Glossary

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A

Abstract of Title: A summary of the public records relating to the title to a particular
piece of land. If there are any title defects they must be cleared before a buyer can purchase clear, marketable, and insurable title.

Abstract of Judgment: A summary of a court judgment that creates a lien against a property when filed with the county recorder.

Acceleration Clause: Allows the lender to speed up the rate at which your loan comes due
or even to demand immediate payment of the entire balance of the loan should you default on you loan. 

Acceptance: A seller’s written approval of a buyer’s offer.

Acknowledgment: A declaration by a notary certifying the identity of the signer, either by personal knowledge or written identification.

Addendum: An addition or change to a contract.

Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate is adjusted periodically based on an index. Also known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage

Adjustment Period: The amount of time between interest rate changes for an adjustable rate mortgage.

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 specific terms spelled out in writing and signed by both parties

Amortization: Loan payment calculated to pay off the debt at the end of a fixed
period, including interest on the outstanding balance.

Annual Percentage Rate (APR): The total cost of the loan, including interest and other finance charges, expressed as a yearly rate.

Application: A request for a loan completed by a borrower and submitted to a lender. The document is used to determine creditworthiness that details income, debt, and other obligations.

Application Fee: A fee some lenders charge to process a loan application.

Appraisal: An estimate of the value of property, made by a professional appraiser.

Appraisal Fee: The charge for estimating the value of property.

Appraisal Report: A detailed written report regarding the fair market value of a property based on its condition and recent sales of comparable properties in the particular area.

Appreciation: An increase in the value of a property.

APR (Annual Percentage Rate): The total cost of the loan, including interest and other finance charges, expressed as a yearly rate.

ARM (Adjustable Rate Mortgage): A mortgage loan with an interest rate that changes periodically to reflect changes in a specified financial index.

As-Is Condition: A property being purchased or sold in its existing condition.

Asking Price: The initial price for a property, as determined by the seller.

Assessment Value: The value of a property as determined by a tax assessor in order to calculate a tax base.

Assessment Rolls: A list of taxable properties compiled by a tax assessor.

Assets: Any items of value, including cash, real estate, investments, and securities.

Assignor: An individual who transfers rights and interests of a property to another.

Assumable Mortgage: The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt. 

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B

Back End Ratio: A borrower’s debt-to-income ratio, expressed as a percentage, calculated by adding the new mortgage payment (including principal, interest, taxes, and insurance) and rental or consumer credit obligations divided by gross monthly income.

Balloon Mortgage: Usually a short-term fixed-rate loan which involves small payments for
a certain period of time and one large payment for the remaining amount of the principal at a specific time. 

Balloon Payment: The final lump sum payment of a balloon mortgage.

Bankruptcy: A court proceeding authorizing reorganization or discharge of debts.

Before Tax Income: Gross income before taxes are deducted.

Betterment: An improvement that increases a property’s value.

Bilateral Contract: A contract in which the involved parties offer mutual promises; also called a reciprocal contract.

Bill of Sale: A document that transfers personal property ownership from one party to another.

Binder: 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.

Bona Fide: A legal term referring to actions or individuals that are acting honestly and in good faith.

Bond: An agreement that insures a party against loss by acts or defaults of another party.

Breach of Contract: Failure to perform the provisions of a contract.

Broker: An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. 

Buy-Down: Paying a premium to the lender to reduce the interest rate of a loan.

Buyer’s Broker: A real estate broker who represents only the buyer’s interest and whose commission is paid by the buyer.

Buyer’s Market: A slow real estate market, in which buyers have the market advantage.

Bylaws: Rules and regulations that govern a homeowner’s association or corporation.

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C

Call (Demand) Option: A clause in a loan agreement that lets the lender request the balance of the loan at any time during the life of the loan.

Cancellation Clause: A clause that explains the conditions under which a party may terminate an agreement.

