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 Clause - Condition in a mortgage that may require the balance of the
loan to become due immediately, if regular mortgage payments are not made or for
breach of other conditions of the mortgage.
Acceptance - The date when both parties, seller and buyer, have agreed to and completed
signing and/or initialing the contract.
Adjustable rate mortgage loan (ARM) - A type of alternative mortgage instrument
in which the interest rate adjusts periodically according to a predetermined index
and margin. This adjustment results in the mortgage payment either increasing or
decreasing.
Adjustment Period – The length of time between interest rate changes on ARM.
For example, a loan with an adjustment period of one-year ARM, which means that
the interest rate can change once a year.
Agreement of Sale - Known by various names, such as contract of purchase, purchase
agreement, or sales agreement according to location or jurisdiction. A contract
in which a seller agrees to sell and a buyer agrees to buy, under certain specific
terms and conditions spelled out in writing and signed by both parties.
Amortization - A payment plan which enables the borrower to reduce his debt gradually
through monthly payments of principal.
Annual percentage rate (APR) - A rate which represents the relationship of the total
finance charge (interest, loan fees, point) to the amount of the loan.
Application - A form used to apply for a mortgage loan and to record pertinent information
concerning a prospective mortgagor and the proposed security.
Appraisal - An expert judgment or estimate of the quality or value of real estate
as of a given date.
Appraised value - An opinion of value reached by an appraiser based upon knowledge,
experience, and a study of pertinent data.
Appraiser- A person qualified by education, training, and experience to estimate
the value of real and personal property.
Appreciation - An increase in value; the opposite of depreciation.
Assessment - The process of placing a value on property for the strict purpose of
taxation. may also refer to a levy against property for a special purpose, such
as a sewer assessment.
Assumption of Mortgage - An obligation undertaken by the purchaser of property to
be personally liable for payment of an existing mortgage. In an assumption, the
purchaser is substituted for the original mortgagor in the mortgage instrument and
the original mortgagor is to be released from further liability in the assumption,
the mortgagee's consent is usually required. The original mortgagor should always
obtain a written release from further liability if he desires to be fully released
under the assumption. Failure to obtain such a release renders the original mortgagor
liable if the person assuming the mortgage fails to make the monthly payments. An
"Assumption of Mortgage" is often confused with "purchasing subject
to a mortgage." When one purchases subject to a mortgage, the purchaser agrees
to make the monthly mortgage payments on an existing mortgage, but the original
mortgagor remains personally liable if the purchaser fails to make the monthly payments.
Since the original mortgagor remains liable in the event of default, the mortgagee's
consent is not required to a sale subject to a mortgage. Both "Assumption of
Mortgage" and "Purchasing Subject to a Mortgage" are used to finance
the sale of property. They may also be used when a mortgagor is in financial difficulty
and desires to sell the property to avoid foreclosure.
B
Balloon mortgage - A mortgage with periodic installments of principal and interest
that do not fully amortize the loan. The balance of the mortgage is due in a lump
sum at the end of the term.
Balloon payment- The unpaid principal amount of a mortgagee or other long-term loan
due at a certain date in he future, usually the amount that must be paid in a lump
sum at the end of the term.
Binder, insurance - A written evidence of temporary hazard or title coverage that
only runs for a limited time and must be replaced by a permanent policy.
Borrower - One who receives funds with the expressed or implied intention of repaying
the loan in full.
Broker - (See real estate broker)
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.
Buydown – Permanent–prepaid interest bringing the note rate on the loan
down to a lower, permanent rate. Temporary–prepaid interest lowering the note
rate temporarily on the loan, allowing the buyer to more readily qualify and to
increase payments as income grows.
C
Caps - A limitation on the interest rate increase of either the periodic or lifetime
rate or both for an adjustable rate mortgage.
Cash Reserves - The amount of the buyer’s liquid cash remaining after making
the down payment and paying all closing costs.
CC&R’s – Covenants, conditions and restrictions. A document that
controls the use, requirements and restrictions of the property.
Certificate Of Occupancy (CO) - Written authorization given by a local municipality
that allows a newly-completed or substantially-completed structure to be inhabited.
The issuing of a CO means that: the home is SAFE, SOUND & SANITARY, and has
matches the PLANS & SPECIFICATIONS given to the Appraiser at the beginning of
the Loan Process.
Certificate of Commitment – The lender’s approval of a VA loan, which
is usually good for up to six months.
