We understand the mortgage process can be confusing. Use our Real Estate Glossary to help clarify some of the most common real estate terms in the industry.
ACCELERATION CLAUSE
A provision in a mortgage that allows the lender to demand immediate payment of the outstanding loan balance under certain circumstanceswhen the borrower defaults on the loan.
ACRE
Land measuring 43,560 square feet.
ACTUAL AGE
Also called Effective Age, this is the amount of time that has passed since a structure was built.
ADJUSTMENT DATE
The date the interest rate changes on an adjustable rate mortgage.
ADDENDUM
A document supplementthat contains additional information on the subject. Addendums are often used by appraisers to explain items that did not fit on the standard appraisal form.
ADJUSTABLE-RATE MORTGAGE (ARM)
A type of mortgage where the interest rate (usually the prime lending rate) varies based on a particular index.
ADJUSTED BASIS
The value of an assetthat includes the original price plus the value of any improvement less any applicable depreciation.
ADJUSTED SALES PRICE
An adjusted sales price based on differences between it and another comparable property.
AFFIRMATION
A declaration that a certain set of facts are truthful.
AFFORDABILITY ANALYSIS
A calculation used to determine if you can meet the mortgage obligationsfor a particular property including the down payment, closing costs and continual mortgage payments.
AGENT
A person who has been appointed to represent a buyer or seller.
AMENITY
Any feature of a property that increases its value or desirability. Location proximity to mountains or woods, or other amenities like parks and swimming pools.
AMORTIZATION
The repayment of a loan throughregular installments.
AMORTIZATION SCHEDULE
The breakdown of individual payments throughout the life of an amortized loan, itemizing principal contribution and interest fees.
AMORTIZATION TERM
The length of time in which an amortized loan is repaid (commonly amortized over 15 or 30 years).
ANNUAL PERCENTAGE RATE (APR)
The annual interest rate charged on a loan.
ANNUITY
A sum of money paid at regular intervals (usually annually).
APPLICATION
A form used to apply for a mortgage loan that details a potential borrower’s income, debt, savings and other information.
APPRAISAL
A “defensible” and carefully documented opinion of value. Most commonly determined by recent sales data of comparable properties by a licensed, professional appraiser.
APPRAISAL PRINCIPLES
The basic standards for the property valuation process: property inspection, market analysis and economics.
APPRAISAL REPORT
The end result of the appraisal process usually consists of a standardized form such as the Uniform Residential Appraisal Report form 1004. The purpose of the report is to convey the opinion of value of the appraised property and to provide supporting information for that opinion.
APPRAISED VALUE
An opinion of the fair market value of a property as developed by a licensed, certified appraiser.
APPRAISER
An educated, certified professional with extensive knowledge of real estate markets, values and practices. The appraiser is usually the only independent voice in a real estate transaction with no vested interest in the ultimate value or sales price of the property.
APPRECIATION
The rise in property value due to market forces.
ARMS LENGTH TRANSACTION
Any transaction in which the two parties are not connected and often used to reflects the true market value of a property.
ASSESSED VALUE
The value of a property according to a tax assessment.
ASSESSMENT
Assigning a value to a property for the purpose of levying taxes.
ASSESSOR
A public official who establishes the value of a property for taxation purposes.
ASSET
Any item of value in which you own.
ASSIGNMENT
Transfer of a mortgage ownership when the loan is sold to another company.
ASSUMABLE MORTGAGE
A mortgage that can be assumed by the buyer when a home is sold.
ASSUMPTION
When a buyer takes over, or “assumes” the sellers mortgage.
ATTACHED HOUSING
Any number of houses that are physically attached to one another, but are occupied by different people.
BALLOON MORTGAGE
A single large payment at the end of a mortgage loan to pay off the balance. This usually occurs when the monthly payments are not large enough to repay the loan by the end of the term.
BALLOON PAYMENT
A large payment at the end of a balloon mortgage term.
BANKRUPTCY
When a person or business is unable to pay their debts and seeks protection of the state against creditors.
BILL OF SALE
A receipt for the sale of property.
BIWEEKLY MORTGAGE
A mortgage made up of “half payments” every two weeks instead of one payment per month. By making 13 monthly payments per year (instead of 12), it significantly reduces the time it takes to pay off a thirty year mortgage.
BOND MARKET
Refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing
BRIDGE FINANCING
An interim loan made to speed up the purchase of a new home before the buyer’s current residence sells using its equity to fund the new purchase.
