- 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
- 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.
- The addition to land through natural forces
like wind or water.
- Example: Soil carried by a river then
deposited on land.
- 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
- A measure of land equal to 43,560 square
- Adjustable Rate Mortgage (ARM)
- Also known as a variable rate mortgage. The
interest rate on these mortgages changes
- Adjustment Period
- The length of time for which the interest
rate is fixed on an adjustable. If the
adjustment period is six months, then the
interest rate will remain fixed for six months,
after which time it will adjust.
- Agreement of Sale
- A written signed agreement between the
seller and the purchaser in which the purchaser
agrees to buy certain real estate and the seller
agrees to sell upon terms of the agreement. Also
known as contract of purchase, purchase
agreement, offer and acceptance, earnest money
contract or sales agreement.
- A gradual paying off of a debt by periodic
installments which pay principal and interest.
- Annual Percentage Rate (APR)
- The effective rate of interest for a loan
per year. This rate is typically higher than the
note rate because it takes into account closing
costs. This is one way to compare loan programs
offered by different lenders. Caution : the APR
is sometimes computed differently by different
lenders and can be misleading.
- An opinion or estimate of the value of a
property at a given date.
- Arm's length transaction
- A transaction among parties each of who acts
in his or her own best interest.
- Example: A transaction between a father and
his son would NOT be an Arm's length
- A local tax levied against a property for a
specific purpose such as street lights.
- 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. Assumable loans do not have a due-on-sale
clause. The lender has to be notified and agree
to the assumption. The lender may require the
buyer to qualify for the loan and may charge an
assumption fee. The seller should obtain a
written release from the lender stating clearly
that he/she is no longer liable to make mortgage
payments. See also "Subject To."
- Attorney In Fact
- One who is authorized to act for another
under a power of attorney which may be general
or limited in scope.
- Example: John wants to sell his house but
has to be out of the country for four months.
John gives authorization to Mary to sign the
grant deed to sell the property to a buyer. Mary
becomes John's Attorney In Fact.
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- 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
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
- 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.
- 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 amout of $100,000.
- 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 payments
- Blanket Mortgage
- A mortgage covering more than one piece of
- Example : A developer subdivides a tract of
land into lots and obtains a blanket mortgage on
the whole tract.
- 1. A debt instrument in the capital markets.
The U.S. government, corporations and
municipalities use bonds to raise money. Bonds
can also be backed by mortgages. The best known
bond is the 30-yr. treasury bond issued by the
- 2. A sum of money given to a court to
guarantee against a loss. For example if there
is a lien on a property, the owner may remove
the lien by posting a bond.
- Borrower (mortgagor, trustor)
- One who applies for a loan secured by real
estate and is responsible for repaying the loan
- Bridge Loan
- An interim loan 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 bridge loan is made on the
buyers current residence to finance the buyers
new residence. The loan is paid off when the
buyers current residence is sold.
- See Real Estate Broker or Mortgage Broker.
- Short for Web browser, a software
application used to locate and display Web
pages. The two most popular browsers are
Microsoft Internet Explorer and Netscape
- Obtaining a lower interest rate (buying down
the rate) by paying additional points to the
lender. The lower rate may apply for the full
duration of the loan or for just the first few
years. A buydown may be used to qualify a
borrower who would otherwise not qualify since a
buydown results in lower payments.
- Example : A very popular buydown is the 2-1
buydown. If the interest rate on the note is 9
percent, the buydown results in the rate being 7
percent (9 percent minus 2 percent) for the
first year, 8 percent (9 percent minus 1
percent) for the second year, and 9 percent
- Buyer's Broker
- An agent hired by a buyer to locate a
property for purchase. The broker represents the
buyer and negotiates with the sellers broker for
the best possible deal for the buyer.
- Buyer's Market
- Market conditions that favor the buyer.
I.e., a market in which there are more sellers
than buyers. As a result, a buyer has an excess
supply of homes from which to choose and can
negotiate a lower price. A buyer's market may be
caused by an economic slump or overbuilding.
- Buying Your Home: Settlement Costs and
Information (HUD guide)
- A booklet that provides an overview of the
lending process and is required to be given to
consumers after the loan application is
- A set of regulations by which an
organization conducts its business.
- Example : A condominium association prepares
bylaws that state the minimum number of owners
to conduct a meeting to decide policies.
