Abstract (of Title)
A historical summary of all the recorded transactions that affect the title to the property. An attorney or a title company will review an abstract of title to determine if there are any problems affecting the title to the property. All such problems must be cleared before the buyer can be issued a clear and insurable title.Abutting
Bordering upon or next to; the joining or touching of adjoining land; sharing a common boundary.Acceleration Clause
A loan provision giving the lender the power to declare all sums owing lender immediately due and payable upon the violation of a specific loan provision, such as the sale of the property, or the failure to make loan payments on time. Example : John sells his property to Mary who takes over John’s mortgage payments. They do not notify the lender of this transaction. The lender finds out that the title to the property has transferred and calls the loan, since the loan documents state that the loan is due on the sale of the property. John is now liable to pay his lender in full.Acceptance
An offeree’s consent to enter into a contract and be bound by the terms of the offer. In a real estate transaction an offer is made from the buyer to the seller. If the seller accepts the offer within the prescribed time limit, it becomes a binding contract. In this case Acceptance is documented by the Seller signing and delivering the signed document.Accretion
The addition to land through natural forces like wind or water. Example: Soil carried by a river then deposited on land.Acknowledgment
Formal declaration before a public official (typically a Notary Public) that one has signed a document. Required before recording real estate legal documents, such as a deeds of trust.Back-end Ratio, or Debt Ratio
The amount you pay in monthly debt (car payments, credit cards, student loans, etc.) divided by your gross monthly income.Balloon (Payment) Mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract. Example : A balloon mortgage for $25,000 has interest only payments for 5 years at 12 percent ($250 per month),with the full principal of $25,000 due and payable after five yearsBankruptcy
The financial inability to pay one’s debts when due. The debtor surrenders his assets to the bankruptcy court. An individual typically files for Chapter 7 (all debts wiped out) or Chapter 13 (establishes a payment plan to pay off debts). A bankruptcy stays on an individual’s credit report for seven years.Beneficiary
The person who receives or is to receive the benefits resulting from certain acts. Example : The lender is named as the beneficiary on a mortgage loan. Example : John has a life insurance policy for $100,000 with Jane as his beneficiary. Should John die, Jane will receive the benefits in the amount of $100,000.Betterment
An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.Bill of Sale
A written document that transfers title to personal property.Binder
1. A title insurance binder is the written commitment of a title insurance company to insure title to the property subject to the conditions and exclusions shown on the binder. 2. Preliminary agreement, normally secured with earnest money, between a buyer and a seller as an offer to purchase real estate.Biweekly Mortgage
A mortgage which requires half the normal monthly payment every two weeks. Over the course of the year, twenty-six half payments are made which is equivalent to thirteen full mortgage payments. As a result of this extra payment the loan amortizes much faster than a loan with normal monthly paymentsCall Option
A clause in the mortgage that gives the lender the right to “call” the mortgage due and payable at the end of a given length of time, for whatever reason.Capital Expenditure
The cost of an improvement made either to extend the life of a property or to increase its value.Capital Gains
When you sell a capital asset at a profit, such as real estate, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain.Capital Improvement
Any item, structure or addition that is a permanent improvement to the property.Caps (interest)
Limits on the amount that the interest rate on an ARM can change per year and/or during the life of the loan. Payment caps limit the amount that monthly payments for an ARM may change.Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.).Debt Ratio
This is a loan qualifying ratio used by lenders to determine if a borrower qualifies for a loan. The debt (-to-income) ratio is calculated by taking the borrower’s monthly debts, including house payments, credit cards and personal loans, and dividing it by the monthly income.Deed
A written document by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the buyer at closing.DEED-IN-LIEU OF FORECLOSURE
(In general we consider this an option of last resort.)
