encumbrance.)
deed-in-lieu: A deed given by a borrower to the lender to satisfy a debt and avoid foreclosure. Also called a “voluntary conveyance.”
default: The failure to make payments on a loan on a timely basis. Generally, thirty days after the due date if payment is not received, the mortgage is in default. (Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.)
defect: A title which is irregular or faulty.
defective title: Any recorded instrument preventing a clear title. (For example
deferred interest: When a mortgage is written with a monthly payment less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. (See negative amortization.)
deficiency judgment: Personal claim against the debtor when funds derived from a foreclosure or trustee's sale are less than the amount required to pay off the mortgages, accrued interest, legal fees, etc.
delinquency: Failure to make payments on time.
delinquent taxes: Unpaid property taxes, which are a lien against the property.
delivery: The final and absolute transfer of a deed from seller to buyer. A necessary requisite to the transfer of title.
demand note: A note having no specified date for repayment, but due on the demand of the lender.
density: Intensity of land use; routinely used as a basis for zoning. Regulations, for example, may limit the number of multiunit dwellings that can be built per parcel of a specific size in a designated area.
Department of Veterans Affairs (VA): Agency of the federal government which guarantees long-term, low- or no-down payment residential mortgages to eligible veterans of the military services. (The guarantee protects the lender against loss, encouraging lenders to make mortgages to veterans.)
deposit: A sum of money given to bind the sale of real estate. (Also known as “earnest money.”)
depreciation: Decline in property value.
descent: A title by descent occurs when a person obtains land from a relative who died without a will.
description: The exact location of a piece of real property stated in terms of lot, block, tract, part lot, metes and bounds, recorded instruments, or U.S. Government survey (sectionalized). This is also referred to as the “legal description of property.”
development rights: Literally, an owner’s right to develop his property. (In the past, many states and municipalities have purchased landowners’ development rights as a way of ensuring the preservation of open land, farmland or wooded areas.)
devise: A gift of real estate by will or last testament.
disclosure statement: The section of the finance agreement specifying the total premium, fees, amount financed, finance charge, annual percentage rate, total of payments and amount of each payment.
disclosure: Statement of facts concerning the condition of the property for sale and the surrounding area.
discount fare: The rate of interest paid by a commercial bank when it borrows from a federal reserve bank.
discount points: (See points.)
dominant estate: The property for which a right-of-way easement exists across another's adjoining piece of land is said to be the dominant estate. The land across which the easement runs is the servient estate.
dower: The rights of a widow in the property of her deceased husband.
down payment: The amount paid by the buyer to the seller upon signing the agreement of sale. The difference between the purchase price and the maximum mortgage amount. Lenders typically require a 20% down payment, although mortgage down payments of 5-15% are common.
dragnet clause: A provision in a mortgage pledging several properties as collateral. A default could lead to foreclosure on any of the properties in the dragnet.
draw: A portion of the mortgage loan applied to construction loans as improvements to the property progress.
dual agency: Where one broker represents both the buyer and seller in a purchase. Both parties must agree to the relationship.
due on sale clause: A clause in the deed of trust or mortgage stating that the entire loan is due when the secured property changes ownership.
earnest money: Advance payment of part of the purchase price of a property by the buyer to bind a contract. The earnest money is usually put in escrow. Also called “deposit” or “earnest money deposit.” If the sale does not go through, the earnest money is forfeited, unless the offer expressly provides that it is refundable.
easement: A right of one party to use the land or property of another for a limited purpose, usually extended as a clause in a deed, for example, to use as a right-of-way or for laying sewer or electric lines across a property. (See deed restriction and encumbrance.)
effective age: An appraiser’s estimate of the physical condition of a building, the effective age may be more of less than the actual age.
effective demand: A qualifying term
effective gross income: Normal annual income including any regular or guaranteed overtime. Salary is generally the principal source, but other income may qualify.
egress: The right to leave a tract of land. Often used interchangeably with “access.”
eminent domain: The right of a municipality or public utility to acquire privately owned property for public use at fair market value. (See condemnation.)
employer-assisted housing: A housing initiative offering ways for employers to work with local lenders in developing plans to assist their employees in purchasing homes in an area.
encroachment: A land use, obstruction, or building that intrudes upon (or interferes with) the use of another individual’s property. For example, a wall, fence or driveway.
encumbrance: Any right to, interest in, lien on, or liability to a property that lessens its value. An encumbrance revealed by a title search does not legally prevent transfer of the property, but it is up to the buyer to if he wants to purchase with the encumbrance, or what can be done to remove it. (See covenant and deed restriction.)
endorsement: A statement issued by an insurance company for a Homeowner’s Policy or an Owner’s Title Policy which changes or corrects the information in the original policy.
endorser: A person who signs ownership interest over to another. (Contrast with “co-maker.”)
entitlement: The loan amount that the VA will guarantee for a particular borrower. (Also known as “eligibility.”)
Equal Credit Opportunity Act (ECOA): A federal law requiring lenders and other creditors to make credit equally available without discrimination.
equity: The selling price of a property less the amount still owed for the property.
equity participation: A type of mortgage transaction in which the lender receives a fixed rate of interest on the loan and shares in the profits derived from the land, resulting in tax advantages for both. (Also know as “equity sharing.”)
escheat: Reversion of property to the state when an owner dies leaving no legal heirs, devisees or claimants.
escrow account: An account for the protection of the buyer and seller which is maintained by the title company, broker, attorney, etc.
escrow agent: An agent for both the buyer and the seller who holds money and/or properties.
escrow analysis: The periodic examination of escrow accounts to determine if current deposits will provide sufficient funds to pay all taxes, insurance, etc.
escrow collections: Funds collected 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.
escrow fee: Fee paid to the escrow agent for closing the transaction.
escrow payment: The portion of a mortgagor’s monthly payment that is held by the escrow agent to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items. Known as “impounds” or “reserves.”
escrow: (1) When a disinterested third party who holds money and/or documents for processing or disbursement until the conditions of the intended contract are met. (2) The money is held in a trust fund, provided by the lender to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.
estate: A person’s possessions. The extent of a person’s interest in real property.
estoppel: A legal restraint preventing a person from reneging on his previous position, assertions or commitments.
eviction: The lawful expulsion of an occupant from property.
examination of title: The record title to real estate property based on the title search or abstract, studying the chain of title to reach a conclusion of the status of the title.
exception: (1) Provision in a title insurance policy excluding liability for a specific title defect or an outstanding lien or encumbrance. (2) That portion of land to be deleted or excluded.
exclusive listing: A contract giving a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner’s right to sell the property alone.
execute: To sign a legal instrument. A deed is executed when it is signed, sealed, witnessed and delivered.
executor/executrix: Person appointed by the probate court to carry out the terms of a will.
extended mortgage: When the due date of a mortgage is extended for a longer period of time than originally stated—usually at a higher interest rate.
Fair Credit Reporting Act: A consumer protection law regulating the disclosure of consumer credit reports and establishing procedures for correcting mistakes on credit records.
fair market value: The price at which a seller will sell and a buyer is willing to buy, if neither is under undue pressure.
Fannie 97®: A financing option for a fixed-rate mortgage offering home buyers a 3% down payment for 15-30 years, with a loan-to-value (LTV) percentage of 97%. Designed for people with modest incomes, buyers must take a pre-purchase home-buyer education session to qualify.
Fannie Mae Properties: Fannie Mae owns, manages, and has available for sale, single-family and multi-family homes, condominiums, and townhouses. Fannie Mae homes are sold through local real estate brokers whose contact information is provided in the Fannie Mae Properties for Sale search results on homepath.com.
Fannie Mae: FNMA, or Federal National Mortgage Association
Fannie Mae's Community Home Buyer's ProgramSM: Program 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.
Farmer's Home Administration (FmHA): An agency, within the U.S. Department of Agriculture, that assists purchasers of homes and farms in small towns and rural areas.
Federal Home Loan Mortgage Corporation (FHLMC): (See Freddie Mac.)
Federal Housing Administration (FHA) Guarantee: An insurance contract in which HUD (through FHA) insures the lender will recover a specific percentage of the loan amount from the insurer (FHA) in the event of default.
Federal Housing Administration (FHA): A division of the Department of Housing and Urban Development (HUD) who's main activity is insuring residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.
