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Real
Estate Glossary |
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Abstract of
Judgment - The summary of a
court judgment that creates a lien
against a property when filed with
the county recorder
Abstract of Title -
historical summary of all of the
recorded instruments and proceedings
that affect title to a property.
Accelerated Cost Recovery System
- A tax calculation that provides
greater depreciation in the early
years of ownership of real estate or
personal property.
Acceleration Clause - a loan
provision giving the lender the
right to declare the entire amount
immediately due and payable upon
violation of another specific loan
provision, commonly referred to as
the Due on Sale Clause.
Acceptance - a buyers or
sellers agreement to enter into a
contract and be bound by the terms
of the offer.
Accrued Interest - interest
that has been earned but not paid.
Accumulated Depreciation - in
accounting, the amount of
depreciation expense that has been
claimed to date.
Acknowledgment - a
declaration by a person who has
signed a document that such
signature is a voluntary act, made
before a duly authorized person.
Acquisition Cost - the price
and all fees required to obtain a
property.
Acquisition Loan - money
borrowed for the purpose of
purchasing a property.
Acre - a two dimensional
measure of land equaling 4,840
square yards or 43,560 square feet.
Addendum - something added as
an attachment to a contract.
Additional Principal Payment
- Extra money included in the
monthly payment to help reduce the
principal and shorten the term of
the loan.
Adjoining - contiguous,
attached, sharing a common border.
Adjustable Rate Mortgage (ARM)
- a mortgage loan that allows the
interest rate to be changed at
specific intervals over the maturity
of the loan, based on a monitored
index.
Adjusted Cost Basis - The
cost of any improvements the seller
makes to the property. Deducting the
cost from the original sales price
provides the profit or loss of a
home when it is sold.
Adjusted Tax Basis - the
original cost or other basis of the
property, reduced by depreciation
deductions and increased by capital
expenditures.
Adjustment Period - The
amount of time between interest rate
adjustments in an adjustable-rate
mortgage.
Administrator - a person
appointed by a court to administer
the estate of a deceased person who
left no will.
Administrator's Deed - A
legal document that an administrator
of an estate uses to transfer
property.
Adverse Possession - a means
of acquiring title to real estate
where an occupant has been in
actual, open, notorious, exclusive
and continuous occupancy of property
for the period required by state
law.
Affidavit - a written
statement, sworn to or affirmed
before an officer who is authorized
to administer an oath or
affirmation.
Agency - the legal
relationship between a principal and
his agent arising from a contract in
which the principal engages the
agent to perform certain acts on
behalf of the principal.
Agreement for Deed - see
Contract for Deed.
Alienation - to convey or
transfer title and possession of
property.
All Inclusive Trust Deed -
This applies to states that use
trust deeds instead of mortgages. It
is the same as a wraparound
mortgage.
Amortized Loan - loan that is
repaid in a series of installments
each of which contains a portion
that is applied to reduce the
principal amount of the loan and a
portion that is applied to pay
interest with each successive
payment allocates a larger portion
to principal reduction and a smaller
portion to interest payment until
the outstanding balance is
ultimately reduced to zero.
Annual Cap - maximum amount
the interest rate on an adjustable
rate mortgage can be raised or
lowered in the course of one twelve
month period.
Annual Percentage Rate (APR)
- effective rate of interest rate
for a loan per year including fees
and points, disclosure of which is
required by the Truth-in-Lending
Law.
Anticipatory Breach - A
communication that informs a party
that the obligations of the original
contract will not be fulfilled.
Appraised Value - opinion or
estimate of a value of a property,
values are determined by one of
three methods: comparable sales
(residential), replacement cost
(insurance), or income approach
(commercial).
Appreciation - an increase in
the value of a property.
Arrears - mortgage payment
includes interest for prior month,
or overdue payments in default.
As-Is - without guarantees as
to condition.
Assessed Value - the value
established for property tax
purposes.
Assignee - the person to whom
an agreement or contract is sold or
transferred.
Assignment - the method by
which a right or contract is
transferred.
Assignor - the person who
assigns or transfers an agreement or
contract to another.
Assumable Mortgage - An
existing mortgage which allows the
next purchaser of a property to be
liable for the payments and other
obligations of the note and
mortgage. Depending on the type of
loan, the assumption of the
obligation by this next purchaser
may or may not require a
qualification and approval process
and may or may not release the
original mortgagor (borrower) from
further liability. A written release
from the mortgagee (lender) is
required to relieve the original
mortgagor of responsibility.
Attornment - A tenant's
formal agreement to be a tenant of a
new landlord.
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Backup
Contract - a contract to buy
real estate that becomes
effective if a prior contract
fails to be consummated.
Balance - see Principal
Balance.
Balloon Loan - a loan
that has level monthly payments
that will amortize it over a
stated term (e.g., 30 years) but
that requires a lump sum payment
of the entire principal balance
at the end of a shorter term
(e.g., 10 years).
Balloon Payment - An
installment payment which is
larger (most often much larger)
than the other scheduled
payments. It is usually the last
payment. If a note is written
for $50,000 at a fixed 9.0% rate
of interest with payments based
on an amortization schedule of
30 years and a balloon payment
due in 5 years, the first 60
payments will each be $402.31
(the normal payment for a 30
year loan at 9.0% interest) and
the last payment will be
$47,940.15 which will be the
outstanding balance remaining
after the 60th payment.
Bankruptcy - the
financial inability to pay one's
debts when due causes the debtor
to seek relief through court
action.
Bankruptcy Discharge -
the release of a bankrupt party
from the obligation to repay
debts that were or might have
been proved in a bankruptcy
proceeding.
Basis Point - one 100th
of 1%.
Beneficiary - the person
who receives or is to receive
the benefits resulting from
certain acts.
Bilateral Contract - a
contract under which each party
promises performance.
Bill of Sale - a written
instrument given to pass title
of personal property.
Bird Dog - someone who
identifies a potential good real
estate investment opportunity
and passes that deal on to
another investor for a fee.
Biweekly Mortgage - A
mortgage that requires payments
every two weeks and helps repay
the loan over a shorter term.
Blanket Mortgage - a
single mortgage which attaches
to more than one property.
Board Of Equalization - A
state board charged with
ensuring that local property
taxes are assessed in a uniform
manner
Board of Realtors - a
local group of real estate
licensees who are members of the
state and national association
of Realtors.
Bond - (1) a written
agreement purchased from a
bonding company that guarantees
a person will properly carry out
a specific act, such as managing
funds, showing up in court,
providing good title to a piece
of real estate or completing a
construction project. If the
person who purchased the bond
fails at his or her task, the
bonding company will pay the
aggrieved party an amount up to
the value of the bond.
Breach of Contract - a
violation of the terms of a
legal agreement, default.
Bridge Loan - mortgage
financing between the
termination of one loan and the
beginning of another loan.
Broker - An individual
who acts as an intermediary
between two or more parties for
the purpose of negotiating a
transaction agreeable to all of
the parties. In lending, the
broker arranges and negotiates
loan amounts, interest rates and
loan terms between borrowers and
lenders. Depending on the type
of loan, the state wherein the
transaction is occurring and
contractual arrangements, the
broker may represent the
borrower, the lender or not have
a fiduciary responsibility to
either. (See definition of
"fiduciary responsibility"
below.).