Certificate of Reasonable Value (CVR) – A document that establishes the maximum
value and loan amount or a VA guaranteed mortgage.
Certificate of Title - A certificate issued by a title company or a written opinion
rendered by an attorney that the seller has good marketable and insurable title
to the property which he is offering for sale. A certificate of title offers no
protection against any hidden defects in the title which an examination of the records
could not reveal. The issuer of a certificate of title is liable only for damages
due to negligence. The protection offered a homeowner under a certificate of title
is not as great as that offered in a title insurance policy.
Chattel - Personal property.
Closing or Close of Escrow - The day on which the formalities of a real estate sale
are concluded. The certificate of title, abstract, and deed are generally prepared
for the closing by an attorney and this cost charged to the buyer. The buyer signs
the mortgage, and closing costs are paid. The final closing merely confirms the
original agreement reached in the agreement of sale.
Closing Costs - The numerous expenses which buyers and sellers normally incur to
complete a transaction in the transfer of ownership of real estate. These costs
are in addition to price of the property and are items prepaid at the closing day.
This is a typical list:
BUYER'S EXPENSES
1. Documentary Stamps on Notes
2. Recording Deed and Mortgage
3. Escrow Fees
4. Attorney's Fee
5. Title Insurance
6. Appraisal and Inspection
7. Survey Charge
SELLER'S EXPENSES
1. Cost of Abstract
2. Documentary Stamps on Deed
3. Escrow Fees
4. Real Estate Commission
5. Recording Mortgage
6. Survey Charge
7. Attorney's Fee
The agreement of sale negotiated previously between the buyer and the seller may
state in writing who will pay each of the above costs.
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--6 to 7 percent on houses, 10 percent on land.
Commitment Period – The period during which a loan approval is valid.
Comparative Market Analysis – An opinion of the market value of a home expressed
by a real estate agent and not an appraiser.
Condemnation - The taking of private property for public use by a government unit,
against the will of the owner, but with payment of just compensation under the government's
power of eminent domain. Condemnation may also be a determination by a governmental
agency that a particular building is unsafe or unfit for use.
Condominium - Individual ownership of a dwelling unit and an individual interest
in the common areas and facilities which serve the multi-unit project.
Consideration – Anything of value to induce another to enter into a contract,
i.e., money, services, a promise.
Contingency – A condition that must be satisfied before a contract is binding.
For instance, a sales agreement may be contingent upon the buyer obtaining financing.
Contract of Purchase - (See agreement of sale)
Construction loan - A short-term, interim loan for financing the cost of construction.
The lender makes payments to the builder at periodic intervals as the work progresses.
Contractor - In the construction industry, a contractor is one who contracts to
erect buildings or portions of them. There are also contractors for each phase of
construction: heating, electrical, plumbing, air conditioning, road building, bridge
and dam erection, and others.
Conventional Mortgage - A mortgage loan not insured by HUD or guaranteed by the
Veterans' Administration. It is subject to conditions established by the lending
institution and State statutes. The mortgage rates may vary with different institutions
and between States. (States have various interest limits.)
Conversion Clause – A provision in some ARMs that enables homebuyers to change
an ARM to a fixed rate loan, usually after the first adjustment period. The new
fixed rate is generally set at the prevailing interest rate for fixed rate mortgages.
This conversion feature may cost extra.
Cooperative Housing - An apartment building or a group of dwellings owned by a corporation,
the stockholders of which are the residents of the dwellings. It is operated for
their benefit by their elected board of directors. In a cooperative, the corporation
or association owns title to the real estate. A resident purchases stock in the
corporation which entitles him to occupy a unit in the building or property owned
by the cooperative. While the resident does not own his unit, he has an absolute
right to occupy his unit for as long as he owns the stock.
Co-signer- A person who signs a legal instrument and therefore becomes individually
and jointly liable for repayment or performance of an obligation.
Credit report - A report to a prospective lender on the credit standing of a prospective
borrower or tenant. Used to help determine creditworthiness.
D
Deed - A formal written instrument 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 purchaser
at closing day. There are two parties to a deed: the grantor and the grantee. (See
also deed of trust, general warranty deed, quitclaim deed, and special warranty
deed.)
Deed of Trust - Like a mortgage, a security instrument whereby real property is
given as security for a debt. However, in a deed of trust there are three parties
to the instrument: the borrower, the trustee, and the lender, (or beneficiary).