If you have incurred a long term financial hardship and your house has been on the market (at fair market value) for at least 90 days, you may be eligible for a deed-in lieu of foreclosure. To be considered for this option, you must complete a financial package and provide a copy of your recent active listing agreement. Also, there cannot be any additional claims or liens (other the mortgage) against the property. If you are approved for a deed-in-lieu, you will be giving up all rights to the property and the property will be conveyed to your investor. In exchange for the deed-in-lieu, the lender may waiver all deficiency judgment rights. You may be asked to participate in a Short Sale program before a deed-in-lieu of foreclosure is accepted.Deed of Trust
A security instrument (document describing the rights and duties of the lender and borrower) used in real estate transactions in many states. The parties to a deed of trust are: trustee (third party), trustor (borrower), beneficiary (lender).Deed Restriction
A clause in a deed that limits the use of land. Example : A deed might require that a road cannot be built on the land.Default
Failure to meet legal obligations in a contract, such as the failure to make the monthly mortgage payment.Defective Title
Any recorded instrument that would prevent a Grantor / Seller from giving a clear title.Example: The seller has a contractor lien on the property that was filed when he/she failed to pay the contractor for the kitchen remodel. The seller may obtain clear title by paying the contractor and removing the lien.
Deferred Interest
Unpaid interest added to the loan balance. This is common in a negative amortized or option arm loan program. The minimum payment is less than the interest charges. The interest that is not paid is added to the balance.Deficiency Judgment
Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the mortgages, accrued interest, legal fees, etc.Delinquency
Failure to make payments on time. A Notice of Default and foreclosure process usually takes place after you are delinquent for more than a few months.Depreciation
When related to the appraisal of property, depreciation is the decrease in value from any cause. When related to taxation, “book depreciation” is a steady decrease (calculated using mathematical formulas or schedules) in the owner’s tax basis.Earnest Money
A deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate brokers or the escrow company.Easement
The right to use the land of another for a specific purpose. Easements may be temporary or permanent. Example: The utility company may need an easement to run electric lines.Eminent Domain
The right of the government or a public utility to acquire property for necessary public use by condemnation, with proper compensation to the owner.Encroachment
A building, part of a building, or an obstruction (e.g., a fence or wall) that physically intrudes upon or overlaps the property of another.Encumbrance
Any interest or right in real property possessed by a stranger to the title, which affects the owner’s property value, but does not prevent the owner from transferring title. Encumbrances may affect title, or condition or use of the property.Entitlement
VA home loan benefits are known as entitlement and/or eligibility.Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.Equity
The market value of real property, less the amount of any liens. Equity is often expressed as a percentage of the property value.Equity Sharing
Joint ownership of a property between the owner/occupant and the owner/investor, that results in tax advantages for both parties. Upon sale of the property the joint owners split profits based on the percentage they own. Fair Credit Reporting Act. A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.Fair Market Value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.Fannie Mae-Backed Security rates
Fannie Mae pools large quantities of mortgages, creates securities with them, and sells them as Fannie Mae-backed securities. The rates on these securities influence mortgage rates very strongly.Farmer’s Home Administration (FmHA)
An agency, within the U.S. Department of Agriculture, that administers assistance programs for purchasers of homes and farms in small towns and rural areas.Fed, Federal Reserve Bank, Federal Discount Rate
The rate that the New York Fed charges for loans to member banks.Federal Funds Rate
The Rate banks charge each other for overnight loans.Federal Home Loan Bank Board (FHLBB)
Provides financing to farmers.General Warranty Deed
A deed in which the Grantor (seller) agrees to the protect the grantee (buyer) against any other claim to title of the property. See also warranty deed.Good Faith Estimate (GFE)
The form that lists the settlement charges the borrower must pay at closing. The lender is obligated to provide the borrower this form within three business days of receiving the loan application.Government National Mortgage Association (GNMA, Ginnie Mae)
A government corporation which guarantees mortgage-backed securities issued by approved lenders. GNMA mortgage-backed securities are considered by many to be as safe as Treasury securities.Grantee
That party in the deed who is the buyer or recipient.Graduated Payment Mortgage (GPM)
A trust deed or mortgage requiring increasingly higher payments during the life of the loan. Negative amortization may occur under some circumstances.Grandfather Clause
The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible.Grantor
That party who is the seller or the giver.Hazard Insurance (Fire Insurance, Homeowners insurance)