Broker Price Opinion (BPO)
- real estate broker
provides an estimated value of a
property
Building Permit -
permission granted by a local
government or agency to build a
specific structure at a specific
site.
Bundle of Rights -
ownership in real property
implies a group of rights, such
as the right of occupancy, use
and enjoyment, the right to sell
in whole or in part, the right
to control the use, the right to
bequeath, the right to lease any
or all of the rights, the right
to the benefits derived by
occupancy and use of the
property, etc.
Buy Down - A payment of
discounts points in exchange for
a lower rate of interest. It has
the effect of providing the
lender with a greater yield
today in exchange for a lower
yield in the future. (See
definition of "discount points"
below.).
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Call Option
- A clause in a loan agreement
that allows a lender to ask for
the balance at any time.
Cancellation Clause - a
contract provision that gives
the right to terminate the
obligations upon the occurrence
of specified conditions or
events.
Cap - a provision of an
adjustable-rate mortgage (ARM)
that limits how much the
interest rate or loan payments
may increase or decrease. In
upward rate markets, it protects
the borrower from large
increases in the interest rate
or monthly payment. See lifetime
payment cap, lifetime rate cap,
periodic payment cap, and
periodic rate cap.
Capital - (1) money used
to create income, either as an
investment in a business or an
income property. (2) the money
or property comprising the
wealth owned or used by a person
or business enterprise. (3) the
accumulated wealth of a person
or business. (4) the net worth
of a business represented by the
amount by which its assets
exceed liabilities.
Capital Expenditure - the
cost of an improvement made to
extend the useful life of a
property or to add to its value,
such as adding a room. The cost
of repairing a property is not a
capital expenditure. Capital
expenditures are appreciated
over their useful life; repairs
are subtracted from income for
the current year.
Capital Improvement - any
structure or component erected
as a permanent improvement to
real property that adds to its
value and useful life. (See
Capital Expenditure).
Capitalization (Cap) Rate
- rate of return used to derive
the capital value of an income
stream, divide annual income by
net operating income.
Carrying Charges -
expenses necessary for holding
property, such as taxes and
interest on idle property or
property under construction.
Cash Flow - The net
operating income minus the total
of all debt service payments.
(See definition of "net
operating income" below.)
Cash Flow Basis - this
calculation shows when your
monthly payment savings exceed
your estimated closing costs and
discount points. It does not
consider the tax impact or
differences in principal balance
reduction between your current
loan and the refinance
suggestions. You can use the
Amortization Schedule Calculator
to compare principal reduction.
Cash Out - Cash given to
the borrower from the proceeds
of a loan. While relatively
common as part of a refinance,
it is uncommon, but not
impossible, as a benefit of a
small percentage of
non-conforming loans used for a
purchase.
Cash-Out Refinance - a
refinance transaction in which
the new loan amount exceeds the
total of the principal balance
of the existing first mortgage
and any secondary mortgages or
liens, together with closing
costs and points for the new
loan. This excess is usually
given to the borrower in cash
and can often be used for debt
consolidation, home improvement,
or any other purpose. The
borrower effectively borrows
against the home equity.
Caveat Emptor - let the
buyer beware.
Certificate of Eligibility
- issues by the Veterans
Administration to those who
qualify for a VA loan.
Certificate of Insurance
- a document issued by an
insurance company to verify the
coverage.
Certificate of Occupancy
(C.O.) - a document issued
by a local government or agency
permitting the structure to be
occupied by members of the
public.
Certified Commercial
Investment Member (CCIM) - a
designation awarded by the
Realtors National Marketing
Institute, which is affiliated
with the National Association of
Realtors.
Certified Residential Broker
(CRB) - a designation
awarded by the Realtors National
Marketing Institute, which is
affiliated with the National
Association of Realtors.
Certified Residential
Specialist (CRS) - a
designation awarded by the
Realtors National Marketing
Institute, which is affiliated
with the National Association of
Realtors.
Chain of Title - a
history of conveyances and
encumbrances affecting a title
from the time that the original
patent was granted or as far
back as records are available.
Clear Title - a
marketable title, one free of
clouds and disputed interests.
Closing - The formal
meeting where loan documents are
signed and funds disbursed.
Note, however, that Federal law
requires that funds not be
disbursed for three business
days on certain loans where
personal residences serve as the
security. (See definition of
"recission" below.)
Closing Costs - The
expenses which borrowers incur
to complete the loan
transaction. These costs may
include title searches, title
insurance, closing fees,
recording fees, processing fees
and other charges.
Closing Date - the date
on which the seller delivers the
deed and the buyer pays for the
property.
Closing Statement - an
accounting of funds from a real
estate transaction, also known
as a HUD-1.
Cloud on Title - an
outstanding claim or encumbrance
that, if valid, would affect or
impair the owner's title.
Coinsurance Clause - a
provision in a hazard insurance
policy stating the minimum
amount of coverage that must be
maintained - as a percentage of
the total value of the property
- in order for the insured to
collect the full amount of a
loss.
Collateral - property
pledged as security for a debt.
Collectors Deed - If the
Property has not been redeemed
during the one-year redemption
period, the holder of the
Certificate of Purchase may
apply for and receive a
Collectors Deed to the property
Combined Loan-to-Value (CLTV)
- The total of all loans
relative to the value of the
property. If a property has a
value of $100,000 and three
loans totaling $125,000, the
CLTV is 125% ($125,000 /
$100,000).
Commitment - The
notification that a lender has
approved a loan. Virtually all
commitments are issued
conditionally; that is, subject
to some list of conditions that
must be satisfied prior to
funding actually taking place.
Typical conditions include
appraisals of a certain value,
clean title, verification of
representations by the borrower,
etc.
Comparable Sales - As
part of the appraisal process,
those relatively recently sold
properties which will be
compared to the subject property
(the property being appraised)
for the purpose of forming an
opinion of value for the subject
property. The facts and details
of the comparable properties
will be compared to those of the
subject. In an urban setting, to
be of credible assistance in
this process, comparable sales
must have the same use as the
subject, have many similarities
to the subject in terms of size
of house, size of lot,
construction, bedroom count,
room count, floor plan,
amenities, street traffic and be
in the same neighborhood and
have been sold in the recent
past (preferably no more than
six months) by way of an "arms
length" transaction (i.e., not
sold to a relative or friend and
not sold due to a forced sale or
distress sale) and be within one
mile of the subject property.
More liberal standards will
apply for rural property and
some suburban properties but the
basic premise holds, the more
similar the comparable sales are
to the subject property, the
more accurate the value assigned
to the subject property will be.
Lenders will often compensate
for the less precise nature of
rural appraised values by
allowing only lower
loan-to-value ratios than those
in urban settings, usually 10%
lower. (See definition of
"loan-to-value" below.)
Conditions, Covenants, and
Restrictions (CCR's) -
promises written into deeds and
other instruments agreeing to
performance or nonperformance of
certain acts, or requiring or
prohibiting certain uses of the
property.
Conforming Loan - A loan
which has underwriting criteria
consistent with (i.e.,
conforming to) those strict
guidelines of Fannie Mae,
Freddie Mac, FHA or VA. These
are typically the lowest
interest rate loans with very
good terms. (See definitions of
"Fannie Mae", "Freddie Mac",
"FHA", "VA" and "underwriting"
below.).
