|
Abstract (Of Title)
A summary of the public records relating to the
title to a particular piece of land. An attorney or
title insurance company reviews an abstract of title
to determine whether there are any title defects
which must be cleared before a buyer can purchase
clear, marketable, and insurable title.
Acceleration
The right of the mortgagee (lender) to demand the
immediate repayment of the mortgage loan balance
upon the default of the mortgagor (borrower), or by
using the right vested in the Due-on-Sale-Clause.
Acknowledgment
A formal declaration before an authorized official
(usually a notary public) by a person who has
executed a document, that he did in fact execute
(sign) the document.
Addendum
Something added. Items added to a document, letter,
contract, escrow instructions, etc.
Agent
A person who acts or has the power to act for
another. A real estate agent acts on behalf of the
principal (the buyer or seller) and has a fiduciary
responsibility towards the principal. Buyer's Agent:
a agent who represents the buyer and owes fiduciary
duties to the buyer. Seller's Agent: an agent who
represents the seller and owes fiduciary duties to
the seller. They are usually referred to as the
listing agent who is authorized by a property owner
to find a buyer or a tenant for the property.
Agreement of Sale
A written agreement of contract in which the seller
agrees to sell and the buyer agrees to buy under
specific terms and conditions.
Alienation Clause
A clause within a loan instrument calling for a debt
in its entirety upon the transfer of ownership of
the secured property. Also called a "due on sale"
clause.
Amenities
Features that enhance and add to the value or
desirability of real estate. Common amenities
include swimming pools, professional landscaping,
gourmet kitchen and so on.
Amortization
The reduction of a debt over time by making periodic
payments, usually monthly, a portion of which is
interest and a portion of which reduces the
outstanding amount of the debt. The monthly mortgage
payments remain the same over the life of the loan,
even though the proportion of principal to interest
changes over time. In the early part of the loan
period the principal repayment is very small and
interest repayment is very high. At the end of the
loan that relationship is reversed.
Appraisal
An estimate of the value of property, made by a
qualified professional called an "appraiser".
Appraiser
Someone who practices appraisal. Appraisers' work
involves appraising, review (the process of
critically studying a report prepared by another),
or consulting (the process of providing information,
analysis of real estate data, and recommendations on
diversified problems in real estate, other than
estimating value).
APR - Annual Percentage Rate
The actual interest rate taking into account the
points and other prepaid fees expressed in annual
percentage terms. Not to be confused with initial
interest rate, a teaser rate lenders use to get you
into a loan.
ARM-Adjustable Rate Mortgage
A loan that allows the interest rate to change
periodically up or down.
The interest rate on an ARM is determined by adding
a margin or spread to a specified financial index.
Financial indexes include; Treasury, Certificate of
Deposit,Cost of Funds. The margin is the difference
between the index rate and the ARM rate.
Adjustment interval is how often the interest rate
is adjusted. A loan that adjusts its interest rate
after six months is called a six-month ARM.
Rate caps limit how much your interest rate can move
up or down. Periodic caps limit the change per
adjustment period, and a lifetime cap governs the
maximum amount the interest rate can increase or
decrease over the life of the loan.
Assessment
A local tax levied against a property for a specific
purpose, such as a sewer or street lights.
Assessor
One appointed to assess property for taxation.
Assignment
A transfer or making over to another the whole of
any property, real or personal, or of any estate or
right therein. To assign is to transfer.
Assumption
The agreement between the buyer and seller where the
buyer takes over the payments on an existing
mortgage from the seller. Assuming a loan can
usually save the buyer money since this is an
existing mortgage debt, unlike a new mortgage where
closing costs and new, probably higher, interest
rates will apply.
Balloon Mortgage
A mortgage for a fixed term shorter than necessary
to fully repay the debt. As a result, the remaining
amount of principal is due at the maturity of the
loan.
Blanket Mortgage
A mortgage covering at least two pieces of real
estate as security for the same mortgage.
Bond
An insurance agreement by which one party is insured
against loss or default by a third party. In the
construction business a performance bond ensures the
interested party that the contractor will complete
the project.