A type of real estate insurance providing protection against loss due to fire and other risks.Home Equity Conversion Mortgage (HECM)
A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. This is commonly known as a reverse mortgage.Home Equity Line of Credit
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in a property.Home Inspection
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.Home KeeperSM
Fannie Mae’s adjustable-rate conventional reverse mortgage, which allows older homeowners to borrow against the value of their homes and receive the proceeds according to the payment option they select. The amount available is based on the number of borrowers and their ages and the adjusted property value. Anyone 62 years or older who either owns his or her own home free and clear or has very low mortgage debt is eligible.Home Warranty Plan
Insurance that covers appliances, heating systems, etc. Typically purchased at the time of closing.Impound Account
That portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.Improvements
Additions to raw land such as buildings, streets, etc. that add value to the land.Income (Capitalization) Approach
An appraisal method used for the valuation of income-producing property in which net income is capitalized.Income Property
Real estate that generates rental income. Examples: apartment buildings, office buildings and shopping centers.Index
A statistic that indicates some current economic of financial condition. Indexes are used to make adjustments in variable rate loans.Inflation
In economics, inflation is an increase in the general level of prices of a given kind. General inflation is a fall in the market value or purchasing power of money within an economy, and is referred to as a rise in the general level of prices.Ingress and Egress
The right to pass through a piece of property. See Easements.Installment Sale
1. Re. Taxation: When selling real property and receiving one or more payments in subsequent years, the taxpayer may report the sale as an installment sale. This allows the taxpayer to defer the recognition of gain over many years and save taxes. 2. Installment sale land contract. See Conditional Sales Contract.Interest Only
An interest-only loan program is a loan program that has an interest-only payment option. The loan can be a fixed rate or variable rate program. The interest only monthly payment is the amount of the interest rate times the original loan amount divided by twelve. No principal is paid, and the loan balance does not decrease. You may pay the interest only payment amount or pay the fully amortized payment amount. The interest only payment option is only available in the initial years of the loan term. Conforming loan programs have the interest only term for ten to fifteen years. Jumbo programs vary from three years up to ten years.Joint and Several Liability
A creditor can demand full repayment from any and all of those who have borrowed. Each borrower is liable for the full debt, not just the prorated share.Joint Tenancy
Ownership of a property by two or more people, each of whom has an undivided interest with the right of survivorship.Example: John and Mary own a house in joint tenancy. Each owns half of the entire (undivided) property. If John dies, Mary will own the entire property and vice versa.
Judgment
The decision of a court of law stating that one individual is indebted to another and fixing the amount of indebtedness. Judgments, when recorded, become a lien on real property owned by the defendant.Judgment Lien
The claim on the property of a debtor resulting from a judgment.Judicial Foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.Jumbo Loan
Loan size that is larger than the conforming loan limit established by the Fannie Mae or Freddie Mac.Junior Mortgage
A mortgage subordinate to another mortgage. In the case of a foreclosure a senior mortgage will be paid prior to a junior mortgage.Land Contract
See Conditional Sales ContractLate Charge
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.Lease
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.Leasehold Estate
Tenant’s right of possession for a specific period of time under a lease agreement.Lease with Option to Purchase
A lease under which the lessee has the right to purchase the property. The option may run for a portion or for the full length of the leaseLegal Description
Legally acceptable identification of real estate by one of the following:
* metes and bounds
* recorded plat (lot and block number)
Lessee
A person to whom property is rented under a lease. (Tenant)Lessor
A person who rents property to another under a lease. (Landlord)Margin
A fixed number added to the index to compute the rate on an adjustable rate mortgage.Marketable Title
Title that is free of liens, clouds and other legal defects and hence is readily acceptable by a buyer.Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.Master Association
A homeowners’ association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a “second-level” association that handles matters affecting the entire development, while the “first-level” associations handle matters affecting their particular portions of the project.Mechanics Lien
The right of an unpaid contractor or subcontractor to file a lien against property to recover the amount due to him/her.Merged Credit Report
A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of your credit.Modification
The act of changing any of the terms of the mortgage.Mortgage
A written instrument that creates a lien upon real estate as security for the payment of a specified debt.Mortgage Backed Security (MBS)