Consideration - anything
of value given to induce
entering into a contract.
Contiguous - actually
touching, having a common
boundary.
Contingency - A condition
that must be met before a
contract is legally binding. For
example, home purchasers often
include a contingency that
specifies that the contract is
not binding until the purchaser
obtains a satisfactory home
inspection report from a
qualified home inspector.
Contract - an agreement
between competent parties to do
or not do certain things for
consideration.
Contract For Deed - a
real estate installment selling
arrangement whereby the buyer
may use, occupy, and enjoy land,
but no deed is given by the
seller until all or a specified
part of the sale price has been
paid, same as land contract.
Contractor - one who
contracts to provide specific
goods or services.
Conventional Loan - A
conforming loan with no
government guarantee; that is, a
Fannie Mae or Freddie Mac loan.
(See definition of "conforming
loan" above.).
Conversion - changing
property to a different use or
form of ownership.
Convey - to deed or
transfer title to another.
Cooperative (co-op) - a
type of multiple ownership in
which the residents of a
multi-unit housing complex own
shares in the cooperative
corporation that owns the
property, giving each resident
the right to occupy a specific
apartment or unit.
Counteroffer - rejection
of an offer with a simultaneous
substitute offer.
Creative Financing - any
financing arrangement other than
a traditional mortgage from a
third party lending institution.
Credit Line - A loan that
allows revolving use of the
credit; that is, after funds
have been borrowed and repaid
they may be borrowed again
without applying for a new loan.
Typically, a credit limit is
established and some or all of
the available funds can be
optionally disbursed at closing.
Undisbursed funds are available
for the borrowers use at any
time. Payments are required only
on the outstanding balance. They
are similar in use to a credit
card except that they typically
use checks to access the funds.
They are inexpensive, effective
tools for investors.
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Dealer -
one who holds real property
primarily for sale to customers,
merchandise is inventory and
gain on sale is treated as
ordinary income.
Debt Coverage Ratio (DCR)
- A ratio used in underwriting
loans for income producing
property which is created by
dividing net operating income by
total debt service. Ratios of at
least 1.10 are generally
required with ratios of 1.20 and
higher considered the norm. (See
definition of "underwriting"
below.).
Debt Ratio (DR, D:I) -
Also known as debt to income.
The ratio of the total of
minimum monthly debt payments to
gross monthly income. If minimum
monthly payments on a credit
card, auto lease, and mortgage
(PITI) were $30, $220 and $750
respectively and the gross
monthly income was $3000, the
debt ratio would be 33.33%
($1000 / $3000). Only debt
obligations that will be in
place after the loan has funded
are considered. Payments for
food, utilities, entertainment,
medical bills, etc. are not
included in the calculation.
Contractual obligations for rent
(e.g., a lease) would be
included in the calculation. The
housing ratio in this example
would be 25.0% ($750 / $3000).
The preferred candidate for
conventional loans typically
would have debt ratios of 28%
for housing and 36% for the
total with the maximum ratios
allowed (on a case by case basis
with compensating factors; i.e.,
some other strong positive to
offset the negative of the
higher debt ratio) being around
30% / 40% (housing / total). FHA
and VA loans allow a total of
approximately 41.0%.
Non-conforming loans may allow
total debt ratios as high as 55%
or so. True "hard money" loans
seldom consider debt ratios.
(see definitions of "PITI",
"Housing Ratio", "Non-conforming
Loan" below).
Decree - an order issued
by one in authority, a court
order or decision.
Deed - written document,
properly signed and delivered,
that conveys title to real
property.
Deed in Lieu of Foreclosure
- the act of giving property
back to the lender without
foreclosure.
Deed of Trust (DOT) -
DOT's are similar to mortgages
in that they serve as security
for a loan by encumbering real
estate. However, a mortgage is
between two parties (borrower
and lender) and a deed of trust
involves three parties
(borrower, lender and trustee).
The trustee holds the property
in trust as security for the
payment of the debt and can sell
the property if the borrower
defaults.
Deed Restriction - see
Conditions, Covenants, and
Restrictions.
Default - Failure to meet
all of the commitments and
obligations specified in the
mortgage or deed of trust.
Defaults usually give the lender
the right to accelerate payments
and start foreclosure.
Defeasance - clause in
mortgage that gives the borrower
the right to redeem the property
after default by paying the full
indebtedness and fees incurred.
Deferred Maintenance - a
type of physical depreciation
due to lack of normal upkeep.
Deferred Payments -
payments to be made at some
future date.
Deficiency Judgment - a
court order stating that the
borrower still owes money when
the security for a loan does not
entirely satisfy a defaulted
debt.
Density - the intensity
of land use.
Density Test - An
analysis of soil to determine if
the surface can support the
foundation of a house.
Depreciation Recapture -
when real property is sold at a
gain and accelerated
depreciation has been claimed,
the owner may be required to pay
tax at ordinary income rates to
the extent of the excess
accelerated depreciation.
Discount Points - One
point equals one percent of the
loan amount. Paying points has
the effect of giving the lender
a higher yield. Two points on a
$100,000 mortgage would cost
$2,000 ($100,000 x 0.02).
Document Preparation -
this fee covers the expenses
associated with this process of
preparing some of the legal
documents that you will be
signing at the time of closing,
such as the mortgage, note, and
truth-in-lending statement
Down Payment - The
portion of the purchase price
paid by a buyer to a seller from
sources of funds outside of
those provided by a lender.
Draw - a periodic advance
of funds from a lender.
Due Diligence - The act
of carefully reviewing, checking
and verifying all of the facts
and issues before proceeding. In
lending it is, among other
things, verification of
employment, income and savings;
review of the appraisal; credit
report; and status of the title.
Due-on-Sale - see
Acceleration Clause -
reservation of lender's right to
call the loan due and payable
upon sale of the property.
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Earnest Money
- a deposit made by a purchaser
of real estate to show good
faith.
Easement - the right,
privilege, or interest that one
party has in the land of
another.
Easement by Necessity -
the right of an owner to cross
over another's property for a
special necessary purpose.
Easement by Prescription
- continued use of another's
property for a special purpose
can convert to permanent use if
certain conditions are met.
Egress - a means of
access or exit.
Eminent Domain - the
right of the government or a
public utility to acquire
property for necessary public
use by condemnation, but the
owner must be fairly
compensated.
Employer-Assisted Housing
- a special Fannie Mae housing
initiative that offers several
different ways for employers to
work with local lenders to
develop plans to assist their
employees in purchasing homes.
Encroachment - a
building, part of a building, or
obstruction that physically
intrudes upon, overlaps, or
trespasses upon the property of
another.
Encumbrance - any right
to or interest in land that
affects its value, including
mortgage loans, unpaid taxes,
easements, junior liens, or deed
restrictions.
Equal Credit Opportunity Act
(ECOA) - a federal law that
requires lenders and other
creditors to make credit equally
available without discrimination
based on race, color, religion,
national origin, age, sex,
marital status, or receipt of
income from public assistance
programs.
Equitable Conversion - a
legal doctrine in some states in
which, under a contract of sale,
buyers and sellers are treated
as though the closing has taken
place in that the seller in
possession has an obligation to
take care of the property.
Equitable Title - the
interest held by one who has
agreed to purchase, but has not
yet closed the transaction.