Federal Reserve System: The central federal banking system serving member commercial banks and is responsible for making federal monetary policy.
Federal Tax Lien: A lien attached to a property for non-payment of federal taxes, such as income tax, estate tax, etc. Unlike other liens, a federal tax is not automatically wiped out by foreclosing on a mortgage or trust deed recorded before the tax lien, with the exception of judicial foreclosure.
fee simple (fee absolute or fee simple absolute): Absolute ownership of real property with unconditional power of disposition during the owner's life. Descends to heirs upon the owner's death if the owner dies without a will.
fee simple deed: The absolute ownership of a property or parcel of land. The highest degree of ownership possible in real estate, giving unqualified ownership and complete power to dispose of the property. Also known as “fee absolute.”
FHA: The Federal Housing Administration, a federal agency which insures first mortgages, allowing lenders to make a loan for a very high percentage of the sale price.
FHA coinsured mortgage: A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor's default.
FHA insurance: Mortgage insurance provided by the Federal Housing Administration to protect banks, savings and loans, and mortgage companies against loss on real estate loans. Requires a fee (up to 2.25% of the loan amount) paid at closing to insure the loan with FHA.
FHA loan: A government-backed mortgage loan supported by the US FHA and the Department of Housing and Urban Development (HUD). Also known as a “government mortgage.”
fiduciary: A real estate broker is a fiduciary for his/her clients; that I,s a person in a position of trust or responsibility with specific duties to act in the best interest of a client.
filing fee: Fee paid to the County Clerk’s Office to record the documents required in a real estate closing.
finance charge: The total dollar amount your loan will cos., including all interest payments for the life of the loan, any interest paid at closing, 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.)
financing statement: A document filed with the Register of Deeds or Secretary of State securing the title to personal property.
finder's fee: A commission paid to a mortgage broker for finding a loan for a prospective borrower.
firm commitment: A lender’s agreement to make a loan to a specific borrower on a specific property.
first mortgage: The superior lien on a property, regardless of other encumbrances against the property.
fixed installment: The monthly payment due on a mortgage loan, including both principal and interest.
fixed rate mortgage: A mortgage with a rate of interest that remains unchanged throughout the life of a mortgage.
fixtures: Personal property attached to real estate which and is legally treated as part of the property while attached. For examples: medicine cabinets, window blinds, dishwashers, air conditioners, and chandeliers, etc.
float: Floating is essentially choosing not to lock the interest rate, betting the rates will be lower at closing. Choosing to float is generally considered risky and may result in a higher interest rate.
flood insurance: Insurance covering damage to property from natural flooding. Federally subsidized flood insurance is available to the owners of property situated in a flood plain, since such property usually is otherwise uninsurable. (See flood plain.)
flood plain: A nearly flat land area along the course of a river or stream that is subject to flooding. The frequency of flooding is suggested by reference; for example, an “annual flood plain,” indicates flooding is expected once each year.
FNMA: (See Fannie Mae.)
foreclosure: A legal proceeding which sells a property secured with a mortgage or deed of trust to satisfy an underlying debt. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt. Also known as a “repossession” of property.
forfeiture of title: Provision in a deed creating a penalty for the violation of conditions or restrictions imposed by the seller upon the buyer in a deed or other proper document. For example, a deed may be granted upon the condition that if liquor is sold on the land, the title to the land will be forfeited by the buyer (or some later owner) and will revert to the seller.
forfeiture: The loss of money, property, rights, or privileges due to a breach of legal obligation.
forgery: The falsifying another person’s name to a deed, mortgage or check or other legal document.
Freddie Mac: The Federal Home Loan Mortgage Corporation (FHLMC). A federal agency which buys conventional and federally-insured first mortgages from members of the Federal Reserve and the Federal Home Loan Bank systems.
free and clear title: Title to a property which is free from any mortgage, lien, or other encumbrance.
freely assumable: A loan which may be assumed by anyone without permission from the lender. (The original borrower is usually held liable in the event the loan is not repaid.)
front ratio: Ratio of monthly housing costs (principal, insurance, taxes, and interest) to gross monthly income. Used by lenders to evaluate loan qualification. Lenders typically allow a front ratio of 28%-40 %.
FSBO: For sale by owner. A property not listed with a real estate broker.
full disclosure: Revealing all known facts which may affect the buyer's decision. A broker must disclose all known defects in the property.
fully amortized ARM: An adjustable-rate mortgage (ARM) with a monthly payment sufficient to amortize the remaining balance at the interest accrual rate over the amortization term.
fully indexed rate: The fully indexed rate = value of the index + margin. (See adjustable loans.)
funding approval: The lender’s approval to disburse funds.
general warranty deed: Where the seller agrees to protect the buyer against being dispossessed because of any other claims against the property.
Ginnie Mae: Government National Mortgage Association (GNMA). A federal association working with the FHA to offer special assistance in obtaining mortgages and which also purchases secondary market mortgages.
GNMA: (See Ginnie Mae.)
good faith estimate: An estimate of charges likely to be incurred by the buyer at loan closing.
good funds: Cash or wire transfers, certified funds (such as certified checks and cashier’s checks), uncertified checks in amounts less than $1,500.00 (such as checks, traveler’s checks, money orders), given to the Escrow Agent for disbursement.
government mortgage: (See FHA loan.)
Government National Mortgage Association (GNMA): (See Ginnie Mae.)
grace period: The time period between the due date of a mortgage payment and the date when late charges are assessed.
graduated payment mortgage (GPM): A loan with relatively small monthly payments in the beginning and gradually increasing dollar amounts over the life of the mortgage.
grandfather clause: A legal provision allowing for a specific activity or land use to continue, exempting the property from a new law that would otherwise render the activity or use unlawful.
grant deed: Contains warranties against prior conveyances or encumbrances. (When title insurance is purchased, warranties in a deed are of little practical significance.)
grant: To bestow—with or without compensation—a gift of land or money.
grantee: The person to whom a grant is made. The buyer; the party to whom title to real property is conveyed.
grantor: The person who makes a grant. The seller: the party who conveys title to real property to another.
GRI: Graduate Realtors Institute: Granted to a member of the National Association of Realtors who successfully completes three courses covering Law, Finance and Principles of Real Estate.
gross monthly income: The total amount the borrower earns per month—not counting any taxes or expenses. Used in calculations to determine whether a borrower qualifies for a particular loan.
ground rent: The money paid for the use of land when a property is held as a leasehold estate rather than as a fee simple estate.
growing-equity mortgage (GEM): A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.
guarantee mortgage: A mortgage guaranteed by a third party, such as a VA or FHA. (Borrowers must pay an insurance premium to get a guaranteed mortgage.)
guaranty policy: A title insurance policy insuring only against title defects appearing in public records. (Other policies insure against all defects, whether in public records or not.)
guaranty: A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to live up to the contract.
guardian: A person appointed by a court to manage the affairs of an individual not capable of handling his/her own affairs.
hazard insurance: The homeowner's insurance policy, protecting from physical damage to the property, such as fire, earthquakes, tornadoes, floods, vandalism, storms, and other “acts of God.” (Buyer often has to add coverage for liability or personal poverty.)
heir: The person who is entitled to the property of an individual who dies without leaving a will (intestate).
hereditaments: Any kind of estates, interest, and rights in real estate which can be inherited.
hiatus: A gap or space left unintentionally, when attempting to describe adjoining parcels of land.
Home Equity Conversion Mortgage (HECM): A special type of “reverse” mortgage enabling older home owners to convert their home equity into cash, using a variety of payment options. Qualifying for a HECM is based not on income, but rather on the value of the home. The loan does not have to be repaid until the borrower no longer occupies the property.
home inspection report: Made by a qualified inspector after a thorough inspection of the property to evaluate the structural and mechanical condition. A satisfactory home inspection is usually included as a contingency by the buyer.
home repair loan: Used to repair or make additions to existing structures, without affecting the existing mortgage.
home warranty insurance: Insures the buyer against defects in home purchases—usually appliances, plumbing, heating and electrical. Usually purchased at the closing. (Also called a “home warranty plan.”)