Cap: The limit on the amount that the monthly payment and interest rate can increase on an adjustable rate mortgage.

Capital: Money used to create additional wealth, such as money invested in rental property.

Capital Expenditure: The cost of making improvements on property.

Capital Gains: The profit from the sale of real estate or other long term investments.

Capital Gains Tax: A tax on the profit from the sale of real estate or other long term investments.

Capital Improvement: Any improvement that increases the value of a property.

Cash Out Refinancing: Refinancing a mortgage with a loan amount that is greater than the amount due on the loan being refinanced. The additional funds may be used for cash to the borrower, payment of additional outstanding liens, or personal new loan expenses.

Caveat Emptor: A legal principle derived from the Latin phase, meaning “let the buyer beware.”

CC&R’s (Covenants, Conditions, and Restrictions): Rules and regulations for a particular housing development.

Certificate of Occupancy: A document issued by local government to a builder, stating that the building has met all building codes and is suitable for habitation.

Certificate of Title: A document issued by a title company or a written opinion from an attorney stating that the seller of a property has good marketable and insurable title to the property for sale.

Chain of Title: The official record detailing the ownership history of a property.

Change Frequency: The interest rate change schedule on an adjustable rate mortgage.

Clear Title: A property that does not have any liens, defects, or other legal encumbrances recorded against it.

Closing: The final step in the purchase of a property, in which documents are signed and recorded and the property is transferred to the new owner.

Closing Costs: Various costs related to the sale of real estate, including loan, title, escrow, and appraisal fees.

Cloud on Title: An outstanding encumbrance on a property which may adversely affect the marketability of title.

Collateral: Property that a borrower offers as security to obtain a loan.

Collection: Steps taken by a lender to obtain overdue payments on a loan.

Commercial Property: An area zoned for business.

Commission: A percentage of a sale paid to an agent of the sale as compensation for assisting either the buyer or seller.

Commitment: A promise from a lender to make a loan, under certain terms. Commitments are issued for a limited period of time.

Commitment Fee: The amount a lender may charge for issuing a commitment to lend.

Common Area: An area within a housing complex or tract that is owned by all residents and is maintained using common funds.

Common Area Assessments: Fees paid by the owners of a condominium or home in a planned unit development to operate and maintain common areas.

Common Interest Development: A compilation of individually-owned units that share responsibility for and usage of common areas.

Community Property: A classification in certain states of property owned jointly by a husband and wife.

Comparable: A property with similar characteristics used to compare with a subject property for the purpose of determining the fair market value of the subject property.

Condominium: Individual ownership of a unit within a building or development with common areas owned by all residents. The individual owners own the interior space of the dwelling. They do not own the land the condominium sits on.

Conforming Loan: Any loan that meets the qualifications to be purchased by Fannie Mae or Freddie Mac.

Construction Loan: A short term loan of which funds are disbursed in stages by the lender, for the construction of a home.

Construction to Permanent Loan: Converting a construction loan to a traditional mortgage loan after construction is complete.

Consumer Credit : Credit owed that is not secured by real estate.

Contract: An agreement between two or more parties.

Contract to Purchase: A contract between the seller and buyer of a home detailing the price and terms of the transaction.

Conventional Mortgage: A long-term loan for the purchase of a home that is not insured by HUD or guaranteed by the Veteran’s Administration.

Convertible Adjustable Rate Mortgage: An adjustable rate loan that allows the borrower to convert to a fixed rate loan during a specific period of time.

Conveyance: The transfer of a property’s title from one party to another.

Conveyance Tax: A tax on the transfer of real property.

Co-Signer: A second party who signs a promissory note and assumes responsibility for payment of the loan. A co-signer is fully responsible for the debt in the event the borrower does not repay the debt.

Counteroffer: A response to an offer to purchase property, usually requesting a change in the terms set forth in the buyer’s offer.

Credit: Money lent to a borrower in exchange for a commitment to repay the loan within a certain timeframe.