BRIDGING
Structural pieces used between beams to support a structure.
BROKER
A person who brings together a buyer and seller to facilitatethe purchase of property.
BUILDING LINE OR SETBACK
The required distance between buildings and the property line, imposed by municipalities or home associations.
BUILT-INS
Personal property items which are installed in a real estate improvement in a way that they become part of the building (i.e. built-in microwave ovens and dishwashers)
BUY DOWN
Additional money paid to reduce the interest rate of a fixed rate mortgage for a period of time. A buy-down may be paid by the borrowerto have a lower payment at the beginning of the mortgage, or paid by the seller, or lender, as incentive to buy the property.
CALL OPTION
A clause in a mortgage which allows the lender to require payment of the outstanding balance.
CAP
Associated with Adjustable Rate Mortgages. A limit on how much interest rates may change within a certain time period or the life of an Adjustable Rate Mortgage.
CAPE COD COLONIAL
A single-story house style made popular in New England. Often characterized by a steep roof with gables.
CAPITAL
Accumulated goods and money which is most often used to generate additional income.
CASH-OUT REFINANCE
Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash.
CERTIFICATE OF DEPOSIT
A document showing that the bearer has a certain amount of money, at a particular amount interest, on deposit with a financial institution.
CERTIFICATE OF DEPOSIT INDEX
An index based on the interest rate of six month CD’s. Used to set interest rates on some Adjustable Rate Mortgages.
CERTIFICATE OF ELIGIBILITY
A document issued by the Veterans Administration that certifies eligibility for a VA loan.
CERTIFICATE OF OCCUPANCY
Issued by an appropriate jurisdictional entity, this document certifies that a building complies with all building codes and is safe for use or habitation.
CERTIFICATE OF REASONABLE VALUE (CRV)
Usually based on an independent appraisal, a CRV for a particular property establishes the maximum amount which can be secured by a VA mortgage.
CERTIFICATE OF TITLE
A document designating the legal owner of a parcel of real estate. Usually provided by a title or abstract company.
CERTIFIED GENERAL APPRAISER
Generally, any professional who has met the local or state requirements, and passed the appropriate certification exam, and is capable of appraising any type of property.
CERTIFIED RESIDENTIAL APPRAISER
A sub-classification of appraiser who is only licensed to appraise residential property, usually up to four units.
CHAIN OF TITLE
The complete history of ownership of a piece of property.
CHATTEL
Any personal property which is not attached to or an integral part of a property. Chattel is not commonly taken into consideration when appraising the value of real property.
CLEAR TITLE
Ownership of property that is not encumbered by any counter-claim or lien.
CLOSING
A torturous process designed to induce cramping in a home buyer’s hands by requiring signature on countless pieces of documentation that nobody has ever read. Or, the process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale (CLOSING COSTS).
CLOSING COSTS
All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal.
CLOSING STATEMENT
The document detailing the final financial arrangement between a buyer and seller and the costs paid by each.
CO-BORROWER
A second person sharing obligation on the loan and title on the property.
COLLATERAL
An asset which is placed at risk to secure the repayment of a loan.
COLLECTION
The process a lender takes to pursue a borrower who is delinquent on his payments in order to bring the mortgage current again. Includes documentation that may be used in foreclosure.
CO-MAKER
A second party who signs a loan, along with the borrower, and becomes liable for the debt should the borrower default.
COMMON LAW
As opposed to statute law.Laws that have been established by custom, usage and courts over many years.
COMMISSION
A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property.
COMMON AREA ASSESSMENTS
Fees which are charged to the tenets or owners of properties to cover the costs of maintaining areas shared with other tenets or owners. Commonly found in condominium, PUD or office spaces.
COMMON AREAS
Any areas, such as entryways, foyers, pools, recreational facilities or the like, which are shared by the tenets or owners of property nearby. Commonly found in condominium, PUD or office spaces.
COMMUNITY PROPERTY
In many jurisdictions, any property which has been acquired by a married couple. The ownership of the property is considered equal unless stipulated otherwise by both parties.
COMPARABLES
An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property whose value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property.
COMPOUND INTEREST
Interest paid on the principal amount, as well as any accumulated interest.
CONCESSIONS
Additional value granted by a buyer or seller to entice another party to complete a deal.
CONDEMNATION
The official process by which a property is deemed to be uninhabitable or unusable due to internal damage or other external conditions.
CONDENSATION
The transition of water vapor to liquid. Typically forms in areas of high humidity.
