Investment plans allowing employees to set
aside tax-deferred income for retirement or
emergency purposes. 401(k) investment plans
are provided by private corporation
employers. 403(b) plan is a retirement plan
for university, civil government, and
not-for-profit employees. Some plans allow
for loans against the accumulated monies and
this loan is an acceptable sources of down
payments for most types of loans.
loan: Some 401(k)/403(b) plan
administrators allow for loans against the
monies accumulated. Loans against 401K plans
are an acceptable source of down payment for
most types of loans. The Tax-Deferred
403(b)Plan Loan Program provides you with
access to your 403(b)Plan money before
retirement. And because the money is
borrowed, rather than withdrawn, it isn’t
subject to income taxes or early
Back to the top
Title: A summary of public records
pertaining to the title of a specific piece
of property. The title insurance company or
an attorney reviews the abstract of title to
determine whether there are any title
defects needing correction before a buyer
can purchase it.
Notes made by a title examiner based on his
examination of the land records. These notes
provide a concise summary of transactions
affecting the property.
The joining, reaching, or touching of an
adjoining property. Abutting pieces of
property share a common boundary.
The right of the lender to demand the
immediate repayment of a mortgage loan
balance upon either the default of the
borrower, or by using the right vested in
the Due-on-Sale Clause which demands
immediate loan repayment if the home is
Acceleration clause: Clause in the
mortgage allowing the lender to demand
payment immediately due and payable upon a
noted event, such as the borrower defaulting
on the loan or transfering title to another
individual without informing lender.
An agent is obligated to account for all
property or money belonging to the principal
entrusted to that agent. See also
Addition to land through natural causes,
such as the building up of an island through
volcanic activity or the building up of a
beach through natural wave action.
A Declaration made by a person to a public
official authorized to take
acknowledgements, or a notary public, that
the instrument was executed by him as a free
and voluntary act.
equal to 43,560 square feet.
Action to quiet
title: A court action to establish
ownership to real property. Although
technically not an action to remove a cloud
on a title, the two actions are usually
referred to as "Quiet Title" actions.
Designates an assessment of taxes against
Adjustable rate mortgage: A mortgage
where the interest rate is adjusted
periodically based on a pre-selected index.
This is also sometimes known as the
renegotiable rate mortgage or the variable
The cost of a property plus the value of any
capital expenditures for upgrades to the
property minus any depreciation taken.
The date that the interest rate changes on
an adjustable-rate mortgage.
period or interval: The period elapsing
between adjustment dates for an
adjustable-rate mortgage (ARM).
Money that the buyer and sellers credit each
other at the time of closing.
Administator/Administratrix: A person
appointed by a court to settle the estate of
a deceased person who dies without a will.
Possession: The right of an occupant of
land to acquire title against the real
owner, where possession has been actual,
continuous, hostile, visible, and distinct
for the statutory period.
Written statement signed and sworn before an
Analysis: An analysis of a buyer's
ability to afford the purchase of a home.
Reviews income, debts and available funds,
and considers the type of mortgage being
considered, the likely closing costs, and
the area where you want to purchase a home.
relationship in which the agent is given the
authority to act on behalf of another person
(principal). In real estate transactions,
usually the seller is the principal, and the
broker is the agent. In an agency
relationship, the principal delegates to the
agent the right to act on his or her behalf
in business transactions and to exercise
some discretion while so acting. The agent
has a fiduciary relationship with the
principal and owes to that principal the
duties of Loyalty, Obedience, Disclosure,
Confidentiality, Reasonable Care and
Diligence, and Accounting. Also see Buyer's
Broker, Exclusive Buyer's Broker, Seller's
meeting of minds. A change to the correct or
alteration to the original document or
agreement without modifying its principal
essence or real meaning.
Agreement of Sale: A contract in
which a seller agrees to sell and a buyer
agrees to buy, under certain specific terms
and conditions spelled out in writing and
signed by both parties. Usually (but not
always) secured by the payment of earnest
money. In some states it is known as a
Purchase Agreement, Land Contract, or
Earnest Money Contract.
Clause: A clause in a mortgage which
gives the lender the right to call the
entire loan balance due if the property is
sold also known as due-on-sale clause.
Amenities: Nonmonetary benefits and
satisfactions derived from property
ownership, such as a pleasant view, pride in
home ownership, etc.
The loan payment consists of a portion which
will be applied to pay the accruing interest
on a loan, with the remainder being applied
to the principal. Over time, the amount
applied to principal increases, the interest
portion decreases as the loan balance
schedule: A schedule or table which
shows how much of each payment will be
applied toward principal and how much toward
interest over the life of the loan. In
addition, it shows the gradual decrease of
the loan balance until it reaches zero.
Term: The length of time required to
amortize the mortgage loan expressed as a
number of months. For example, 480 months is
the amortization term for a 40-year
Mortgage: A mortgage which requires
periodic payments which include both
interest and principal. Also see Self
Percentage Rage (APR): The interest rate
reflecting the cost of a mortgage as a
yearly rate. This rate is likely to be
higher than the stated note rate because it
takes into account points and other credit
costs. The APR allows home buyers to compare
different types of mortgages based on the
annual cost for each loan.
Federal and state laws prohibiting, among
other things, monopolies, monopolistic
practices, restraint of trade, and price
An initial statement of personal and
financial information which is required to
approve a loan.
Fees that are paid upon application. Charges
for property appraisal and a credit report
are usually included in the application fee.
Agency: Agency relationship where the
Broker appoints one agent in the office to
represent the seller and another agent in
the same office to represent the buyer. Also
known as Split Agency, Designated Agency.
Prior relationships or conversations between
the 2 agents appointed could possibly create
a conflict of interest.
An opinion by a licensed appraiser of the
fair market value of a property.
The charge for estimating the value of
property offered as security.
Appraised Value: An opinion of a
property's fair market value, based on an
appraiser's knowledge, experience, and
analysis of the property. An appraisal is
based primarily on comparable sales.
An individual qualified by education,
training, and experience to estimate the
value of real property and personal
An increase in the value or worth of
attorney: An attorney authorized by a
title insurance company to handle closings
and render title opinions.
Anything attached to the land or used with
it that passes to the new owner(s).
payment made after it is due is in arrears.
Interest is said to be paid in arrears since
it is paid to the date of payment rather
than in advance.
The price placed on property for sale.
A local tax levied against a property for a
specific purpose, such as a sewer or street
The total assessed value of all property in
a given assessment district for a specific
purpose, such as a sewer or street lights.
The value placed on a property by a public
tax assessor for purposes of taxation.
local government official who determines the
value of the property for taxation purposes.
possession that has value in an exchange.
One who receives an assignment or transfer
of rights. An assignment of a contract
transfers the right to buy property.
The transfer of a mortgage from one person
The one who assigns to another person.
When a home is sold, the seller may be able
to transfer the mortgage to the new buyer.
This means the mortgage is assumable.
Lenders generally require credit review of
the new borrower and may charge a fee for
the assumption. Some mortgages contain a
due-on-sale clause, which means that the
mortgage may not be transferable to the new
buyer. Instead, the lender may make you pay
the entire balance that is due when you sell
the home. Assumability can help you attract
buyers if you sell your home.
mortgage: A mortgage that can be assumed
by the buyer when property is sold. Usually,
the borrower must "qualify" in order to
assume the loan.
The term applied when a buyer assumes the
The fee paid to a lender (usually by the
purchaser of real property) when an
assumption takes place.
Mortgage: The transfer of title to
property to a grantee wherein he assumes
liability for payment of an existing note
secured by a mortgage against the property.
A home that has one or more common walls
adjoining another home. Condominiums and row
houses are attached homes.
The legal method by which a debtor's
property is placed in the custody of the law
and held as security pending outcome of a
fact: A type of agency relationship
where one person holds a power of attorney
allowing him to execute legal documents on
behalf of another, noted as the principal.
Decisions made by the attorney in fact are
binding on the principal.