Credit Bureau: A company whose function is to collect credit data and issue credit reports. A credit bureau will generally access credit information held by a credit repository.

Credit History: A record of a person’s current and past payment of debts.

Creditor: Any individual or institution to whom a debt is owed.

Credit Rating: Credit worthiness assigned to an individual based on current credit, credit history, and financial standing.

Credit Report: A report furnished by an independent credit reporting agency that verifies an individual’s credit and payment history on current and previous debts, and other information pertinent to their credit history.

Credit Repository: A large company that gathers financial and credit information from multiple sources about individuals who have applied for credit. The credit repository generally furnishes data to credit reporting agencies or bureaus.

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D

Debt: Any amount of money, goods, or services one person owes to another.

Debt Ratio: A borrower’s monthly payment obligations divided by gross monthly income.

Deed: The legal document that transfers ownership of real property from one person to another. There are may types of deeds (e.g., quit claim, grant, warranty).

Default: Failure to make loan payments as agreed to in the terms of the mortgage or deed of trust. A borrower may default for reasons other than non-payment (e.g., failure to keep the property in a safe and sound condition, failure to notify the lender that the property has been sold).

Delinquent Mortgage: A mortgage that is behind on regularly scheduled payments.

Deposit: Money the buyer offers when extending an offer to purchase a property in order to show good faith.

Depreciation: A property’s decline in value due to wear and tear, adverse changes in the neighborhood, or any other reasons.

Discharge: The final step in bankruptcy proceedings, in which debts are no longer owed or collectable.

Disclosure: A statement to a potential buyer of a property, including all of the relevant information about that property.

Discount Points: Fees that a borrower pays to lower the interest rate on a loan. Each point is equal to one percent of the loan amount.

Distressed Property: Property in poor physical condition.

Documentary Stamps: A state tax, in the form of stamps, that is required on deeds and mortgages when property titles pass from one owner to another. The fee is generally paid to the state.

Down Payment: The amount of money the purchaser agrees to pay to the seller upon signing the sales agreement.

Dual Agent: An agent who represents both the buyer and the seller in a transaction.

Due-On-Sale Clause: A statement in loan documents that states that the loan must be paid in full when the house is sold.

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E

Early Occupancy: When the seller of a property allows the buyers to occupy the property before the sale is complete.

Earnest Money: The deposit money a buyer gives to a seller with the offer to purchase a property.

Easement: A right given to an individual or agency authorizing access to or over the owner’s property.

Encumbrance: A claim or lien on a property that affects a free and clear title to the property.

Equal Credit Opportunity Act: A federal law prohibiting lenders or other creditors from refusing credit based on the applicant’s race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to contract); on the fact that all or part of the applicant’s income is derived from public assistance; or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.

Equity: The remaining value of a homeowner’s property after deducting existing liens.

Escrow (Escrow Agent): A neutral third party who holds money and documents until all conditions of the agreement are satisfied and then directs the closing of the transaction.

Escrow (Impound) Account: An account established to hold funds for payment of various homeowner’s expenses, such as hazard insurance or property taxes.

Escrow (Impound) Analysis: An annual review of an escrow account by a lender to determine if the lender is withholding enough funds from the borrower’s monthly mortgage payment to cover property taxes, insurance, or other expenses.

Escrow Closing: When all conditions for the real estate transaction are met and the property title is transferred to the buyer.

Escrow Instructions: Instructions prepared by the escrow agent stating the conditions, parameters, and contingencies of a transaction. The escrow instructions are agreed to by all parties.

Examination of Title: A review of public records and other documents by a title company to establish the chain of ownership of a property.

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F

Fair Credit Reporting Act: A federal law that prevents old or inaccurate information from remaining in consumer credit files and regulates credit reporting procedures.

Fair Debt Collection Practices Act: A federal law that renders debtor harassment illegal and regulates collection practices.

