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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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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