A bond or other financial obligation secured by a pool of mortgage loans.Mortgage Banker
Specializes in originating and servicing loans. They generally sell their loans to investors, but may continue to service them.Mortgage Broker
Arranges financing for a borrower by placing loans with lenders. Mortgage brokers are paid a fee by the borrower or the lender when a loan closes.Mortgage Life Insurance
A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.Mortgagee
The lender.Mortgagor
The borrower.Negative Amortization
An increase in principal balance which occurs when the monthly payments do not cover all of the interest cost. The interest cost which is not covered by the payment is added to the unpaid principal balance.Net Effective Income
The borrowers gross income minus federal income tax.No-Doc Loan
A loan requiring very little loan documentation. These loans usually require large (25%) down payments.Nonconforming loan
Loans that do not comply with Fannie Mae or Freddie Mac guidelines.Notary Public
One authorized to take acknowledgments of certain types of documents, such as deeds, contracts, and mortgages.Note
The Note is a promissory note, which is signed with loan documents and states the loan amount, interest rate and loan terms.Notice of default
A letter sent to the defaulting party as a reminder of the default.Offer
An expression of willingness to purchase a property at a specified price.Offeree
One who receives the offer. When the buyer makes an offer to the seller the seller is an offeree.Offeror
One who makes the offer. When the buyer makes an offer to the seller the buyer is an offeror.Office of Comptroller Currency
The oldest federal financial regulatory body that oversees the nation’s federally chartered banks.Office of Thrift Supervision
The OTS charters federal thrift institutions and is the primary regulator of all federal and many state-chartered thrift institutions.Open-end Mortgage
A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions.Open House
A method of showing a home for sale to prospective buyers where the home is left open for inspection by those who may be interested in making a purchase.Option Arm
The Option Arm loan program, commonly referred to as the negative amortized loan, has a low starting payment rate. Typically the starting rate is 1 to 2 percent. The initial monthly loan payment is calculated based on the starting rate, but the note rate will adjust to the Index plus the Margin after the first one to three months. The payment remains the same for the entire year, and is only adjusted yearly on the anniversary date. Since the interest charges may exceed the monthly payment, the interest that is not paid is added to the loan balance. This increases the loan amount, rather than decreasing the loan balance as in a fully amortized loan. Thus we have a negative amortization, or increasing loan balance, during the initial years of this loan.Package Mortgage
Mortgage covering both real and personal property.Paper
A mortgage, deed of trust or land contract provided in lieu of cash.Partial Release
A provision in a mortgage that allows some of the property secured to be freed from serving as collateral.Participation Mortgage
A mortgage that allows the lender to share in part of the income or resale proceeds.Pass-through Certificates
Interests in a pool of mortgages sold by mortgage bankers to investors. Money collected as monthly mortgage payments is distributed to those who own certificates.Permanent Loan or Mortgage
A mortgage for a long period of time. Often referred to as the mortgage that pays off a construction loan on a completed property.Permit
A document issued by a government regulatory authority that allows the bearer to take some specific action. An occupancy permit allows the owner of a building to occupy or rent the building.Qualification Rate
Rate of interest used to calculate whether or not a borrower qualifies for a mortgage.Qualification Requirements
Guidelines used by lenders to decide whether to loan money to an applicant.Qualified Acceptance, Conditional Acceptance
Acceptance for a loan (or other contract) provided that certain conditions are met.Qualified Buyer
A person who has been pre-approved for a mortgage loan.Qualifying Ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.Quiet Title (Action)
A court action to settle a title dispute.Quit Claim Deed
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor’s interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.Radon
A radioactive gas which seeps up from the ground and can cause health problems. A radon test is often part of the home inspection.Re-Short Sale
A short sale is an agreement with a lender allowing for the sale of a property to a third party for less than the amount owed on the mortgage. Under this agreement, the lender accepts less than the amount owed and releases the borrower from the mortgage, thereby preventing foreclosureReal Property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.Realtor ｮ
A real estate professional who is a member of the National Association of Realtors.Real Estate Broker
An individual who often owns a real estate company or is in a management position, and who is licensed to represent a buyer or a seller in a real estate transaction.Real Estate Settlement Procedure Act (RESPA)
A law that states how mortgage lenders must treat those who apply for real estate loans on property with one to four units.Example : A lender is required to provide a good faith estimate of closing costs within three days of an application being filed.