CONDOMINIUM
A development where individual units are owned, but common areas and amenities are shared equally by all owners.
CONDOMINIUM CONVERSION
Commonly, the conversion of a rental property such as an apartment complex into a CONDOMINIUM-style complex where each unit is owned rather than leased.
CONDUIT
The pipe through which electric wiring is run.
CONSTRUCTION LOAN
A loan made to a builder or homeowner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed.
CONTIGUOUS
Connected to or touching along an unbroken boundary.
CONTINGENCY
Something that must occur before something else happens. Often used in real estate sales when a buyer must sell a current home before purchasing a new one. Or, when a buyer makes an offer that requires a complete home inspection before it becomes official.
CONTRACT
A legally binding agreement, oral or written, between two parties.
CONVENTIONAL MORTGAGE
A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.).
CONVERTIBLE ARM
A mortgage that begins as an adjustable, that allows the borrower to convert the loan to a fixed rate within a specific time frame.
COOPERATIVE (CO-OP)
A form of ownership where each resident of a multi-unit property owns a share in a cooperative corporation that owns the building. With each resident having rights to a specific unit within the building.
CORPORATE RELOCATION
A situation where a person’s employer pays all or some of the expenses associated with moving from one location to another, usually over a substantial distance. Relocation expenses often include the amounts, such as brokerage fees, incurred in the selling and buying of the employee’s primary residence.
COST OF FUNDS INDEX (COFI)
An index of financial institutions costs used to set interest rates for some Adjustable Rate Mortgages.
COVENANT
A stipulation in any mortgage that, if not met, can be cause for the lender to foreclose.
CREDIT
A loan of money for the purchase of property, real or personal. Credit is either secured by an asset, such as a home, or unsecured.
CREDIT HISTORY
A record of debt payments, past and present. Used by mortgage lenders in determining credit worthiness of individuals.
CREDITOR
A person to whom money is owed.
CREDIT REPORT
A detailed report of an individual’s credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals.
CREDIT REPOSITORY
Large companies that gather and store financial and credit information about individuals who apply for credit.
DATE OF APPRAISAL
The specific point in time as of which an appraiser designates the value of a home. Often stipulated as the date of inspection.
DEBT
An obligation to repay some amount owed. This may or may not be monetary.
DEBT EQUITY RATIO
The ratio of the amount a mortgagor still owes on a property to the amount of equity they have in the home. Equity is calculated at the fair-market value of the home, less any outstanding mortgage debt.
DEED
A document indicating the ownership of a property.
DEED-IN-LIEU (OF FORECLOSURE)
A document given by a borrower to a lender, transferring title of the property. Often used to avoid credit-damaging foreclosure procedures.
DEED OF TRUST
A document which transfers title in a property to a trustee, whose obligations and powers are stipulated. Often used in mortgage transactions.
DEED OF RECONVEYANCE
A document which transfers ownership of a property from a Trustee back to a borrower who has fulfilled the obligations of a mortgage.
DEED OF RELEASE
A document which dismisses a lien or other claim on a property.
DEED OF SURRENDER
A document used to surrender any claim a person has to a property.
DEFAULT
The condition in which a borrower has failed to meet the obligations of a loan or mortgage.
DELINQUENCY
The state in which a borrow has failed to meet payment obligations on time.
DEPOSIT
Cash given along with an offer to purchase property, Also called EARNEST MONEY.
DEPRECIATION
The natural decline in property value due to market forces or depletion of resources.
DETACHED SINGLE-FAMILY HOME
A single building improvement intended to serve as a home for one family.
DISCOUNT POINTS
Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount.
DOWNSPOUT
The pipe that water moves through to reach the ground from the rain gutter.
DUE-ON-SALE PROVISION
A clause in a mortgage giving the lender the right to demand payment of the full balance when the borrower sells the property.
DUPLEX
A single-building improvement which is divided and provides two units which serve as homes to two families.
DWELLING
A house or other building which serves as a home.
DOWN PAYMENT
An amount paid in cash for a property, with the intent to mortgage the remaining amount due.
EARNEST MONEY DEPOSIT
A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.
EASEMENT
The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines.
EAVE
The part of the roof that extends beyond the exterior wall.
ECONOMIC DEPRECIATION
The decline in property value caused by external forces, such as neighborhood blight or adverse development.
ECONOMIC LIFE
The amount of time which any income-producing property is able to provide benefits to its owner.