Fair Housing Act: A federal law that outlaws denying rent or refusing to sell property to anyone based on race, color, religion, familial status (having one or more children), handicap, or national origin.

Fannie Mae (FNMA): The Federal National Mortgage Association, a congressionally chartered company, owned by shareholders, that buys mortgages from lenders and resells them as securities in the secondary mortgage market.

Federal Home Loan Mortgage Corporation: A company, commonly known as Freddie Mac, that buys mortgages from lenders and resells them to investors.

Federal Housing Administration (FHA): A government agency that operates various home loan programs.

Fee Simple: A type of property ownership in which the owner owns both the land and the structures and is entitled to use the property freely in accordance with state and local laws.

FHA Loans: Mortgages insured by the Federal Housing Administration.

First Mortgage: The primary mortgage on a property that has priority over all other mortgages recorded against it.

Fixed Installment: The monthly payment on a fixed rate loan.

Fixed Rate Mortgage: A home loan with an interest rate that remains the same for the entire term of the loan.

Foreclosure: A legal process in which a lender enforces early payment of a mortgage in default by taking and selling the mortgaged property to repay the loan, legal costs, and other liens on the property.

Free and Clear: When a property is completely paid and has no liens attached.

Front End Ratio: A borrower’s debt-to-income ratio, expressed as a percentage, calculated by dividing the mortgage payment (including principal, interest, tax, and insurance) by gross monthly income.

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G

Gift Funds: Cash a borrower receives from a relative or another source, used to make a down payment on a property.

Good Faith Estimate: An estimate from a lender that details the estimated costs a borrower will incur, including points, loan processing fees, inspection fees, title, escrow, recording, and other fees.

Government National Mortgage Association: An agency, commonly known as Ginnie Mae, which purchases only government-backed loans, then resells them to investors.

Grace Period: A period of time after the payment due date during which a penalty for late payment is not assessed.

Grant Deed: The most common type of title transfer conveyance, which has warranties against prior conveyances or encumbrances.

Graduated Payment Mortgage: A mortgage with payments that gradually increase over three to five years, then remain fixed for the remainder of the term.

Gross Income: Total household income before taxes or other expenses are taken out.

Guarantee Mortgage: A mortgage loan that is guaranteed by a third party, such as a government institution.

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H

Hazard Insurance: A type of homeowner’s insurance that protects against damages caused to property by fire, wind, or other common hazards.

Home Equity Loan: A loan in which the owner of a property borrows against any remaining equity in the property.

Home Inspection: An examination of the construction, condition, and internal systems of a home by a qualified inspector prior to purchase.

Home Warranty: Insurance that covers repairs to certain parts of a house and some fixtures. It is generally offered and paid for by the seller.

Homeowner’s Insurance: Insurance that includes hazard insurance, personal liability, and theft coverage.

Homeowner’s Association: An elected group that governs a planned community.

Housing Expense Ratio: The percentage of gross monthly income that goes for housing costs.

HUD (U.S. Department of Housing and Urban Development): A federal agency charged with overseeing the Federal Housing Administration and other housing and community development programs.

HUD-1 Uniform Settlement Statement: A closing settlement statement that identifies the distribution of funds and closing costs on a real estate purchase transaction.

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I

Impound (Escrows): A portion of the monthly mortgage payment that is placed in an account and held to pay hazard insurance, property insurance, and private mortgage insurance.

Income Property: Property used to generate rental income.

Incurable Defect: A property defect that cannot be fixed or that would be too costly to repair.

Inspection Report: A document describing the examination of a home’s exterior and interior.

Insurance Binder: A temporary policy used until a permanent policy can be obtained. It is usually valid for 30, 60, or 90 days.

Interest: The cost of borrowing money.

Interest Rate: The amount at which interest will be charged for a loan, expressed as a percentage of the loan amount.

Interest Rate Cap: The limit on the amount of interest that can be charged on the monthly payment of an adjustable rate mortgage during the adjustment period.