Opinion of Title: An instrument written
and signed by the attorney who examines the
abstract of title, stating his opinion as to
whether a seller may convey legal title.
public sale of property to the highest
Back to the top
A loan amortized over a longer period than
the term of the loan. Usually this refers to
a thirty-year amortization and a five year
term. At the end of the term of the loan,
the remaining outstanding principal on the
loan is due. This final payment is known as
a balloon payment.
The final lump sum payment that is due at
the end of the balloon mortgage term period.
A court action to restructure debt. The most
common for an individual is a "Chapter 7 No
Asset" bankruptcy which relieves the
borrower of most types of debts.
Original cost of property plus value of any
improvements put on by the seller minus the
depreciation taken by the seller.
The lender named on the mortgage note. One
entitled to the proceeds of property held in
trust, also proceeds of wills, insurance
policies, or trusts.
Bill of sale:
A written instrument given to pass title to
personal property from a seller to a buyer.
(Purchase): Same as 'Agreement
commitment): A report issued by a title
insurance company setting forth the
condition of title and setting forth
conditions under which the title company
will issue a title insurance policy.
Mortgage: A mortgage in which you make
payments every two weeks instead of once a
month. The basic result is that instead of
making twelve monthly payments during the
year, you make thirteen. The extra payment
reduces the principal, substantially
reducing the time.
Mortgage: A plan to reduce the debt
every two weeks (instead of the standard
monthly payment schedule). The 26 (or
possibly 27) biweekly payments are each
equal to one-half of the monthly payment
required if the loan were a standard 30-year
fixed-rate mortgage. The result for the
borrower is a substantial savings in
interest than if monthly payments were made.
Mortgage: One mortgage on at least two
pieces of real property.
The illegal practice of inducing panic
selling in a neighborhood by making
representations of the entry of members of a
minority group. See
The bond market primarily includes
government-issued securities and corporate
debt securities, and facilitates the
transfer of capital from savers to the
issuers or organizations requiring capital
for government projects, business expansions
and ongoing operations. Lenders follow this
market intensely because as the yields of
bonds go up and down, fixed rate mortgages
do approximately the same thing.
(Mortgagor): The borrower of money for a
Contract: Without having a legal
(possibly contractual) basis, one of the
parties to a contract fails to perform
according to the contract.
Financing: A financial agreement,
generally made between a short term loan and
a long term loan, where the borrower needs
to have more time before taking on long term
A loan that 'bridges' the gap between the
purchase of a new home and the sale of the
borrower's current home. The borrower's
current home is used as collateral and the
money is used to close on the new home
before the current home is sold.
individual who acts as a agent in the
business of assisting in arranging funding
or negotiating contracts for a client but
who does not loan the money himself. Brokers
usually charge or receive a commission for
real estate brokerage brings together
parties interested in buying, selling,
exchanging, or leasing real property. A fee
is attached for this service.
Thermal Unit): Unit of heat required to
raise one pound of water one degree
Legal regulations that specify construction
(Setback): A line fixed at a certain
distance from the sides of a lot beyond
which no structure can project. Also see
Rights: The real property rights which
arise by reason of the ownership of the
physical real estate; the right to use it,
to sell it, to mortgage it, to lease it, to
enter it, to give it away, etc, subject to
reduction in the interest rate or monthly
payments accomplished by payment of an
additional fee. The reduced interest rate
may hold for all or part of the loan term.
(Buyer's Agent): An agent who represents
only the buyer in a transaction. An
'Exclusive Buyer's Broker' conducts his/her
business by representing buyers only.
Back to the top
Similar to the
maximum allowable interest rate increase for
adjustable rate mortgages.
Money available for use in financing the
day-to-day activities of a business.
Increased funds gained on the sale of an
Rate: The ratio of property income to
the market value of the property.
Limit to the amount the interest rate on an
adjustable rate mortgage which may change
per year and/or the life of the loan.
Limit on the amounts that monthly payments
on an adjustable rate mortgage may change.
The amount of money received in period of
time from an income-producing property less
expenses of the property.
The amount of money received above your
original mortgage amount due to the equity
in the property when refinancing your
refinance: A refinance giving the owner
a higher amount than the current loan
A legal term meaning "let the buyer beware".
Consumer Credit Counseling Services (CCCS)
is a debt management service. This service,
or others like it, noted on your credit
report can be viewed as a negative mark on
your credit until it is removed.
maximum allowable interest rate over the
life of the loan of an adjustable rate
deposit: A time deposit held in a bank
which pays a certain amount of interest to
deposit index: A value used for
determining interest rate changes on some
adjustable rate mortgages; it is an average
of what banks are paying on certificates of
eligibility: A document which entitles
qualified veterans to guaranteed VA loans
for mobile homes, homes and business.
occupancy: A written authorization given
by a local government that allows a newly
completed or substantially completed
structure meets the local building standards
to be inhabited.
reasonable value: A document issued by
the Department of Veterans Affairs (VA)
establishing the maximum loan amount for a
title: A document provided by a
qualified source (such as a title company)
that shows the property legally belongs to
the current owner.
veteran status: A document given to
veterans or reservists who have served 90
days of continuous active duty.
A document copy attested (or certified) to
be true by the officer holding the original.
trust: Literally means the person for
whose benefit the trust is created.
Chain of title:
The succession of title ownership to real
property from the present owner back to the
original owner at some distant time.
frequency: The frequency (in months) of
payment and/or interest rate changes in an
adjustable-rate mortgage (ARM).
An illegal practice of directing people to
or away from certain areas or neighborhoods
because of minority status.
Used to describe when a lender has given up
on your default and subsequently writing the
debt off for tax or other book keeping
purposes. This is noted on your credit
Property, other than real estate, owned by
an individual. Also called personal
A land title that doesn't have any liens
(including a mortgage) against it.
Person (or other entity such as a company)
who employs an agent. Typically in real
estate transactions the seller is a client
of the listing agent. A Client is also known
as the Principal.
meeting between the buyer, seller and lender
or their agents where the property and funds
legally change hands, also called
These are expenses - over and above the
price of the property - that are incurred by
buyers and sellers when transferring
ownership of a property. Closing costs can
include an origination fee, discount points,
appraisal fee, title search and insurance,
survey, taxes, deed recording fee, credit
report charge, etc. The cost of closing is
usually about 3% to 6% of the mortgage
statement: A detailed written summary of
the financial settlement of a real estate
transaction, showing all charges and credits
made, and all cash received and paid out.
Cloud on title:
An expression meaning that a claim on a
property prevents the tansfer of a clear
title when the property is sold.
An additional individual who is both
obligated on the loan and is on title to the
measure of how much interest a financial
institution must pay for money it borrows
from savers in the form of deposits, or from
other lenders such as a Federal Home Loan
Something of value deposited with a lender
as a pledge to insure repayment of a loan.
The process of resolving a delinquent, or
past due, mortgage loan including, when
necessary, proceeding with foreclosure.
Equally responsible party, with the
principal borrower, for repayment of a
An unlawful practice of combining or mixing
client's funds with the agent's own funds.
An amount, usually a percentage of the
property sales price, that is collected by a
real estate professional as a fee for
negotiating the transaction.
A written promise between a lender and
borrower to make or insure a loan for a
specified amount and items.
assessments: They are charges paid to
the Homeowners Association by the owners of
the individual units in a condominium or
planned development that are generally used
to maintain the property and common areas.
Those portions of a building, land, and
amenities owned or managed by a planned
development or homeowners' association that
are used by all of the unit owners.
The body of law developed first in England
from judicial decisions shaped by custom and
precedent, but not written in any formal
property: In some states property
acquired during a couple's marriage that is
considered to be owned jointly unless
specifically acquired as separate property
of either spouse.
Reinvestment Act (CRA): The federal law
which requires federally regulated lenders
to describe the geographical market area
they serve. Deposits from that area are to
be reinvested in that area whenever
practical, and requires financial
institutions to meet the credit needs of all
segments of their communities, including
low- and moderate-income neighborhoods.
Properties which are similar to a particular
property and are used to establish a value
for that property.
interest: Interest which is computed on
the principal and any unpaid accumulated
interest. Also see
The legal process for taking over privately
owned property for public use, through due
process under the right of eminent domain,
with compensation to the owner.