EFFECTIVE AGE
The subjective, estimated age of a property based on its condition, rather than the actual time since it was built. Excessive wear and tear can cause a property’s effective age to be greater than its actual age.
EMINENT DOMAIN
The legal process whereby a government can take ownership of a piece of property in order to convert it to public use. Often, the property owner is paid fair-market value for the property.
ENCROACHMENT
A building or other improvement on one property which invades another property or restricts its usage.
ENCUMBRANCE
A claim against a property. Examples are mortgages, liens and easements.
ENERGY EFFICIENCY RATIO
An efficiency rating system for air conditioning units that corresponds to the number of BTU’s output per watt of electricity used.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
U.S. federal law requiring that lenders afford people equal chance of getting credit without discrimination based on race, religion, age, sex etc.
EQUITY
The difference between the fair market value of a property and that amount an owner owes on any mortgages or loans secured by the property.
EQUITY BUILDUP
The natural increase in the amount of equity an owner has in a property, accumulated through market appreciation and debt repayment.
ERRORS AND OMISSIONS INSURANCE
An insurance policy taken out by appraisers to cover their liability for any mistakes made during the appraisal process.
ESCROW
An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property.
ESCROW ACCOUNT
An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that go into the escrow account each month.
ESCROW ANALYSIS
An analysis performed by the lender usually once each year to see that the amount of money going into the escrow account each month is correct for the forecasted expenses.
ESCROW DISBURSEMENTS
The payout of funds from an escrow account to pay property expenses such as taxes and insurance.
ESTATE
The total of all property and assets owned by an individual.
EVICTION
The lawful expulsion of an occupant from real property.
EXAMINATION OF TITLE
The report on the title of a property from the public records or an abstract of the title.
EXCLUSIVE LISTING
An agreement between the owner of a property and a real estate agent giving the agent exclusive right to sell the property.
EXECUTOR
The person named in a will to administer the estate.
FACADE
The front exposure of any building. Often used to describe an artificial or false front which is not consistent with the construction of the rest of the building.
FAIR CREDIT REPORTING ACT
A federal law regulating the way credit agencies disclose consumer credit reports and the remedies available to consumers for disputing and correcting mistakes on their credit history.
FAIR MARKET VALUE
The price at which two unrelated parties, under no duress, are willing to transact business.
FANNIE MAE
A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation’s largest source of financing for home mortgages.
FASCIA
The boards that enclose the eaves.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
The U.S. Government agency created in 1933 which maintains the stability of and public confidence in the nation’s financial system by insuring deposits and promoting safe and sound banking practices.
FEDERAL HOUSING ADMINISTRATION (FHA)
A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930’s to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders.
FEE APPRAISER
A certified, professional appraiser who forms an opinion of the fair market value of property and receives a set fee in exchange.
FEE SIMPLE
A complete, unencumbered ownership right in a piece of property.
FEE SIMPLE ESTATE
A form or ownership, or holding title to real estate. It is the most complete form of title, having an unconditional and unlimited interest of perpetual duration.
FHA MORTGAGE
A mortgage that is insured by the Federal Housing Administration (FHA).
FINAL VALUE ESTIMATE
The opinion of value of a piece of property resulting from an appraisal following the USPAP guidelines.
FIRM COMMITMENT
A lender’s agreement to make a loan to a specific borrower on a specific property.
FIRST MORTGAGE
The primary loan or mortgage secured by a piece of property.
FIXED-RATE MORTGAGE (FRM)
A mortgage which has a fixed rate of interest over the life of the loan.
FIXTURE
Any piece of personal property which becomes permanently affixed to a piece of real property.
FLASHING
The metal used around the base of roof mounted equipment, or at the junction of angles used to prevent leaking.
FLOOD INSURANCE
Supplemental insurance which covers a homeowner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones.
FLOOR PLAN
The representation of a building which shows the basic outline of the structure, as well as detailed information about the positioning of rooms, hallways, doors, stairs and other features. Often includes detailed information about other fixtures and amenities.
FLUE
The furnace exhaust pipe, usually going through the roof.
FLUSH VALVE
The valve between the toilet bowl and the tank.
FOOTING
The partially buried support for a vertical structural member such as a post.
FORECLOSURE
The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan.
FORFEITURE
The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.
FOUNDATION
The solid structural element upon which a structure is built.
FRONTAGE
The segment of a property that runs along a point of access, such as a street or water front.
FUNCTIONAL OBSOLESCENCE
A decrease in the value of property due to a feature or lack thereof which renders the property undesirable. Functional obsolescence can also occur when the surrounding area changes, rendering the property unusable for its originally intended purpose.