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- 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.
- 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,
- Caveat Emptor
- A legal term meaning "let the buyer beware."
The buyer must examine the property and buy at
his/her own risk.
Example : A property may
be offered in an "as is" condition with no
expressed or implied guarantee of quality or
- CC&R's - Covenants, conditions, and
- The basic rules establishing the rights and
obligations of owners of real property within a
condominium, townhouse, PUD, subdivision or
other tract of land. An association is organized
for the purpose of operating and maintaining
property commonly owned by the individual
owners. The association is normally made up of
- Certificate of Eligibility
- The document issued by the Department of
Veterans Affairs to those who qualify for a VA
loan which may be used to buy a house with zero
down. 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
- Document issued by a local governmental
agency that states a property meets the local
building standards for occupancy and is in
compliance with public health and building
codes. This document is normally required by a
lender prior to closing the loan.
- Certificate of Reasonable Value (CRV)
- An appraisal performed by an VA approved
appraiser which establishes the property's
current market value. This value establishes the
ceiling on the maximum VA mortgage loan
- Certificate of Title
- An opinion rendered by an attorney as to the
status of title to a property, according to the
public records. This certificate does not the
same level of protection as title insurance.
- Chain of Title
- The chronological order of conveyance of a
parcel of land from the original owner to the
- Example: An abstractor can research title to
property going back to the date that the
property was granted to the United States.
- Clear Title
- A marketable title, free of clouds and
disputed interests. Most lenders require a clear
title prior to closing.
- Closing Costs
- Expenses incurred by the buyer and seller in
a real estate or mortgage transaction. There are
two types of costs: recurring and non-recurring.
- Non-recurring costs are one time
transactional costs which include
- Discount and origination points
- Lender fees: underwriting, processing,
document preparations, flood certificate, tax
service, wire transfer, courier, etc
- Title insurance fees
- Escrow, attorney or closing agent fees
- Recording fees
- Inspection and appraisal fees
- Real estate brokerage commissions
- Recurring fees are costs associated with
owning the property and they recur month after
month. These costs may include hazard insurance,
interest, property taxes, mortgage insurance
(PMI), and association fees. A pro-rated amount
of these fees may have to be paid at closing
- Pre-paid interest - interest charges from
the date of closing to the end of the month
- Property taxes if due
- Hazard insurance, fire insurance or
homeowners insurance has to be paid for one year
- Mortgage insurance (PMI) may be required if
the loan amount is more than 80 percent of the
value of the property. In the past a whole year
of PMI had to be paid up-front, however in
recent years many PMI companies only require on
to two months up-front. Mortgage insurance
premiums are normally paid every month with the
- Impound account may need money to be set up
for future payments
- Cloud on Title
- An outstanding claim or encumbrance that, if
valid, would affect or impair the owner's title.
Compare with clear title.
- A monthly cost-of-funds index (COFI)
reflecting the average interest rate paid by
11th Federal Home Loan Bank District savings
institutions for savings and checking accounts.
The 11th district covers Arizona, California and
Nevada. The index is published on the last day
of the month and reflects the cost of funds for
the prior month. This rate is used by lenders to
determine the index rate for some of their
variable rate loan products.
- A written document provided by a lender to
agreeing to make a loan on specific terms to a
borrower or builder.
- 1. Taking private property for a public use
with compensation to the owner under eminent
domain. Used by governments to acquire land for
streets, schools, freeways, etc. and by
utilities to acquire necessary property.
- 2. Declaring a structure unfit for use
because of violations in housing codes or other
- Conditional Commitment
- A written document provided by a lender
agreeing to make a loan provided certain
conditions are met prior to closing.
- Conditional Sales Contract (Land Contract)
- A real estate sales contract in which she
seller (vendor) agrees to convey title to the
buyer (vendee) after certain conditions have
been met and transfer is not required within one
year.(installment selling arrangement whereby
the buyer may use and occupy land, but no deed
is given by seller until the sales price has
- Individual ownership in space called a unit
with an undivided interest in common in a
portion of real property.
- Construction loan
- A short term loan to pay for the
construction of buildings or homes. These loans
typically provide periodic disbursements to the
builder as each stage of the building is
completed. When construction is completed a
take-out or permanent loan is used to pay off
the construction loan.