In such a transaction, the borrower transfers the legal title for the property to
the trustee who holds the property in trust as security for the payment of the debt
to the lender or beneficiary. If the borrower pays the debt as agreed, the deed
of trust becomes void. If, however, he defaults in the payment of the debt, the
trustee may sell the property at a public sale, under the terms of the deed of trust.
In most jurisdictions where the deed of trust is in force, the borrower is subject
to having his property sold without benefit of legal proceedings. A few States have
begun in recent years to treat the deed of trust like a mortgage.
Deposit -(See Earnest Money)
Default - Failure to make mortgage payments as agreed to in a commitment based on
the terms and at the designated time set forth in the mortgage or deed of trust.
It is the mortgagor's responsibility to remember the due date and send the payment
prior to the due date, not after. Generally, thirty days after the due date if payment
is not received, the mortgage is in default. In the event of default, the mortgage
may give the lender the right to accelerate payments, take possession and receive
rents, and start foreclosure. Defaults may also come about by the failure to observe
other conditions in the mortgage or deed of trust.
Depreciation - Decline in value of a house due to wear and tear, adverse changes
in the neighborhood, or any other reason.
Discount Points – A loan fee charged by a lender of FHA, VA, or conventional
loans to increase the yield on the investment. One point = 1% of the loan amount.
Documentary Stamps - A State tax, in the forms of stamps, required on deeds and
mortgages when real estate title passes from one owner to another. The amount of
stamps required varies with each State.
Down payment - The amount of money to be paid by the purchaser to the seller upon
the signing of the agreement of sale. The agreement of sale will refer to the down
payment amount and will acknowledge receipt of the down payment. Down payment is
the difference between the sales price and maximum mortgage amount. The down payment
may not be refundable if the purchaser fails to buy the property without good cause.
If the purchaser wants the down payment to be refundable, he should insert a clause
in the agreement of sale specifying the conditions under which the deposit will
be refunded, if the agreement does not already contain such clause. If the seller
cannot deliver good title, the agreement of sale usually requires the seller to
return the down payment and to pay interest and expenses incurred by the purchaser.
Draw System - Scheduled payment of money to a builder during the phases of home
construction. Between each draw, the appraiser must inspect the home to ensure that
construction is proceeding as planned.
Due-on-sale Clause - A type of acceleration clause, calling for a debt under a mortgage
or deed of trust to be due in its entirety upon transfer of ownership of the secured
property.
E
Earnest Money - The deposit money given to the seller or his agent by the potential
buyer upon the signing of the agreement of sale to show that he is serious about
buying the house. If the sale goes through, the earnest money is applied against
the down payment. If the sale does not go through, the earnest money will be forfeited
or lost unless the binder or offer to purchase expressly provides that it is refundable.
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.
Eminent domain - The right of a government to take private property for public use
upon payment of its fair value.
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. It can take numerous forms, such as zoning ordinances,
easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid
taxes, or restrictive covenants. An encumbrance does not legally prevent transfer
of the property to another. A title search is all that is usually done to reveal
the existence of such encumbrances, and it is up to the buyer to determine whether
he wants to purchase with the encumbrance, or what can be done to remove it.
Equity - The value of a homeowner's unencumbered interest in real estate. Equity
is computed by subtracting from the property's fair market value the total of the
unpaid mortgage balance and any outstanding liens or other debts against the property.
A homeowner's equity increases as he pays off his mortgage or as the property appreciates
in value. When the mortgage and all other debts against the property are paid in
full the homeowner has 100% equity in his property.
Escrow - Funds paid by one party to another (the escrow agent) to hold until the
occurrence of a specified event, after which the funds are released to a designated
individual. In FHA mortgage transactions an escrow account usually refers to the
funds a mortgagor pays the lender at the time of the periodic mortgage payments.
The money is held in a trust fund, provided by the lender for the buyer. Such funds
should be adequate to cover yearly anticipated expenditures for mortgage insurance
premiums, taxes, hazard insurance premiums, and special assessments.
Escrow payment - That portion of a mortgagor's monthly payment held by the lender
to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other
items as they become due. Known as impounds or reserves in some states.
Exclusive right to sell (Listing) - A written contract giving a licensed real estate
agent the exclusive right to sell a property for a specified time. The owner agrees
to pay a full commission to the broker even though the owner may sell the property.
F
FHA Loan - A loan insured by the Federal Housing Administration (of the Department
of Housing and Urban Development).
