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| Abstract (of title) |
A written summary of the title history of a
particular piece of real estate. |
| Acceleration Clause | A
provision of a mortgage or note which provides that the entire
outstanding balance will become due and payable in the event of
default. |
| Adjustable Rate
Mortgage (ARM) | A
mortgage in which the interest rate is adjusted periodically, based on
the movement of a financial index. |
| Amortization | Repayment
of loan by installment payments. As the payments are made, the debt is
reduced so that at the end of fixed period or term, no money will be
owed. |
| Annual Percentage
Rate (APR) | The annual
percentage rate refers to the total cost of the loan, expressed as a
yearly rate. |
| Application
Fee | That part of
the closing costs pre-paid to the lender at time of application to
cover initial expenses. |
| Appraisal | A report made by a qualified person as to the value of a
property as of a given date. |
| Assessed Value | The value placed on a piece of real estate by the taxing
authority for the purpose of taxation. Also called an
assessment. |
| Assumption of
Mortgage | The
purchaser takes over mortgage payments for the balance of the loan,
assuming primary liability. Unless specifically released by the
lender,
the seller remains secondarily liable. |
| - B - | TOP |
| Balloon Mortgage | A
mortgage with periodic payments that do not fully amortize the loan.
The outstanding balance of the mortgage is due in a lump sum at the
end
of the term. |
| Bridge
Loan | A
short-term loan secured by the equity in an as-yet-unsold house, with
the funds to be used for a down payment and/or closing costs on a new
house. There is no payment of principal until the house is sold or the
end of the loan term, whichever comes first. Interest payments may or
may not be deferred until the house is sold. |
| Broker | The person who, for a commission or a fee, brings parties
together and assists in negotiating contracts between
them. |
| Buydown | Money
advanced by an individual (e.g. builder, seller, buyer, lender,
developer) to lower monthly mortgage payments for a few years or the
whole term. |
| - C - | TOP |
| Cap (interest rate) | The
maximum interest rate increase allowable on an adjustable rate
mortgage. Does not result in negative amortization. See Negative
amortization. |
| Cap (payment
rate) | The
maximum payment amount increase allowable on an adjustable rate
mortgage. May result in negative amortization. See Negative
amortization. |
| Certificate Of
Title | A statement
that shows ownership of property, stating that the seller has clear
legal title. |
| Closing | The
concluding day of the real estate transaction, when title and deed
pass
from seller to buyer, the buyer signs the mortgage and pays the
purchase price and closing costs. |
| Closing Costs | Expenses
(over and above the price of the property) incurred by buyers and
sellers in transferring ownership of a property. Also called
"settlement costs." |
| Closing
Statement | A
financial disclosure giving an account of all funds received and
expected at closing, including the escrow deposit for taxes, hazard
insurance and mortgage insurance for the escrow
account. |
| Commission | An
agent's or broker's fee for bringing the pricipals together and
helping
to negotiate a real estate transaction, often a percentage of the
sales
price or flat fee. |
| Commitment | An
agreement, frequently in writing, between a lender and a borrower to
loan money at a future date, subject to certain
conditions. |
| Comparables | Refers
to similar properties used for comparison purposes in the appraisal
process. These properties will be reasonably the same size and
location, with similar amenities and characteristics, so that the
approximate fair market value of the subject property can be
determined. |
| Condominium | Ownership
of a single unit in a multiunit building or complex of buildings.
Along
with this goes a share of ownership of the common
areas. |
| Contingency | A condition that must be met for a contract or a commitment
to remain binding. |
| Conventional
Mortgage | Any mortgage
loan that is not insured by FHA, guaranteed by VA, of funded by a
government authorized bond sale or grant. |
| Convey | To transfer real estate from one person to
another. |
| Credit
Report | The report to
a prospective lender on the credit standing of a prospective
borrower. |
| - D - | TOP |
| Deed | A legal
written document by which title to property is
transferred. |
| Default | Failure
to fulfill the terms as agreed to in the mortgage of
note. |
| Down
Payment | The difference
between the sale price of a property and the mortgage
amount. |
| Due-On-Sale | A
clause in a mortgage which gives the lender the right to require
immediate repayment of a mortgage balance if the property changes
hands. |
| - E - | TOP |
| Earnest Money | The
deposit money given to seller or his agent by the potential buyer at
the time of the purchase offer. If the offer is accepted, the money
will become part of the down payment. |
| Easement | A
right to the limited use of land owned by another. An electric
company,
for example, could have an easement to put up electric power lines
over
someone's property. |
| Encumbrance | Anything that affects or limits the title to a property,
such as outstanding mortgages, easement rights or unpaid back
taxes. |
| Equity | The
value in which the owner has in real estate over and above the
mortgages against it. When the mortgage and all other debts against
the
property are paid in full, the owner has 100% equity in his
property. |
| Escrow | Funds
and/ or deed left in trust to a third party. Generally, a portion of
the monthly mortgage payment is held in escrow by the lender to pay
for
taxes, hazard insurance and yearly mortgage insurance
premiums. |
| - F - | TOP |
| First Mortgage | A mortgage that has a primary lien against a
property. |
| Fixed-Rates
Mortgage | A mortgage
with an interest rate and monthly payments that remain constant over
the life of the loan. |
| Fixture | Property,
such as a hot water heater or plumbing fixture, that has become
permanently attached to piece of real estate and goes with the
property
when it is sold. |
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| Flood
Certification | An
independent agency report required by the lender to determine whether