- Anything of value given to induce another to
enter into a contract. Earnest money deposit on
a sales contract is consideration.
- The requirement that a particular event
occur before a contract is binding. For example:
The sale of a home can be contingent upon the
buyer obtaining financing.
- An agreement between competent parties to do
or not do certain things for consideration.
- To have a valid contract for the sale of
real estate there must be:
- an offer
- an acceptance
- competent parties
- legal purpose
- written documentation
- description of the property
- signatures by principals or their
- Contract of Sale
- See Agreement of Sale
- Conventional Loan
- Any mortgage loan other than a VA or an FHA
loan. A convention loan may be conforming or
- The transfer of title of real from one party
- Cooperative (Co-op)
- See Stock Cooperative.
- Convertible Adjustable Rate Mortgage (ARM)
- Some variable loans come with options to
convert to a fixed loan based on a
pre-determined formula, during a given time
period. For example the 1 Year T-Bill ARM may be
converted to a fixed rate during the first five
years on the adjustment date. One could convert
during the thirteenth, twenty-fifth,
thirty-seventh, forty-ninth or sixty-first month
of the loan.
- Credit Report
- A report detailing a borrower's credit and
payment history including: revolving and
installment accounts; public records such as tax
liens and judgments.
- Credit Score
- A credit score is a snapshot of a person�s
credit risk at a particular point in time. It is
used by lenders to help determine if a borrower
qualifies for a loan. There are three main
credit reporting companies that issue these
credit scores. Experian calls it the FICO score,
Trans Union calls it Empirica, and Equifax calls
it the Beacon.
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- 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
- 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 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),
- 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.
- 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.
- 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.
- 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
owners tax basis.
- Discount Points
- Fees paid to a lender to reduce the interest
- Documentary Tax Stamps
- Stamps affixed to a deed showing the amount
of transfer tax.
- The rights of a widow or child to part of a
deceased husband's or fathers property.
- The amount paid for the purchase of a
property in addition to the mortgage, but not
including any closing costs.
- Example : John buys a house for $100,000 and
obtains a loan for $80,000. His downpayment is
- Dragnet Clause
- A provision in a mortgage that pledges
several properties as collateral. A default in
the mortgage could lead to foreclosure
proceedings on any of the properties in the
- Due on Sale Clause
- A clause in the Deed of Trust or Mortgage
that states that the entire loan is due upon the
sale of the property.
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- 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.
- The right to use the land of another for a
specific purpose. Easements may be temporary or
- 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
- 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.
- 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.
- 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.
- The reversion of property to the state in
the event that the owner dies without leaving a
will and has no legal heirs.
- 1. Delivery of a deed by a grantor to a
third party for delivery to the grantee upon the
occurrence of a conditional event.
- 2. Calif. Civil Code Sec.1057: "A grant may
be deposited by the grantor with a third person,
to be delivered on the performance of a
condition, and, on delivery by the depositary,
it will take effect. While in the possession of
the third person, and subject to condition, it
is called an escrow."
- Executor (Executrix?feminine for Executor)
- A person named in a will to carry out its
provisions for the disposition of the estate.
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- 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.
- 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
- Federal Home Loan Bank Board (FHLBB)
- Provides financing to farmers.
- Federal Home Loan Mortgage Corporation
(FHLMC, Freddie Mac)
- Freddie Mac maintains a nationwide secondary
market primarily for conventional loans
originated by banks, thrift institutions and
other HUD-approved lenders. Freddie Mac finances
most of its operations through the sale of
mortgage Participation Certificates.
- Federal Housing Administration (FHA)
- An agency within the U.S. Department of
Housing and Urban Development (HUD). FHA offers
mortgage insurance programs to protect the
lender in the event of default. Because lenders
are insured against loss, they can make
affordable financing available to borrowers who
would not otherwise qualify.
- Federal National Mortgage Association (FNMA,
- Provides a secondary market for FHA, VA and
conventional loans. Fannie Mae issues
mortgage-backed securities and guarantees timely
payment their principal and interest to
- Federal Reserve System
- The central federal banking system that
regulates and provides services to member
commercial banks. Also has the responsibility
for conducting federal monetary policy.