Recapture tax
Some government sponsored or insured programs, like HUD Low Income Housing programs, require that the buyer occupy the property and retain ownership for a specific period of time. If the buyer sells the property and in some cases moves out of the property, the tax benefits or subsidies received are recaptured, meaning charged to the homeowner. This is a penalty assessed for selling the house too early.Recession
A recession is usually defined as a fall of a country’s real Gross National Product in two or more successive quarters of a year. A recession may also involve falling prices, which can lead to a depression. In a free market economy, recessions come and go at fairly regular intervals, often five to ten years, in what is known as the business cycle.Reconveyance
When a mortgage is paid in full, the lender conveys the property back to the owner.Sales Agreement or Sales Contract
See Agreement of Sale.Savings & Loan
Depository institutions that specialize in originating, servicing and holding mortgage loans primarily on owner occupied residential property.Second Home
Also known as a vacation home. This home is different from an investment property as it is not rented, but used occasionally by the owners.Second Mortgage
A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages generally carry a higher rate than a first mortgage since they represent a higher risk for an investor.Secondary Mortgage Market
The market where banks, savings & loans and mortgage bankers can sell mortgages to investors like Fannie Mae or Freddie Mac.Section 1031
The section of the IRS that deals with tax free exchanges of certain property. General rules for tax free exchanges areThe properties must be : * Exchanged
* Similar
* Used for business or as an investment
Section 8 Housing
Privately owned rental units participating in the low-income rental assistance program. Landlords receive subsidies on behalf of qualified low-income tenants, allowing the tenants to pay a limited proportion of their incomes toward the rent.Security
Property that serves as collateral for a debt.Takeout Financing
A commitment to provide permanent financing upon completion of construction. The take out loan normally pays off the construction loan.Tax Lien
Lien for nonpayment of taxes.Tax Sale
Public sale of a property at an auction by a government authority as a result of non-payment of taxes.Teaser Rate
A low initial interest rate on a mortgage.Tenancy at Sufferance
Tenancy established when a person who had been a lawful tenant wrongfully remains in possession of property after expiration of a lease.Tenancy at Will
A license to use or occupy land and buildings at the will of the owner. The tenant may decide to leave the property at any time or must leave at the landlords will.Tenancy by the Entirety
A form of ownership by husband and wife whereby each owns the entire property. In event of the death of one, the survivor owns the property without probate.Tenancy for Years
Created by a lease for a fixed term, such as 6 months, 2 years, etc.Tenancy in Common
Ownership of a property by 2 or more persons, each of whom has an undivided interest, without the right of survivorship. Upon the death of one of the owners, the ownership share of the deceased is inherited by the beneficiary designated on the owner’s will.Tenancy in Severalty
Ownership of property by one person.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.Time is of the Essence
Legal phrase in a contract requiring all references to specific dates and times noted in the contract be interpreted exactly.Underwriting
The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc.Undivided Interest
An ownership right to use and possess a property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property.Unimproved Property
Land that has received no development.Unencumbered Property
Real estate with free and clear title.Unrecorded Deed
A document that transfers title from the grantor to the grantee without recording (i.e. providing public notice).Usury
Charging a rate of interest greater than that permitted by law.Vacation Home
See second home.
VA Loan
Home loan guaranteed by the U.S. Veterans Administration, enabling a veteran to buy a home with no money down.Variable Rate Mortgage
See Adjustable Rate MortgageVerification of Deposit (VOD)
A document signed by the borrower’s bank or other financial institution verifying the account balance and history.Verification of Employment
A document signed by the borrower’s employer verifying his/her starting date, job title, salary and probability of continued employment.Waiver
The voluntary renunciation, abandonment, or surrender of some claim, right, or privilege.Walk-Through Inspection
A final walk-through immediately prior to closing to verify that no changes have taken place and no new damage has occurred.Warehousing
Mortgage bankers and other financial institutions make loans that are then periodically sold on the secondary market. After the loan is made but before it is sold, the loan is said to be in the lender’s warehouse.Warranty Deed
A deed conveying the title to a property with a warranty of a clear marketable title.Wear and Tear
Normal use and the resulting reduction in value of a property.Wraparound Mortgage
A loan arrangement whereby the existing loan is retained and a new loan is added to the property.Example : The seller sells his/her property for $200,000. The buyer puts $80,000 down. The seller has an existing loan balance of $100,000 for a remaining period of twenty-five years at an interest rate of 6 percent. The seller then makes a wraparound mortgage to the buyer, (where the seller acts as a lender) for $120,000 at 8 percent. The seller has to continue making payments on his old loan. They buyer has to pay the seller on the new loan. The buyer may at a later date refinance the property and close both loans.
Zero Lot Line
A form of housing where individual units are on separate lots, but are attached to one another. Example: PUD, townhouse.Zoning
Areas may be zoned to specify use of a property i.e. residential, commercial, agricultural. These zoning ordinances are normally enforced by the city or the county.