Equity - The value of the
unencumbered interest in real
estate as determined by
subtracting the total of the
unpaid mortgage balances plus
the sum of any current liens
against the property from the
property's fair market value.
Escheat - the reversion
of property to the state in the
event that the owner dies
without leaving a will and has
no legal heirs.
Escrow - an agreement
between two or more parties
providing that certain
instruments or property be
placed with a third party for
safekeeping, pending the
fulfillment or performance of a
specified act or condition.
Escrow Account - An
account from which funds can be
disbursed only for specified
reasons; i.e. the money is held
in trust for a specific use. In
lending, these accounts are most
often used to hold and disburse
real estate taxes and hazard
insurance premiums which have
been paid in advance (usually on
a monthly basis) by the
borrower.
Escrow Analysis - the
periodic examination of escrow
accounts to determine if current
monthly deposits will provide
sufficient funds to pay taxes,
insurance, and other bills when
due.
Escrow Collections -
funds collected by the loan
servicer and set aside in an
escrow account to pay borrower
expenses such as property taxes,
mortgage insurance, and hazard
homeowners insurance.
Escrow Disbursements -
the use of escrow funds to pay
real estate taxes, homeowners
insurance, mortgage insurance,
and other property expenses as
they become due.
Escrow Payment - the
portion of a borrower\'s monthly
payment that is held by the loan
servicer to pay for taxes,
hazard homeowners insurance,
mortgage insurance, lease
payments, and other items as
they become due. Known as
"impounds" or "reserves" in some
states.
Estate - the degree,
nature, and extent of interest
that a person has in real
property.
Estate at Sufferance -
the wrongful occupancy of
property by a tenant after the
lease has expired.
Estate for Life - see
Life Estate.
Estate Tax - a tax on the
value of property left by the
deceased, subject to certain tax
rules.
Estoppel - a doctrine of
law that stops one from later
denying facts which that person
once acknowledged were true and
others accepted on good faith.
Eviction - legal
proceeding by a lessor
(landlord) to recover possession
of property.
Exchange - under Section
1031 of the IRS Tax Code,
like-kind property used in a
trade or business or held as an
investment can be exchanged
tax-free, subject to certain
conditions.
Exclusive Listing - a
written contract that gives a
licensed real estate agent the
exclusive right to sell a
property for a specified time,
but reserving the owner\'s right
to sell the property alone
without the payment of a
commission.
Exculpatory Clause -
provision in a mortgage allowing
the borrower to surrender the
property to the lender without
personal liability.
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Facade -
the outside front wall of a
building.
Face Value - the dollar
amount, shown by words and/or
numbers on a document.
Fair Credit Reporting Act
- a federal law that allows
individuals to examine and
correct information used by
credit reporting services.
Fannie Mae (FNMA) -
Federal National Mortgage
Association, a federally
chartered corporation that
purchases mortgages and packages
them to sell as securities.
Federal Fair Housing Law
- a federal law that forbids
discrimination on the bias of
race, color, sex, religion, or
national origin in the selling
or renting of property.
Federal Housing
Administration (FHA) - an
agency within HUD that
administers many loan programs
designed to make housing more
available.
Fee Agreement - An
agreement between a borrower and
a broker which normally
specifies the relationship
between them and the amount of
compensation to the broker.
Fee Simple - absolute
ownership of real property.
Fiduciary Responsibility
- An obligation to act in the
best interest of another party.
This type of obligation
typically exists when one person
places special trust and
confidence in another person and
that responsibility is accepted.
First Mortgage - That
mortgage which is recorded at
the earliest time. The time of
recording is the sole criteria.
Size of loan and type of
mortgage are immaterial. When
the first mortgage is paid off
and released, the second
mortgage (if any existed)
becomes the first mortgage.
Fixed Payment Mortgage -
a loan secured by real property
which features a periodic
payment of interest and
principal which is constant over
the term of the loan.
Fixed Rate Mortgage - A
mortgage with an interest rate
that remains the same through
the life of the loan.
Floodplain - A level land
area subject to periodic
flooding from a contiguous body
of water.
Forbearance - a course of
action a lender may pursue to
delay foreclosure or legal
action against a delinquent
borrower
Foreclosure - The process
by which the mortgagor's
(borrower's) rights to a
property are terminated. While
the general process is similar
from state to state, the actual
procedures tend to vary greatly.
FRBO - for rent by owner.
Freddie Mac (FHMLC) -
Federal Home Loan Mortgage
Corporation, a federally
chartered corporation that
purchases mortgages and packages
them to sell as securities.
FSBO - for sale by owner.
Fully Amortized
Adjustable-Rate Mortgage - A
mortgage that amortizes, or pays
down, the balance of a loan.
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Gable Roof
- one with a triangle, with
the ridge forming an angle at
the top and each eave forming an
angle at the bottom.
Gain - an increase in
money or property value.
Garden Apartments - a
housing complex whereby some or
all tenants have access to a
lawn area.
General Contractor - one
who constructs a building or
other improvement for the owner
or developer.
General Lien - a lien
that includes all of the
property owned by the debtor,
rather than a specific property.
General Warranty Deed - a
deed in which the grantor agrees
to protect the grantee against
any other claim to title of the
property.
Gentrification - the
displacement of lower income
residents by higher income
residents in a neighborhood.
Graduated-Payment Mortgage
(GPM) - A mortgage that
requires a borrower to make
larger monthly payments over the
term of the loan. The payment is
unusually low for the first few
years but gradually rises until
year three or five, then remains
fixed.
Grantee - the party to
whom title to real property is
conveyed.
Grantor - the party who
gives the deed.
Gross Debt Service - the
amount of money needed to pay
principal, interest and taxes,
and sometimes energy costs. If
the dwelling unit is a
condominium, all or a portion of
common fees are excluded,
depending on what expenses are
covered.
Gross Monthly Income -
Income before deductions for
taxes, social security, saving
plans, court ordered child
support, etc.
Gross Rent Multiplier -
the sales price divided by the
gross annual rental rate.
Ground Lease - one that
rents the land only.
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Habendum
Clause - The "to have and to
hold" clause that defines the
quantity of the estate granted
in the deed.
Hard Money Loan - A loan
that is underwritten with the
condition and value of the
property as the primary criteria
for approval. Secondary issues
may include the credit of the
borrower, the ability of the
borrower to repay the loan
and/or the ability of the
borrower to manage the property
or successfully complete a rehab
and sell the property. Owner
occupancy, debt ratios and other
issues are seldom a factor.
Appraisals rather than purchase
prices are used to determine
value. Cash out purchases are
often allowed and are another
key benefit. These loans are
usually approved within days and
are often funded in two weeks or
under with times as short as two
or three days not uncommon. The
cost for the benefits of speed
of funding, lax underwriting and
other advantages is typically a
moderately high interest rate
(usually low to mid teens) and
high points (usually 5 to 10).
(See definition of
"underwriting" below.)
Hazard Insurance -
Insurance to provide
compensation if the improvements
are damaged or destroyed. It is
almost always a requirement of
loans.
Hereditaments - property,
personal and real, capable of
being inherited
Hiatus - A gap between
two parcels of land that is not
included in the legal
description of either property.
Highest and Best Use -
the use that is most likely to
produce the greatest net return
to the land and/or building over
a given period.