Fair Market Value - The price at which property is transferred between a willing
buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent
data and neither of whom is under any compulsion to buy or sell.
Federal Home Loan Mortgage Corporation (FHLMC) - A private corporation authorized
by Congress to provide secondary mortgage market support for conventional mortgages.
Also know as Freddie Mac.
Federal Housing Administration (FHA) - A division of HUD. Its main activity is the
insuring of residential mortgage loans made by private lenders. FHA does not lend
money.
Federal National Mortgage Association (FNMA) - A privately owned corporation created
by Congress to support the secondary mortgage market. Also known as Fannie Mae.
Fee Simple - An estate under which the owner is entitled to unrestricted powers
to dispose of the property, and which can be left by will or inherited. The greatest
interest a person can have in real estate.
Fiduciary - A person in a position of trust and confidence for another.
Firm commitment - A lender's agreement to make a loan to a specific borrower of
a specific property.
First mortgage - A mortgage having priority over all other voluntary liens against
certain property.
Foreclosure - A legal term applied to any of the various methods of enforcing payment
of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged
property, and depriving the mortgagor of possession.
Fully Indexed Rate – The maximum interest rate on an ARM that can be reached
at the first adjustment.
G
General Warranty Deed - A deed which conveys not only all the grantor's interests
in and title to the property to the grantee, but also warrants that if the title
is defective or has a "cloud" on it (such as mortgage claims, tax liens,
title claims, judgments, or mechanic's liens against it) the grantee may hold the
grantor liable.
Gift Letter – A letter from a relative stating that an amount will be gifted
to the buyer and that said amount is not to be repaid.
Government National Mortgage Association (GNMA) – Called “Ginnie Mae,”
a governmental part of the secondary market that deals in primarily in recycling
VA and FHA mortgages, particularly those that are highly leveraged.
Graduated Payment Mortgage - Residential mortgage which has monthly mortgage payments
that start at a low level and increase at a predetermined rate.
Grantee - That party in the deed who is the buyer or recipient.
Grantor - That party in the deed who is the seller or giver.
H
Hazard Insurance - Protects against damages caused to property by fire, windstorms,
and other common hazards.
Holdback - That portion of a loan commitment not funded until some additional requirement
such as rental or completion is attained. In construction it is a percentage of
the contractor's draw held back to provide additional protection for the interim
lender, often in an amount equal to the contractor's profit.
Home Inspection Report – A qualified inspector’s report on a property’s
overall condition. The report usually included an evaluation of both the structure
and mechanical systems.
Home Warranty Plan – Protection against failure of mechanical systems within
the property. Usually includes plumbing, electrical, heating systems and installed
appliances.
HUD - U.S. Department of Housing and Urban Development. Office of Housing/Federal
Housing Administration within HUD insures home mortgage loans made by lenders and
sets minimum standards for such homes.
I
Index - An economic measurement that is used to measure periodic interest rate adjustments
for an adjustable rate mortgage.
Interest - A charge paid for borrowing money. (See mortgage note)
Interest rate- The percentage of an amount of money which is paid for its use for
a specified time. Usually expressed as an annual percentage.
Investor - An person or institution investing in mortgages.
Involuntary lien - A lien imposed against property without consent of an owner.
Examples include taxes, special assessment, federal income tax liens, mechanics
liens, and materials liens.
J
Joint Tenancy - An equal undivided ownership of property by two or more persons.
Upon the death of any owner, the survivors take the decedent's interest in the property.
Jumbo Loans – Mortgage loans that exceed the loan amounts acceptable for sale
in the secondary market; these jumbos must be packaged and sold differently to investors
and therefore have separate underwriting guidelines.
K
Keep Informed - Using a licensed Realtor who is kept abreast of the latest real
estate changes and practices, will affect the bottom line.
L
Land contract - A contract ordinarily used in connection with the sale of property
in cases where the seller does not wish to convey title until all or a certain part
of the purchase price is paid by the buyer. This financing vehicle is often used
when property is sold on a small down payment.
Lease - A written document containing the conditions under which the possession
and use of real or personal property are given by the owner to another for a stated
period and for a stated consideration.
Legal description - A property description recognized by law which is sufficient
to locate and identify the property without oral testimony.
Lessee (tenant) - The person or persons holding rights of possession and use of
property under terms of a lease.
Lessor (landlord) - The one leasing property to a lessee.