Breach
Violation of an obligation in a contract.
Bridge Loan
A loan, usually short term, that finances the
portion of the purchase price not provided by the
mortgage loan and the down payment. A bridge loan is
commonly used when a purchaser has not sold his
existing home before he closes on his purchase of a
new home. The bridge loan is paid off when the old
home is sold, out of the proceeds of that sale.
Broker
A real estate professional who has acquired a higher
level of training and experience than a sales agent.
A minimum number of classes must be taken along with
passing a state exam to acquire a brokers license.
Generally they are a legal representative or a
proprietor of the office. Brokers usually charge a
fee or receive a commission for their services.
Building Code
A set of stringent laws that control the
construction of buildings, design, materials and
other similar factors.
Building Line or Setback
Distances from the ends and/or sides of the lot
beyond which construction may not extend. The
building line may be established by a filed plat of
subdivision, by restrictive covenants in deeds or
leases, by building codes, or by zoning ordinances.
Buy-down
When the lender and or the home builder subsidized
the mortgage by lowering the interest rate during
the first years of the loan. While the payments are
initially low, they will increase when the subsidy
expires.
Buyers Market
A market condition which occurs in real estate where
more homes are for sale than there are interested
buyers.
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,
insurance, maintenance, utilities, etc.)
Capital Gain
Income that results from sale of a capital
(tangible) asset.
Capitalization
An appraising term used in determining value by
considering net operating income and a percentage of
reasonable return on investment.
Certificate of Eligibility
The document given to qualified veterans which
entitles them to VA guaranteed loans for homes,
business, and mobile homes. Certificates of
eligibility may be obtained by sending DD-214
(Separation Paper) to the local VA office with VA
form 1880 (request for Certificate of Eligibility).
Chain Of Title
A history of conveyances and encumbrances affecting
the title as far back as records are available.
Closing
The end of the transaction when the seller hands
over the title to the buyer in exchange for payment.
Also called settlement.
Closing Costs
Costs the buyer must pay at the time of the closing
in addition to the down payment which may include
points, title charges, credit report fee, document
preparation fee, mortgage insurance premium,
inspections, appraisals, prepayments for property
taxes, deed recording fee, and homeowners insurance.
Closing costs can vary considerably from one
financial institution to another.
Cloud (On Title)
An outstanding claim or encumbrance which adversely
affects the marketability of title.
Commission
Money paid to a real estate agent or broker by the
seller as compensation for finding a buyer and
completing the sale. Usually it is a percentage of
the sale price: 4 to 7 percent on houses, 10 percent
on land.
Condemnation
A declaration by governing powers that a structure
is unfit for use.
Conditional Sales Contract
A contract for the sale of property where the buyer
has possession and use, but the seller retains title
until the conditions of the contract have been
fulfilled. Also known as a land contract.
Condominium or Condo
A condominium is a home in a shared building or
development. The buyer gets title the space inside
the unit, shares the common areas with other unit
owners and pays a maintenance fee to the condominium
association to pay for needed maintenance, repairs
and improvements to the property.
Construction Loan
A short term interim loan to pay for the
construction of building or homes. These are usually
designed to provide periodic disbursements to the
builder as he progresses.
Contingency
A condition that must be met before a contract is
binding. Contingencies include: the property must
appraise for sales price or buyers approving of
various inspections.
Contract Sale or Deed
A contract between purchaser and a seller of real
estate to convey title after certain conditions have
been met. It is a form of installment sale.
Conventional Loan
A fixed rate and fixed term loan that is made
without government insurance.
Convertible Loan
Some ARM Color loans include a provision that allows
it to convert to a fixed rate mortgage at specific
times, usually from the end of the first through the
fifth years. There is usually an additional fee,
$300-$500, to convert it.
Conveyance
The transfer of the title to land from one to
another.
Co-operative or Co-op
In a residential co-operative, the buyer purchases
shares in the co-op corporation which is made up of
the residents in the co-op property. The buyer owns
the shares rather than owning real property. In
exchange he has the right to lease and occupy a
co-op unit.
Covenants
Agreements written into deeds and other instruments
stating performance or non-performance of certain
acts or noting certain uses or non-uses of property.