Holdover Tenant - a
tenant who remains in possession
of leased property after the
expiration of the lease term.
Home Equity Loan - In the
most literal sense, this
expression applies to virtually
all loans (first mortgages and
second mortgages, fixed and
adjustable interest rates,
credit lines and fully
amortizing loans, etc.) placed
on an owner occupied property
when the loan-to-value after the
Home Equity Loan closes is no
higher than 100%. That is, it is
a loan secured by the available
equity of an owner occupied
residential property.
Homeowner Association (HOA)
- an organization of the
homeowners in a particular
subdivision, planned unit
development, or condominium
created to enforce deed
restrictions and manage common
elements of the development.
Homeowners' Warranty - A
special insurance policy that
covers certain home repairs for
a specified amount of time.
Homeowner's Insurance (Hazard
Insurance) - insurance
coverage that compensates for
physical damage to a property
from fire, wind, vandalism, or
other hazards. The policy
typically combines personal
liability insurance and property
hazard insurance coverage for a
dwelling and its contents. See
also homeowner's insurance.
Homestead - status
provided to a homeowner's
principal residence by some
state statutes to protect the
home against judgments up to
specified amounts.
Homestead Exemption - in
some jurisdictions a reduction
in the assessed value allowed
for one's personal residence.
Housing and Urban Development
(HUD) - a federal government
agency established to implement
certain federal housing and
community development programs.
Housing Code - local
government ordinance that sets
minimum standards of safety and
sanitation for existing
residential buildings.
Hypothecate - to pledge
something as security without
having to give up possession of
it.
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Implied
Warranty of Habitability - a
legal doctrine that requires
landlords to offer and maintain
livable premises for their
tenants. If a landlord fails to
provide habitable housing,
tenants in most states may
legally withhold rent or take
other measures, including hiring
someone to fix the problem or
moving out.
Impound Account - see
Escrow Account.
Improvements - additions
to raw land such as buildings,
streets, sewers, etc. that
increase the value of the
property.
Incidents of Ownership -
any control over property. If
you give away property but keep
an incident of ownership--for
example, you give away an
apartment building but retain
the right to receive rent--then
legally, no gift has been made.
This distinction can be
important if you\'re making
large gifts to reduce your
eventual estate tax.
Indemnify - to protect
another person against loss or
damage.
Index - The published
cost of money that serves as the
minimum basis for determining
the interest rate for an
adjustable rate mortgage. Among
the commonly used indices are
the Prime Rate (Prime), the
London Interbank Offering Rate
(LIBOR), the Cost of Funds (COF)
and the 1 year Treasury Bill (1
year T). The particular index is
generally, though not always,
selected based on how often an
interest rate is supposed to
adjust. Loans which allow
monthly interest rate
adjustments commonly use the
Prime Rate. Loans that adjust
semi-annually may use LIBOR. The
1 year Treasury and the Cost of
Funds are often used for loans
which adjust on an annual basis.
There are other Treasury
instruments which are used for 3
and 5 year adjustment periods.
The interest rate of the loan is
determined by adding a margin to
the index. The size of the
margin is typically a function
of the index used and the credit
worthiness of the borrower.
Typical margins on a Prime Rate
based loan would be 0.0 to 5.0
so that if the Prime Rate were
8.25% and the margin were 2.0
(typical for an "average"
borrower), the interest rate
would be 10.25% (8.25 + 2.0).
Initial Note Rate - With
regard to an adjustable rate
mortgage, the note rate upon
origination. This rate may
differ from the fully indexed
note rate.
Installment Contract -
see Contract for Deed
Installment Sale - when a
seller accepts a mortgage for
all or part of the sale, tax on
the gain is paid as the mortgage
principal is collected.
Insurance Binder - a
document that states that
insurance is temporarily in
effect. Because the coverage
will expire by a specified date,
a permanent policy must be
obtained before the expiration
date.
Insured Mortgage - a
mortgage that is protected by
the Federal Housing
Administration (FHA) or by
private mortgage insurance
(PMI). If the borrower defaults
on the loan, the insurer must
pay the lender the lesser of the
loss incurred or the insured
amount.
Inter Vivos - during
one's life.
Interest Accrual Rate -
the percentage rate at which
interest accrues on the
mortgage. In most cases, it is
also the rate used to calculate
the monthly payments.
Interest Rate - The
percentage of the loan amount
charged for borrowing money;
i.e., the cost of the money
expressed as a percentage.
Interest Rate Buydown Plan
- a temporary buydown gives a
borrower a reduced monthly
payment during the first few
years of a home loan and is
typically paid for in an initial
lump sum made by the seller,
lender, or borrower. A permanent
buydown is paid the same way but
reduces the interest rate over
the entire life of a home loan.
Interim Financing - a
loan, including a construction
loan, used when the property
owner is unable or unwilling to
arrange permanent financing.
Intestate - having made
no valid will.
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Joint and
Several Liability - a
creditor can demand full
repayment from any and all of
those who have borrowed, each
borrower is liable for the full
debt, not just the prorated
share.
Joint Tenancy - ownership
of realty by two or more
persons, each of whom has an
undivided interest.
Joint Venture - an
agreement between two or more
persons who invest in a single
business or property.
Judgment - a decree of a
court stating that one
individual is indebted to
another and fixing the amount of
the indebtedness.
Judgment Creditor - one
who has received a court decree
or judgment for money due from a
debtor.
Judgment Lien - the claim
upon the property of a debtor
resulting from recording a
judgment.
Judicial Foreclosure -
having a defaulted debtor's
property sold where the court
ratifies the price paid.
Jumbo Loan - A loan
larger than the maximum allowed
by conforming loans. The
threshold amount has
traditionally been adjusted more
or less on an annual basis and
has been in the low $200,000's.
Banks and mortgage brokers can
quote the current threshold.
They are typically available at
interest rates slightly higher
than those of conforming loans
and typically require the same
underwriting standards as
conforming loans. (see
definition of "conforming loan"
above).
Junior Mortgage - a
mortgage whose claim against the
property will be satisfied only
after prior mortgages have been
repaid.
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Kicker -
A payment required by a mortgage
in addition to normal principal
and interest.
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Lien - A
claim on a property of another
as security for money owed.
Examples of types of liens would
include judgments, mechanic's
liens, mortgages and unpaid
taxes.
Land Contract - see
Contract for Deed.
Land Lease - see Ground
Lease.
Land Trust - A revocable,
living trust primarily used to
hold title to real estate for
privacy and anonymity. Also
known as an Illinois Land Trust
or Nominee Trust. The land
trustee is a nominal title
holder, with the beneficiaries
having the exclusive right to
direct and control the actions
of the trustee.
Landlocked - condition of
a lot that has no access to
public thoroughfare except
through an adjacent lot.
Lease - a contract in
which, for a rent payment, the
one entitled to the possession
of the real property (lessor)
transfers those rights to
another (lessee) for a specified
period of time.
Lease Option - a lease
combined with an option
agreement that gives the lessee
(tenant) the right to purchase
the property under specified
conditions.
Lease Purchase - a lease
combined with a purchase
agreement that obligates the
lessee (tenant) to purchase the
property under specified
conditions.
Leasehold - the interest
or estate on which a lessee
(tenant) of real estate has a
lease.