A form of real estate, usually a dwelling
with individual ownership of separate
portions of housing in a multi-unit complex.
The owner also shares financial
responsibility for common areas.
conversion: Changing the ownership of an
existing building (usually a rental project)
to the condominium form of ownership.
hotel: A condominium project that has
rental or registration desks, short-term
occupancy units, food, telephone and daily
cleaning services. The project is operated
as a commercial hotel even though the units
are individually owned.
The obligation to safeguard the principal's
lawful confidences and secrets. Therefore, a
real estate broker or agent must keep
confidential any information that may weaken
principal's bargaining position.
loan: A short-term, interim loan for
financing the cost of construction. The
lender makes payments (called draws) to the
builder usually at specified intervals of
Reporting Agency: An agency that obtains
data from a credit repository to prepare
reports used by lenders to determine a
potential borrower's credit history.
Before a contract is binding, a dependent
(or contingent) event must be satisfied, for
example, before a contract is binding the
buyer must sell his property.
Any fee that is earned upon the occurence of
some specified event; for example. listing
contracts usually specify that the listing
agent will be paid a fee at closing.
binding agreement between two or more
persons or entities by which rights to
specific goods, services or actions are
acquired/exchanged by the parties to the
deed: A written agreement between the
seller and buyer of a piece of property,
whereby the buyer receives title to the
property only after making a determined
number of payments.
Exchange of Real Estate: A contract for
the sale of real estate in which the
consideration is paid wholly or partly in
real property instead of cash.
sale: The agreement between the buyer
and seller on the purchase price, terms, and
conditions necessary to both parties to
convey the title to the buyer.
price: The full purchase price as stated
in the contract.
loan: A mortgage loan other than one
insured or guaranteed by a government agency
such as the FHA.
mortgage: Refers to home loans other
than government loans (VA and FHA).
clause: A provision allowing a ARM loan
to be converted to a fixed-rate loan at some
point during the term, usually at the end of
the first adjustment period.
ARMs: ARMs that can be converted to a
fixed rate term loan. Certain restrictions
A document, such as a deed, used to effect a
transfer of property from one owner to
agent: A real estate agent who sells a
property. The selling agent may be the
subagent or listing agent of the seller or a
housing: An apartment building or a
group of dwellings owned by a corporation,
the stockholders of which are the residents
of the dwellings. It is operated for their
benefit by their elected board of directors.
Cost approach to
value: An estimate of value based on
current construction costs plus land value,
less depreciation. See also
Income Approach to Value
Market Approach to
Accounting that includes original cost of
property plus certain expenses such as money
spent on permanent improvements and other
costs, minus any depreciation claimed on tax
returns over the years.
COFI (Cost of
funds index): One of the indexes that is
used to determine interest rate changes for
certain adjustable-rate mortgages. It
represents the weighted-average cost of
savings, borrowings, and advances of the
financial institutions such as banks and
savings & loans.
contract: A building contract which sets
the builder's profit as a agreed upon
percentage of the actual cost of labor and
An offer made in response to a previous
division within a state, usually having
within it one or more cities or towns.
The part of a loan agreement that sets forth
constraints as to what the borrower will and
will not do regarding the property pledged
as collateral for the loan.
agreement in which a borrower receives
something of value in exchange for a promise
to compensate the lender at a future date.
A record of an individual's repayment of
debt. Credit histories are reviewed by
mortgage lenders as one of the underwriting
criteria in determining credit risk.
The maximum amount that you can borrow.
A record that lists all past and present
debts and the timeliness of their repayment,
and documents an individual's credit
repository: An organization that gathers
financial and public records information
about the payment records of individuals who
are being considered for credit.
score: A statistical summary of the
information contained in a consumer's credit
report. A well known credit risk score is
the FICO score, which is a mathematical
summary calculation that assigns numerical
values to various pieces of information in
the credit report.
person to whom money is owed.
A dead end street which widens sufficiently
at the end to permit an automobile to make a
buyer who is working with an agent who
represents the seller. The term may also
define a seller who is working with an agent
who represents the buyer.
Back to the top
Debt instrument evidencing the holder's
right to receive interest and principal
installments from the named debtor.
the payments of principal and interest by a
borrower to a lender.
ratio: The measurement of debt payments
to gross household income.
Debt-to-income ratio: The ratio,
expressed as a percentage, resulting from
dividing a borrower's monthly payment
obligation on long-term debts is by his
gross monthly income. See
housing expenses-to-income ratio.
Practices Act: Part of the federal
Consumer Protection Act made specifically
applicable to real estate in 1975,
specifically prohibiting a lengthy number of
false, misleading and deceptive acts or
restrictions: A set of restrictions
filed by a subdivider to cover an entire
tract or subdivision.
An owner of private property gives said
property for some public use, as the
dedication of land for streets, schools,
formal written instrument by which title to
real property is transferred from one person
Deed of trust:
A deed establishing a trust. It is used in
some loan transactions in place of a
mortgage. In a trust deed the property on
which money has been lent is conveyed as
collateral to a trustee, who holds it in
trust for the benefit of the holder(s) of
the loan notes.
restriction: A limitation written into a
deed limiting or restricting the use of the
Short for "deed in lieu of foreclosure."
This conveys title to the lender when the
borrower is in default and wants to avoid
Failure to meet legal obligations in a
contract, specifically, failure to make the
monthly payments on a mortgage.
A provision in a deed or in a separate
instrument which, being performed, renders
the instrument void.
Title to real property missing some of the
elements necessary to be a good/legal
interest: When a monthly payment is less
than required to satisfy the note rate, the
unpaid interest is deferred by adding it to
the loan balance. See
judgment: Personal claim against the
debtor when the sale of foreclosed property
does not yield sufficient proceeds to pay
off the loan(s) and accrued interest.
Failure of a borrower to make payments on
time; this can lead to foreclosure.
The actual transfer of the deed, or an act
of a seller showing intent to make a deed
Veterans Affairs (VA): An independent
agency of the federal government that
guarantees long-term, low or no-down payment
mortgages to eligible veterans.
deposit made by the buyer as evidence of
good faith in offering to purchase real
estate and to secure performance of the
Decrease in value to real property or
improvements caused by deterioration,
obsolescence, or economic factors.
Derogatory credit history entries. From
several various causes, these usually have a
negative result on a credit report.
Property is acquired through inheritance
laws when there is no will.
agency: Agency relationship where the
Broker appoints one agent in the office to
represent the seller and/or another agent in
the same office to represent the Buyer.
transfer of real estate by will or last
to whom real estate is given by will or last
testator who leaves real estate.
endorsement: A lender who can complete
the processing and closing of an FHA loan
without having prior approval from the FHA.
mortgage: An amortized mortgage in which
principal and interest are computed on the
Payments made during the course of an escrow
or at closing.
An agent is under obligation to disclose to
the client all known relevant and material
information that pertains to the scope of
An ARM with an initial discount, a lower
number of percentage points of interest to
provide a lower rate and lower payments for
part of the mortgage term. After the
discount period, the ARM rate will probably
increase depending on the index rate.
The amount paid either to maintain or lower
the interest rate charged. Each point is
equal to one percent (1%) of the loan amount
(i.e., two points on a $200,000 mortgage
would equal $4,000).
The interest rate the Federal Reserve System
charges on a loan that it makes to a bank.
To remove a person from his or her real
property by lawful means, including, if
necessary, the use of force.
stamps: A form of tax in some states
that requires a revenue stamp to be affixed
to documents transferring title to real
rights of a widow to some or all of her
deceased husband's property.
Money paid as a portion of the property
purchase price that is paid in cash and is
not part of the mortgage loan amount.
A provision in a mortgage that pledges
several properties as collateral. A default
in the mortgage could lead to foreclosure
proceedings on any of the properties in the
Dual agency occurs when a real estate agent
is representing both buyer and seller in the
same transaction. Conflict of interest may
arise from such an arrangement.
Due on sale:
A clause in a mortgage agreement providing
that, if the borrower sells, transfers, or,
in some instances, encumbers the property,
the lender has the right to demand the
outstanding balance in full.
clause: A provision in a mortgage or
deed of trust that allows the lender to
demand immediate payment of the balance of
the mortgage if the mortgage holder sells or
transfers auy interest in the property.