- Fee Simple (Fee Absolute or Fee Simple
- Absolute ownership of real property; owner
is entitled to the entire property with
unconditional power of disposition during the
owners life and upon his death the property
descends to the owner's designated heirs.
- Fair Isaac Corporation. This credit score is
reported on your Experian (formerly TRW) credit
report. A FICO score is a snapshot of a person�s
credit risk at a particular point in time.
- Fidelity Bond
- An assurance, generally purchased by an
employer, to cover employees who are entrusted
with valuable property or funds.
- Example : A landlord employs a clerk who
collects rents. To safeguard these funds during
the collection process, the landlord purchases a
fidelity bond the clerk.
- A person in a position of trust or
responsibility with specific duties to act in
the best interest of a client. A real estate
broker is a fiduciary for his/her clients.
- Finance Charge
- Interest charged by a lender.
- First Mortgage
- A mortgage that has priority as a lien over
all other mortgages. In the case of a
foreclosure the first mortgage will be satisfied
before other mortgages. See also second
- Personal property attached to the land in
such a way as to be considered part of the real
- Flood Insurance
- An insurance policy that covers property
damage due to natural flooding. Flood insurance
may be required on properties in a flood zone.
- Foreclosure (Repossession)
- A legal process in which the right, title
and interest of a mortgagor or trustor in real
property are terminated by selling the property
and applying the proceeds to satisfy liens of
- Framed Page
- In HTML, refers to dividing the browser
display area into separate sections, each of
which is really a different Web page.
- Free and clear
- A property that has no liens.
- For sale by owner. A property for sale that
is not listed with a real estate broker.
- Fully indexed rate
- A fully indexed rate is the value of an
index plus a margin. See adjustable loans.
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- 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
- 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
- That party in the deed who is the buyer or
- Graduated Payment Mortgage (GPM)
- A trust deed or mortgage requiring
increasingly higher payments during the life of
the loan. Negative amortization may occur under
- 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.
- That party who is the seller or the giver.
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- Hazard Insurance (Fire Insurance, Homeowners
- A type of real estate insurance providing
protection against loss due to fire and other
- Home Page
- The main page of a web site. This is usually
the first page that comes up on the computer
screen. Typically, the home page serves as an
index or table of contents to other documents
available at the site. It is also referred to as
the Index page.
- Home Warranty Plan
- Insurance that covers appliances, heating
systems, etc. Typically purchased at the time of
- Homeowners Association
- An association of homeowners in a particular
subdivision, planned unit development (PUD), or
condominium organized to manage the common area
of the development and to enforce the
association rules and regulations.
- Status provided to a homeowner's principal
residence that protects the home against certain
types of judgments.
- Homestead Exemption
- A statutory exemption shielding real
homestead property against the rights of certain
creditors. Regarding taxation: an exemption
reducing the assessed value of a principal
residence for the purposes of calculating
property tax. E.g., John's principal residence
is assessed at $100,000 and the homestead
exemption is $7,000. His property taxes will be
based on $93,000.
- Housing and Urban Development
- A U.S. government agency established to
implement certain federal housing and community
- Housing Code
- A local government ordinance that sets
minimum standards of safety and sanitation for
existing residential buildings.
- Short for Hyper Text
Markup Language, the authoring
language used to create documents on the World
- HUD 1
- A closing document required by HUD that
outlines the settlement cost of a loan. The
closing agent prepares this document and sends
it to the buyer upon closing.
- To pledge a property as security without
having to give up possession of it.
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- 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.
- 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
- Income Property
- Real estate that generates rental income.
Examples: apartment buildings, office buildings
and shopping centers.
- A statistic that indicates some current
economic of financial condition. Indexes are
used to make adjustments in variable rate loans.
- 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.
- Internet Service
Provider, a company that provides access
to the Internet. For a monthly fee, the service
provider gives you a software package, username,
password and access phone number. You can then
log on to the Internet and browse the World Wide
Web, and send and receive e-mail.
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- 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.
- The decision of a court of law stating that
one individual is indebted to another and fixing
the amount of indebtedness. Judgements, when
recorded, become a lien on real property owned
by the defendant.
- Judgement Lien
- The claim on the property of a debtor
resulting from a judgement.
- Jumbo Loan
- Loan size that is larger than the conforming
loan limit established by the Fannie Mae or
- 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.
