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