Forcing action or inaction against a
person's desire not to go in that direction.
Back to the top
A deposit made by the buyer as evidence of
good faith in offering to purchase property
and to secure performance of the contract.
Usually held by a title company in an escrow
Agreement of Sale.
deposit: A deposit made by the potential
property purchaser to show that he or she is
serious about purchasing the property.
right held by one person to make specific,
limited use of land owned by another person,
such as a right of way for utilities.
Obselescence: The property loses value
due to external cause or events e.g., a
sewer plant is built next door to the
subject property; aka Functional
An official estimate, ususally by an
appraiser, of the physical condition of a
building. The actual age of a building may
be different than its effective age.
interest rate: For loans, the effective
rate is the stated interest rate plus fees
and charges prorated over the estimated life
of the mortgage, usually ten years.
Crops to which a tenant who cultivated the
land is entitled by agreement with the
The right of a government to take private
property for public use upon payment of its
fair market value. Eminent domain is a basis
for condemnation proceedings.
An object which invades a portion of a
property belonging to someone esle.
A claim attached to real property, such as a
lien, mortgage or unpaid taxes.
Writing one's name on a negotiable
instrument, or on a paper attached to it, by
which the signer transfers ownership of the
instrument to another party.
A legal obligation on the federal government
to make payments to a person, business, or
governmental unit that meets the rules set
opportunity act: Federal law which
prohibits creditors from certain forms of
discrimination, such as race, gender, age,
It is illegal for a person's treatment of
another to be discriminatory, or tend to
exclude or otherwise harm members of a
minority group, or have discriminatory
difference between the fair market value of
the property and the amount still owed on
its mortgage and other liens.
clause: The clause in a contract
permitting adjustments of the payments based
on an economic index that neither party to
the agreement controls, such as an increase
in the cost of living index,.
reversion of property to the state in the
event the owner thereof dies without leaving
a will (intestate) and has no heirs to whom
the property may pass by lawful descent, or
when the property is abandoned for a period
Temporary deposit, with a third party, of
money to be delivered upon the fulfillment
of a condition, such as the funds needed for
such expenses as property taxes.
An account that holds money safely until
needed to satisfy some obligation.
An annual analysis performed to make sure an
adeuate amount of money is being collected
to cover anticipated expenditures.
disbursements: The use of escrow funds
to pay real estate taxes, property
insurance, mortgage insurance, and other
property expenses as they become due.
The part of a mortgagor’s monthly payment,
above the mortgage principal and interest,
that is held by the servicer to pay for
taxes, hazard insurance, mortgage insurance,
lease payments, and other items as they
reimbursement: In an assumption or wrap
loan transaction, the buyer reimburses the
seller for the current balance of his
sum total of all the real property and
personal property owned by an individual.
Estate at will:
Possession of property at the discretion of
years: Tenant has rights in real
property for a designated number of years.
value: An appraisal (the
closing costs statement: The statement
which lists the financial settlement between
buyer and seller and the costs each must
pay. A separate statement for buyer and
seller is sometimes prepared.
impediment to a law of action, whereby one
is forbidden to contradict or deny one's own
previous statement or act.
Abbreviation for "et uxor", meaning "and
The lawful expulsion of an occupant from
title: The report on the title of a
property from the public records or an
abstract of the title.
agency: The practice of representing
either the buyer or the seller in a
transaction. Owes Fiduciary Duties to the
party he represents.
agency: The practice of representing
only buyers and never sellers in a
broker/agent: The practice of
representing only buyers and never sellers
in a transaction. The company never lists a
seller's property and thus never has a
seller as a client. Agents never accept
subagency that is offered by a seller's
listing: A written contract that gives a
licensed real estate agent the exclusive
right to sell a property for a specified
to sell: A Listing Agreement which gives
the listing agent the right to sell the
property for a specified time, with the
right to collect a commission if the
property is sold by anyone, including the
owner, during the listing period.
agency: The practice of representing
only sellers and never buyers in a
Executor or Executrix: A person named
in a will to carry out its terms and
administer the estate.
Back to the top
An agent who assists the parties to a
potential real estate transaction in
communication, interposition, and
negotiation, between or among them, without
being an advocate for any interest. Does not
represent any of the parties to the
reporting act: A consumer protection law
that regulates the disclosure of consumer
credit reports by consumer/credit reporting
agencies and establishes procedures for
correcting mistakes on one's credit record.
Fair housing laws: Federal, state,
and local laws, particularly Title VIII of
the 1968 Civil Rights Act, Title VI of the
Civil Rights Act of 1964, and the Civil
Rights Act of 1866, which forbid
discrimination because of race, sex, color,
religion, or national origin, in the selling
or renting of homes or apartments, and in
other specified transactions.
value: The highest price that a buyer,
willing but not compelled to buy, would pay,
and the lowest a seller, willing but not
compelled to sell, would accept.
(FNMA): The Federal National Mortgage
Association, which is a congressionally
chartered, shareholder-owned company that is
the nation's largest supplier of home
mortgage funds. FNMA was established for the
purpose of purchasing loans from primary
lenders (mortgage companies). FNMA is a
private corporation and its stock is traded
on the New York Stock Exchange. FNMA buys
VA, FHA, and conventional mortgages from
Administration (FmHA): Provides
financing to farmers and other qualified
borrowers who are unable to obtain loans
Loan Bank: Provides liquidity to
supervised financial service companies, such
as savings and loans and credit unions. The
bank system has several districts.
Loan Board: The board which charters and
regulates federal savings and loan
associations, as well as controlling the
system of Federal Home Loan Banks.
Loan Mortgage Corporation (FHLMC), aka
"Freddie Mac": Is a quasi-governmental
agency that purchases conventional mortgage
from insured depository institutions and
HUD-approved mortgage bankers.
Administration (FHA): A division of the
Department of Housing and Urban Development.
Its main activity is the insuring of
residential mortgage loans made by approved
private lenders. FHA also sets standards for
Bank: The regulatory agency for certain
commercial banks and bank holding companies.
Sets monetary policy for the country and
provides liquidity for supervised financial
lien: A lien attached to property for
nonpayment of a federal tax.
The greatest possible interest a person can
have in real estate.
estate: The most complete form of
ownership of real property absolute
ownership. Commonly used to to denote a
property where the owner has undivided title
to the land on which the property is
FHA loan: A
loan insured by the Federal Housing
Administration open to all qualified home
purchasers. These loans are generous enough
to handle moderately-priced homes almost
anywhere in the country.
A mortgage that is insured by the Federal
Housing Administration (FHA). Along with VA
loans, an FHA loan will often be referred to
as a government loan.
insurance: Requires a fee paid at
closing to insure the loan with FHA. In
addition, FHA mortgage insurance requires an
annual fee of up to 0.5 percent of the
current loan amount, paid in monthly
Fiduciary Duties: A broker or agent
always owes these duties to the person they
are representing: Loyalty, Obedience,
Disclosure, Confidentiality, Reasonable Care
and Diligence, and Accounting. These duties
are inherent in all agency relationships and
enforced by all courts of law in the US.
A promise by FHA to insure a mortgage loan
for a specified property and borrower. A
promise from a lender to make a mortgage
The primary lien against a property.
mortgage: The mortgage interest rate
will remain the same on these mortgages
throughout the term of the mortgage for the
Personal property that becomes real property
when attached in a permanent manner to real
Insurance that compensates for physical
property damage resulting from flooding. It
is required for properties located in
federally designated flood areas.
A legal process by which the lender or the
seller forces a sale of a mortgaged property
because the borrower has not met the terms
of the mortgage. Also known as a
repossession of property.
misstatement of a material fact made with
intent to deceive or made with reckless
disregard of the truth, and which actually
One linear foot (12 inches) along the street
side of a lot.
Revealing all the known facts which may
affect the decision of a buyer or tenant.