GENERAL LIEN
A broad-based claim against several properties owned by a defaulting party.
GFI
Ground Fault Interrupter. A type of circuit breaker required in areas where water is present.
GINNIE MAE
A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income home buyers.
GIRDER
A main supporting beam.
GOVERNMENT MORTGAGE
Any mortgage insured by a government agency, such as the FHA or VA.
GRADE
The slope of land around a building. Also ground level.
GRANTEE
Any person who is given ownership of a piece of property.
GRANTOR
Any person who gives away ownership of a piece of property.
GROSS AREA
The sum total of all floor space, including areas such as stairways and closet space. Often measured based on external wall lengths.
HAZARD INSURANCE
Insurance covering damage to a property caused by hazards such as fire, wind and accident.
HEIGHT ZONING
A municipal restriction on the maximum height of any building or other structure.
HIDDEN AMENITIES
Assets of a property which contribute to its value, but are not readily apparent. Examples might include upgraded or premium building materials.
HIGHEST AND BEST USE
The most profitable and likely use of a property. Selected from reasonably probable and legal alternative uses, which are found to be physically possible, appropriately supported and financially feasible to result in the highest possible land value.
HOME EQUITY CONVERSION MORTGAGE (HECM)
Also known as a reverse annuity mortgage. It allows homeowners (usually older) to convert equity in the home into cash. Normally paid by the lender in monthly payments. HECM’s typically do not have to be repaid until the borrower is no longer occupying the home.
HOME EQUITY LINE OF CREDIT
A type of mortgage loan that allows the borrower to draw cash against the equity in his home.
HOME INSPECTION
A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value.
HOME INSPECTOR
A person who performs professional home inspections. Usually, with an extensive knowledge of house construction methods, common house problems, how to identify those problems and how to correct them.
HOMEOWNER’S ASSOCIATION
An organization of homeowners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants.
HOMEOWNER’S INSURANCE
A policy which covers a homeowner for any loss of property due to accident, intrusion or hazard.
HOMEOWNER’S WARRANTY
An insurance policy covering the repair of systems and appliances within the home for the coverage period.
HUD MEDIAN INCOME
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
HUD-1 STATEMENT
A standardized, itemized list, published by the U.S. Department of Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected with a particular property purchase.
IMPROVED LAND
Any parcel of land which has been changed from its natural state through the creation of roads, buildings or other structures.
IMPROVEMENTS
Any item added to vacant land with the intent of increasing its value or usability.
IMPROVEMENT RATIO
The comparative value of an improved piece of land to its natural, unaltered state.
INCOME APPROACH
The process of estimating the value of property by considering the present value of a stream of income generated by the property.
INCOME PROPERTY
A piece of property whose highest and best use is the generation of income through rents or other sources.
INDEPENDENT APPRAISAL
An estimation of value created by a professional, certified appraiser with no vested interest in the value of the property.
INSPECTION
The examination of a piece of property, its buildings or other amenities.
INSURABLE TITLE
The title to property which has been sufficiently reviewed by a title insurance company, such that they are willing to insure it as free and clear.
INTEREST RATE
A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.
INVESTMENT PROPERTY
Any piece of property that is expected to generate a financial return. This may come as the result of periodic rents or through appreciation of the property value over time.
JOINT TENANCY
A situation where two or more parties own a piece of property together. Each of the owners has an equal share, and may not dispose of or alter that share without the consent of the other owners.
JUDGMENT
An official court decision. If the judgment requires payment from one party to another, the court may put a lien against the payee’s property as collateral.
JUDICIAL FORECLOSURE
A type of foreclosure conducted as a civil suit in a court of law.
JUMBO LOAN
A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans.
LATE CHARGE
An extra charge, or penalty added to a regular mortgage payment when the payment is made late by an amount of time specified in the original loan document.
LATENT DEFECTS
Any defect in a piece of property which is not readily apparent, but which has an impact of the value. Structural damage or termite infestation would be examples of latent defects.
LEASE
A contract between a property owner and a tenant specifying the payment amount, terms and conditions, as well as the length of time the contract will be in force.
LEASEHOLD ESTATE
A type of property “ownership” where the buyer actually has a long-term lease on the property.
LEASE OPTION
A lease agreement that gives the tenant an option to buy the property. Usually, a portion of the regular monthly rent payment will be applied towards the down payment.