Interest Rate Ceiling: The highest amount of interest a lender can charge for a particular adjustable rate mortgage over its lifetime. Also known as a life cap.

Interest-Only Loan: A loan in which the monthly payment covers only the interest; the principal balance does not decline with each payment.

Investment Property: Real estate that generates rental income.

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J

Joint Liability: When two or more individuals are responsible to fulfill the terms of a loan or agreement.

Joint Tenancy : Ownership of a property in which two or more individuals have equal shares of a piece of property, and survivorship rights pass to the surviving owner or owners.

Judgment: The decision of a court of law.

Jumbo Loan: A loan that exceeds loan amount limits set by Fannie Mae and Freddie Mac.

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L

Land Contract: A contract in which the seller does not transfer title to the buyer until the full purchase price of the property is paid.

Late Charge: A fee charged to a borrower when their payment is not received on time or within the grace period (if provided).

Late Payment: A payment received by the lender after the due date.

Legal Description: A method of geographically describing the location of a property that is acceptable in a court of law.

Lender: Any bank, credit union, mortgage company, or savings institution that offers home loans.

Letter of Intent: A formal statement in which an individual indicates the intention to purchase property for a certain price and on a specific date.

Liabilities: A individual’s debts and financial obligations.

Liability Insurance: An insurance policy that protects property owners against claims of negligence, property damage, or personal injury.

LIBOR: The London Interbank Offered Rate, which is the base interest rate paid on deposits between banks in the Eurodollar market.

Lien: An attachment by an individual or company to the property of another as security for repayment of a debt.

Life Cap: The limit on the amount that a loan rate can change during the term of an adjustable rate mortgage.

Liquid Assets: Cash and all other assets that can be quickly converted to cash.

Loan Approval: The decision a lender makes about the amount that can be borrowed for the purchase of a property.

Loan-to-Value Ratio: A measure used by lenders to assess the relationship between the value of the property and the amount of the loan. The loan-to-value ratio is determined by dividing the loan amount by the fair market value of the property.

Loan Officer: A representative of a lending institution who is authorized to act on behalf of a lender in order to obtain new borrowers.

Loan Origination Fee: The lender’s fee (price) for a particular loan type, loan amount, interest rate, and term.

Loan Processing Fee: A fee charged for gathering information to process a loan.

Loan Term: The length of time set by a lender for a borrower to repay a mortgage loan.

Lock In: A period of time during which a potential borrower and a lender have agreed to a specific interest rate.

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M

Margin: Percentage points added to an index to determine the interest rate of the loan.

Marketable Title: A title that is free and clear of all objectionable liens, clouds, or other title defects.

Market Conditions: Factors affecting the sale and purchase of homes at a point in time.

Market Value: The likely selling price of a property if sold in a reasonable length of time after being put up for sale.

Mechanic’s Lien: An encumbrance filed by a subcontractor or supplier against a property to ensure payment of goods or services.

Mortgage: A lien or claim against real property given by the buyer to a lender as security for repayment of the loan.

Mortgage Acceleration Clause: A statement in the mortgage documents that permits a lender to request payment in full of the loan as a lump sum in certain cases, such as when the home is sold, the title is changed, the loan is refinanced, or if the borrower defaults on a payment.

Mortgage Banker: A company that provides home loans using its own capital, then usually sells the loans to investors.

Mortgage Broker: An individual or company that receives a commission for matching prospective borrowers with lenders.

Mortgagee: The lender in a mortgage agreement.

Mortgage Insurance: Insurance often required on conventional loans with less than a 20% down payment to protect the lender from possible default on the loan.

Mortgage Life Insurance: Insurance that will pay off a mortgage if the borrower dies before the loan is paid off.

Mortgage Note: A legal document in which a borrower agrees to repay a loan.

Mortgagor: The borrower in a mortgage agreement.