Leasehold Estate - A way
of holding title to a property
wherein the mortgagor does not
actually own the property but
rather has a recorded long-term
lease on it.
Legal Blemish - Blemishes
on a piece of property, such as
a zoning violation or fraudulent
title claim.
Legal Description -
legally acceptable
identification of real estate by
government survey, metes and
bounds, or recorded plat.
Lessee - a person to whom
property is rented under a
lease.
Lessor - one who rents
property to another under a
lease.
Let - to rent a property
to a tenant.
Letter of Intent -
written expression of desire to
enter into a contract without
actually doing so.
Liabilities - a person's
debts or financial obligations.
Liabilities include long-term
and short-term debt, as well as
potential losses from legal
claims.
Liability Insurance -
insurance coverage that offers
protection against claims
alleging that a property owner's
negligence or inappropriate
action resulted in bodily injury
or property damage to another
party. See also homeowners
insurance.
Lien Theory State - Texas
is a Lien Theory State, where
legal title of mortgaged
property resides with the
mortgagor (borrower), with the
mortgage as a lien against the
property. Contrast with title
theory state.
Life Estate - an interest
in property that terminates upon
the death of a specified person.
Life Tenant - one who is
allowed to use property for life
or the lifetime of another
designated person.
Lifetime Cap - The
highest amount over the initial
interest rate that an adjustable
mortgage can be raised. Lifetime
caps are typically in the range
of 5.0% - 7.0%. If the initial
interest rate is 5.25% and the
lifetime cap is 6.0%, the
highest interest rate a borrower
could pay during the course of
the loan would be 11.25% (5.25%
+ 6.0%).
Like-Kind Property -
property having the same nature.
Limited Partnership - one
in which there is at least one
partner who is passive and
limits liability to the amount
invested and at least one
partner whose liability extends
beyond monetary investment.
Line Of Credit - an
agreement by a lender to extend
credit up to a certain amount
for a certain time without the
need for the borrower to file
another application.
Liquidated Damages - an
amount agreed upon in a contract
that one party will pay the
other in the event of a breach
of contract.
Liquidity - ease of
converting assets to cash.
Lis Pendens - Latin for
"suit pending", recorded notice
of the filing of a lawsuit, the
outcome of which may affect
title to real property.
Listing - written
agreement between a principal
and an agent authorizing the
agent to perform services for
the principal involving the
principal's property.
Loan Application (1003) -
A loan application that is
required for conforming loans.
It has become the standard
application for most residential
loans, even non-conforming
loans.
Loan Origination Fee -
Most lenders charge borrowers an
origination fee--or points--for
processing a loan. A point is 1
percent of the total loan
amount.
Loan Package - The
organized group of documents
that contains all of the
information required to obtain
an underwriting decision of loan
approval or loan denial.
Depending on the type of loan
and the particular lender, a
package may contain some or all
of the following as well as
other documents: loan
application, statement of use of
funds, statement of net worth, P
& L statements, tax returns, pay
stubs, statements from various
types of banking and investment
accounts, property appraisal,
letters of explanation, credit
report, verification of
employment, verification of
housing payments, purchase
agreement, etc. (See definition
of "underwriting" below.)
Loan-to-Value (LTV) - The
ratio of the size of the loan to
the value of the property. If
the loan is $80,000 and the
value of the property is
$100,000 the LTV is 80% ($80,000
/ $100,000).
Lot and Block - method of
identifying legal description of
property, see Legal Description.
Lot Line - a line
bounding a lot as described in a
property survey.
Low-Documentation Loan -
A mortgage that requires only
minimal verification of income
and assets
Low-Down-Payment Loan - A
home loan that requires the
borrower to make only a small
down payment before obtaining
the financing needed to purchase
a house.
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Management
Agreement - a contract
between the owner of property
and someone who agrees to manage
it.
Margin - A constant
(fixed) amount over an index
that determines a lender's yield
on an adjustable rate loan. The
interest rate of an adjustable
rate loan is determined by
adding a margin to an index. The
size of the margin is typically
a function of the index used and
the credit worthiness of the
borrower. Typical margins on a
Prime Rate based loan would be
0.0 to 5.0 so that if the Prime
Rate were 8.25% and the margin
were 2.0 (typical for an
"average" borrower), the
interest rate would be 10.25%
(8.25 + 2.0). (See definition of
"index" above.).
Marketable Title - a
title free from defect.
Master Lease - a
controlling lease.
Maturity - The date on
which the principal balance of a
loan, bond, or other financial
instrument becomes due and
payable
Maximum Financing - A
loan amount within 5 percent of
the highest loan-to-value ratio
allowed for a property.
Mechanic's Lien - a lien
given by law upon a building or
other improvement upon land as
security for the payment of
labor and materials furnished
for improvement.
Merged Credit Report - A
report that draws information
from the Big Three
credit-reporting companies:
Equifax, Experian, and Trans
Union Corp.
Minimum Payment - the
minimum amount that must be paid
monthly on an account. On the
HELOC product, the minimum
payment is interest only during
the draw period. On the Fixed
Rate Second products, the
minimum payment is principal and
interest.
Monthly Mortgage Insurance
(MI) Payment - portion of
monthly payment that covers the
cost of Private Mortgage
Insurance.
Monthly Payment (P&I) -
this is the monthly mortgage
payment on a home loan, this
includes principal and interest,
but excludes any amounts that
are applied to taxes and
insurance.
Monthly Principal & Interest
(P&I) Payment - portion of
monthly payment that covers the
principal and interest due on
the loan.
Monthly Taxes & Insurance
(T&I) Payment - portion of
monthly payment that funds the
escrow or impound account for
taxes and insurance.
Mortgage - A lien against
real property given by a
borrower to a lender as security
for money borrowed.
Mortgage (Open-End) - A
mortgage that allows additional
money to be borrowed (up to the
original loan amount) without
refinancing the loan or paying
additional financing charges .
Mortgage Balance - see
Principal Balance.
Mortgage Insurance Premium
(MIP) - The payment made by
a borrower of FHA insured
mortgages to provide a reserve
that protects lenders against
losses from very high
loan-to-value loans.
Mortgage Loan - A loan
which is secured by a mortgage
lien filed against real
property.
Mortgage-Interest Deduction
- The tax write-off that the
Internal Revenue Service allows
most owners to claim for annual
interest payments made on real
estate loans. mortgagee
Mortgagee - The entity to
whom the mortgage is given;
i.e., the lender.
Mortgagor - The entity
who gives the mortgage; i.e.,
the borrower.
Multi-Dwelling Property -
A property that contains
individual units for several
households but carries only one
mortgage.
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Needs-Based
Pricing - A seller's asking
price that is based on factors
such as the required funds to
pay off the mortgage, the cost
of remodeling or the purchase of
another house.
Negative Amortization -
Some adjustable rate mortgages
allow the interest rate to
fluctuate independently of a
required minimum payment. If a
borrower makes the minimum
payment it may not cover all of
the interest that would normally
be due at the current interest
rate. In essence, the borrower
is deferring the interest
payment, which is why this is
called "deferred interest." The
deferred interest is added to
the balance of the loan and the
loan balance grows larger
instead of smaller, which is
called negative amortization.
Negotiation - The process
of bargaining that precedes an
agreement.