ARM: An adjustable-rate mortgage (ARM)
with a monthly payment that is sufficient to
amortize the remaining balance, at the
interest accrual rate, over the amortization
Back to the top
A lien that includes all the property owned
by a debtor, rather than a specific
property. Also see Specific Lien.
deed: A deed which conveys not only all
the grantor's interests in and title to the
property to the grantee, but also warrants
that if the title is defective or has a
"cloud" on it (such as mortgage claims, tax
liens, title claims, judgments, or
mechanic's liens against it) the grantee may
hold the grantor liable. A general warranty
deed offers the most protection of any deed.
See GNMA (Government National Mortgage
National Mortgage Association): Also
known as "Ginnie Mae," provides sources of
funds for residential mortgages, insured or
guaranteed by FHA or VA.
estimate: A written estimate of closing
costs which a lender must provide you within
three days of submitting an application.
survey method: A system of land
description (not used in Texas) which uses
meridians (north and south lines) and base
lines (east and west lines). Areas include
quadrangles (24 miles on each side),
townships (6 miles on each side), and
sections (1 mile on each side).
A period of time during which a loan payment
may be paid after its due date but not incur
a late penalty. Such late payments may be
reported on your credit report.
payment mortgage (GPM): A type of
flexible-payment mortgage where the payments
increase for a specified period of time and
then level off. This type of mortgage has
negative amortization built into it.
clause: The clause in a law permitting
the continuation of a use, business, etc.,
which, when was permissible but, because of
a change in the law is now not permissible.
person to whom real estate is conveyed (the
person conveying real estate by deed (the
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.
For qualifying purposes, the income of the
borrower before taxes or expenses are
A property lease where the landlord pays
charges regularly incurred by the owner,
such as taxes, insurance, utilities, and
Rent paid for vacant land. If the property
is improved, ground rent is the portion
attributable to the land only.
mortgage (GEM): A fixed-rate mortgage
that provides scheduled payment increases
over an established period of time. The
increased amount of the monthly payment is
applied directly toward reducing the
remaining balance of the mortgage.
mortgage: A mortgage that is guaranteed
by a third party.
Back to the top
The "to have and hold" clause which defines
or limits the quantity of the estate granted
in the premises of the deed.
insurance: A form of insurance in which
the insurance company protects the insured
from specified losses, such as fire,
windstorm and the like.
Assigns: (1) An heir is one who receives
property from someone who has died. One who
might inherit or succeed to an interest in a
property under the rules of law applicipable
when a property owner dies. (2) Assigns: A
person or persons to whom a property right
Property, personal and real, capable of
will: Will written entirely in the
testator's handwriting but has not been
conversion mortgage (HECM): Usually
referred to as a reverse annuity mortgage,
what makes this type of mortgage unique is
that instead of making payments to a lender,
the lender makes payments to you. It enables
older home owners to convert the equity they
have in their homes into cash, usually in
the form of monthly payments. Unlike
traditional home equity loans, a borrower
does not qualify on the basis of income but
on the value of his or her home. In
addition, the loan does not have to be
repaid until the borrower no longer occupies
Home equity line
of credit: A mortgage loan, usually in
second position, that allows the borrower to
obtain cash drawn against the equity of his
home, up to a predetermined amount.
loan: A fixed or adjustable rate loan
obtained for a variety of purposes, secured
by the equity in your home. Interest paid is
A thorough inspection by a professional that
evaluates the structural and mechanical
condition of a property. A satisfactory home
inspection is often included as a
contingency by the purchaser.
fees: Also known as maintenance fees.
Payments made by property owner(s) of a
condominium or a unit in PUD (Planned Unit
Development) to the homeowners' association
for expenses incurred in upkeep of the
insurance: An insurance policy that
combines personal liability insurance and
hazard insurance coverage for a dwelling and
warranty: A type of insurance often
purchased by homebuyers that will cover
repairs to certain items, such as heating or
air conditioning, should they break down
within the coverage period.
Land, and the improvements thereon,
designated by the owner as his homestead
and, therefore, protected by state law from
forced sale by certain creditors of the
owner. Not applicable in all states.
Housing expenses-to-income ratio: The
ratio, expressed as a percentage, resulting
from dividing a borrower's housing expenses
by his gross monthly income. Also see
Settlement statement mandated by the US
Department of Housing and Urban Development.
A document that provides an itemized listing
of the funds that are payable at closing.
Items that appear on the statement include
real estate commissions, loan fees, points,
and initial escrow amounts. Each item on the
statement is represented by a separate
number within a standardized numbering
system. The totals at the bottom of the
HUD-1 statement define the seller's net
proceeds and the buyer's net payment at
Back to the top
Any agency relationship that is indicated by
the words and/or actions of the agent or
principal rather than by written agreement
also called accidental agency. See
for a more detailed description.
Account held by a lender for payment of
taxes, insurance, or other expenses.
Sometimes called Escrow Account.
Valuable additions to the land, such as
buildings, fences, roads, etc., which
increase the value of the property.
Income approach to value: An estimate
of value based on the monetary returns that
a property can be expected to generate
capitalization. Also see Cost Approach to
Value and Market Approach to Value.
published interest rate against which
lenders measure the difference between the
current interest rate on an adjustable rate
mortgage and that earned by other
investments (such as one- three-, and
five-year U.S. Treasury security yields, the
monthly average interest rate on loans
closed by savings and loan institutions, and
the monthly average costs-of-funds incurred
by savings and loans), which is then used to
adjust the interest rate on an adjustable
mortgage up or down.
The sum of the published index plus the
margin. For example if the index were 7% and
the margin 1.75%, the indexed rate would be
8.75%. Often, lenders charge less than the
indexed rate the first year of an
rate: This refers to the original
interest rate of the mortgage at the time of
closing. This rate changes for an
adjustable-rate mortgage (ARM). It's also
known as "start rate" or "teaser."
clause: A stipulation in an offer to
purchase that makes the sale contingent on
the findings of a home inspector.
sale: A tax term used to describe a sale
which is usually accomplished by use of a
land contract, contract for deed, agreement
of sale, conditional sales contract, or
A title which a title company will insure.
mortgage: A mortgage that is protected
by the Federal Housing Administration (FHA)
or by private mortgage insurance (MI).
The fee charged for using another's money or
credit. It is expressed as a percentage rate
over a period of time.
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.
buydown plan: An arrangement that allows
the property seller to deposit money to an
account. That money is then released each
month to reduce the mortgagor's monthly
payments during the early years of a
ceiling: For an adjustable-rate mortgage
(ARM), the maximum interest rate, as
specified in the mortgage note.
floor: For an adjustable-rate mortgage
(ARM), the minimum interest rate, as
specified in the mortgage note.
financing: A construction loan made
during completion of a building or a
project. A permanent loan usually replaces
this loan after completion.
A broker who acts as an Intermediary in a
transaction does not represent either party.
He may not do anything that would give any
party to the transaction an advantage over
any other party.
Legal designation of a person who has died
without leaving a valid will.
As defined in the fair housing laws, it is
the illegal act of coercing, intimidating,
threatening, or interfering with a person in
exercising or enjoying any right granted or
protected by federal, state or local fair
Back to the top
several: A liability which allows the
creditor to sue any one of the debtors or
sue all together.
A form of ownership where two or more people
have an undivided interest in a property,
with the right of survivorship. Upon the
death of one owner, his/her interest passes
to the remaining owners and not to the heirs
or the devises of the deceased.
The official and authentic decision of a
court of justice concerning the respective
rights and claims of the parties to an
action or suit. Money judgments, when
recorded, become a lien on real property of
liens or General liens): These are
usually at the end of your account
histories, and while they don't always
necessarily damage your credit rating, they
can really impair your ability to borrow
foreclosure: A type of foreclosure
proceeding used in some states that is
handled as a civil lawsuit and conducted
entirely under the auspices of a court.
A loan which is larger (more than $240,000
as of 1/1/99) than the limits set by the
Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation.
Jumbo loans cannot be funded by these two
Back to the top
Delay or negligence in asserting one's
A penalty for failure to pay an installment
payments: Mortgage payments are the most
critical account on your credit history.