Credit Report / History
Lenders will investigate your credit record which is
a history of your debts. They get a report from a
credit reporting agency (TRW, Equifax, TransUnion)
which shows if you pay you debts on time and with
who you have current debts with.
Debt-to-income Ratio
The ratio, expressed as a percentage, which results
when a borrower's monthly payment obligation on
long-term debts is divided by his or her gross
monthly income.
Deed
A legal document by which property title is
transferred from one owner to another.
Default
Failure to meet legal obligations in a contract,
specifically, failure to make the monthly payments
on a mortgage.
Depreciation
Decline in value of a house due to wear and tear,
adverse changes in the neighborhood, or any other
reason.
Devisee
A person who receives real estate from another by
will.
Down Payment
The down payment is the percentage of the purchase
price that the buyer must pay in cash and may not
borrow from the lender. The down payment amount in
addition to the mortgage equals the purchase price
of a property. They can vary from 0% to over 50%.
The less your down payment the better your credit
has to be. Lower down payments generally result in
higher interest rates.
Dual Agency
Representing both parties in a transaction. In
virtually all states it is unethical and illegal for
a broker to represent buyer and seller in a real
estate transaction without written consent of both.
Due-on-Sale Clause
A provision in a mortgage or deed of trust that
allows the lender to demand immediate payment of the
balance of the mortgage if the mortgage holder sells
the home.
Earnest Money
The deposit money given to the seller by the
potential buyer as evidence of good faith in
purchasing real estate. The broker places the money
in an escrow or trust account until closing, when it
becomes part of the down payment.
Easement Rights
A right- of- way granted to a person or company
authorizing access to or over the owner's land. An
electric company obtaining a right- of- way across
private property is a common example.
Economic Obsolescence
Loss of useful life and desirability of a property
through economic forces, such as change in zoning,
changes in traffic flow, etc., rather than
deterioration.
Encroachment
An obstruction, building, or part of a building that
intrudes beyond a legal boundary onto neighboring
private or public land, or a building extending
beyond the building line.
Encumbrance
A legal right or interest in land that affects a
good or clear title, and diminishes the land's
value.
Equal Credit Opportunity Act (ECOA)
Is 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 value of the property less the amount of unpaid
mortgages and any outstanding liens.
Escalation Clause
A clause in a lease providing for an increased rent
at a future time due to increased costs to lessor,
as in cost of living index, tax increases, etc.
Escheat
The reverting of property to the state in the
absence of heirs.
Escrow
Money or other valuables given to a third party with
directions to deliver them to another party upon the
fulfillment of a specific act or condition.
Escrow Instructions
This discloses when the escrow should be closing and
when possession should take place, proration of
property taxes, transfer taxes, release of funds and
the basics of satisfying the escrow demands.
Estate
The ownership interest of a person in real property.
Also refers to a deceased person's property.
Exclusive Agency Listing
A written agreement giving the broker the right to
market an owner's property for a certain period of
time, but also allowing the owner to sell the
property during that period without paying a
commission.
Exclusive Right - to Sell
A written agreemen Color t between the agent and the
owner whereby the owner promises to pay a fee or
commission to the broker if his property is sold
during the listing period, regardless of whether the
broker is responsible for the sale.
Fair Market Value
That price a property will bring given that both
buyer and seller are fully aware of market
conditions and comparable properties.
Fannie Mae - FNMA
Nickname for the Federal National Mortgage
Association. FNMA is a public corporation originally
established by the federal government. Fannie Mae
purchases mortgage loans from lenders and results in
a major source of funds for mortgage companies.
Fee Simple
Ownership of title to property without any
limitation, which can be sold, left at will, or
inherited.
FHA - Federal Housing Administration
Part of the US Department of Housing and Urban
Development (HUD). It was established in 1934 to
encourage improvement in housing standards and
communities. The FHA insures mortgage loans.
FHA Mortgage
A mortgage loan insured by the Federal Housing
Administration.