a
property is located in a flood hazard zone, which would then require a
federally mandated flood insurance policy. |
| Foreclosure | A legal procedure in which property mortgaged as security
for a loan is sold to pay the defaulting borrower's
debt. |
| - G - | TOP |
Graduated Payment
Mortgage | A
fixed rate loan with monthly payments that start low, increasing by a
fixed amount for a specific number of years. After that period, the
payments typically remain constant for the duration of the
loan. |
| Gross
Income | Normal
income, including overtime, prior to any taxes or payroll deductions,
that is regular and dependable. This income may come from more than
one
source. |
| - H - | TOP |
| Hazard Insurance | Insurance protection against damage to a property from
fire, windstorms, and other common hazards. |
| Homeowner's Insurance |
An
insurance policy that covers the dwelling and its contents in case of
fire or wind damage, theft, liability for property damage and personal
liability. |
| HUD-1
Form | See Real
Estate Settlement Statement. |
| - I - | TOP |
| Income Property | Real estate that is owned for investment purposes and not
used as the owner's residence. |
| Interest | A
charge paid for the use of money. |
| Interim Financing | See Bridge Loan. |
| - J - | TOP |
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| - L - | TOP |
| Land Sales Contract | When
the buyer agrees to make payments directly to the seller at
pre-negotiated terms. The seller agrees to deed the property to the
buyer upon completion of the agreement. The buyer becomes the owner of
equity in this type of sale. (Also see Owner
Financing) |
| Lien | A legal
claim on a property used as security for a
debt. |
| Loan-To-Value
Ratio | The
relationship between the amount of the mortgage and property value,
usually shown as a percentage. |
| - M - | TOP |
| Market Value | The price at which a property will sell, assuming a
knowledgeable buyer and seller, both operating without undue
pressure. |
| Mortgage | A
contract in which a borrower's property is pledged as security for a
loan which is to be repaid on an installment
basis. |
| Mortgage
Note | A written
promise to pay a debt at a stated interest rate during a specified
term. The agreement is secured by a mortgage. |
| Mortgagee | The lender in a mortgage contract. |
| Mortgagor | The borrower in a mortgage
contract. |
| - N - | TOP |
| Negative Amortization | A
loan in which the outstanding principal balance goes up instead of
down
because the monthly payments are not large enough to cover the full
amount of interest due. Also called deferred
interest. |
| - O - | TOP |
| Offer to Purchase | A written proposal to buy a piece of real estate that
becomes binding when accepted by the seller. Also called a sales
contract. |
| Origination
Fee | A
fee charged for the work involved in the evaluation, preparation,
submission, approval and closing of a proposed mortgage
loan. |
| Owner
Financing | A purchase in
which the seller provides all or part of the
financing. |
| - P - | TOP |
| PITI | An
acronym for payments to lender that cover principal, interest, taxes
and insurance on a property. |
| Plat | A map
of a piece of land showing boundary lines, streets, actual measurements
and easements. |
| Point | A
fee paid to the lender on closing day to increase the effective yield
of the mortgage. A point is one percent of the amount of the mortgage
loan. Also called a discount point. |
| Prepayment Penalty | A charge paid to the lender by the borrower if a mortgage
loan is repaid before its term is over. |
| Pre-Approval | A commitment by a lender to extend credit provided that
specific conditions are met. |
| Pre-Qualification | A
preliminary assessment of a buyer's ability to secure a loan, based on
a specific set of lending guidelines and buyer representations made.
This is not a guarantee or commitment by a lender to extend
credit. |
| Prime
Rate | The
interest rate charged by banks to their preferred corporate customers,
it tends to be an estimator for general trends in short term interest
rates. |
| Principal | The
amount borrowed or remaining unpaid; also, that part of the monthly
payment that reduces the outstanding balance of a
mortgage. |
| PMI (Private Mortgage
Insurance) | Insurance
written by a private company to protect the lender against loss caused
by mortgage default. |
| - Q - | TOP |
| Qualifying Ratios | Guidelines applied by lenders to determine how large a loan
to grant a home buyer. |
| - R - | TOP |
| Real Estate Settlement Statement |
Final
settlement statement often referred to as the HUD-1 form, used to
itemize buyer, seller, broker, and lender charges and credits at
closing. |
| Realtor | A real
estate broker or sales associate affiliated with the National
Association of Realtors. |
| Recording
Fee | The charges
made by the register of deeds to record the legal
documents. |
| Refinancing | Repaying a debt with the proceeds of a new loan, using the
same property as collateral or security. |
| - S - | TOP |
| Second Mortgage | A loan on property which already has an existing mortgage
(the first mortgage). The second mortgage is subordinate to the
first. |
| Secondary Mortgage
Market | The buying and
selling of existing mortgages through agencies (i.e. Fannie Mae,
Freddie Mac). |
| Survey | A map
prepared by an engineer or surveyor charting a particular piece of real
estate. |
| - T - | TOP |
| Title | Ownership
of a property. A clear title is one without any outstanding liens or
encumbrances. A cloud on title refers to any outstanding liens or
encumbrances which could impair the title. |
| Title Insurance Policy |
Protection against financial loss arising from
defects in the title occurring before purchase. |
| Title Search | A check of public record to disclose the past and current
facts regarding ownership of a particular piece of
property. |
| Transfer
Tax | In some areas
city, county or state taxes imposed when property passes from one
person to another. |
| Truth-In-Lending | A
federal law that requires lenders to fully disclose, in writing, the
terms and conditions of a mortgage, including the APR and other
charges. |
| - U - | TOP |
| Underwriting | The process of evaluating a loan application to determine
the risk involved for the lender. |
| - V - | TOP |
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