Licensed Mortgage Broker - The licensed person who, for a commission or a fee, brings
parties together and assists in negotiating contracts between them. A firm or individual
bringing the borrower and lender together and receiving a commission. A mortgage
broker does not retain servicing.
Lien - A claim by one person on the property of another as security for money owed.
Such claims may include obligations not met or satisfied, judgments, unpaid taxes,
materials, or labor.
Limited partnership - A partnership that consists of one or more general partners
who are fully liable and one or more limited partners who are liable only for the
amount of their investment.
Loan - A sum of money loaned at interest to be repaid.
Loan Commitment – A written promise to make a loan for a specified amount
on specified terms.
Loan Processing - (1) A System by which a Buyer is evaluated for loan approval.
The system compares the stated income, debt, savings and credit against documentation
provided by the buyer (or alternative Federal documents). Calculations of Debt-To-Income,
Loan-To-Value, Net Worth, Cash Reserves and Compensating Factors are used to develop
and Underwriting Opinion. (2) The system of structuring a Buyer's financial situation
and documentation in such a way that an Underwriting Opinion can be reached.
Loan submission - A package of pertinent papers and documents regarding specific
property or properties. It is delivered to a prospective lender for review and consideration
for the purpose of making a mortgage loan.
Loan-to-value ratio - The relationship between the amount of the mortgage loan and
the appraised value of the security expressed as a percentage of the appraised value.
Lock-in – The fixing of an interest rate or points at a certain level, usually
during the loan application process. It is usually done for a certain period of
time such as 60 days and may require a fee or premium in the form of a higher interest
rate.
M
Margin - The number of basis points a lender adds to the index to determine the
interest rate of an adjustable rate mortgage.
Marketable Title - A title that is free and clear of objectionable liens, clouds,
or other title defects. A title which enables an owner to sell his property freely
to others and which others will accept without objection.
Metes and bounds - A description in a deed of the land location in which the boundaries
are defined by directions and distances.
Mortgage - A lien or claim against real property given by the buyer to the lender
as security for money borrowed. Under government-insured or loan-guarantee provisions,
the payments may include escrow amounts covering taxes, hazard insurance, water
charges, and special assessments. Mortgages generally run from 10 to 30 years, during
which the loan is to be paid off.
Mortgage Commitment - A written notice from the bank or other lending institution
saying it will advance mortgage funds in a specified amount to enable a buyer to
purchase a house.
Mortgage Deed – Companion legal document to promissory note recorded by the
county enumerating the lender’s procedure to enforce loan terms.
Mortgage Insurance Premium - The payment made by a borrower to the lender for transmittal
to HUD to help defray the cost of the FHA mortgage insurance program and to provide
a reserve fund to protect lenders against loss in insured mortgage transactions.
In FHA insured mortgages this represents an annual rate of one-half of one percent
paid by the mortgagor on a monthly basis.
Mortgage Life Insurance - A type of term life insurance often bought by mortgagors.
The amount of coverage decreases as the mortgage balance declines. In the event
that the borrower dies while the policy is in force, the debt is automatically satisfied
by insurance proceeds.
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.
Mortgage (Open-End) - A mortgage with a provision that permits borrowing additional
money in the future without refinancing the loan or paying additional financing
charges. Open-end provisions often limit such borrowing to no more than would raise
the balance to the original loan figure.
Mortgagee - The lender in a mortgage agreement.
Mortgagor - The borrower in a mortgage agreement.
N
Negative Amortization - Occurs when monthly payments fail to cover the interest
cost. The interest that isn't covered is added to the unpaid principal balance,
which means that even after several payments the borrowers could owe more than they
did at the beginning of the loan. Negative amortization can occur when an ARM has
a payment cap that results in monthly payments that aren't high enough to cover
the interest.
Note - Promissory note to lender detailing terms of repayment of amount borrowed.
O
Offer to Purchase - A preliminary agreement, secured by the payment of earnest money,
between a buyer and seller as an offer to purchase real estate. A binder secures
the right to purchase real estate upon agreed terms for a limited period of time.
If the buyer changes his mind or is unable to purchase, the earnest money is forfeited
unless the binder expressly provides that it is to be refunded.
Origination - The process of originating mortgages. Solicitation may be from individual
borrowers, builders, or brokers.
Origination fee - A fee or charge for the work involved in the evaluation, preparation,
and submission of a proposed mortgage loan.