LEGAL DESCRIPTION
The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection.
LENDER
The person or entity who loans funds to a buyer. In return, the lender will receive periodic payments, including principal and interest amounts.
LIABILITIES
A person’s outstanding debt obligations.
LIABILITY INSURANCE
Insurance that covers against potential lawsuit brought against a property owner for alleged negligence resulting in damage to another party.
LIEN
Any claim against a piece of property resulting from a debt or other obligation.
LIFE CAP
A limit on how far the interest rate can move for an Adjustable Rate Mortgage.
LINE OF CREDIT
An extension of credit for a certain amount for a specific amount of time. To be used by the borrower at his discretion.
LIQUID ASSET
Any asset which can be quickly converted into cash at little or no cost, or cash itself.
LOAN
Money borrowed, to be repaid with interest, according to the specific terms and conditions of the loan.
LOAN OFFICER
A person that “sells” loans, representing the lender to the borrower, and the borrower to the lender.
LOAN ORIGINATION
How a lender refers to the process of writing new loans.
LOAN SERVICING
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.
LOAN-TO-VALUE RATIO (LTV)
The comparison of the amount owed on a mortgaged property to its fair market value.
LOCK-IN
An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time.
LOCK-IN PERIOD
The amount of time the lender has guaranteed an interest rate to a borrower.
MAJOR DEFICIENCY
A deficiency that strongly impacts the usability and habitability of a house. Or a deficiency that may be very expensive to repair.
MANUFACTURED HOUSING
Once known as “mobile homes” manufactured housing is any building which has been constructed off site, then moved onto a piece of real property.
MARGIN
The difference between the interest rate and the index on an adjustable rate mortgage.
MARGINAL LAND
Land whose value has been diminished due to some internal defect or external condition. In most cases, the cost to correct the flaw or condition is as much or more than the expected return from the property.
MASTER ASSOCIATION
An umbrella organization that is made up of multiple, smaller homeowner’s associations. Often found in very large developments or condominium projects.
MATURITY
The date on which the principal balance of a financial instrument becomes due and payable.
MERGED CREDIT REPORT
A credit report derived from data obtained from multiple credit agencies.
METES AND BOUNDS
A traditional way of describing property, generally expressed in terms of distance from a known landmark or intersection, and then following the boundaries of the property back to its origin.
METROPOLITAN AREA
The accumulated land in and around a city or other municipality which falls under the political and economic influence of that entity.
MINERAL RIGHTS
The legal right to exploit and enjoy the benefits of any minerals located below the surface of a parcel of land.
MISREPRESENTATION
A statement by one party in a transaction that is incorrect or misleading. Most misrepresentations are deemed to be intentional and thus may constitute fraud. Others, however, some are rendered through simple mistakes, oversights or negligence.
MODIFICATION
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you to refinance. If any changes are made, it is called a modification.
MORTGAGE
A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral.
MORTGAGE BANKER
A financial institution that provides primary and secondary mortgages to home buyers.
MORTGAGE BROKER
A person or organization that serves as a middleman to facilitate the mortgage process. Brokers often represent multiple mortgage bankers and offer the most appropriate deal to each buyer.
MORTGAGEE
The entity that lends money in a real estate transaction.
MORTGAGE INSURANCE
A policy that fulfills those obligations of a mortgage when the policy holder defaults or is no longer able to make payments.
MORTGAGE INSURANCE PREMIUM (MIP)
A fee that is often included in mortgage payments that pays for mortgage insurance coverage.
MORTGAGE LIFE INSURANCE
A policy that fulfills the obligations of a mortgage when the policy holder dies.
MORTGAGOR
The entity that borrows money in a real estate transaction.
MULTI-FAMILY PROPERTIES
Any collection of buildings that are designed and built to support the habitation of more than four families.
NATURAL VACANCY RATE
The percentage of vacant properties in a given area that is the result of natural turnover and market forces.
NEGATIVE AMORTIZATION
When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest.
NEIGHBORHOOD LIFE-CYCLE
The evolution of neighborhood use and demographics over time. Economic fluctuations, municipal zoning changes and population shifts can affect the life cycle.
NET LEASABLE AREA
The space in a development, outside of the common areas, that can be rented to tenants.
NO CASH-OUT REFINANCE
A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a “rate and term refinance.”
NO-COST LOAN
Many lenders offer loans that you can obtain at “no cost.” You should inquire whether this means there are no “lender” costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a “no-point” loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
NO-POINT LOAN
A loan with no “points”. The interest rate on such a loan will be higher than a loan with points paid. Also sometimes refers to a refinance loan where closing costs are included in the loan.