HomeKeeperSM: Fannie Mae's adjustable-rate conventional reverse mortgage. Allows older homeowners to borrow against the value of their homes and receive the proceeds according to the payment option they select. Anyone 62 years or older who either owns their own home debt-free, or has a very low mortgage debt is eligible.
homeowner’s insurance: Protects the property and contents against loss from fire, vandalism, natural disasters, etc. Must be greater of at least the amount of the loan or 80% of the value of the improvements.
homeowners association: A nonprofit association of homeowners in a particular subdivision, planned unit development (PUD), or condominium that manages the common areas of the development and enforces the association's rules and regulations.
homeowner's insurance: An insurance policy combining personal liability insurance and hazard insurance coverage for a home and its contents. (See hazard insurance.)
homeowner's warranty (HOW): Insurance covering repairs to specific parts of a house for a specified period of time. A homeowner's warranty is usually provided by the property seller as a condition of the sale.
homestead (exemption): A person's principal residence and the land contiguous to the home. Many states, including Texas, give special privileges to such lands, such as reducing the assessed value of the property for calculating property taxes, and protection and exemptions from forced sale by certain creditors of the owner.
HomeStyle® Mortgage Loan: A mortgage enabling eligible a buyer to obtain financing to remodel, repair, and upgrade their existing homes or a home they are purchasing.
Housing and Urban Development (HUD): The U.S. government agency which implements certain federal housing and community development programs.
housing code: A local government ordinance setting the minimum standards of safety for existing residential buildings.
housing expense ratio: The percentage of gross monthly income spent on housing expenses.
Housing Expenses-to-Income Ratio: The percentage obtained by dividing housing expenses by gross monthly income. (Also called “payment-to-income ratio,” and “front-end ratio.” See debt-to-income ratio.)
HUD 1: An itemized statement (prepared by the closing agent) required by the U.S. Department of Housing and Urban Development (HUD) for federally mortgages on residential properties. It shows the source and distribution of funds connected with the purchase of residential property, such as real estate commissions, loan fees, points, and the initial escrow amounts. (Also called the “losing statement” or the “settlement sheet.”)
HUD flood zone: An area prone to flooding, according to the Housing and Urban Development (HUD).
HUD median income: Median family income for a particular county or metropolitan area as estimated by the Department of Housing and Urban Development (HUD).
hypothecate: To pledge a property as security without having to give up possession of the property.
impound account: The portion of a borrower's monthly payments held by the lender in a trust account to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as “reserves.”")
improvements: Additions to raw land which add value to the property, such as buildings, streets, etc.
in personam: Directed at a specific person or persons, rather than against a property or generally for all people.
in rem: Pertaining to property or people in general.
income approach: Estimating the value of a property based on the income it generates.
income property: Real estate developed or improved to produce rental income. Examples include apartments, office buildings and shopping centers.
income to debt ratio: The percentage of gross income which lenders allow for monthly housing costs when evaluating a buyer's qualification for a particular loan amount.
indemnify: Insurance against possible loss or damage. A title insurance policy, for example, is a contract of indemnity.
index: A published interest rate, not controlled by the lender, used to compute an adjustable interest rate (ARM). Common indexes include one-year U.S. Treasury securities and 11th District Cost of Funds. The index and the interest rate linked to it may increase or decrease.
indexing: An adjustment of interest rates according to a specified index or economic indicator.
in-file credit report: An objective account of credit and legal information obtained from a credit repository.
ingress and egress: The right to go enter and exit only over a piece of property. (See also easement.)
initial interest rate: The original interest rate of the mortgage at the time of closing, for an adjustable-rate mortgage (ARM). (Sometimes known as “start rate” or “teaser.”)
inspections: An examination of property to see repairs are required before funds are received. For example, a termite inspection.
installment loan: Borrowed money repaid in equal payments, known as installments.
instrument: A written document having a legal effect.
insurable title: A property title which a title company agrees to insure against defects.
insurance: A contract of indemnity protecting against specified perils.
insurance binder: A document stating that insurance is temporarily in effect until a specified date, so that a permanent policy may be obtained before the expiration date.
insured closing service: A service offered to certain large lenders or developers by the insurer to indemnify for any loss in settlement funds caused by
insured mortgage: A mortgage protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer pays the lender for the loss incurred or the insured amount.
interest: The charge a borrower pays to a lender for use of money.
interest accrual rate: The rate interest accrues on a mortgage—usually the rate used to calculate the monthly payments, although not for an adjustable-rate mortgage (ARM).
interest cap: Limit on the amount an interest rate can change on an Adjustable Rate Mortgage, regardless of how much the index changes. Most ARMs have cap on both the amount of possible increase or decrease and a life-long cap limiting how much the interest rate can vary over the life of the loan.
interest only payments: A mortgage where only the interest is paid on a monthly basis, so that the buyer accrues no equity. (Usually used only on some purchase money mortgages where the buyer is responsible for paying the seller the entire amount of the second mortgage at some time in the future.)
interest rate: The percentage of interest paid on the principal amount of borrowed money.
interest rate buydown plan: Where a seller (or another party) deposits money to an account to be released each month to reduce the monthly payments during the early years of a mortgage. During the specified period, the buyer's interest rate is “bought down” below the actual interest rate.
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.
interim financing: A temporary or short term loan such, as a construction loan made during completion of a building. A permanent loan replaces this loan after completion.
interval ownership: A form of time share ownership. (See time share ownership.)
intestate: Dying without at will (or without a valid will), so that property of the deceased passes to heirs determined by laws of succession.
investor: A money source for a lender.
joint and several liability: A creditor can demand full repayment from any borrowers.
joint protection policy: A title insurance policy which insures both the owner and/or the lender.
joint tenancy: Property ownership by two or more people, each having separate and equal rights on any matter affecting disposition of the property—usually with the right of survivorship—meaning if one party dies, ownership automatically accrues to the surviving owner or owners.
judgment lien: The claim on a property resulting from a judgment against a debtor; an involuntary lien.
judgment docket: The record book of a County Clerk where a judgment is entered in order that it may become a lien upon the property of the debtor.
judgment: A court’s determination regarding the rights of parties in an action. For example, judgment of debt on a property owner can create a lien on all of the owner's property within that jurisdiction.
judicial foreclosure: Foreclosure proceeding used in some states to handled a civil lawsuit, conducted entirely under the auspices of a court.
jumbo loan: A loan that exceeds Fannie Mae’s and FHA's mortgage amount limits
junior lien: A mortgage lower in lien priority than another mortgage. Lenders are repaid in a particular order when a property is foreclosed. This order is established by the loan documents. The lender with the first claim to repayment holds the “first mortgage,” and all remaining lenders are said to hold a “junior lien.” (Also sometimes called a “secondary mortgage.”)
key lot: A tract of land selling for a higher price because of its desirable location.
kicker: A payment required by a mortgage in addition to normal principal and interest. (Also known as a own as a “participation loan.”)
land contract: An arrangement allowing the buyer to occupy land, while the seller continues to hold legal title until the sales price has been paid in full.
landmark: Any conspicuous object helping to establish land boundaries.
late charge: The penalty a borrower pays for paying an installment late (usually 15 days after the due date).
lease: A written agreement between the property owner and a tenant allowing the tenant to possess the property for a specified period of time and rent.
leasehold: The right to possess and use a property for a fixed period of time. The lease is the agreement creating that right.
leasehold estate: Tenant's right of possession under a lease agreement.
lease with option to purchase: An agreements allowing the lessee the right to purchase the property.
lease-purchase mortgage loan: An alternative financing option allowing home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount deposited in a savings account to accumulate toward a down payment.
legal description: Identifying a parcel of land with a geographical methodology accepted in a court of law.
lender: The financial institution that loans money for a property, such as a bank or mortgage company.
lender’s policy: A title policy insuring the validity, enforceability and priority of a lender’s lien. (This form does not provide protection for the owner.)
lessee: The tenant who holds a leasehold.
lessor: The one who gives a leasehold to a lessee; the landlord.
liabilities: An individual's financial obligations, including all long-term and short-term debts.
liability insurance: Coverage offering a property owner protection against claims of owner's negligence resulting in bodily injury or property damage to another party.
license: Permission to enter or use land belonging to another, without constituting an interest in the land. For example, permission to hunt game on a particular property.
lien: A monetary charge imposed on a property as a legal claim as security for an unpaid debt. (For example, see “mechanic’s lien” and “judgment lien” and “tax lien.”)
lien waver: A waiver of mechanics' lien rights against a property, signed by the contractors or subcontractors involved. (See mechanic’s lien.)