Move-In Condition: A house that is ready for a new occupant to move in without any repairs, upgrades, or changes to the house.

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N

Negative Amortization: When monthly mortgage payments do not cover the principal and interest of a loan and the outstanding balance of the loan grows larger with each payment.

Net Cash Flow: An investment property that generates income after all of the expenses, such as mortgage, taxes, and insurance, have been paid. The cash flow may either be positive or negative.

Net Worth: An individual or company’s worth after subtracting total liabilities from total assets.

Non-Assumption Clause: A provision in a loan agreement that prohibits the transfer of a mortgage to another borrower.

Non-Conforming Loans: Any loan that is too large or doesn’t otherwise meet the qualifications to be purchased by Fannie Mae or Freddie Mac.

Non-Owner Occupied: A property not used as a residence by the owner of the property.

Non-Recurring Closing Costs: One-time expenses at closing for items such as appraisal, credit report, loan points, home inspection, and title insurance.

Notary Public: An individual who is designated by the state and authorized to certify the identity of a person signing various documents.

Note: The promissory note, a document that details the terms of a loan and legally obligates the borrower to repay the debt.

Notice of Default: An initial action from a lender when a borrower’s mortgage payment is late and all other attempts to resolve the issue out of court have been unsuccessful.

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O

Option: When a potential buyer puts down an amount of money for the right to purchase a piece of real estate within a certain period of time, but is not obligated to buy.

Original Principal Balance: The amount of principal owed on a loan before the borrower makes any payments.

Owner Financing: When the seller of a property finances all or part of a real estate purchase.

Owner Occupied: A property in which the owner is also the resident of the property.

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P

Per Diem Interest: Interest that is charged on a daily basis.

Personal Property: Moveable belongings on a property.

PITI (Principal, Interest, Taxes, Insurance): The complete monthly cost associated with a loan payment.

Planned Unit Development (PUD): Residential projects that may contain clusters of homes, in which residents own the house and land and share use and financial responsibility for common areas.

Plat: A map or chart of a lot, subdivision, or community showing boundary lines, buildings, easements, and improvements, as drawn by a surveyor.

PMI (Private Mortgage Insurance): Insurance required on conventional loans with less than a 20% down payment to protect the lender from possible default on the loan.

Point: One percent of the principal amount of a mortgage loan.

Portfolio Lender: A lender that makes loans with its own funds and does not sell the loans to the secondary market.

Power of Attorney: A legal document authorizing an individual to act on the behalf of another.

Pre-Approval (Credit Approval): When a lender completes an assessment of individual’s creditworthiness and ability to pay for a house and indicates the amount that can be borrowed. Final loan approval is not given until the property has been appraised and all other lender conditions have been obtained.

Preliminary Title Report: A report issued by a title company at the beginning of the loan application process that indicates if there are liens on the property, who has title to the property, and any property taxes owed.

Prepaid Interest Charge: The portion of interest which covers the time period between loan funding and the beginning of the first 30-day period covered by the first payment. Prepaid interest is collected at the loan closing.

Prepayment: Payment of the entire mortgage loan, or part of it, before the due date (maturity date).

Prepayment Penalty: A monetary penalty imposed by a lender on a borrower who pays off a loan before a specified length of time. The prepayment penalty is generally assessed only during the first five years of the loan.

Property Tax: Taxes from local government that are based on the market value of a property.

Punch List: A list, compiled by a buyer on a final walk-through, detailing items to be fixed before closing.

Purchase Agreement (Contract): A contract between the seller and buyer of a home detailing the price and terms of the transaction.

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Q

Qualification: When a lender completes an assessment of a borrower’s creditworthiness and ability to pay for a house and indicates the amount the lender is willing to lend.

Quitclaim Deed: A legal document that released an individual from any interest in a piece of real estate, whether or not the individual actually had an interest.

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R

Rate Lock: A period of time during which a potential borrower and a lender have agreed to a specific interest rate.