NON-CONFORMING USE
The use of land for purposes contrary to the applicable municipal zoning specifications. Often occurs when zoning changes after a property is in use.
NON-LIQUID ASSET
Any asset which cannot be quickly converted into cash at little or no cost.
NOTE
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
NOTE RATE
The interest rate stated on a mortgage note.
NOTICE OF DEFAULT
Formal written notice from a lender to a borrower that default has occurred.
OBSOLESCENCE
The process of an assets value diminishing due to the development of more desirable alternatives or because of the degradation of its capabilities.
OCCUPANCY
A physical presence within and control of a property.
OCCUPANCY RATE
The percentage of properties in a given area that are occupied.
OFF-SITE IMPROVEMENTS
Buildings, structures or other amenities which are not located on a piece of property, but are necessary to maximize the use of the property or in some way contribute to the value of the property.
ON-SITE IMPROVEMENTS
Buildings, structures or other amenities that are erected on a piece of property and contribute to its value.
ORIGINAL EQUITY
The amount of cash a home buyer initially invests in the home.
ORIGINAL PRINCIPAL BALANCE
The total amount of principal owed on a mortgage loan at the time of closing.
ORIGINATION FEE
Refers to the total number of points paid by a borrower at closing.
OWNER FINANCING
A transaction where the property owner provides all or part of the financing.
OWNER OCCUPIED
The state of property wherein the owner occupies at least some portion of the property.
PARTIAL INTEREST
A shared ownership in a piece of property. May be divided among two or more parties.
PARTIAL PAYMENT
A payment of less than the regular monthly amount. Usually, a lender will not accept partial payments.
PAYMENT CHANGE DATE
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM).
PERIODIC PAYMENT CAP
The limit on how much regular monthly payments on an Adjustable Rate Mortgage can change during one adjustment period.
PERIODIC RATE CAP
The limit on how much the interest rate on an Adjustable Rate Mortgage can change during any one adjustment period.
PERSONAL PROPERTY
Owned items which are not permanently affixed to the land.
PERSONAL RESIDENCE
The primary domicile of a person or family.
PITI RESERVES
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home.
PLANNED UNIT DEVELOPMENT (PUD)
A coordinated, real estate development where common areas are shared and maintained by an owner’s association or other entity.
POINT
A percentage of a mortgage amount (one point = 1 percent).
POWER OF ATTORNEY
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
PRE-APPROVAL
The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers.
PREFABRICATED
Any building or portion thereof which is manufactured and assembled off site, then erected on a property.
PREPAYMENT
Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized.
PREPAYMENT PENALTY
A fee that may be charged to a borrower who pays off a loan before it is due.
PRE-QUALIFICATION
Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan.
PRIME RATE
The interest rate that banks and other lending institutions charge other banks or preferred customers.
PRINCIPAL
The amount owed on a mortgage which does not include interest or other fees.
PRINCIPAL BALANCE
The outstanding balance of principal on a mortgage. Does not include interest due.
PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)
The most common constituents of a monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI)
A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%.
PROMISSORY NOTE
A written promise to repay a specified amount over a specified period of time.
PROPERTY
Any item which is owned or possessed.
PUBLIC AUCTION
A meeting in an announced public location to sell property to repay a mortgage that is in default.
PUD (PLANNED UNIT DEVELOPMENT)
A project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.
PURCHASE AGREEMENT
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
PURCHASE MONEY TRANSACTIONS
The acquisition of property through the payment of money or its equivalent.
QUALIFYING RATIOS
Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrower’s monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income.
QUITCLAIM DEED
A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear.
RATE LOCK
A guarantee from a lender of a specific interest rate for a period of time.
RAW LAND
Any land which has not been developed.
REAL ESTATE
A piece of land and any improvements or fixtures located on that land.
REAL ESTATE AGENT
A licensed professional who facilitates the buying and selling of real estate.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
A federal law requiring lenders to give full disclosure of closing costs to borrowers.
REAL PROPERTY
Land, improvements and appurtenances, and the interest and benefits thereof.
REALTOR®
A real estate agent or broker who is a member of the NATIONAL ASSOCIATION of REALTORS®
RECORDER
A local government employee whose role it is to keep records of all real estate transactions within the jurisdiction.
RECORDING
The filing of a real estate transaction with the appropriate government agent (normally the RECORDER). A real estate transaction is considered final when it is recorded.