Originator - A person who solicits builder, brokers, and others to obtain applications
for mortgage loans. origination is the process by which the mortgage lender brings
into being a mortgage secured by real property.
P
Payment Cap – the maximum amount the payment can adjust in any given time
frame.
PITI (principal, interest, taxes, and insurance) - The principal and interest payment
on most loans is fixed for the term of the loan; the tax and insurance portion may
be adjusted to reflect changes in takes or insurance costs. Note: In cases where
the buyer puts down less than 20% of the Sales Price, Mortgage Insurance may be
required as part of the Total Monthly Payment (PITI).
Plans and specifications - Architectural and engineering drawings and specifications
for construction of a building or project, including a description of materials
to be used and the manner in which they are to be applied.
Plot - A map or chart of a lot, subdivision or community drawn by a surveyor showing
boundary lines, buildings, improvements on the land, and easements.
Points - Sometimes called "discount points." A point is one percent of
the amount of the mortgage loan. For example, if a loan is for $25,000, one point
is $250. Points are charged by a lender to raise the yield on his loan at a time
when money is tight, interest rates are high, and there is a legal limit to the
interest rate that can be charged on a mortgage. Buyers are prohibited from paying
points on HUD or Veterans' Administration guaranteed loans (sellers can pay, however).
On a conventional mortgage, points may be paid by either buyer or seller or split
between them.
Preclosing - A transaction preceding the formal closing, often used to settle outstanding
issues (survey, pest inspection, hazard insurance, flood insurance (if required),
with the formal closing shortly thereafter.
Prepayment - Payment of mortgage loan, or part of it, before due date. Mortgage
agreements often restrict the right of prepayment either by limiting the amount
that can be prepaid in any one year or charging a penalty for prepayment. The Federal
Housing Administration does not permit such restrictions in FHA insured mortgages.
Prepayment Penalty – A fee charged to a borrower who pays a loan before it
is due. Not allowed for FHA or VA loans.
Principal - The basic element of the loan as distinguished from interest and mortgage
insurance premium. In other words, principal is the amount upon which interest is
paid.
Principal balance - The outstanding balance of a loan.
Private mortgage insurance (PMI) - Insurance written by a private company protecting
the mortgage lender against loss by a mortgage default.
Purchase Agreement - (See agreement of sale).
Q
Qualify – The process where the buyer meets the requirements as set forth
by the lender when obtaining a mortgage.
Quitclaim 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.
(See deed.)
R
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 real estate broker or an associate holding active membership in a local
real estate board affiliated with the National Association of Realtors.
Reconveyance - The transfer of land from one person to the immediately preceding
owner. It is used when the performance of debt is satisfied under the terms of a
deed of trust.
Redemption period - That period of time in those states where it is allowed in which
a foreclosed mortgagor has to buy back his property by paying principal amount and
interest and fees.
Refinancing - The process of the same mortgagor paying off one loan with the proceeds
from another loan.
Regulation Z – The set of rules governing consumer lending issued by the Federal
Reserve Board of Governors in accordance with the Consumer Protection Act.
Release of lien - An instrument discharging secured property from a lien.
Rent with Option – A contract, which gives one the right to lease property
at a certain sum with the option to purchase at a future date.
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. The determination whether a
covenant runs with the land or is personal is governed by the language of the covenant,
the intent of the parties, and the law in the State where the land is situated.
Restrictive covenants that run with the land are encumbrances and may affect the
value and marketability of title. Restrictive covenants may limit the density of
buildings per acre, regulate size, style or price range of buildings to be erected,
or prevent particular businesses from operating or minority groups from owning or
occupying homes in a given area. (This latter discriminatory covenant is unconstitutional
and has been declared unenforceable by the U.S. Supreme Court.)
Right of survivorship - In joint tenancy, the right of survivors to acquire the
interest of a deceased joint tenant.
Right-of-way - A privilege operating as an easement upon land, whereby a land owner,
by grant or agreement, gives another the right to pass over land. Also knows as
easement.
S
Sale-leaseback - A technique in which a seller deeds property to a buyer for a consideration
and the buyer simultaneously leases the property back to the seller, usually on
a long-term basis.
Sales Agreement - See agreement of sale.
Sales Contract - Another name for a sales agreement, purchase agreement, etc. Not
to be confused with a land contract, which is a conditional sales contract.
Satisfaction of mortgage - The record able instrument given by the lender to evidence
payment in full of the mortgage debt. Sometimes knows as a release deed.
