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Abstract (of title)
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A
written summary of the title history of a particular piece of real estate.
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Acceleration Clause
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A
provision of a mortgage or note which provides that the entire outstanding
balance will become due and payable in the event of default.
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Adjustable Rate Mortgage
(ARM)
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A
mortgage in which the interest rate is adjusted periodically, based on the
movement of a financial index.
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Amortization
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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.
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Annual Percentage Rate
(APR)
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The
annual percentage rate refers to the total cost of the loan, expressed as a
yearly rate.
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Application Fee
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That
part of the closing costs pre-paid to the lender at time of application to
cover initial expenses.
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Appraisal
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A
report made by a qualified person as to the value of a property as of a
given date.
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Assessed Value
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The
value placed on a piece of real estate by the taxing authority for the
purpose of taxation. Also called an assessment.
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Assumption of Mortgage
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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.
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- B -
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Balloon Mortgage
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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.
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Bridge Loan
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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.
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Broker
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The
person who, for a commission or a fee, brings parties together and assists
in negotiating contracts between them.
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Buydown
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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.
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Cap (interest rate)
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The
maximum interest rate increase allowable on an adjustable rate mortgage.
Does not result in negative amortization. See Negative amortization.
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Cap (payment rate)
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The
maximum payment amount increase allowable on an adjustable rate mortgage.
May result in negative amortization. See Negative amortization.
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Certificate Of Title
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A
statement that shows ownership of property, stating that the seller has
clear legal title.
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Closing
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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.
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Closing Costs
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Expenses
(over and above the price of the property) incurred by buyers and sellers
in transferring ownership of a property. Also called "settlement
costs."
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Closing Statement
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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.
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Commission
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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.
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Commitment
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An
agreement, frequently in writing, between a lender and a borrower to loan
money at a future date, subject to certain conditions.
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Comparables
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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.
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Condominium
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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.
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Contingency
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A
condition that must be met for a contract or a commitment to remain
binding.
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Conventional Mortgage
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Any
mortgage loan that is not insured by FHA, guaranteed by VA, of funded by a
government authorized bond sale or grant.
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Convey
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To
transfer real estate from one person to another.
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Credit Report
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The
report to a prospective lender on the credit standing of a prospective
borrower.
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Deed
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A legal
written document by which title to property is transferred.
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Default
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Failure
to fulfill the terms as agreed to in the mortgage of note.
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Down Payment
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The
difference between the sale price of a property and the mortgage amount.
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Due-On-Sale
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A
clause in a mortgage which gives the lender the right to require immediate
repayment of a mortgage balance if the property changes hands.
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- E -
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Earnest Money
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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.
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Easement
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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.
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Encumbrance
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Anything
that affects or limits the title to a property, such as outstanding
mortgages, easement rights or unpaid back taxes.
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Equity
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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.
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Escrow
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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.
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- F -
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First Mortgage
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A
mortgage that has a primary lien against a property.
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Fixed-Rates Mortgage
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A
mortgage with an interest rate and monthly payments that remain constant
over the life of the loan.
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Fixture
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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
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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.
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Foreclosure
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A legal
procedure in which property mortgaged as security for a loan is sold to pay
the defaulting borrower's debt.
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- G -
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Graduated Payment
Mortgage
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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.
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Gross Income
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Normal
income, including overtime, prior to any payroll deductions, that is
regular and dependable. This income may come from more than one source.
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- H -
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Hazard Insurance
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Insurance
protection against damage to a property from fire, windstorms, and other
common hazards.
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Homeowner's Insurance
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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.
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HUD-1 Form
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See
Real Estate Settlement Statement.
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- I -
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Income Property
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Real
estate that is owned for investment purposes and not used as the owner's
residence.
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Interest
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A
charge paid for the use of money.
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Interim Financing
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See
Bridge Loan.
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- J -
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No Terms Listed
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- K -
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No Terms Listed
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- L -
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Land Contract
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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)
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Lien
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A legal
claim on a property used as security for a debt.
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Loan-To-Value Ratio
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The
relationship between the amount of the mortgage and property value, usually
shown as a percentage.
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- M -
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Market Value
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The
price at which a property will sell, assuming a knowledgeable buyer and
seller, both operating without undue pressure.
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Mortgage
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A
contract in which a borrower's property is pledged as security for a loan
which is to be repaid on an installment basis.
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Mortgage Note
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A
written promise to pay a debt at a stated interest rate during a specified
term. The agreement is secured by a mortgage.
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Mortgagee
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The
lender in a mortgage contract.
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Mortgagor
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The
borrower in a mortgage contract.
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- N -
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TOP
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Negative Amortization
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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.
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- O -
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TOP
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Offer to Purchase
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A
written proposal to buy a piece of real estate that becomes binding when
accepted by the seller. Also called a sales contract.
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Origination Fee
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A fee
charged for the work involved in the evaluation preparation and submission
of a proposed mortgage loan.
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Owner Financing
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A
purchase in which the seller provides all or part of the financing.
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- P -
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PITI
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An
acronym for payments to lender that cover principal, interest, taxes and
insurance on a property.
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Plat
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A map
of a piece of land showing boundary lines, streets, actual measurements and
easements.
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Point
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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.
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Prepayment Penalty
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A
charge paid to the lender by the borrower if a mortgage loan is repaid
before its term is over.
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Pre-Approval
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A
commitment by a lender to extend credit provided that specific conditions
are met.
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Pre-Qualification
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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.
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Prime Rate
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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.
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Principal
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The
amount borrowed or remaining unpaid; also, that part of the monthly payment
that reduces the outstanding balance of a mortgage.
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PMI (Private Mortgage
Insurance)
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Insurance
written by a private company to protect the lender against loss caused by
mortgage default.
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- Q -
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Qualifying Ratios
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Guidelines
applied by lenders to determine how large a loan to grant a home buyer.
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- R -
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TOP
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Real Estate Settlement
Statement
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Final
settlement statement often referred to as the HUD-1 form, used to itemize
buyer, seller, broker, and lender charges and credits at closing.
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Realtor
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A real
estate broker or sales associate affiliated with the National Association
of Realtors.
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Recording Fee
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The
charges made by the register of deeds to record the legal documents.
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Refinancing
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Repaying
a debt with the proceeds of a new loan, using the same property as
collateral or security.
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- S -
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Second Mortgage
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A loan
on property which already has an existing mortgage(the first mortgage). The
second mortgage is subordinate to the first.
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Secondary Mortgage
Market
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The
buying and selling of existing mortgages through agencies (i.e. Fannie Mae,
Freddie Mac).
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Survey
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A map
prepared by an engineer or surveyor charting a particular piece of real
estate.
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- T -
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Title
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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.
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Title Insurance Policy
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Protection
against financial loss arising from defects in the title occurring before
purchase.
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Title Search
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A check
of public record to disclose the past and current facts regarding ownership
of a particular piece of property.
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Transfer Tax
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In some
areas city, county or state taxes imposed when property passes from one
person to another.
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Truth-In-Lending
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A
federal law that requires lenders to fully disclose, in writing, the terms
and conditions of a mortgage, including the APR and other charges.
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- U -
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Underwriting
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The
process of evaluating a loan application to determine the risk involved for
the lender.
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- V -
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TOP
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No Terms Listed
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- W -
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TOP
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No Terms Listed
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- X -
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TOP
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No Terms Listed
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- Y -
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No Terms Listed
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- Z -
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No Terms Listed
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