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- A payment required by a mortgage in addition
to normal principal and interest. Sometimes
known as a participation loan.
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- Land Contract
- See Conditional Sales Contract
- 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 lease
- Legal Description
- Legally acceptable identification of real
estate by one of the following:
- the government rectangular survey
- metes and bounds
- recorded plat (lot and block number)
- A person to whom property is rented under a
- A person who rents property to another under
a lease. (Landlord)
- London Interbank Offered Rates. Average
London Eurodollar rates. The Libor Index rate is
used in many variable loan programs.
- Life Estate
- An estate in real property for the life of a
living person. The estate then reverts back to
the grantor or to a third party.
- A claim against the property for the payment
of a debt, judgment, mortgage or taxes.
- Example : Unpaid contractors may file a
- Lis Pendens
- Latin for "lawsuit pending." Recorded notice
that litigation is pending on a property. Most
lenders will require the clearance of the Lis
Pendens prior to closing.
- Real Estate properties for sale are usually
considered listed when a real estate agent is
contracted to sell the property, using a listing
agreement, and the property is posted in the
multiple listing service, MLS, for that local
region. It can also be in an Internet listing
service online, which can be done directly by
- Loan Application
- A document required by a lender prior to
loan approval. The application includes detailed
information about the borrower and the property.
- Loan Origination Fee or Points
- Charge by a lender or broker connected with
originating a loan. This is different from
discount points which are used to buy down the
rate of interest.
- 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 value of the
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- 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
- Mechanics Lien
- The right of an unpaid contractor or
subcontractor to file a lien against property to
recover the amount due to him/her.
- 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
- The lender.
- The borrower.
- Mortgage Insurance
- See private mortgage insurance (PMI)
- Mortgage Note
- A written agreement to repay a loan. The
agreement is secured by a mortgage, serves as
proof of an indebtedness, and states the manner
in which it shall be paid. The note states the
actual amount of the debt that the mortgage
secures and renders the mortgagor personally
responsible for repayment.
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- 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
- 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.
- 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.
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- An expression of willingness to purchase a
property at a specified price.
- One who receives the offer. When the buyer
makes an offer to the seller the seller is an
- One who makes the offer. When the buyer
makes an offer to the seller the buyer is an
- Office of Comptroller Currency
- The oldest federal financial regulatory body
that oversees the nation's federally chartered
- 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.
- One who receives or purchases an option.
- One who gives or sells an option.
- Oral Contract
- A verbal agreement. Verbal agreements for
the sale or use of real estate are normally
- Origination Fee
- See Loan Origination Fee.
- Owner of Record
- The individual named on a deed that has been
recorded at the county recorders office.
- Owner Occupant
- A tenant of a residence who also owns the
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- Package Mortgage
- Mortgage covering both real and personal
- 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
- 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.
- 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
- Email phishing, also referred to as brand
spoofing or carding, is a variation on
�fishing,� the idea being that bait is thrown
out with the hopes that while most will ignore
the bait, some will be tempted into biting. An
example of receiving this kind of spam email is
�We have been trying to contact you regarding
your loan request. Your loan is approved. Click
here to complete your loan application.� Another
example is a request for information using a
bank�s website header, so it looks like it�s
coming from the bank, but is actually a fake.
- Principal, Interest,
Taxes and Insurance. Your mortgage
loan payment usually includes the principal and
interest amounts. When you borrow more than 80
percent of the value of your home, lenders
usually require that you also pay the taxes and
insurance payments with your loan payment.
- Planned Unit Development (PUD)
- A zoning classification that allows
flexibility in the design of a subdivision.
PUD's include individually owned units as well
as some common space that is jointly owned.
- A plan or map of a specific land area.
- Plat Book
- A public record containing maps of land,
showing the division of the land into streets,
blocks, and lots and indicating the measurements
of the individual parcels.
- Fees paid to lenders. 1 point = 1 percent of
the loan amount. On a $100,000 loan 1 point is
$1000. Points may be further classified into
origination points or discount points.
- Portfolio Loan
- A loan that is held as an investment by a
bank or savings and loan, and NOT sold on the
secondary market to investors.
- Power of Attorney
- A written document authorizing a person to
act on the behalf of another person. That person
does not have to be an attorney. See
- Prepaid Interest
- Prepaid interest is the interest charged to
borrowers at closing to pay for the cost of
borrowing for a balance of the month. For
example, if a loan closes on the 19th of the
month and the first payment is due on the 1st of
the following month, the lender will charge 12
days of prepaid interest.