FHA Mortgage Insurance
Requires a fee (up to 2.25% of the loan amount) paid
at closing to insure the loan with FHA. In addition,
FHA mortgage insurance requires an annual fee of up
to 0.5% of the current loan amount, paid in monthly
installments. The lower the down payment, the more
years the fee must be paid.
Foreclosure
A legal process by which the lender or the seller
forces a sale of a mortgaged property because the
borrower has not met the terms of the mortgage. Also
known as a repossession of property.
Freddie Mac - FHLMC
Nickname for Federal Home Loan Mortgage Corporation.
It is a quasi-governmental agency that purchases
conventional mortgages from insured depository
institutions and HUD- approved mortgage bankers.
Functional Obsolescence
Loss in value due to out-of-date or poorly designed
equipment while newer equipment and structures have
been invented since it's construction.
Ginnie Mae - GNMA
Government National Mortgage Association
Graduated Payment Mortgage - GPM
A type of flexible-payment mortgage where the
payments increase for a specified period of time and
then level off. This type of mortgage has negative
amortization built into it.
Grantee
That party in the deed who is the buyer or
recipient.
Grantor
That party in the deed who is the seller or giver.
Home or Property Inspection
A detailed inspection of the physical structure, the
plumbing, electrical and heating systems and the
overall condition of the home. Typically the cost is
$150-$300 and the results are detailed in a multiple
page report.
Homeowners Insurance
Insurance that protects the homeowners from Casualty
losses or damage to the home or personal property
and from liability damages to other people or
property. Homeowners insurance is required by the
lender and may be included in the monthly mortgage
payment.
Home Owners Association
An association of homeowners within a community
formed to improve and maintain the quality of the
community. An association formed by the developer of
condominiums or planned developments.
Housing Expense-to-Income Ratio
The ratio, expressed as a percentage, which results
when a borrower's housing expenses are divided by
his or her gross monthly income.
HUD-The US Department of Housing and Urban
Development
Department of Housing and Urban Development, a
government agency created to make the American Dream
of home ownership a real possibility for everyone.
HUD has many programs involving homeownership
assistance for low and moderate income families,
community planning and development, fair housing and
equal opportunity, and home improvement loans. The
Housing and Urban Development home page is a rich
resource of information.
Impound
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.
Index
A published interest rate against which lenders
measure the difference between the current interest
rate on an adjustable rate mortgage and that earned
by other investments (such as one-three and
five-year U.S. Treasury security yields, the monthly
average interest rate on loans closed by savings and
loan institutions, and the monthly average
costs-of-funds incurred by savings and loans), which
is used to adjust the interest rate on an adjustable
mortgage.
Initial Interest Rate
The initial rate quoted usually is a lower
introductory rate, sometimes called a teaser or
discount rate. This lower rate lasts only until the
first adjustment, after which you will be charged
the fully indexed rate.
Interest
A charge paid for borrowing money.
Joint Tenancy
Joint ownership by two or more persons with right of
survivorship. Upon the death of a joint tenant, his
interest does not go to his heirs, but to the
remaining joint tenants.
Jumbo Loan
A loan which is larger than the limits set by the
FNMA and FHLMC (more than $207,000 as of 1/1/96).
Because jumbo loans cannot be funded by these two
agencies, they usually carry a higher interest rate.
Lease
A contract between the owner of real property,
called the lessor, and another person referred to as
the lessee, covering all conditions by which the
lessee may occupy and use the property.
Lease With Option To Purchase
A lease where the lessee has the option to purchase
the leased property. The terms of the purchase
option must be set forth in the lease.
Legal Description
The geographical identification of a parcel of land.
Lien
A hold or claim on the property of another to
satisfy an unpaid debt or obligation.
Life Time Cap
Life time cap governs the maximum amount the
interest rate increase or decrease over the
life of the loan.
Listing Contract
An agreement between a homeowner and a licensed real
estate broker that authorizes the broker to market
the property for sale during a given time period.
Loan Origination Fee
A fee charged by the lender for evaluating,
preparing and submitting a proposed mortgage loan.
Loan-to-Value Ratio
The ratio of a mortgage loan principal to the
property's appraised value or its sales price,
whichever is lower. Loan-to-value ratios vary
depending upon the individual lender's policy.