Real Estate Agent: An individual who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission.

Real Estate Broker: A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission and who may be responsible for supervising real estate agents in their employ.

Real Property: Land and anything permanently affixed to it.

Reconveyance: A release of lien filed with the county recorder.

Recording Fee: A fee charged by a Recorder to cover the cost of recording documents for the public records.

Refinancing: Replacing a mortgage loan with a new loan that has better terms.

Rescission: The cancellation of a transaction or contract by law or by mutual consent.

Restructured Loan: A mortgage with newly negotiated terms.

Right to Rescission: A provision in the federal Truth-In-Lending Act that allows borrowers to cancel certain loans within three days of signing loan documents.

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S

Secondary Mortgage Market: An area of the mortgage industry that packages home loans and resells them as securities to investors.

Secured Loan: A loan backed by collateral.

Security: A piece of property designated as collateral.

Servicer: A company that collects and processes mortgage payments and manages borrowers’ escrow accounts.

Special Assessment: A special tax imposed on property for road construction, sidewalks, sewers, street lights, or other municipal needs.

Square Footage: The number of square feet of livable space in a home.

Statement of Information: A form completed by a customer for the title company to give further identification of the customer.

Step-Rate Mortgage: A loan that has a gradual increase in the interest rate during the years of the loan.

Survey: A map made by a surveyor with the purpose of measuring land with elevations, boundaries, improvements, and its relationship to surrounding tracts of land.

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T

Tax Lien: A claim placed against a property for the purpose of repaying back taxes. Property may be sold for payment of delinquent taxes.

Teaser Rate: A low, short-term rate offered on an adjustable rate mortgage to assist borrowers in initially qualifying for a home loan.

Title Company: A firm that provides title insurance and confirms that the title to a property is clear.

Title Insurance: An insurance policy issued to lenders and buyers to protect against claims to the property due to prior defects in title.

Title Search: A check of public title records to ensure that the seller is the legal owner of a property and that there are no claims or liens against the property.

Transfer of Ownership: Any legal means by which real estate changes from one owner to another.

Transfer Tax: An assessment on a piece of property by state or local authorities when the ownership of the property changes.

Trust Account: A special account to safeguard funds for a buyer or seller, primarily used by brokers and escrow agents. An escrow or impound account is also a trust account.

Trustee: An individual who has legal responsibility to hold property for another person(s).

Truth-In-Lending Act: A federal law that requires a Truth-In-Lending Statement to be disclosed for all consumer loans. The Truth-In-Lending Statement includes the annual percentage rate (APR), as well as the other terms of the loan; the Truth-In-Lending Act also requires the disclosure of the right of rescission, which allows a consumer to cancel a refinance, home improvement loan, second mortgage, or other refinancing loan program for three business days after the contract is signed, if the home is owner occupied.

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U

Underwriting: The process of evaluating the creditworthiness of a borrower and the risks associated with making a particular loan. The underwriter established the loan amount, loan term, interest rate, and conditions for funding the loan.

Unsecured Loan: A loan that is not backed by any collateral.

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V

VA Loan: A Veterans Administration program that allows veterans to purchase a house without a down payment.

Variable Interest Rate: A loan interest rate that changes with fluctuations in the index to which it is attached, such as the U.S. Treasury bill index.

Variable Rate Mortgage: A mortgage loan with an interest rate that changes with fluctuations in the index to which it is attached.

Verification of Deposit (VOD): When a lender, as part of the loan process, requests that the potential borrower’s bank sign a statement verifying the borrower’s account balances and history.

Verification of Employment (VOE): When a lender, as part of the loan process, requests that the borrower’s employer confirm a borrower’s employment position and salary.

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W

Walk-Through: A buyer’s final inspection of a home to determine if the conditions established in the purchase agreement have been satisfied.

Wraparound: Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

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Z

Zoning: The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.

Zoning Variance: A one-time modification of an existing zoning regulation.