- Full or partial payment of the principal
before the due date. This might occur if the
borrower makes extra payments, sells the
property, or refinances the existing loan.
- Prepayment Penalty
- Fees paid by the borrower if they pay the
loan before its due date.
- Primary Mortgage Market
- Companies that originate and service
mortgage loans (banks, savings & loans,
credit union, mortgage bankers, institutional
lenders) make up the primary mortgage market.
See also secondary mortgage market.
- Prime Rate
- The rate offered to a bank's best customers.
- The outstanding balance on a loan.
- Private Mortgage Insurance (PMI)
- In the event that you do not have a 20
percent down payment, lenders will allow a
smaller down payment - as low as 2 percent in
some cases. With the smaller down payment loans,
however, borrowers are usually required to carry
private mortgage insurance. Private mortgage
insurance payments are normally made annual or
monthly. An impound account may be required.
- Court process to establish the validity of
the will of a deceased person.
- Property Tax
- A government levy based on the market value
(as assessed by the county assessor's office) of
- Public Sale
- An auction of property with notice to the
- Purchase Agreement
- A real property agreement between a buyer
and seller specifying the price and terms of the
- Purchase Money Mortgage
- A mortgage used to finance the purchase of a
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- 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.
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- 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
- 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.
- When a mortgage is paid in full, the lender
conveys the property back to the owner.
- The act of entering into a book of public
records instruments affecting title to the real
property. A lender requires that a deed of trust
or a mortgage be recorded to evidence the debt
against the property.
- The cancellation of a contract. When
refinancing a mortgage on a principal residence
the law gives the homeowner three days to cancel
- The right of the holder of a note secured by
a mortgage or deed of trust to claim money from
the borrower in default in addition to the
property pledged as a collateral.
- The practice of refusing to provide loans or
insurance in a certain neighborhood.
- Repaying an existing loan from the proceeds
of a new loan on the same property.
- Regulation Z (Reg Z)
- A federal regulation requiring creditors to
provide full disclosure of the terms of a loan
including the terms of the loan and the annual
percentage rate (APR).
- Real Estate Investment Trusts (REIT)
- A trust that uses investors money to
purchase and manage real estate. Investors
realize some of the tax advantages in owning
- Restrictive Covenants
- Private restrictions limiting the use of
real property. Restrictive covenants are created
by deed and may "run with the land," binding all
subsequent purchasers of the land, or may be
"personal" and binding only between the original
seller and buyer.
- Reverse Mortgage
- A mortgage used by the elderly that provides
income as long as they live in exchange.
Payments made cause the loan principal to
- Right of survivorship
- The right of a surviving joint tenant to
acquire the interest of a deceased joint owner.
- Rollover Loan
- A loan that is amortized over a long period
of time (e.g., 30 yrs) but the interest rate is
fixed for a short period (e.g., 5 yrs). The loan
may be extended or rolled over, at the end of
the shorter term, based on the terms of the
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- 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
- Secondary Mortgage Market
- The market where banks, savings & loans
and mortgage bankers can sell mortgages to
investors like Fannie Mae or Freddie Mac.
- 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.
- 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.
- Section 1031
- The section of the IRS that deals with tax
free exchanges of certain property. General
rules for tax free exchanges are
- The properties must be :
- Used for business or as an investment
- Property that serves as collateral for a
- The act of billing, collecting payment,
filing reports, managing impound accounts and
handling defaults on a mortgage.
- Settlement Cost (HUD guide)
- See Buying Your Home: Settlement Costs and
Information (HUD guide)
- Settlement Statement
- See HUD 1
- Shared Appreciation Mortgage
- A residential loan with a fixed,
below-market interest rate in which the lender
is entitled to a specified share of property
appreciation during an agreed upon time period.
- Special Assessment
- A special tax imposed on property,
individual lots or all property in the
neighborhood to pay for improvements - street
lights, sidewalks, etc.
- Special Warranty Deed
- The grantor does not warrant against title
defects arising from conditions that existed
before he/she owned the property. The seller
warrants that he/she has done nothing to impair
- Sheriff's Deed
- A deed given at the sheriff's sale in the
foreclosure of a mortgage.
