| - A - |
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| Abstract (of title) |
A written summary of the title
history of a particular piece of real estate.
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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 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.
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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 piece of
real estate 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 Mortgage |
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 house, with the funds to be
used for a down payment and/or closing costs on a new house.
There is no payment of principal until the house is sold
or the end of the loan term, whichever comes first. Interest
payments may or may not be deferred until the house 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 few years or the whole term.
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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.
|
| 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 statement that 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, the buyer signs the mortgage and pays the purchase
price and 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. Also called "settlement
costs."
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| Closing Statement |
A financial disclosure 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 pricipals 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.
|
| Condominium |
Ownership of a single unit in
a multiunit building or complex of buildings. Along with
this goes a share of ownership of the common areas.
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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, of funded by a government
authorized bond sale or grant.
|
| Convey |
To transfer real estate from
one person to another.
|
| 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 of note.
|
| Down Payment |
The difference between the sale
price of a property and the mortgage amount.
|
| 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.
|
| 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.
|
| 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 yearly mortgage insurance premiums.
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| First Mortgage |
A mortgage that has a primary
lien against a property.
|
| Fixed-Rates Mortgage |
A mortgage with an interest rate
and monthly payments that remain constant over the life of
the loan.
|
| 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.
|
| 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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| - H - |
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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.
|
| Interim Financing |
See Bridge Loan.
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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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| - N - |
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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.
|
| 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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| - P - |
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| PITI |
An acronym for payments to lender
that cover principal, interest, taxes and insurance on a
property.
|
| 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.
|
| 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 buyer representations made. 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 tends to
be 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.
|
| PMI (Private Mortgage
Insurance) |
Insurance written by a private
company to protect the lender against loss caused by mortgage
default.
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| - Q - |
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| Qualifying Ratios |
Guidelines applied by lenders
to determine how large a loan to grant a home buyer.
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| - R - |
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| Real Estate Settlement
Statement |
Final settlement statement often
referred to as the HUD-1 form, used to itemize buyer, seller,
broker, and lender charges and credits at closing.
|
| Realtor |
A real estate broker or sales
associate affiliated with the National Association of Realtors.
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| Recording Fee |
The charges made by the register
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.
|
| Secondary Mortgage
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 arising from defects in the title occurring before purchase.
|
| Title Search |
A check of public record to disclose
the past and current facts regarding ownership of a particular
piece ofproperty.
|
| Transfer Tax |
In some areas city, county or
state taxes imposed when property passes from one person
to another.
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| Truth-In-Lending |
A federal law that 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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