Lock-in Rate
A commitment made by a lender to make a mortgage
loan at a specified rate, pending loan approval, on
or prior to a specified date.
Market Value
The highest price a buyer will pay for a property
and the lowest price the seller will accept in a
typical market.
Margin
The amount a lender adds to the index on an
adjustable rate mortgage to establish the adjusted
interest rate.
Mechanic's Lien
A lien created by statute on a specific property for
labor or materials contributed to an improvement on
that property.
Mortgage
A lien on real estate given by the buyer to secure
money borrowed to purchase the real estate.
Mortgage Broker
An individual or company that obtains mortgages for
others by finding lending institutions, insurance
companies or private sources to lend the money. The
mortgage broker may also handle collections and
disbursements.
Mortgage Insurance
A policy that provides protection for the lender in
case of default and or which guarantees repayment of
the loan if the borrower becomes disabled or dies.
Mortgage Insurance Premium - MIP
Insurance from FHA to the lender against incurring a
loss on account of the borrower's default.
Multiple Listing
A listing taken by a member of an organization of
brokers, whereby all members have an opportunity to
find a buyer.
NAR - National Association of Realtors
The largest trade association in the country serving
over 700,000 Realtors. The purpose of the
association is to enhance the ability and
opportunity of its members to conduct business
successfully and ethically and to promote the
preservation of the right to own, transfer and use
real property.
Negative Amortization
Occurs when your monthly payments are not large
enough to pay all the interest due on the loan. This
unpaid interest is added to the unpaid balance of
the loan. The danger of negative amortization is
that the home buyer ends up owing more than the
original amount of the loan.
Non Assumption Clause
A statement in a mortgage contract forbidding the
assumption of the mortgage without the prior
approval of the lender.
Notary Public
One who is authorized by federal or local government
to attest authentic signatures and administer oaths.
Note
A written instrument acknowledging a debt and
promising payment.
Offer
A proposal to purchase real estate at a particular
price, subject to other specified terms and
conditions. Acceptance of the offer by the seller
creates a purchase contract. A counteroffer is a
different offer made in response to the initial
offer.
Origination Fee
Application fee(s) for processing a proposed
mortgage.
Option
A right given, for consideration, to purchase or
lease property upon stipulated terms within a
specific period of time.
Periodic Caps
Periodic caps limit the change per adjustment period
of a loan.
PITI Payment
A loan payment that combines Principal, Interest,
Taxes and Insurance.
Plat
A map or chart of a lot, subdivision or community
drawn by a surveyor showing boundary lines,
buildings, improvements on the land, and easements.
PMI - Private Mortgage Insurance
Insurance issued to a lender to protect it against
loss on a defaulted mortgage loan. Its use is
usually limited to loans with high loan-to-value
ratios, generally in excess of 80%. The borrower
pays the premiums.
Point
An amount equal to one percent of the loan amount
paid to a lender for making the loan. A lender may
charge the borrower several points in order to
provide the loan.
Power of Attorney
A legal document authorizing one person to act on
behalf of another.
Prepayment
A privilege in a mortgage permitting the borrower to
make payments in advance of their due date.
Prepayment Penalty
Money charged for an early repayment of debt.
Prepayment penalties are allowed in some form, but
are not necessarily imposed in many states.
Primary Mortgage Market
Lenders making mortgage loans directly to borrowers
such as savings and loan associations, commercial
banks, and mortgage companies. These lenders
sometimes sell their mortgages into the secondary
market such as FNMA or GNMA.
Pre-qualification
Getting pre-qualified for a loan is a free process
and normally takes between 15 minutes to an hour on
the phone. The lender will ask you some basic
questions about your household income, time on the
job, credit history, down payment and personal
savings. You should get pre-qualified before looking
for properties so you and your real estate agent
know in what price range to start looking.
Principal
One of the parties to a transaction. For example,
the buyer and seller are principals in the purchase
of real property. Also the amount of debt, not
counting interest, left on a loan.
Purchase Agreement
An agreement between buyer and seller denoting price
and terms of the sale.