- Single Family Home (SFR)
- A type of residential structure designed to
include one dwelling. E.g., town home, detached
- Example : Town houses, detached units.
- Spec House
- A single family dwelling constructed by a
builder in anticipation of finding a buyer.
- Specific Performance
- A legal action in which the court requires a
party to a contract to perform their obligations
under the terms of the agreement.
- Stock Cooperative
- A common interest development in which a
corporation holds title. Stock and exclusive
right to occupancy are given to individual
members (stock holders) of the stock
- Standard Uniform Loan Application (Form
- A standard loan application widely used in
the mortgage industry.
- A tract of land divided into lots suitable
for home building purposes.
- A loan in a lower priority, for example a
second mortgage is subordinate to a first.
- Subject To Clause
- A clause stating that the grantee takes
title "subject to" an existing mortgage or trust
deed. The original mortgagor remains responsible
for any deficiency in the event of foreclosure.
See Assumable Mortgage.
- Map made by a licensed surveyor who measures
land and charts its boundaries, improvements and
relationship to the property surrounding it.
- Sweat Equity
- Value added to a property due to
improvements made personally by the owner.
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- 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
- 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
- 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
- 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.
- Evidence that the owner of the property is
in lawful possession. Evidence of ownership.
- Title Insurance
- An insurance policy which protects the
insured against loss arising from defects in
title. Title insurance policies are typically
obtained for the buyer and the lender.
- Title Report
- A document indicating the current state of
title. The report includes information on the
current ownership, outstanding deeds of trust or
mortgages, liens, easements, convenants,
restrictions, and any defects.
- Title Search
- An examination of the public records to
determine the ownership and encumbrances
affecting the property.
- Town House
- Residence which normally has 2 or more
floors and is attached to other similar units.
Town houses are commonly found in planned unit
developments (PUDs) and condominiums.
- A parcel of land, generally held for
- Transfer Tax
- Tax paid to the city, county, state or other
government entity upon sale of a property.
- Treasury Bill
- Treasury bills are short-term debt
instruments used by the U.S. Government to
finance their debt. Commonly called T-bills they
come in denominations of three months, six
months and one year. Each Treasury bill has a
corresponding interest rate (i.e. 3-month T-bill
rate, 1-year T-bill rate). The rate determines
the Tbill Index rate, which is used in many
variable rate loan programs.
- Triple-Net Lease
- One in which the tenant pays all operating
expense of the property. The landlord receives
the net rent.
- Trust Account
- A separate bank account maintained by a
broker or escrow company to handle all money
collected for clients. A broker may not
commingle these funds with his/her own funds.
- Trust Deed
- See Deed of Trust.
- A party who is given legal responsibility to
hold property in the best interest of or "for
the benefit of" another. The trustee is one
placed in a position of responsibility for
another, a responsibility enforceable in a court
- Truth in Lending
- See Regulation Z.
- Two-Step Mortgage
- A mortgage in which the borrower receives a
fixed rate for a specified number of years (most
often 5 or 7), and then receives a new interest
rate based on the terms in the note.
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- 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.
- Unincumbered 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).
- Charging a rate of interest greater than
that permitted by law.
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- 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 Mortgage
- Verification 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.
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- The voluntary renunciation, abandonment, or
surrender of some claim, right, or privilege.
- 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
- Warranty Deed
- A deed conveying the title to a property
with a warranty of a clear marketable title.
- Web Portal
- Commonly referred to as simply a portal, a
Web site or service that offers a broad array of
resources and services, such as e-mail, forums,
search engines, and on-line shopping malls. The
first Web portals were online services, such as
AOL, that provided access to the Web, but by now
most of the traditional search engines have
transformed themselves into Web portals to
attract and keep a larger audience.
- Wraparound Mortgage
- A loan arrangement whereby the existing loan
is retained and a new loan is added to the
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.
- What You See Is
What You Get. Computer
software may display data on the computer screen
with a format and color scheme that is different
when you print the page or when you view it in a
Web browser. Software that is WYSIWYG will print
and look the same as what you see on the screen
in the WYSIWYG.
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- Zero Lot Line
- A form of housing where individual units are
on separate lots, but are attached to one
another. Example: PUD, townhouse.
- 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.
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