life estate: A grant reserving of the right of use, occupancy and ownership of a property for the life of the specified individual. At the individual's death, the property then reverts to the grantor.
life of loan cap: The maximum interest rate to be charged during the life of the loan, often expressed as an increment above the initial loan rate. For example, an adjustable rate mortgage (ARM)with a starting rate of 7.25% and a 6% lifetime cap will never adjust above 13.25%. (Also known as a “lifetime cap.”)
line of credit: The agreement of a financial institution extending credit up to a specific amount for a specific time to a specified borrower.
link: (1) One of a series of owners. (See chain of title.); (2) A distance of 7.92 inches. A measurement used by surveyors.
liquid asset: Any asset easily converted to cash.
liquidated damages: Compensation paid to the seller if the buyer fails to complete the purchase even though all contingencies have been satisfied. For example, the seller may keep the buyer's earnest money if the buyer defaults on the contract.
lis pendens: A legal notice to bind third parties of litigation who claim an interest in a real estate property.
littoral: A reference to land, or the right to use land, adjoining a body of water. (See riparian rights.)
loan: A sum of money lent for a specified period of time, repayable with interest.
loan application fee: Paid to the lender at the time of application to process the loan application.
loan application: A document required by a lender prior to loan approval containing detailed information about the borrower.
loan commitment: (See commitment letter.)
loan discount: The points charged by a lender, paid by either the buyer or the seller on conventional loans. The number of points fluctuates with the mortgage money market. (See point.)
loan origination fees: Money required by the lender before starting approval process for a mortgage.
loan policy: A title insurance policy protecting a mortgagee (or beneficiary under a deed of trust) against loss from an invalid title to a property. (See lender’s policy.) Also know as “mortgage policy,” or “mortgagee policy.”)
loan servicing: The act of collecting loan payments, handling property tax and insurance escrows, foreclosing on defaulted loans, and remitting payments to the investors.
loan-to-value ratio (LTV): The loan amount divided by the appraised property value. For example, a $100,000 home with an $90,000 mortgage has a LTV percentage of 90%.
lock: The act of committing to a specific mortgage rate. (Also see float.)
lock-in: A written agreement in which the lender guarantees a specified interest rate for a set period of time, protecting the borrower from rising rates during the process. The lock-in may also specify the number of points to be paid at closing.
lock-in period: The time period for which a lender will guarantee a certain interest rate. Request information from your lender regarding specific lock procedures. (Also see lock-in.)
Loss Payable Clause: Provision added to a Fire and Casualty Policy stating any loss will be paid to two or more parties according to their interests. (Usually the owner and the mortgage lender.)
lot: Any portion of real property; usually a portion of a subdivision as defined by a plat or survey.
lump sum payment: A sum of money paid at one time, as opposed to numerous payments over a given period of time.
maintenance fee: Charged by a homeowner’s association as defined in a subdivision’s restrictions.
majority: The age at which a person is entitled to handle his or her own business affairs.
margin: A fixed number added to the index to compute the rate on an adjustable rate mortgage (ARM). For example, if an ARM has an index of 4% and a margin of 2.5, the interest rate is set at 6.5% (4 + 2.5).
market value: The price at which a seller will sell and a buyer is willing to buy, if neither is under undue pressure. Also known as “fair market value.”
marketable title: A title that is free and clear of objectionable liens, clouds, or other title defects, and therefore, acceptable to the buyer
master association: A “second-level” homeowners’ association that handles matters affecting the entire development. (The “first-level” associations handle matters affecting particular portions of the project.)
maturity: The date on which the principal balance of a loan is due.
maximum financing: A mortgage amount that is within 5% of the highest loan-to-value (LTV) percentage allowed. For example, maximum financing on a fixed-rate mortgage would be 90% or higher, because 95% is the maximum allowable LTV percentage for a fixed-rate mortgage.
mechanic’s lien: A legal claim by unpaid contractors, laborers or suppliers on real estate property as security for work or supplies used in construction or improvements.
merged credit report: A credit report containing information from three credit repositories.
metes and bounds: The boundaries of a piece of land, described with terminal points, angles, distances and monuments.
minimum lot restriction: The smallest lot size in a subdivision on which building is allowed; usually specified by zoning regulations.
minor: One who is legally incapable of making contracts due insufficient age or status.
MIP (Mortgage Insurance Premium): Insurance from FHA to protect the lender from loss due to a borrower's default. (In FHA insured mortgages this represents an annual rate of one-half of 1% paid by the mortgagor monthly.)
modification: The act of changing any of the terms of the mortgage.
monthly fixed installment: That portion of the total monthly payment applied toward principal and interest.
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 requiring monthly payments to reduce the debt.
monument of survey: Visible marks or indications left on objects (such as posts, stones, trees, etc.) indicating the lines and boundaries of a survey.
mortgage (open-end): A mortgage provision which permits borrowing additional money in the future without refinancing the loan or paying additional financing charges.
mortgage: An instrument whereby an owner conditionally transfers title of property to another as security for payment of a debt.
mortgage assumption: A transaction where the buyer agrees to assume the loan obligation against a property.
Mortgage Backed Security (MBS): A bond or other financial obligation secured by a pool of mortgage loans.
mortgage banker: A lending institution that lends money solely for real estate, securing its loans with mortgages on the real estate. A company that originates mortgages exclusively for resale in the secondary mortgage market.
mortgage broker: A person or company that brings borrowers and lenders together for a fee or a commission for their services.
mortgage commitment: Written notice from a lending institution stating it will advance mortgage funds in a specified amount for a buyer to purchase a property.
mortgage insurance premium (MIP): (See MIP.)
mortgage insurance: Insurance written by an independent mortgage insurance company protecting the lender against loss from mortgage default, allowing the lender to loan a higher percentage of the sale price. (Also see PMI- private mortgage insurance.)
mortgage life insurance: A term life insurance often bought by mortgagors, where coverage decreases as the principal balance of the mortgage declines. If the borrower dies while the policy is in force, the remaining debt is paid by insurance proceeds.
mortgage note: A written agreement to repay a loan, which states the manner in which the loan will be repaid.
mortgage policy: (See loan policy.)
Mortgage Revenue Bonds: Issued by communities as a means of providing lower cost mortgage funds to certain qualified borrowers.
mortgage title policy: A policy insuring a mortgage or beneficiary under a Deed of Trust against loss caused by an invalid title.
mortgage: A legal document pledging property as a security for a loan. Mortgages generally run from 10-30 years.
mortgagee: The lender; the one who holds the mortgage to a property.
mortgagee’s policy: (See lender’s policy.)
mortgagor: The borrower.
multidwelling units: Properties providing separate housing units for more than one family on a single mortgage.
multifamily mortgage: A residential mortgage on a dwelling designed to house five or more families, such as an apartment complex.
multiple listing: A central bureau listing real estate for sale held individually by members of a group of real estate brokers. Any member may sell the properties divide the commission with the broker who made the original listing.
municipal utility district: Any area with a special tax to provide water and/or sewer services.
muniments of title: Documents proving an owner’s title to property.
National Association of Realtors (NAR): The trade organization which sets the standards for the real estate professionals across the country.
negative amortization: A gradual increase in mortgage debt occurring when the monthly payment is too small to cover the entire principal and interest due. The interest that isn't covered is added to the unpaid balance, creating “negative” amortization. Negative amortization can occur when an ARM has a payment cap that results in monthly payments too small to cover the interest.
negotiation: Discussions held between parties to resolve issues and reach an agreement.
net effective income: The borrower's gross income minus federal income tax.
net worth: The value of all of a person's total assets minus all 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 mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens, and other funds for the borrower's use—not exceed 1% of the principal amount of the new mortgage.
non-assumption clause: A statement in a mortgage contract forbidding the assumption of the mortgage by another party without the prior approval of the lender.
non-conforming loan: Loans which do not comply with Fannie Mae or Freddie Mac guidelines.
nonconforming use: A property use that violates local zoning regulations, but is permitted because the use predates implementation of the new regulations. In such cases, expansion or substantial improvement of the property normally restricted. (See planning commission, variance, zoning, zoning board.)