Net Cash Flow -
Investment property that
generates income after expenses
such as principal, interest,
taxes and insurance are
subtracted
Net Operating Income (NOI)
- From income producing
property, the gross income minus
the total of all expenses except
for debt service. Cash flow is
defined as NOI minus the total
of all debt service payments.
No Cash-Out Refinance -
The amount of the new mortgage
covers the remaining balance of
the first loan, closing costs,
any liens and cash no more than
1 percent of the principal on
the new loan.
No Income Verification Loan
(NIV) - A type of loan
generally limited to the
self-employed that is
underwritten based on the
borrower's written
representation of their annual
income as stated on the loan
application. No tax returns,
operating statements or other
verification of the income is
required. Debt ratios are
computed based on the stated
income. The primary intent of
these programs is to allow
owners of small businesses to
use their actual cash flows
rather than the net incomes
normally reported in tax
filings. Higher interest rates
on these products compensate
lenders for their higher risks.
(See definition of "debt ratio"
above.)
Non-Assumption Clause - A
loan provision that prohibits
the transfer of a mortgage to
another borrower without lender
approval.
Non-conforming Loan - A
loan not meeting the
underwriting requirements of
Fannie Mae and Freddie Mac.
I.e., the vast majority of
loans.
Non-Qualifying - buyer is
not required to qualify through
traditional bank financing
requirements
Non-Recurring Closing Costs
- Costs that are one-time only
fees for such items as an
appraisal, loan points, credit
report, title insurance and a
home inspection
Note - A written promise
to repay a certain sum of money
on specified terms.
Note Broker - An
individual who acts as an
intermediary between a holder of
an existing note and a
prospective purchaser of the
note.
Notice of Default - A
lender's initial action when a
mortgage payment is late and
attempts to reconcile the issue
out of court have failed.
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Obligee -
The person in whose favor an
obligation is entered into.
Obligor - The person who
binds himself or herself to
another.
Option - the right to
purchase or lease a property
upon specified terms within a
specified period of time
Ordinances - municipal
rules governing the use of land
Origination Fee - A fee
paid to either a broker or a
lender for originating a loan.
It may be the only compensation
for their work in arranging
and/or processing the loan or it
may be only a portion of the
compensation. Not every loan has
an origination fee.
Originator - An
individual who works with a
borrower to start a loan.
Usually an employee of a
financial institution, an
employee of a broker or an
independent contractor
affiliated with several brokers,
the originator determines the
type of loan a borrower probably
qualifies for, helps complete an
accurate application, gathers
documents necessary to get an
approval and acts as an
intermediary between the
borrower and the underwriter.
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Penalty -
Money one will pay for breaking
a law or violating part or all
of the terms of a contract.
PITI - The shorthand way
of stating the most usual
elements of a residential
mortgage payment which may
consist not only of the
Principal and Interest (PI) but
the property taxes (T) and
hazard insurance (I) as well. In
the case where all four elements
are part of the payment, the
lender escrows the T and I and
pays them on behalf of the
borrower when they come due.
Some loans are written such that
the payment to the lender
consists only of the P and I in
which case the borrower pays the
taxes and insurance directly.
Planned Unit Development
(PUD) - A highly designed
residential project that
features relatively dense
clusters of houses, which are
usually surrounded by areas of
commonly owned open space
maintained by a nonprofit
community association.
Portfolio Loan - A
non-conforming loan that is held
by the original lender rather
than being sold on the secondary
market.
Prepayment Penalty - fee
charged for paying off a loan
within a relatively short period
of time after the loan has
closed, provision is currently
found only in non-conforming
products, time period during
which it applies is usually one
to three years
Principal Balance -
outstanding dollar amount owed
on a loan exclusive of accrued
interest
Principal, Interest, Taxes,
Insurance (PITI) - monthly
payments required by an
amortizing loan that includes
escrow deposits for taxes and
insurance in addition to the
principal and interest
Private Mortgage Insurance
(PMI) - insurance premium
paid by a borrower to protect
lenders against losses from
loans with loan-to-value ratios
higher than 80%, default
insurance for lenders
Pro Forma - refers to the
presentation of data, such as a
balance of income statement,
where certain amounts are
hypothetical. For example, a pro
forma balance sheet might show a
debt issue that has been
proposed but has not been
consummated.
Probate - The process of
establishing the validity of a
will before a duly authorized
court or person. Once validity
is confirmed, the probate court
then administers the sale of
property as directed by the will
or as authorized by the court to
settle any financial obligations
Promissory Note - promise
to pay a specified sum to a
specified person under specified
terms
Purchase Money Mortgage -
a mortgage which secures a note
written on a loan used in the
purchase of real estate
Purchase Subject to Mortgage
- a purchase in which a buyer
agrees to make the monthly
mortgage payments on an existing
mortgage and the original
borrower remains liable if the
purchaser fails to make the
payments as agreed.
Purchase-Money Mortgage (PMM)
- A mortgage obtained by a
borrower as partial payment for
a property.
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Qualifying
Ratio - A ratio calculated
by a lender to determine how
much a potential buyer can
borrow.
Quiet Enjoyment - right
of an owner or any other person
legally entitled to possession
to the use of the property
without interference.
Quiet Title Action - a
suit in court to remove a defect
or cloud on the title,
establishes legal ownership.
Quitclaim Deed - a deed
that conveys only the grantor's
rights or interest in a
property, without stating the
nature of the rights or interest
and with no warranties of
ownership.
Quitclaim Deed - A deed
that transfers without warranty
whatever interest or title a
grantor may have at the time the
conveyance is made.
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Rate Cap
- The maximum interest rate
charge allowed on the monthly
payment of an adjustable rate
mortgage during an adjustment
period.
Rate-Improvement Mortgage
- A loan with a clause that
entitles a borrower to a
one-time interest rate cut
without going through
refinancing.
Real Estate Owned (REO) -
property acquired through a
lender through foreclosure and
held in inventory.
Real Property - the
rights to use real estate.
Realtor - designation
given to licensed real estate
agents who are members of the
National Association of
Realtors.
Recission Period - a
federally mandated period of
three business days (beginning
on the day after a loan closes)
during which the borrower may
cancel the new loan, waiting
period only applies to loans
which are to be secured by a
mortgage on a personal residence
for which the borrower is in
title at the time of loan
origination, right to cancel
does not apply to loans used for
the purchase of property.
Recourse - ability of
lender to make claims against
borrower personally in addition
to the collateral.
Redemption Period -
period during which a former
owner can reclaim foreclosed
property.
Refinance - process of a
borrower paying off one loan
with the proceeds from another.
Regression - The
principle that the value of a
better-quality property is
adversely affected by the
proximity of a lesser-quality
property.
Regulation Z - federal
regulation requiring creditors
to provide full disclosure of
the terms of a loan.
Residential Service Contract
- home warranty or insurance
contract, generally for one
year, covering plumbing,
electrical, and mechanical
systems of the home.
Residual - Value or
income remaining after deducting
an amount necessary to meet
fixed obligations.
Reverse Mortgage - A type
of mortgage designed for elderly
homeowners with substantial
equity by which a lender pays a
periodic payment to the
borrower; the loan balances
increase with interest and
payments causing negative
amortization.
Right of First Refusal -
opportunity of a party to match
the terms of a proposed contract
before the contract is executed.