Less than 12 months history leaves your
credit report kind of thin, good history
boosts your overall rating, and any 'lates'
really hurt your credit rating, even if it's
on rental property. Mortgage 'lates' stay on
your credit report for seven years.
The most common "derog" is related to late
payment history. The more late pays you have
the worse your report is. Or if you have one
or two accounts that show a severe
delinquency record, you have some bad
Hidden structural defects and flaws.
option to purchase: A lease under which
the lessee has the right to purchase the
property. The option may run for the length
of the lease or only for a portion of the
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.
mortgage loan: An alternative financing
option that allows low- and moderate-income
home buyers to lease a home with an option
to buy. Each month's rent payment consists
of principal, interest, taxes and insurance
(PITI) payments on the first mortgage plus
an extra amount that accumulates in a
savings account for a downpayment.
description: A description of a specific
parcel of real estate acceptable to the
courts in that state, and which allows an
independent surveyor to locate and identify
company, institution or person that loans
money with the intention of a full repayment
of the debt. Most commonly, this debt is
repaid with interest.
treatment: Any time a person is treated
differently on the basis of race, sex,
religion, color, familial status,
disability, or national origin, either by
action or inaction, in the selling or
leasing of real property, is a violation of
the Fair Housing Laws.
Individual (tenant) leasing property.
who leases property to a tenant.
The use of borrowed funds to finance an
investment and to magnify the rate of
A person's financial obligations.
Liabilities include long-term and short-term
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.
It is usually part of a homeowner’s
state: States where here legal title of
mortgaged property resides with the
mortgagor (borrower), with the mortgage as a
lien against the property.
encumbrance against property for money,
either voluntary or involuntary.
An interest in real property for the life of
a living person. The interest then reverts
back to the grantor or on to a third party.
(This is useful for investors who want to
purchase a property they believe will be
more valuable in the future.)
cap: For an adjustable-rate mortgage
(ARM), a limit on the amount that payments
can increase or decrease over the life of
A legal notice recorded to show pending
litigation relating to real property and
giving notice that anyone acquiring an
interest in said property subsequent to the
date of the notice may be bound by the
outcome of the litigation.
agreement: The legal agreement between
the listing agent/broker and the vendor,
setting out the services to be rendered,
describing the property for sale, and
stating the terms of payment.
Having a proven track record goes a long way
toward qualifying for a new mortgage. Many
second mortgage lenders won't make a loan,
or they limit the loan amount, for people
who haven't had at least a 12-month mortgage
rating in the past 12 months.
The complete package of information given to
the lender regarding the borrower and the
property which the lender uses to evaluate
the financial state of the borrower and the
After you obtain a loan, the company you
make the payments to is "servicing" your
loan. They process payments, send
statements, manage the escrow/impound
account, provide collection efforts on
delinquent loans, ensure that insurance and
property taxes are made on the property,
handle pay-offs and assumptions, and provide
a variety of other services.
(Loan-to-value ratio): The ratio of the
mortgage loan amount to the properties
appraised value (or the selling price
whichever is less). If you purchase a
property for $100,000 and make a $20,000
down payment the loan to value ratio will be
Lock in: A
commitment you obtain from a lender assuring
you a particular interest rate or feature or
a definite time period. Provides protection
should interest rates rise between the time
you apply for a loan, acquire loan approval,
and, subsequently, close the loan and
receive the funds you have borrowed.
The time period during which the lender has
guaranteed an interest rate to a borrower.
of the most fundamental fiduciary duties an
agent owes to the principal. The duty
obligates a real estate broker to act at all
times, solely in the best interests of the
principal, excluding all other interests,
including that of the broker.
Back to the top
amount, usually a percentage, which is added
to the index to determine the interest rate
for adjustable rate mortgages.
Market approach to value: An estimate
of value based on the actual sales prices of
comparable properties. Also see Cost and
Income Approach to Value.
The price that a willing buyer and a willing
seller, both given full information, and
neither under pressure to act, would agree
upon. Also known as Fair Market Value.
title: Title which can be readily
marketed to a reasonably prudent purchaser
aware of the facts and their legal meaning
concerning liens and encumbrances.
The date on which the principal balance of a
loan becomes due and payable.
A lien created by statue for the purpose of
securing priority of payment for the price
of value of work performed and materials
furnished in construction of repair of
improvements to land, and which attached to
the land as well as the improvements.
bounds: A system of land description
using distance (metes) and angles/compass
directions (bounds), beginning and ending at
the same point. See Government Survey Method
and Recorded Plat Method.
legal document that pledges a property to
the lender as security for payment of a
insurance premium: It is insurance from
FHA to the lender against incurring a loss
on account of the borrower's default.
Misrepresentation: A false statement, or
concealment, of material fact with the
intention of inducing action of another.
fixed object or point, either natural or
man-made, used in making a survey.
contract: A contract providing security
for the repayment of a loan, registered
against property, with stated rights and
remedies in the event of default. Lenders
consider both the property and financial
worth of the borrower in deciding whether to
make a mortgage loan.
A loan secured by the collateral of
specified real estate property which obliges
the borrower to make a predetermined series
of payments. Under government-insured or
loan-guarantee provisions, the payments may
include escrow amounts covering taxes,
hazard insurance, water charges (in some
states), and special assessments.
An individual or company that charges a
service fee to bring borrowers and lenders
together for the purpose of loan
guaranty insurance corporation (MGIC): A
private corporation which, for a fee,
insures mortgage loans similar to FHA and VA
insurance, although not insuring as great a
percentage of the loan.
insurance: Money paid to insure the
mortgage when the down payment is less than
20 percent. See private mortgage insurance
(PMI), FHA mortgage insurance.
and disability insurance: A type of term
life insurance often bought by borrowers.
The amount of coverage decreases as the
principal balance declines. Some policies
also cover the borrower in the event of
disability. In the event that the borrower
dies while the policy is in force, the debt
is automatically satisfied by insurance
proceeds. In the case of disability
insurance, the insurance will make the
mortgage payment for a specified amount of
time during the disability.
A loan which utilizes real estate as
security or collateral to provide for
repayment should you default on the terms of
your loan. The mortgage or Deed of Trust is
your agreement to pledge your home or other
real estate as security.
A written agreement to repay a loan. The
agreement is secured by a mortgage, serves
as proof of an indebtedness, and states the
actual amount of the debt and the manner in
which it shall be paid.
warehousing: A process whereby a
mortgage company will hold loans which would
ordinarily be sold, in order to sell at a
lower discount later. These are used as
collateral security with a bank to borrow
additional money to loan.
The lender of money or the receiver of the
The borrower in a mortgage agreement.
units: Properties that provide separate
housing units for more than one family,
although they secure only a single mortgage.
service (MLS): A system by which a
number of real estate firms share
information about homes that are for sale.
Back to the top
amortization: Occurs when your monthly
payments are not large enough to pay all the
interest due on the loan. The unpaid
interest is added to the unpaid balance of
the loan. A danger of negative amortization
is that the home buyer could end up owing
more than the original loan.
income: The borrower's gross income
minus federal income tax.
A price, which must be expressly agreed
upon, below which the owner will not sell
the property and at which the broker will
not receive a commission.
refinance: A refinance transaction which
is not intended to put cash in the hand of
the borrower. Instead, the new balance is
caculated to cover the balance due on the
current loan and any costs associated with
obtaining the new mortgage.
Almost all lenders offer loans at "no
points." You will find the interest rate on
a "no points" loan is approximately a
quarter percent higher than on a loan where
you pay one point.
clause: A statement in a mortgage
contract forbidding the assumption of the
mortgage without the prior approval of the
lender. Note: The signed obligation to pay a
debt, as a mortgage note.
use: A property which does not conform
to the zoning of an area.
legal document that obligates a borrower to
repay a mortgage loan at a stated interest
rate during a specified period of time.
The interest rate stated on a mortgage note.
default: A formal written notice to a
borrower that a default has occurred and
that legal action may be taken.