Secondary financing - Financing real estate with a loan, or loans, subordinate to
a first mortgage or first trust deed.
Secondary mortgage market- The market where existing mortgages are bought and sold.
It contrasts with the primary mortgage market, where mortgages are just originated,
and packaged for delivery to the secondary market.
Servicing - The duties of the mortgage lender as a loan correspondent as specified
in the servicing agreement for which a fee is received. Consists of operational
procedures covering accounting, bookkeeping, insurance, tax records, loan payment
follow-up, delinquency loan follow-up and loan analysis.
Severalty Ownership – Ownership by one person only. Sole ownership.
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.
Special Lien - A lien that binds a specified piece of property, unlike a general
lien, which is levied against all one's assets. It creates a right to retain something
of value belonging to another person as compensation for labor, material, or money
expended in that person's behalf. In some localities it is called "particular"
lien or "specific" lien.
Special Warranty Deed - A deed in which the grantor conveys title to the grantee
and agrees to protect the grantee against title defects or claims asserted by the
grantor and those persons whose right to assert a claim against the title arose
during the period the grantor held title to the property. In a special warranty
deed the grantor guarantees to the grantee that he has done nothing during the time
he held title to the property which has, or which might in the future, impair the
grantee's title.
State Stamps - (See documentary stamps)
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. A survey is often required by the lender to assure him
that a building is actually sited on the land according to its legal description.
T
Takeout commitment - A promise to make a loan at a future specified time. It is
commonly used to designate a higher cost, shorter term, backup commitment as a support
for construction financing until a suitable permanent loan can be secured.
Tax -As applied to real estate, an enforced charge imposed on persons, property
or income, to be used to support the State. The governing body in turn utilizes
the funds in the best interest of the general public.
Tax Lien - A claim against property for the amount of its due and unpaid taxes.
Tenancy - A holding of real estate under any kind of right of title.
Tenancy At Will - A holding of real estate that can be terminated at the will of
either the lessor or the lessee, usually with notice.
Tenancy by entirety - The joint ownership of property by a husband and wife where
both are viewed as one person under common law that provides for the right of survivorship.
Tenancy in common - In law, the type of tenancy or estate created when real or personal
property is granted, devised or bequeathed to two or more persons, in the absence
of expressed words creating a joint tenancy. There is no right of survivorship.
Term - The period of time between the commencement date an termination date of a
note, mortgage, legal document, or the contract.
Title - As generally used, the rights of ownership and possession of particular
property. In real estate usage, title may refer to the instruments or documents
by which a right of ownership is established (title documents), or it may refer
to the ownership interest one has in the real estate.
Title Insurance - Protects lenders or homeowners against loss of their interest
in property due to legal defects in title. Title insurance may be issued to a "mortgagee's
title policy." Insurance benefits will be paid only to the "named insured"
in the title policy, so it is important that an owner purchase an "owner's
title policy", if he desires the protection of title insurance.
Title Search or Examination - A check of the title records, generally at the local
courthouse, to make sure the buyer is purchasing a house from the legal owner and
there are no liens, overdue special assessments, or other claims or outstanding
restrictive covenants filed in the record, which would adversely affect the marketability
or value of title.
Trustee - 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
of law. (See deed of trust.)
U
Underwriting - The analysis and matching of risk to an appropriate rate and term.
Unencumbered property - A property the title to which is free and clear.
Usury - Charging more for the use of money than allowed by law.
V
VA Loans – A loan, made by a private lender that is partially guaranteed by
the veterans Administration.
Variable rate mortgage - A mortgage agreement that allows for adjustment of the
interest rate in keeping with a fluctuating market and terms agreed upon in the
note.
W
Warehousing - The holding of a mortgage on a short term basis pending either a sale
to an investor or other long term financing.
Warranty deed - A deed in which the grantor or seller warrants or guarantees that
good title is being conveyed, as opposed to a quitclaim deed that contains no representation
or warrant as to the quality of title being conveyed.
X
X - Marks the Spot - Proper signatures and initials are required to make a document
legally enforceable.
Y
Yesterday - Normally the real estate activities of yesterday usually sets the precedence
for real estate activities of today.
Z
ZZZ – Sleeping is not recommended when it comes to dealing with real estate.
“You snooze-You loose.”
Zoning Ordinances - The acts of an authorized local government establishing building
codes, and setting forth regulations for property land usage.