Rate Caps
Rate caps limit how much the interest rate can move
up or down.
Real Estate Agent
A licensed person who works under the direction of a
broker selling and renting real estate.
Real Estate Broker
A middle man or agent who buys and sells real estate
for a company, firm, or individual on a commission
basis. The broker does not have title to the
property, but generally represents the owner.
Realtor
A Realtor is a real estate professional who is a
member of the National Association of Realtors and
subscribes to its strict Code of Ethics. This
professional is committed to protecting and
promoting private ownership of real property,
establishing and maintaining high professional
standards of practice, and creating unity in the
National Association of Realtors organization and
respect for the real estate profession.
Recision
The cancellation of a contract. With respect to
mortgage refinancing, the law that gives the
homeowner three days to cancel a contract in some
cases once it is signed if the transaction uses
equity in the home as security.
Refinance
Obtaining a new mortgage loan on a property already
owned.
Often to replace existing loans on the property.
RESPA
Short for the Real Estate Settlement Procedures Act.
RESPA is a federal law that allows consumers to
review information on known or estimated settlement
costs once after application and once prior to or at
a settlement. The law requires lenders to furnish
the information after application only.
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 Annuity Mortgage - RAM
A form of mortgage in which the lender makes
periodic payments to the borrower using the
borrower's equity in the home as Satisfaction of
Mortgage: the document issued by the mortgagee when
the mortgage loan is paid in full.
Second Mortgage
A mortgage made subsequent to another mortgage and
subordinate to the first one.
Secondary Mortgage Market
The place where primary mortgage lenders sell the
mortgages they make to obtain more funds to
originate more new loans. It provides liquidity for
the lenders.
Seller's Market
More buyers than sellers.
Shared Appreciation Mortgage - SAM
A mortgage in which a borrower receives a
below-market interest rate in return for which the
lender or investor, receives a portion of the future
appreciation in the value of the property. May also
apply to mortgage where the borrowers share the
monthly principal and interest payments with another
party in exchange for part of the appreciation.
Special Assessments
A special tax imposed on property, individual lots
or all property in the immediate area, for road
construction, sidewalks, sewers, street lights, etc.
Survey
A map or plat made by a licensed surveyor showing
the results of measuring the land with its
elevations, improvements, boundaries, and its
relationship to surrounding tracts of land.
Title
Ownership of real property. Title is transferred
from one party to another through a document called
a deed.
Title Insurance
Protection for lenders and homeowners against
financial loss resulting from legal defects in or
other claims against the property's title. The cost
of the policy is usually a function of the value of
the property and is often borne by the purchaser and
or seller.
Title Search
An examination of municipal records to determine the
legal ownership of property. Usually is performed by
a title company.
Trust
A property interest held by one person for the
benefit of another.
Trustee
A party who is given legal responsibility to hold
property in the best interest of or "for the benefit
of" another.
Truth-In-Lending
A federal law requiring disclosure of the APR-Annual
Percentage Rate to home buyers shortly after they
apply for the loan. Also known as Regulation Z.
Underwriting
The decision whether to make a loan to a potential
home buyer based on credit, employment, assets, and
other factors and the matching of this risk to an
appropriate rate and term or loan amount.
VA or US Department of Veterans Affairs
A federal agency designed and operated to help
veterans enter the housing market. The VA assists
veterans in terms of low or no down payment,
mortgage qualifications assistance and low interest
rates.
VA Loan
A mortgage loan guaranteed by the US Department of
Veterans Affairs against loss to the lender and made
through a private lender.
Variable Interest Rate
A fluctuating interest rate which can go up or down
depending on the going market rate.
Waive
To relinquish, or abandon. To forego a right to
enforce or require anything.
Wraparound Mortgage
Results when an existing assumable loan is combined
with a new loan, resulting in an interest rate
somewhere between the old rate and the current
market rate. The payments are made to a second
lender or the previous homeowner, who then forwards
the payments to the first lender after taking the
additional amount off the top.
Zoning Ordinances
The acts of an authorized local government
establishing building codes, and setting forth
regulations for property land usage.
|