Back to the top
A loss in value of real property caused by
changes either internal or external to the
adjustable: Mortgage whose annual rate
changes yearly. The rate is usually based on
movements of a published index plus a
specified margin, chosen by the lender.
mortgage: A mortgage permitting the
mortgagor to borrow additional money under
the same mortgage, with certain conditions,
usually, as to the assets of the mortgage.
An opportunity for prospective buyers to
view a house.
A listing under which the principal (owner)
reserves the right to list his property with
right to purchase property within a definite
time at a specified price. There is no
obligation to purchase, but the seller is
obligated to sell if the option holder
exercise the right to purchase. For the
option to be valid, it must include
The fee charged by a lender to prepare loan
documents, make credit checks, inspect and
sometimes appraise a property.
A property purchase transaction in which the
property seller provides all or part of the
police: Title insurance for the owner of
property. Insurance to defend the owner
against enforcement of any liens or
encumberances against the property that were
in place prior to the issuance of the
Back to the top
mortgage: Mortgage covers real and
Panic peddling: An illegal practice
of creating panic selling in a neighborhood
by asserting the prospective entry of
members of a minority group.
A payment that is not sufficient to cover
the scheduled monthly payment on a mortgage
agent: The real estate agent selling the
property. The selling agent may be (1)the
subagent or listing agent of the seller,
(2)a buyer's agent, or (3)a dual agent.
Wall erected on the property line for the
use of both properties.
date: The effective date of a new
monthly payment amount takes on an
adjustable-rate mortgage (ARM) or
graduated-payment mortgage (GPM).
lease: Lease in which all or part of
rental is a specified percentage of gross
income from total sales made upon the
payment: A limit on the amount that
payments can increase or decrease during any
one adjustment period.
cap: For an adjustable-rate mortgage, a
limit on the amount that the interest rate
can increase or decrease during any one
adjustment period, regardless of how high or
low the index might be.
A long term mortgage, usually ten years or
more. Also called an "end loan."
mortgage: A mortgage on completed
construction on the same property under one
mortgage or trust deed.
property: Any property that is not real
deterioration: The value loss to real
property due to the action of the elements
and old age. Physical deterioration can be
either curable or incurable.
Principal, Interest,Taxes and Insurance. The
amount of the monthly payment (principal,
interest, plus an amount to be placed into
the escrow (impound) account.
development: A project or subdivision
that includes common property that is owned
and maintained by a homeowners' association
for the benefit and use of the individual
mortgage: Money is placed in a pledged
savings account and this fund plus earned
interest is gradually used to reduce
Mortgage Insurance similar to FHA or VA
insurance, insuring part (normally the top
20%) of the first mortgage or deed of trust,
enabling a lender to make a conventional
loan of a higher percentage of the property
An agent lists a property for sale and does
not enter it into the MLS system for several
days, keeping it in his "pocket" so other
agents will not know the property is for
Each point is equal to 1 percent of the loan
amount (e.g., two points on a $100,000
mortgage would cost $2,000).
The authority of a government to adopt and
enforce law governing the use of real estate
based on the need to promote public safety,
health, and general welfare.
attorney: A legal document authorizing
another person to act on one’s behalf. A
power of attorney can grant complete
authority or can be limited to certain acts
and/or certain periods of time.
Determining how much money you will be
eligible to borrow before you apply for a
expenses: Necessary to create an escrow
account or to adjust the seller's existing
escrow account. Can include taxes, hazard
insurance, private mortgage insurance and
Any amount paid to reduce the principal
balance of a loan before the due date.
Payment in full on a mortgage that may
result from a sale of the property, the
owner's decision to pay off the loan in
full, or a foreclosure.
clause: A mortgage Statement of the
terms upon which the mortgagor (borrower)
may pay the entire or stated amount on the
mortgage principal at some time prior to the
penalty: A fee that may be charged to a
borrower who pays off a loan before it is
Pre-qualification: This usually refers
to the loan officer’s written opinion of the
ability of a borrower to qualify for a home
loan, after the loan officer has made
inquiries about debt, income, and savings.
market: Lenders who originate loans and
makes funds available directly to the
The interest, or discount rate charged by a
commercial bank to its largest and strongest
The amount borrowed or remaining unpaid. The
part of the monthly payment that reduces the
remaining balance of a mortgage.
balance: The outstanding balance of
principal on a mortgage. The principal
balance does not include interest or any
A written promise to repay a specified
amount over a specified period of time.
A tax levied on both real and personal
divide or distribute proportionally. At
closing, various expenses such as taxes,
insurance, interest, rents, etc. are
prorated between the seller and buyer.
A meeting in an announced public location to
sell property to repay a mortgage that is in
agreement: A written contract signed by
the buyer and seller stating the terms and
conditions that a property will be sold.
transaction: The acquisition of property
through the payment of money or its
A document that lists the price, terms and
conditions that a buyer is willing to
purchase a property.
Back to the top
meet a mortgage lender's approval
ratios: Calculations used to determine
if a borrower can qualify for a mortgage.
They consist of two separate calculations: a
housing expense as a percent of income ratio
and total debt obligations as a percent of
Quit claim deed:
A deed which transfers whatever interest the
maker of the deed may have in the particular
parcel of land.
Back to the top
Rate lock: A
commitment issued by a lender to a borrower
or other mortgage originator guaranteeing a
specified interest rate for a specified
period of time at a specific cost.
and able: A buyer who is prepared to buy
on the and has the financial capacity to do
agent: A person licensed to negotiate
and transact the sale of real estate.
board: A non profit organization
representing local real estate
agents/brokers and salespeople, which
provides services to its members. The board
usually maintains and operates the Multiple
Listing Service in the community.
inspector: Individual or company who is
trained and qualified to inspect property.
settlement procedure act (RESPA): A
consumer protection law that requires
lenders to give borrowers advance notice of
Transaction Standard (RETS): XML
specification for exchanging real estate
estate/property: Vacant land or land
with improvements and the rights to own or
real estate agent, broker or an associate
who holds active membership in a local real
estate board that is affiliated with the
National Association of Realtors.
Refers to land and buildings and other
improvements from a physical standpoint.
and diligence: An agent, competent real
estate professional, is obligated to use
reasonable care and diligence when pursuing
the principal's affairs.
Court-appointed custodian who controls
property for the court, until the final
disposition of the matter before the court.
The cancellation of a contract. For mortgage
refinancing, the homeowner is given 3 days
by law to cancel a contract once it is
signed provided the transaction uses equity
in the home as security.
With a deed or other writing, setting forth
some explanation for the transaction.
written document that has been entered into
the public records filed with the County
The public official who retains records of
transactions that deal with real property in
Money paid to the lender for recording a
home sale with the proper authorities,
thereby making the record of the home sale
part of the public records.
The written record of title to real property
is entered in the public records, thereby
giving constructive notice to the public.
The right of the holder of a note to look
personally to the borrower or endorser for
payment of the note secured by a mortgage or
deed of trust.
A fund controled by a state Real Estate
Commission. Upon court order due to illegal
acts of licensees, the fund is used to
reimburse the public for monetary loss.
The illegal practice of refusing or limiting
mortgage loans in certain neighborhoods on
the basis of racial or ethnic composition.
Getting a new mortgage loan on a property
Truth in lending law by the Federal Reserve
System requiring lenders to provide full
disclosure of the terms of the loan,
including expressing interest rates as an
annual percentage rate.
A charge, usually less than the original,
for a title insurance policy if a previous
policy on the same property was issued
within a specified period.
Investment Trusts (REIT): A method of
investing, with cetatin tax advantages, in
real estate with a group.
relinquish an interest or claim to a piece
rate mortgage: A loan in which the
interest rate is periodically adjusted.
An agreement made to repay delinquent
installments or advances.
The act of re-acquiring property,
voluntarily surrendered or not, mainly as a
result of non-payment of agreed
Settlement Procedures Act (RESPA): A
federal law dealing with the procedures for
a real estate closing. It requires
disclosure of certain costs in the sale of
improved residential property.
Limitations on the occupancy or use of real
estate contained in a deed or in local
ordinances pertaining to land use.
mortgage: A special type of loan
available to equity-rich, older owners.
Repayment is not necessary until the
borrower sells the property or moves into a
debt/liability: A credit arrangement
that allows a customer to borrow against a
preapproved line of credit when purchasing
services and goods.