Notary Public: One authorized to take acknowledgments of documents including deeds, contracts, and mortgages.
note: A written agreement obligating a borrower to repay a loan of a specific amount of money, at a certain time, or in a certain number of installments, such as a mortgage or deed of trust.
note rate: The interest rate stated on a mortgage note.
notice of default: Formal written notice to a borrower that a default has occurred and that legal action may be taken.
notorious possession: (See adverse possession.)
nuisance: Any use of property judged incompatible with the uses of neighboring property; for example, a junkyard in a residential neighborhood.
obligee: The one to whom an obligation is owed.
obligor: The one who is legally bound (obligated) to repay a note.
offer: The amount a potential buyer indicates he/she is willing to pay for a specific property.
offeree: The one who receives the offer; the seller.
offeror: The one who makes the offer; the buyer.
open end mortgage: A mortgage permitting the buyer to borrow additional money under the same mortgage, with certain conditions.
open house: Showing a home for sale to prospective buyers by leaving the home open for inspection.
option: The right, to buy, sell, or lease land at a fixed price. This right is acquired by a monetary consideration for a fixed period of time.
optionee: The one who purchases an option.
optionor: The one who sells an option.
oral contract: A verbal agreement. (Generally considered unenforceable in real estate transactions.)
original cost: The purchase price of property, paid by the present owner.
original principal balance: The total amount of principal owed on a mortgage before any payments are made.
origination fee: Paid to the lender by the buyer to originate a new loan. Stated in the form of points. One point is equal to 1% of the mortgage amount. The fee is limited to 1% for FHA and VA loans. (Also see loan origination fee and points.)
oversized policies: Policies with an amount exceeding that for which the agent is authorized to write—without specific approval.
owner financing: A property transaction in which the seller provides all or part of the financing.
owner occupant: When the owner resides on the specified property.
owner of record: The individual named on the deed recorded with the county office.
owner’s title policy: Title insurance for the owner of the property (rather than a lien holder).
owner's policy: A title insurance policy insuring the owner of real estate property against loss due to any defect of title not excepted to or excluded from the policy.
Ownership: The right to possess and use property to the exclusion of others.
PIQ: A title term referring to Property In Question.
PMI (Private Mortgage Insurance): A contract which insuring the lender will recover a specific percentage of the loan amount from the insurer in the event the loan defaults. Many lenders require private mortgage insurance on higher percentage loans.
POC: Paid outside of closing. Any charges paid before settlement should be written on the settlement sheet and marked “POC.”
package mortgage: Mortgage covering both real and personal property.
paper: A mortgage, deed of trust or land contract provided in lieu of cash.
parcel: All land contained within a single legal description.
partial payment: A payment insufficient to cover the scheduled monthly mortgage payment.
partial release: A mortgage provision allowing some portion of the property to be freed from serving as collateral.
participation mortgage: A mortgage allowing the lender to share in part of the income or resale proceeds.
partition: Division of land, usually by a legal proceeding, among former co-owners.
pass through certificates: Interests in a pool of mortgages sold by mortgage bankers to investors.
patent: A document or grant conveying title to land by the Federal or State Government.
payment cap: A limit on the amount that the monthly payment on an adjustable rate mortgage can increase or decrease at each adjustment period.
payment change date: The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM)—generally, the month immediately after the adjustment date.
payment penalty: Fee charged to a buyer who pays a loan off early.
payoff penalty: A fee equal to one month’s interest for failing to give written notification of intent to payoff a loan.
payoff: Payment on an existing loan or other lien fully covering the remaining debt.
percolation test: A test required before installation of a septic system, to determine a soil’s capacity for drainage.
periodic payment cap: For an adjustable-rate mortgage (ARM), a specific limit on the amount payments can increase or decrease over one adjustment period—regardless of how high or low the index is.
permanent financing: A loan secured by land after improvements have been completed.
permanent loan or mortgage: A long term mortgage, usually ten years or more. Also called an “end loan.” Often refers to the mortgage paying off a construction loan on a completed property.
permit: A document issued by a government regulatory authority allowing the bearer to take some specific action. For example, an occupancy permit allows the owner of a building to occupy or rent the building.
personal property: Any property that is not real property.
personal representative: A person appointed by the probate court to administer a deceased person's estate. See executor or administrator.
PITI reserves: The cash amount a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months. (Also called “monthly housing expense.”)
planned unit development (PUD): A form of zoning classification allowing greater flexibility in subdivision design, making cluster housing possible, for example. (See cluster housing.)
planning commission: A public body charged with overseeing the growth and development of a municipality, usually in accordance with a master plan. Zoning therefore becomes the means by which growth is controlled. (See variance and zoning board.)
plat: A surveyor’s map of a specific property showing boundaries, buildings, improvements and easements. A map dividing a parcel into lots, as in a subdivision. (Also called a “plat map.”)
Pledged Account Mortgage (PAM): Money placed in a pledged savings account earns interest which is gradually used to reduce mortgage payments.
PMI: Private mortgage insurance. (See Private Mortgage Insurance.)
PMM (Purchase money mortgage): A mortgage given by the seller simultaneously with the purchase of real estate to secure the unpaid balance of the purchase price.
points: 1% of the loan amount. For example, 1.5 points on a $100,000 mortgage would cost the borrower $1,500. (Also called “discount points” or “commission points.”)
policy: A written contract of title insurance.
policyowner: The insured on a title insurance policy.
power of attorney: A legal document giving one person (the “attorney-in-fact”) authorization to act on another’s (the “principal”) behalf as his/her agent or attorney.
Power of Sale: A clause in a will, mortgage, deed of trust or trust agreement authorizing the sale or transfer of land in accordance with the terms of the clause.
preliminary report: A report issued by a title company, before issuing title insurance, showing the recorded condition of title of a specific property. Also known as a “prelim.” (See commitment.)
prearranged refinancing agreement: An arrangement wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage, as an inducement for the borrower to agree to the original mortgage.
preforeclosure sale: A procedure allowing a mortgagor to avoid foreclosure by selling the property for less than the amount owed to the investor.
premium: The amount payable for an insurance policy.
prepaid expenses: Necessary to create or to adjust a seller's escrow account. Expense can include taxes, hazard insurance, private mortgage insurance and special assessments. (Also called “prepaids.”)
prepaid interest: The interest charged to borrowers at closing to cover the cost of borrowing for the balance of the month. For example, if a loan closes on the 21st of the month and the first payment is due on the 1st of the following month, the lender will charge 10 days of prepaid interest.
prepayment: The ability to pay off the remaining balance of a loan.
prepayment penalty: A fee charged by lenders for repaying the loan in advance of the regular schedule, before the loan has been fully amortized. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan. (FHA does not permit such restrictions on their insured loans.)
pre-qualification: Determining how much money a prospective home buyer will be eligible to borrow before applying for a loan, based on income and expenses.
prescriptive easement: A right to use another's property consistent with the owner's rights which is acquired for a definite time period; for example 20 years.
primary lender: A financial institution which actually makes mortgage loans from its funds, such as banks, saving and loans, mortgage companies, and credit unions.
primary mortgage market: Financial institutes that originate and service mortgage loans (banks, savings & loans, credit union, mortgage bankers, institutional lenders) are the primary mortgage market. These lenders sometimes sell their mortgages to the secondary mortgage markets, such as to FNMA or GNMA, etc. (See also secondary mortgage market.)
prime rate: The low, commercial interest rate lenders charge to their most preferred customers.
principal, interest, taxes, and insurance (PITI): The four components of a monthly mortgage payment.
principal: The sum of money on which the interest is paid; the amount borrowed. Or the person having prime responsibility for a loan, as opposed to an endorser.
priority inspection: Inspection for insuring a new construction loan, to ascertain if the improvement had begun when the lender's deed of trust was recorded.
priority: The order of the various liens and encumbrances affecting the title to a property. (The date and time of recording usually determine the priority of documents.)
Private Mortgage Insurance (MI): Mortgage insurance provided by a private mortgage insurance company—and paid by the borrower—to protect lenders against loss if case of default. Lenders generally require mortgage insurance for a loan with a loan-to-value (LTV) percentage over 80%. (Meaning, a down payment of less than 20%).
probate: Court process establishing validity of a deceased person's will.
promissory note: A written promise to repay a loan of a specific amount of money, at a certain time, or in a certain number of installments, such as a mortgage or deed of trust.
property tax: A local tax based on the market value of a property, as assessed by the county assessor's office. (See PITI.)
pro-rate: The buyer’s and seller’s proportionate share of an obligation to be paid, such as taxes, rents, insurance, assessments, etc., based on the number of days of a month the property was held by each.
public auction: An announced public meeting to sell property in order to repay a mortgage in default.
public domain: Land owned by the government and belonging to the community at large.
public records: The transcriptions in a recorder's office of instruments relating to property which have been recorded, with indexes.
public sale: An auction of property with notice to the general public. (See public auction.)