REFINANCE TRANSACTION
A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash.
REMAINING BALANCE
The amount of principal, interest and other costs that has not yet been repaid.
REMAINING TERM
The amount of time remaining on the original amortization schedule.
REPAYMENT PLAN
An arrangement made to repay delinquent installments or advances.
REPLACEMENT RESERVE FUND
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project — particularly that which has a short life expectancy, such as carpeting, furniture, etc.
RESIDENTIAL PROPERTY
A piece of property whose highest and best use is the maintenance of a residence.
REVOLVING DEBT
A type of credit that allows the borrower/customer to make charges against a predetermined line of credit. The customer then pays monthly installments on the amount borrowed, plus interest.
RIGHT OF FIRST REFUSAL
An agreement giving a person the first opportunity to buy or lease a property before the owner offers it for sale to others.
RIGHT OF INGRESS OR EGRESS
The right to enter or leave designated premises.
RIGHT OF SURVIVORSHIP
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
RURAL
An area outside of an established urban area or metropolitan district.
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.
SALE PRICE
The actual price a property sells for, exclusive of any special financing concessions.
SALES COMPARISON APPROACH
An appraisal practice which estimates the value of a property by comparing it to comparable properties which have sold recently.
SECONDARY MARKET
The buying and selling of existing mortgages, usually as part of a “pool” of mortgages.
SECOND MORTGAGE
A loan secured by the equity in a home, when a primary mortgage already exists.
SECURED LOAN
A loan that is backed by collateral. In the case of a mortgage loan, the collateral is the house.
SECURITY
The property used as collateral for a loan.
SELLER CARRY-BACK
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
SERVICER
A financial institution which collects mortgage payments from borrowers and applies the appropriate portions to principal, interest and any escrow accounts.
SERVICING
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.
SINGLE-FAMILY PROPERTY
A property designed and built to support the habitation of one family.
SUBDIVISION
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
SUBJECT PROPERTY
A term which indicates a property which is being appraised.
SUBORDINATE FINANCING
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
SURVEY
A specific map of a piece of property which includes the legal boundaries and any improvements or features of the land. Surveys also depict any rights-of-way, encroachments or easements.
SWEAT EQUITY
The method whereby a homeowner develops equity in a property, either during the purchase or throughout its life, by personally constructing improvements rather than paying to have them built.
TAX-EXEMPT PROPERTY
Any property which is not taxed.
TENANCY
The right to occupy a building or unit.
TENANCY IN COMMON
A form of holding title, whereby there are two or more people on title to a property, ownership does not pass on to the others upon the death of one individual.
THIRD PARTY ORIGINATION Back to top
When a lender uses a third party to originate and package loans for sale to the secondary market (Fannie Mae, Freddie Mac).
TITLE Back to top
A specific document which serves as proof of ownership.
TITLE COMPANY Back to top
An organization which researches and certifies ownership of real estate before it is bought or sold. Title companies also act at the facilitator ensures all parties are paid during the real estate transaction.
TITLE INSURANCE
A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise.
TITLE SEARCH
The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist.
TRANSFER OF OWNERSHIP
Any means by which the ownership of a property changes hands.
TRANSFER OF TAX
Taxes payable when title passes from one owner to another.
TREASURY INDEX
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.
TRUSTEE
A fiduciary that holds or controls property for the benefit of another.
TRUTH IN LENDING
A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage.
UNENCUMBERED PROPERTY
Any property which has no outstanding claims or liens against it.
VACANCY RATE
The current percentage of vacant properties in a given area, regardless of why they are vacant.
VA MORTGAGE
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
VARIANCE
An exception to municipal zoning regulations granted for a specific time period to allow for non-conforming use of the land.
VESTED
Having the right to use a portion of a fund such as an IRA. Typically vesting occurs over time. If you are 100% vested, you have a right to 100% of the fund.
VETERANS AFFAIRS, DEPARTMENT OF (VA)
The successor to the Veteran’s Administration, this government agency is responsible for ensuring the rights and welfare of our nation’s veterans and their dependents. Among other duties, the VA insures home loans made to veterans.
WARRANTY
An affidavit given to stipulate the condition of a property. The person giving the warranty assumes liability if the condition turns out to be untrue.
ZONE
A specific area within a municipality or other jurisdiction which conforms to certain guidelines regarding the use of property in the zone. Typical zones include single-family, multi-family, industrial, commercial and mixed-use.