Right of first
refusal: An agreement provision that
requires the owner of a property to give one
party the first opportunity to purchase or
lease the property before the property is
offered for sale or lease to another.
Right of egress
or ingress: The right to enter or leave
survivorship: The right of survivor(s)
to obtain the interest of a deceased joint
Back to the top
A written agreement giving the terms of a
sale agreed to by both seller and buyer.
A procedure in which a seller, for
consideration, deeds property to a buyer
whereupon the buyer concurrently leases the
property back to the seller.
mortgage: This is a document issued by
the mortgagee when the mortgage loan is paid
An additional mortgage made subsequent to
another mortgage and subordinate to the
financing: Assistance provided for
A loan backed by collateral.
Property pledged as collateral for a loan.
loan: A loan which will end the debt by
the systematic payments of combined
principal and interest. At the end of the
loan period, the balance will be zero.
carry-back: The seller of the property
carries a second trust deed and note against
A real estate agent who sells a property.
A sewage system where waste is drained
through conduits into a septic tank.
organization which collects principal and
interest payments from borrowers and manages
their escrow accounts.
loan: The ongoing process of collecting
a monthly mortgage payment, including
accounting for and payment of the yearly tax
and/or homeowners insurance bills.
Setback: The distance between a
building and the property lines to be in
accordance with local zoning ordinances or
An delinquent account on which one gets a
creditor to settle for less than full
statement: A prepared statement prepared
giving a complete breakdown of costs
involved in a real estate sale transaction.
appreciation mortgage: A mortgage where
a borrower receives a below-market interest
rate in return for which the lender receives
a portion of the future appreciation in the
value of the property.
The deed given at a sheriff's sale in
foreclosure of a mortgage.
Simple interest: Interest computed
only on the principal balance.
deed: A deed in which the grantor
guarantees the title only against defects
arising during the period of his or her
occupancy and ownership of the property.
A claim that only affects or applies to a
certain property or group of properties.
performance suit: A legal action brought
by either a seller or buyer to enforce
compliance to the terms of a contract.
Agency relationship where both the agent
representing the buyer and the agent
representing the seller or in the same
The area in square feet of a building or
tract of land.
calculation: The method used to
calculate the monthly payment required to
repay the remaining balance of a mortgage in
relatively equal installments over the
remaining period of the mortgage.
frauds: The law which requires (in part)
that all contracts transferring real estate,
or for the leasing of real estate for more
than one year, must be written to be
A total of 360 days composed of twelve
The illegal practice of directing members of
minority groups, racial or otherwise, away
from or to certain areas or neighborhoods
mortgage: A loan that allows a gradual
increase in the interest rate during the
first few years (i.e., 5 years) of the loan,
and then remains constant for the remainder
of the load period.
One who is employed by a person already
acting as an agent. Typically a salesperson
licensed under a broker (agent) who is
employed under the terms of a listing
A housing development that is created by
segmenting a tract of land into smaller lots
for sale or lease.
financing: A mortgage or lien that has a
priority that is lower than that of the
trustee: A legal recorded document to
change the trustee under the deed of trust.
principle: The principle which indicates
that a buyer will pay no more for a property
than the cost of an equally desirable
Demonstrating the location of the land with
reference to known points, its dimensions,
and the location and dimensions of any
Equity created by a buyer performing work on
a property he is purchasing.
Back to the top
Tax lien: A
claim against assets filed by a taxing
authority against property of a person who
owes back taxes.
After a period of nonpayment of property
taxes, the property can be sold at a public
sale of property at auction by a
Tenancy by the
entirety: Ownership whereby the husband
and wife each owns the entire property. In
event of death of one, the survivor owns the
property without probate.
common: Property ownership in which two
or more people have an undivided interest in
property, without survivorship rights. That
is, upon death of one of the owners, his
interest passes to his heir(s) or
Everything that may be occupied by a tenant
holding lease rights.
actual life of a mortgage, at the end of
which the mortgage becomes due and payable.
organization: Any outside company with
which the lender contracts to provide
morgage processing services.
Time is of the
essence: A contract clause which makes
failure to perform by a specified date a
violation or material breach of the
An arrangement under which a purchaser
receives an interest in real property and
the right to use specified accommodations
and/or amenities for a specified period and
on a recurring basis.
legal document setting forth a person's
ownership of property.
A company that provides title insurance
policies and title examination.
Insurance to protect a lender or owner
against loss in the event of a property
The examination of official records for the
property's title history to determine the
'chain of title' and the current status of
title, including such concerns as owner,
legal description, property taxes due,
encumbrances, judgments or other liens.
A system of the registration of interests in
land in which documents are closely
regulated, monitored, and examined by the
recording authority to ensure that they are
correct and that title is transferred
ratio: The total obligations, including
monthly housing expenses plus other monthly
debts, as a percentage of gross monthly
dwelling unit usually with two or three
levels, and shared walls.
A fee charged each time you draw on a home
equity credit line.
ownership: The ownership of a property
Tax payable when title passes from one owner
An index that is used to determine interest
rate changes for certain adjustable rate
person who manages assets owned by a trust
under the terms of the trust document, to
safeguard the trust and distribute trust
income or principal as directed by the
mortgage: A mortgage where the borrower
receives a below-market interest rate for a
specified number of years and then receives
a new interest rate adjusted (within certain
limits) to current market conditions.
Back to the top
The process by which a lender decides
whether a potential creditor is creditworthy
and should receive a loan.
agency: A relationship, illegal in all
states, where the real estate agent is the
agent of both the buyer and seller in a
transaction, but without the knowledge and
informed consent of both parties.
Charging more than the rate of interest
allowed by law.
Back to the top
Veterans Administration, a federal agency
which guarantees loans made to qualified
veterans on approved properties.
VA loan: A
long-term, low- or no-down payment loan
guaranteed by the Department of Veterans
Affairs. Restricted to individuals qualified
by military service or other entitlements.
A mortgage guaranteed by the VA.
mortgage: Same as adjustable rate
one buying the property.
one selling the property.
deposit: A document signed by the
borrower's financial institution verifying
the status and balance of the borrower's
employment: A document signed by the
borrower's employer verifying the borrower's
Having the rights of ownership, although
enjoyment of those rights may be delayed
until a future date.
no legal force.
document which appears valid and
enforceable, but may be declared invalid by
one of the parties.
Back to the top
voluntary or intentional relinquishment of a
known claim or right.
When the prime rate of interest is higher on
short term loans than on mortgage loans, a
mortgage firm can have an economic loss.
This loss is offset by charging a warehouse
mortgage: A refinanced home loan where
the balances on all mortgages are combined
into one loan.
execution: A writ to put in force the
sentence or judgement that the law has
Back to the top
Zero lot line:
The construction of a structure on any of
the boundary lines of a lot. A structure is
usually built on the front line, such as a
store built to the sidewalk.
Regulatory government agencies manage the
physical development of land and the uses of
What is a seller
A set dollar amount or
percentage of the purchase price (3% or 6%
usually) that a seller agrees to give the
buyer towards closing costs. This can help
to lower the amount of money required to
close and/or reduce mortgage payments since
the concession can also be used to buy down
How to negotiate a
The best way is to
indicate early on that a seller concession
will be requested - negotiate the �net
price� first - and then add on the seller
concession. It is important to point out
that the seller will receive nothing less,
and the buyer will in essence pay nothing
How to calculate a
The net price
represents the contract price, minus the
concession. When using a 6% concession
therefore the net price is 94% of the
contract price. If the agreed to net price
is say $300,000, then the contract price
would be $319,149 (300,000/94*100), and the
amount of the concession $19,149.
What if the lender or
the appraiser does not accept this?
Every mortgage lender
accepts seller concessions, but lending
criteria apply. A good way to go is to use a
6% seller concession, which may need to be
reduced if the property does not appraise at
the contract price, or if there are lending
Buyers may qualify for
If the concession is
used to buy down the mortgage, buyers may
qualify for more (as much as 50% more!)
since they can often be qualified at the
Back to the top