PUD: See Planned Unit Development.
PUD (Planned Unit Development): 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.
purchase agreement: A document in which the buyer and seller agree to certain terms for the transfer of a real estate property under specific stated conditions. Also called a “sales contract,” “earnest money contract,” or “agreement for sale.”
purchase money mortgage: A mortgage given by a buyer to a seller to secure payment of a part of the purchase price of the property.
purchase money transaction: The acquisition of property through the payment of money or its equivalent.
qualifying ratio: Calculations used in determining if a borrower qualifies for a mortgage
qualifying: The process of determining a buyer's financially ability to assume a mortgage.
quiet title: A court action to settle a title dispute. The court decree obtained is a “quiet title” decree.
quitclaim: A release of claim or title to property. (See quitclaim deed.)
quitclaim deed: A deed conveying any interest a the seller may have in a property. It does not, however, guarantee the seller actually had interest in the property. For example, a buyer who receives a quitclaim deed for a piece of real estate receives only the rights the seller had—there are no guarantees the seller had a clear title, or that the buyer is getting a clear title. By accepting such a deed the buyer assumes all the risks.
radon: A radioactive gas which in sufficient concentrations can cause health problems.
range: A part of the government survey, being a strip of land six miles in width, and numbered east or west of the principal meridian.
rate lock: A commitment issued by a lender guaranteeing a specified interest rate for a specified period of time. (See lock-in.)
rate-improvement mortgage: A fixed-rate mortgage including a provision giving the borrower a one-time option to reduce the interest rate—without refinancing—during the early years of a mortgage.
raw land: Unimproved land without utilities, drainage, buildings, etc.
real estate agent: A person licensed to negotiate and transact the sale of real estate for the property owner.
real estate broker: An agent who buys and sells real estate for a company, firm, or individual on a commission basis, who is licensed to represent a buyer or a seller in a real estate transaction.
Real Estate Investment Trusts (REIT): A trust using investor's money to purchase and manage real estate.
Real Estate Settlement Procedure Act (RESPA): A law stating how mortgage lenders must treat people who apply for real estate loans on property with four or less units.
Real Estate Settlement Procedures Act (RESPA): A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
real estate: See real property.
real property: Land, all improvements, everything built on, it growing on it; everything attached to it, including the sky above and the earth below.
Realtor fees: The amount paid to a Realtor for his or her services.
Realtor®: A person who is a member of a local real estate board affiliated with the National Association of Realtors®.
Realty: Real property.
Recision: The cancellation of a contract. (When refinancing a mortgage on a principal residence, the homeowner legally has three days to cancel the contract once it is signed.)
reconveyance: A document transferring title of a piece of real estate from a trustee to the owner, when the title is being held as collateral security for a debt. (Also called a “deed of reconveyance” or “deed of release.”)
recorder: The public official who records transactions affecting real property in an area. (Sometimes known as a “Registrar of Deeds” or “County Clerk.”)
recording: Noting in a public office the details of a legal document—such as a deed or mortgage—which effects a title to real estate.
recording fees: Money paid to the County Clerk to record documents in public records.
recourse: The right of a lender to claim money from a borrower in default, in addition to the property pledged as a collateral.
redeem: The act of buying back lands after a mortgage foreclosure, tax or other execution sale.
redlining: Illegal refusal to write mortgages in neighborhoods defined by predominance of race, religion or ethnicity.
redlining: Refusing to provide loans or insurance within a particular “high risk” neighborhood.
refinance transaction: Paying off one loan with the proceeds from a new loan using the same property as security.
Regulation Z (Reg Z): Federal Reserve Board regulation requiring creditors to provide full disclosure of the terms of a loan including the annual percentage rate (APR) in accordance with the Consumer Protection Act.
rehabilitation mortgage: A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.
reinsurance: To insure again by transferring a portion of the risk to another insurance company or companies, thus spreading the loss risk any one company has to carry. The insurer, commonly known as the “lead insurer,” assumes risk only to a certain point, the “primary liability.” Anything beyond this point of loss is then covered by the reinsurance.
reissue rate: A reduced rate of title insurance premium when the property owner has been previously covered by the insurer within a certain time.
REIT: See Real Estate Investment Trust.
release: A deed releasing a specific property from the lien of the mortgage or deed of trust.
remainder: An interest in land by a person other than the grantor, in which the right of possession is postponed until the termination of some other interest in that land.
remaining balance: The amount of principal that has not yet been repaid. (See principal.)
remaining term: The original amortization term minus the number of payments applied to date.
renegotiable rate mortgage: A loan secured by a long-term mortgage of up to 30 years, in which the interest rate is adjusted periodically. (See adjustable rate mortgage.)
rent loss insurance: Insurance protecting a landlord against loss of rent or rental value due to fire or other casualty.
rent with option to buy: (See lease-purchase mortgage loan.)
repayment plan: An arrangement to pay delinquent installments, sometimes called "relief provisions."
replacement reserve fund: A fund set aside to replace items in common property at a condominium, PUD, or cooperative project, such as carpeting, furniture, etc.
reserve: A portion of a title insurance company's retained earning set aside for a specific purpose.
RESPA: See Real Estate Settlement Procedures Act.
restrictions: Limits on how a piece of property may be used or how the title conveyed. Sometimes called “restrictive covenants.”
restrictive convents: Created by deed and may “run with the land”—binding all subsequent purchasers of the property, or may be "personal"—binding only the original seller and buyer. (See restrictions.)
reverse mortgage: Mortgage in which the lender makes periodic payments to the borrower against the borrower's equity in the home. Often used by the elderly. Repayment is usually not required until the home is sold or the borrower’s estate is settled, provided the borrower continues living in the home and keeping current on all taxes and insurance. Also called a “release of mortgage.”
reversion: Provision stating that upon the happening of an specific event or contingency, title to the land will return to the grantor.
right-of-way: The right to pass across the lands of another. An easement. A strip of land over which facilities such as highways, railroads or power lines are built.
right of first refusal: A provision requiring the owner of a property to give an individual the first opportunity to purchase or lease a property, before offering it for sale or lease to others.
right of ingress or egress: The right to enter or leave designated premises.
right of survivorship: A surviving joint owner’s right to acquire the interest of a deceased joint owner. (See joint tenancy, tenancy by the entirety, and tenancy in common.)
riparian rights: A property owner’s right to use water on, under or adjacent to his land, a term is used mostly in the East. Comparable rights in the West are referred to as “usufructory rights” or “littoral rights.” (See usufructory rights.)
rollover loan: A loan amortized over a long period of time—such as 30 years—but with an interest rate fixed for a shorter period—such as five years. The loan may be extended or "rolled over," at the end of the shorter term.
Rural Housing Service (RHS): An agency within the Department of Agriculture providing financing to farmers and others buying rural property, who are unable to obtain loans elsewhere. Funds are borrowed from the U.S. Treasury.
sale agreement: A contract between a buyer and seller, specifying the terms and conditions of a sale of real estate. (See agreement of sale.)
sale and leaseback: The sale of a property to a buyer who then leases use of the property back to the seller.
savings & loan: Institutions specializing in mortgage loans primarily, on owner occupied residential property.
search: A careful exploration and examination of the public records in an effort to find all recorded documents relating to the chain of title for a specific property. (See title search.)
second home: A home not used as a primary residence or an investment property (as it is not rented), but used occasionally by the owners. Also called a “vacation home.”
second mortgage: A mortgage ranked immediately below a first mortgage.
secondary mortgage market: The buying and selling of existing mortgages to investors like Fannie Mae or Freddie Mac.
Section 1031: IRS section dealing with tax free exchanges of certain property.
