Abstract (of title)
Abstract (of title)
A written summary of the title history of a particular piece of real estate.
Acceleration Clause
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.
Amortization
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.
Application Fee
Application Fee
That part of the closing costs pre-paid to the lender at time of application to cover initial expenses.
Appraisal
Appraisal
A report made by a qualified person as to the value of a property as of a given date.
APR (Annual Percentage Rate)
APR (Annual Percentage Rate)
The annual percentage rate refers to the total cost of the loan, expressed as a yearly rate.
ARM (Adjustable Rate Mortgage)
ARM (Adjustable Rate Mortgage)
A mortgage in which the interest rate is adjusted periodically, based on the movement of a financial index.
Assessed Value
Assessed Value
The value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.
Assumption of Mortgage
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.
Balloon Mortgage
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.
Bridge Loan
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.
Broker
Broker
The person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
Buydown
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.
Cap (interest rate)
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)
Cap (payment rate)
The maximum payment amount increase allowable on an adjustable rate mortgage. May result in negative amortization. See Negative amortization.
Certificate Of Title
Certificate Of Title
A statement that shows ownership of property, stating that the seller has clear legal title.
Closing
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.
Closing Costs
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."
Closing Disclosure
Closing Disclosure
Replaces the HUD-1 Settlement Statement. It is the final disclosure generated by the lender for use in comparing the Loan Estimate against the final costs and fees for the loan scenario. It includes any credits and charges associated with the particular loan transaction.
Closing Statement
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.
Commission
Commission
An agent's or broker's fee for bringing the principals together and helping to negotiate a real estate transaction, often a percentage of the sales price or flat fee.
Commitment
Commitment
An agreement, frequently in writing, between a lender and a borrower to loan money at a future date, subject to certain conditions.
Comparables
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
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.
Contingency
Contingency
A condition that must be met for a contract or a commitment to remain binding.
Conventional Mortgage
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
Convey
To transfer real estate from one person to another.
Credit Report
Credit Report
The report to a prospective lender on the credit standing of a prospective borrower.
Deed
Deed
A legal written document by which title to property is transferred.
Default
Default
Failure to fulfill the terms as agreed to in the mortgage of note.
Down Payment
Down Payment
The difference between the sale price of a property and the mortgage amount.
Due-On-Sale
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.
Earnest Money
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.
Easement
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
Encumbrance
Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid property taxes.
Equity
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
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.
First Mortgage
First Mortgage
A mortgage that has a primary lien against a property.
Fixed-Rates Mortgage
Fixed-Rates Mortgage
A mortgage with an interest rate and monthly payments that remain constant over the life of the loan.
Fixture
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.
Flood Certification
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.
Foreclosure
Foreclosure
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.
Graduated Payment Mortgage
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
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.
Hazard Insurance
Hazard Insurance
Insurance protection against damage to a property from fire, windstorms, and other common hazards.
Homeowner's Insurance
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.
HUD-1 Form
HUD-1 Form
See Real Estate Settlement Statement.
Income Property
Income Property
Real estate that is owned for investment purposes and not used as the owner's residence.
Interest
Interest
A charge paid for the use of money.
Land Contract
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.)
Lien
Lien
A legal claim on a property used as security for a debt.
Loan Estimate
Loan Estimate
Disclosure required within 3 days of loan application that lists all of the costs and fees associated with a particular loan scenario. The Loan Estimate replaces the Good Faith Estimate (GFE).
Loan-To-Value Ratio
Loan-To-Value Ratio
The relationship between the amount of the mortgage and property value, usually shown as a percentage.
Market Value
Market Value
The price at which a property will sell, assuming a knowledgeable buyer and seller, both operating without undue pressure.
Mortgage
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.
Mortgage Note
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.
Mortgagee
Mortgagee
The lender in a mortgage contract.
Mortgagor
Mortgagor
The borrower in a mortgage contract.
Negative Amortization
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.
Offer to Purchase
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
Origination Fee
A fee charged for the work involved in the evaluation preparation and submission of a proposed mortgage loan.
Owner Financing
Owner Financing
A purchase in which the seller provides all or part of the financing.
PITI
PITI
An acronym for payments to lender that cover principal, interest, taxes and insurance on a property.
Plat
Plat
A map of a piece of land showing boundary lines, streets, actual measurements and easements.
PMI (Private Mortgage Insurance)
PMI (Private Mortgage Insurance)
Insurance written by a private mortgage insurance company to protect the lender against losses caused by mortgage default. This is commonly required on loan transactions involving less than a 20% down payment or equity position.
Point
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.
Pre-Approval
Pre-Approval
A commitment by a lender to extend credit provided that specific conditions are met.
Pre-Qualification
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.
Prepayment Penalty
Prepayment Penalty
A charge paid to the lender by the borrower if a mortgage loan is repaid before its term is over.
Prime Rate
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.
Principal
Principal
The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
Qualifying Ratios
Qualifying Ratios
Guidelines used by lenders to determine how much of a loan a home buyer qualifies for. Often referred to as debt-to-income ratios (or DTI).
Realtor
Realtor
A real estate broker or sales associate affiliated with the National Association of Realtors.
Recording Fee
Recording Fee
The charges made by the register of deeds to record the legal documents.
Refinancing
Refinancing
Repaying a debt with the proceeds of a new loan, using the same property as collateral or security.
Second Mortgage
Second Mortgage
A loan issued on property that is already encumbered by an existing mortgage (ie: the first mortgage). The second mortgage is subordinate to the first.
Secondary Mortgage Market
Secondary Mortgage Market
The market wherein home loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a variety of other institutional investors.
Survey
Survey
A map prepared by an engineer or surveyor charting a particular piece of real estate.
Title
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.
Title Insurance Policy
Title Insurance Policy
A policy designed to protect the buyer or lender after closing from financial losses arising from any defects in the title that may have occurred prior to purchase.
Title Search
Title Search
A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.
Transfer Tax
Transfer Tax
In some areas city, county or state taxes imposed when property passes from one person to another.
Truth-In-Lending
Truth-In-Lending
Federal law that requires lenders to disclose the terms and conditions of a mortgage, including the APR, based on certain charges incurred by the borrower. If the charges were $0, the APR would be equal to that actual interest rate on the loan.
Underwriting
Underwriting
The process of evaluating a loan application to determine the risk involved for the lender.
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