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Sale
Leaseback - sale of property
by seller and simultaneous
leasing of the same property by
seller.
Sandwich Lease - lease
held by a lessee (tenant) who
becomes a lessor (landlord) by
subletting to another lessee
(subtenant), typically the
sandwich leaseholder is neither
the owner nor the user of the
property.
Seasoning - loan which
has been in force for a period
of time thus establishing the
borrower's payment history,
loans are typically deemed to be
seasoned after either six months
or one year.
Second Mortgage -
mortgage recorded after another
mortgage has already been
recorded and not yet released,
subordinated lien.
Section 1031 - section of
the Internal Revenue Code
dealing with tax-free exchanges
of like-kind property.
Section 8 - privately
owned rental dwelling units
participating in the low-income
rental assistance program
created by 1974 amendments to
Section 8 of the 1937 Housing
Act.
Security Deposit - cash
payment required by landlord to
be held during the term of the
lease to offset damages incurred
due to actions of the tenant.
Seller Financing - also
known as Owner Financing.
Settlement Statement -
also known as Closing Statement
or HUD-1.
Short Sale - A sale of a
house in which the proceeds fall
short of what the owner still
owes on the mortgage. Many
lenders will agree to accept the
proceeds of a short sale and
forgive the rest of what is owed
on the mortgage when the owner
cannot make the mortgage
payments. By accepting a short
sale, the lender can avoid a
lengthy and costly foreclosure,
and the owner is able to pay off
the loan for less than what he
owes
Special Warranty Deed -
deed in which the grantor limits
the title warranty given to the
grantee, does not warrant
against title defects arising
from conditions that existed
before grantor owned the
property.
Specific Performance -
legal action in which the court
requires a party to a contract
to perform the terms of the
contract.
Subject To - buyer takes
title to mortgaged real property
but is not personally liable for
the payment of the amount due,
buyer must make payments in
order to keep the property.
Subordination - a clause
or document that permits a
mortgage recorded at a later
date to take priority over an
existing lien.
Survey - process by which
a parcel of land is measured and
its area ascertained.
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Tax and
Insurance Escrow - account
required by a mortgage lender to
fund annual property tax
assessments and hazard insurance
premiums, funded through monthly
contributions by the mortgagor
Tax Lien - a debt
attached to the property for
failing to pay taxes
Teaser Rate - contract
interest rate charged on an
adjustable rate mortgage for the
initial adjustment interval that
is significantly lower than the
fully indexed rate at the time
Terms - conditions and
arrangements specified within a
contract
Time is of the Essence -
a phrase that, when inserted in
a contract, requires that all
references to specific dates and
times of day noted in the
contract be interpreted exactly,
in its absence extreme delays
might be acceptable
Title - evidence of
ownership, evidence of lawful
possession
Title Defect - an
unresolved claim against the
ownership of property, prevents
seller from providing buyer
clear title to the property
Title Insurance - an
insurance policy that protects
the holder from loss sustained
by defects in the title
Title Search - an
examination of the public
records to determine the
ownership and encumbrances
affecting real property
Title Theory State - the
system in which the lender has
legal title to the mortgaged
property and the borrower has
equitable title. Texas is not a
title theory state. Contrast
with lien theory state.
Triple Net Lease - lease
in which the tenant is to pay
all operating expenses of the
property so that the landlord
receives net rent, frequently
used to mean tenant pays taxes,
insurance, and maintenance in
addition to normal operating
expenses
Trust - an arrangement
whereby property is transferred
to a trusted third party trustee
by a grantor/trustor, trustee
holds the property for the
benefit of the beneficiary
Trust Deed - conveyance
of real estate to a third party
to be held for the benefit of
another, commonly used in some
states in place of mortgages
that conditionally convey title
to the lender, same as Deed of
Trust
Trustee - one who holds
property in trust for another to
secure performance of an
obligation, the neutral party in
a trust deed transaction.
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U.S.
Department of Housing and Urban
Development (HUD) - A
federal agency that oversees the
Federal Housing Administration
and a variety of housing and
community development programs.
Underwriting - The act of
applying formal guidelines that
provide qualitative and
quantitative standards for
determining whether or not a
loan should be approved.
Undivided Interest - an
ownership right to use and
possession of a property that is
shared among co-owners, with no
one co-owner having exclusive
rights to any portion of the
property.
Unencumbered Property -
real estate that is owned free
and clear.
Unilateral Contract - an
obligation given by one party
contingent on the performance of
another party, but without
obligating the second party to
perform.
Unimproved Property -
land that has received no
development, construction, or
site preparation (raw land).
Unrealized Gain - excess
of current market value over
cost for an asset that is not
sold.
Unrecorded Deed -
instrument that transfers title
from one party (grantor) to
another party (grantee) without
providing public notice of the
change in ownership.
Urban Renewal - process
of redeveloping deteriorated
sections of the city, often
through demolition and new
construction, may be privately
funded, but most often
associated with government
renewal programs.
Usufruct - the right to
use property--or income from
property--that is owned by
another.
Usury - charging a rate
of interest greater than that
permitted by state law.
Utility Easement - use of
another's property for the
purpose of laying gas, water,
electric and sewer lines.
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V.A. Loan
- home loan guaranteed by the
U.S. Veterans Administration
under the Servicemen's
Readjustment Act of 1944 and
later to compensate lender in
the event of default.
Valuation - The estimated
worth or price. The act of
valuation by appraisal.
Variable Interest Rate -
amount of compensation to a
lender that is allowed to vary
over the maturity of a loan,
typically governed by an
appropriate index.
Variable Rate Mortgage -
long-term mortgage loan applied
to residences, under which the
interest rate may be adjusted on
a six month basis over the term
of the loan, according to
certain restrictions.
Vendee - a buyer of real
estate.
Vendee's Lien - a lien
against property under a
contract of sale to secure the
deposit paid by the purchaser.
Vendor - a seller of real
estate.
Veneer - wood or brick
exterior that covers a less
attractive and less expensive
surface.
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Waiver -
the voluntary renunciation,
abandonment, or surrender of
some claim, right or privilege.
Warehouse Fee - A
closing-cost fee representing
the lender's cost of holding a
borrower's loan temporarily
before it is sold on the
secondary mortgage market.
Warranty Deed - deed that
contains a covenant that the
grantor will protect the grantee
against any and all claims;
usually contains covenants
ensuring good title, freedom
from encumbrances, and quiet
enjoyment.
Wholesale - to contract a
property with the intention of
reselling it quickly at a higher
price.
Wild Deed - An improperly
recorded deed
Without Recourse - words
used in endorsing a note to
denote the note holder is not to
look to the debtor personally in
the event of nonpayment.
Wraparound Mortgage -
loan arrangement in which an
existing loan is retained and an
additional loan is made that
equals or exceeds the existing
loan.
Writ of Execution - a
court order which authorizes and
directs the proper officer of
the court (usually the sheriff)
to carry into effect the
judgment or decree of the court.
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Yield -
measurement of the rate of
earnings of an investment.
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Zero Lot Line
- a form of cluster housing
development in which individual
dwelling units are placed on
separately platted lots, but are
attached to each other.
Zoning - legal mechanism
for local governments to
regulate the use of privately
owned real estate to prevent
conflicting land uses and
promote orderly development.
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