Section 8 Housing: Privately owned low-income rental units where landlords receive subsidies on behalf of qualified low-income tenants.
section of land: A parcel of land comprising one square mile or 640 acres.
secured loan: A loan that is backed by collateral.
security: Property serving as collateral for a debt.
seller take-back: Agreement in which the property owner provides financing. (See owner financing.)
seller’s broker: By law, all brokers work for the seller. (See buyer’s broker and broker.)
seller’s market: A market in which there are fewer houses for sale than there are potential buyers. Housing prices are therefore generally higher, providing a better deal for sellers.
separate property: Property owned by one spouse exclusive and independent from the other spouse.
service charge: Paid by the borrower to the lender for the expenses in processing the loan.
servicer: Organization collecting principal and interest payments and managing escrow accounts of borrowers. (Often services mortgages purchased by an investor in the secondary mortgage market.)
servicing: Operations performed by lender to keep a loan in good standing; such as billing, collecting payments, filing reports, managing impound accounts and handling mortgage defaults.
setback: The distance from a boundary defining the closest point in which a structure may be built.
settlement cost (HUD Guide): A booklet providing an overview of the lending process, given to consumers after the loan application is completed.
settlement/settlement costs: (See closing and closing costs.)
settlement: (See closing.)
Shared Appreciation Mortgage (SAM): A residential loan with a below market interest rate, for which the lender receives a portion of the future appreciation of the property value.
sheriff's deed: Deed given at the sheriff's sale in the foreclosure of a mortgage.
simple interest: Interest computed only on the principle balance.
single agency: Relationship in which an agent represents either the buyer or the seller, but not both.
single family properties: One- to four-unit properties including detached homes, town homes, condominiums, and cooperatives.
spec house: Single family home constructed by a builder before finding a buyer.
special assessment: Special tax imposed on property, individual lots or all property in a given area to pay for improvements—road construction, street lights, sidewalks, sewers, etc.
special deposit account: Account established for rehabilitation mortgages to hold the funds needed for the work, which can then be disbursed over time as particular portions are completed.
special exception: (See nonconforming use, planning commission, variance, zoning, and zoning board.)
special lien: Lien binding a specific property. (As opposed to a general lien levied against all one's assets.) 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. Sometimes called “particular” lien or “specific” lien. (See lien.)
Special warranty deed: A deed containing a covenant whereby the seller agree to protect the buyer against being dispossessed because of any adverse claims to the land by the seller, or anyone claiming through the seller.
special warranty deed: Seller warrants that he/she has done nothing to impair title during his/her ownership, but does not warrant against title defects arising from conditions that existed before his/her ownership.
specific performance: Legal action in which the court requires a party to fulfill its obligations as per an agreement.
spot zoning: Rezoning of property for a use inconsistent with the zoning of surrounding properties. (See nonconforming use, planning commission, variance, zoning, zoning board.)
squatter: One who settles on unoccupied land without legal claim. (See adverse possession.)
standard coverage policy: Form of title insurance containing certain standard exceptions not included in the ALTA policies. Used primarily in some western states.
standard payment calculation: Method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
standard uniform loan application (Form 1003): Standard loan application used in the mortgage industry.
starter: A copy of the last policy or report issued by a title insurer describing the title to land upon which a new search is to be made. (Also called “back title letter” or “back title certificate.”)
statutory reserve: The reserve requirement established by state statutes as the minimum which must be maintained by a title insurance company.
steering: The unlawful and discriminatory influencing of a real estate client to buy or sell property in a particular location expressly for reasons of race, religion or ethnicity.
step-rate mortgage: Mortgage allowing the interest rate to increase according to a specific schedule (such as five years), resulting in increased payments. At the end of the specified period, the rate and payments remain constant for the remainder of the loan.
street improvement bonds: Interest-bearing bonds issued—usually by a city or county—to secure the payment of assessments levied against land to pay for street improvements.
strip development: A commercial development situating businesses side by side along a thoroughfare to which each business has specific access.
subdivision: A parcel of land divided into lots for development.
subject to (purchasing subject to a mortgage): Buyer agrees to make payments on the existing mortgage without notifying the lender. The seller remains liable if the buyer does not make the mortgage payment. The buyer is not personally liable for mortgage payments, but must make payments to keep the property. (See assumable mortgage.)
subordinate financing: Any mortgage or other lien with a priority lower than the first mortgage.
subordination: The act of ranking a person's rights below the rights of others. For example, a second mortgagee's rights are subordinate to the rights of the first mortgagee. A loan in a lower priority.
sub-surface right: The right of ownership to things lying beneath the physical surface of the property.
surety: (1) Person agreeing to be responsible for a debt of another; (2) Agreement by which one undertakes responsibility for the debt of another.
surface rights: Rights to enter upon and use the surface of a parcel of land, usually in connection with an oil and gas lease or other mineral lease.
survey deletion: A deletion to the Mortgage Title Policy after a survey determines “shortages in areas on the policy, reflecting any exceptions. (A survey deletion may also be purchased for the Owner’s Policy.)
survey: Process of measuring a property to determine exact size, location and physical description.
sweat equity: Value added to a property directly by the personal work of its owner.
table funding: When a lender sends “good funds” with the loan package, or gives their authorization to disburse wired funds at the closing table.
takeout financing: Commitment to provide a permanent loan upon completion of construction. The takeout loan normally pays off the construction loan.
tax certificate: Document issued by the Tax Service indicating all taxes currently due on a property.
tax deed: The deed given to a buyer at a public sale of land for non-payment of taxes, conveying only such title as the defaulting taxpayer possessed.
tax deletion: Deletion on the Mortgage Title Policy insuring the taxes are paid through the year stated, and no outstanding taxes are due up to that time. (There is a charge for this deletion.)
tax lien: A claim against real estate for nonpayment of taxes
tax probation: Seller pays buyer’s taxes form January 1 to closing.
tax sale: Public sale of a property at auction by resulting from non-payment of taxes.
tax service fee: Fee paid to the mortgage company to verify that real estate taxes were paid.
teaser rate: A low initial interest rate on a mortgage.
tenancy at sufferance: Tenancy established when a previously lawful tenant wrongfully remains in possession of a property after expiration of the lease.
tenancy at will: A license to use or occupy property at the will of the owner. Although the tenant may decide to leave the property at any time, he /she must leave if the landlord decides they must.
tenancy by the entirety: Property ownership by husband and wife, each having an equal right of possession and survivorship, meaning if one spouse dies, ownership automatically passes to the surviving spouse.
tenancy in common: Property ownership by two or more people, each having separate and equal rights in any matter affecting disposition of the property, but without the right of survivorship (meaning if one owner dies, his or her ownership passes to whomever designated in the decedent’s will).
tenancy in severalty: Ownership of property by one person.
tenant: Any person occupying real property with the owner’s permission.
tenants in common: Persons who are co-owners of residential interest in the same land. At death of a co-tenant, interest passes by will or by laws of intestate succession.
testament: Another term for a will. Commonly referred to as “last will and testament.”
testate: Having made a will. (See intestate.)
testator: Man with a testament or will.
testatrix: Woman with a testament or will.
third-party origination: Process by which a lender uses a third party to originate, process, underwrite, close, fund, or package a mortgage for the secondary mortgage market. (See “mortgage broker.”)
time is of the essence: Legal phrase meaning all references to specific dates and times in a contract be interpreted exactly.
time share ownership: The title to a commercial property or a vacation home which is divided among several owners, each with the right of possession for a specified time interval during the year. (Time sharing is used mostly for vacation properties.)
time share unit: A residential or commercial property which by contract (or by conveyance of a real property interest) allows multiple owners to each occupy the unit during a particular week (or weeks) for a specific number of years.
time share: A form of property ownership under which a property is held by a number of people, each with the right of possession for a specified time interval. Time sharing is used mostly for vacation properties.
title: A document indicating ownership of a specific property.
title company: A company specializing in examining and insuring titles to real estate.
title covenants: Covenants inserted in conveyances or transfers of title to protect the purchaser against imperfections in the title transferred. (See warranty, covenant, and common law covenants.)
title defect: Any irregularity in the chain of title. Any legal right outstanding within a chain of title where others may claim property or to make demands upon a new owner.
title insurance: A policy protecting the insured against losses or damages resulting from any legal defects in a the title to a specific real estate property. For example, insuring a homebuyer against any title errors that might result in later disputes over property ownership. Title Insurance can also protect the lender under similar circumstances. The cost of title insurance is usually a set value per-thousand-dollars of the total loan amount. In the event of a claim, the title company would provide legal defense for the policyholder and would be responsible for paying any losses covered by the policy which were incurred as a result of such claim.
title insurance binder: (See binder.)
title insurance policy: Insurance protecting the buyer or lender against loss resulting from defects in a title to a specific real property.
title insurance premium: The amount (regulated by the state) paid to receive a title policy. (Rate cards are available from Title Resources.)
title plant: The official property records compiled by a title company and organized into a system for fast, efficient access of title information for specific parcels of land.
title report: A report indicating the current state of title, including current ownership, outstanding deeds of trust or mortgages, liens, easements, covenants, restrictions, and any defects. (See “preliminary report.”)
title search: An through examination of public records and court decisions to determine the legal ownership, to make sure the buyer is purchasing the property from the legal owner without liens, other claims or outstanding restrictive covenants which might adversely affect the title. Usually performed by the title company.
back ratio: Ratio of monthly housing costs (principal, insurance, taxes, interest) plus any other regular monthly payments, to gross monthly income. Used by lenders to evaluate an applicants qualification for a loan. (Lenders typically allow a back ratio between 32 and 45 percent.)
total debt ratio: Monthly debt and housing payments divided by gross monthly income. Also known as “back ratio” or “back-end ratio.”).
total expense ratio: Total obligations as a percentage of gross monthly income, including both monthly housing expenses and all other monthly debts.
town house: Residence with two or more floors attached to similar units. Commonly found in planned unit developments (PUDs) and condominiums.
township: A division of territory six miles square, divided into 36 one square mile sections.
tract: A particular parcel of land, generally used as a subdivision.
tract house: A housing unit with a style and floor plan similar to all others in the same development.
trade equity: A buyer trading his own property (or any other asset) for all (or part) of the down payment on the property being purchased.
transfer of ownership: Any way in which a property changes owners.
transfer tax: Money due to the county and/or state when a property is sold.
Treasury index: Method used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans, based on the results of government auctions held for Treasury bills and securities. See adjustable-rate mortgage (ARM).
triple-net lease: One in which the tenant pays all operating expenses of the property.
trust: A property right held by one person for the benefit of another.
trust account: A separate bank account maintained by a broker or escrow company to handle all money collected for clients.
trust deed: (See Deed of Trust.)
trustee: A party given the legal responsibility to hold property in the best interest 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: Federal law requiring disclosure of the Annual Percentage Rate to a buyer shortly after applying for the loan. (See Regulation Z.)
turnkey housing: Housing financed and built by private sponsors, then purchased by housing authorities for the public housing program.
two- to four-family property: Property consisting of a structure where living space is divided into dwelling units for two to four families, with ownership of the structure covered by a single deed. Multi-family housing, such as a duplex.
two-step mortgage: An adjustable-rate mortgage (ARM) with one interest rate for the first five to seven years, and a different rate for the remainder of the loan. Also called a “Super Seven” or “Premier” mortgage.
underwriting: The process of evaluating a loan application to determine the risk involved for the lender, based on the buyer’s credit, income, employment history, assets, etc.
undivided interest: The right to use and possess a property shared among co-owners, with no one co-owner possessing exclusive rights to the property as a whole, or any portion thereof.
unencumbered: Property without mortgages, liens, or other claims against it
unimproved property: Land without development.
unrecorded deed: A document transfering title from the grantor to the grantee without recording (providing public notice).
unsecured loan: A loan not backed by collateral.
usufructory rights: One person’s right to use the property of another. (Most commonly used in referring to an owner’s right to use water on, under or adjacent to his property. The water itself is considered publicly owned.)
usury: A rate of interest above the highest rate established by law.
VA Guarantee: Veterans Administration (VA) contract insuring that the lender will recover a specific percentage of the loan in the event the loan is not repaid.
VA insurance: Mortgage insurance available to veterans of the U.S. military, requiring qualified borrowers to pay 1% of the loan amount to acquire government insurance in case of borrower default. (See VA Guarantee.)
VA loan: A government-backed mortgage loan guaranteed by the U.S. Veterans Administration, enabling a veteran to buy a home or property with a long-term, low-or no-down payment loan.
VA Mortgage Funding Fee: A premium of up to 1-7/8 % paid on a VA-backed loan, due either at closing or added to the amount financed.
vacation home: See second home.
valuation: An estimation of value of a property.
variable interest rate: An interest rate that fluctuates with the current cost of money; also called “flexible interest rate.” Usually limits as to the frequency and amount of fluctuation possible.
variable rate mortgage: Loan fluctuating interest rate, based on the cost of a fund or some other index. (See adjustable rate mortgage.)
variance: A zoning authority’s permission to use or alter property inconsistent with the property’s zoning classification—usually granted only to prevent undue hardship for the property owner. Variances sometimes are referred to as “special exceptions.” (See nonconforming use, planning commission, and zoning.)
vendee: Buyer. (See agreement of sale.)
vendor: Seller. (See agreement of sale.)
vendor's lien: An implied lien given by law to a vendor for the remaining unpaid and unsecured part of a purchase price.
Verification of Deposit (VOD): Document signed by the borrower's bank or financial institution verifying the status, history and balances of financial accounts.
Verification of Employment (VOE): Document signed by the borrower's employer verifying current position, salary and probability of continued employment.
vested: The right to use all or a portion of a fund, such as an individual retirement fund. For example, individuals who are “100% vested” can withdraw all of the funds in their retirement fund.
vestee: A nonlegal term used by title insurers to indicate the property owner in a policy or report.
Veterans Administration Loans: (See VA loans.)
waiver: The voluntary surrender of a known claim or privilege.
waiver of liens: (See lien waiver.)
warehouse fee: A mortgage firm may borrow short term funds to originate a mortgage, later selling it to the secondary mortgage market. If the short term loan interest rate is higher than the mortgage interest rate, the loss is recovered by charging a warehouse fee.
warehousing: Mortgage institutions often make loans that are later sold to the secondary market. After the loan is made—but before it is sold— the loan is said to be in the lenders “warehouse.”
warrant: Legal assurance a title is good and possession will be undisturbed.
warranty: A promise by the seller of real property that he or she is the actual legal owner and will be responsible to the buyer if title is other than as represented.
warranty deed: Guarantees by the seller of clear title to property and protection from any claims against it.
warranty: (1) An agreement by a seller to be responsible for the buyers present or future losses caused by defects in or encumbrances on the title. See “title covenants.” (2) A buyer’s guarantee of the condition of appliances or fixtures. New homes often include extensive warranties covering fixtures, appliances, or possibly the overall structure.
wetlands: Water-saturated lands, such as swamp or marsh: usually protected from development by local, state and federal environmental regulations.
what-if analysis: An analysis based on a “what-if” scenario. A what-if scenario may include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses used in the analysis. Also called a “what-if scenario.”
what-if scenario: See what-if analysis.
will: A properly witnessed written document stating how the property owned by the deceased shall be distributed.
wraparound mortgage: A mortgage which secures a debt which includes the balance due on an existing senior mortgage and an additional amount advanced by the wraparound mortgagee. The wraparound mortgagee thereafter makes the amortizing payments on the senior mortgage. An example
wraparound mortgage: A loan arrangement where the remaining balance on an existing mortgage is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. Payments are made to the second lender—or the previous owner—who then makes the payments due to the first lender—keeping the difference.
zero lot line: (1) Type of housing where attached individual units are on separate lots. For example, a townhouse. (2) Construction of building or home actually on a boundary line of the property. For example, a store built right on the front property line next to a sidewalk.
zoning ordinance: A municipality’s right to determine the use of privately owned property —and any construction or improvements on that property—in a given zone, such as commercial, residential, industrial, agricultural, etc. (See planning commission, variance, and zoning board.)
zoning: The division of a city or county by legislative regulations into areas—zones—designated for specific use, such as residential, commercial, industrial, agricultural, etc.
Zoning Board of Appeals: A group of appointed or elected officials empowered to hear appeals of rulings and decisions made by a municipality’s zoning board or zoning board of review. (See planning commission, variance, zoning, and zoning board.)
Zoning Board, Zoning Board of Review: Appointed or elected officials empowered to enforce a municipality’s zoning ordinances. (See planning commission, variance, zoning, and zoning board.)