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A
Abstract
of Title: A summary
of the public records relating to the title to a particular
piece of land. If there are any title defects they must
be cleared before a buyer can purchase clear, marketable,
and insurable title.
Abstract
of Judgment: A
summary of a court judgment that creates a lien against
a property when filed with the county recorder.
Acceleration
Clause: Allows
the lender to speed up the rate at which your loan comes
due
or even to demand immediate payment of the entire balance
of the loan should you default on you loan.
Acceptance:
A seller’s
written approval of a buyer’s offer.
Acknowledgment:
A declaration
by a notary certifying the identity of the signer, either
by personal knowledge or written identification.
Addendum:
An addition or
change to a contract.
Adjustable
Rate Mortgage (ARM): A
mortgage in which the interest rate is adjusted periodically
based on an index. Also known as the renegotiable rate mortgage,
the variable rate mortgage or the Canadian rollover mortgage
Adjustment
Period: The amount
of time between interest rate changes for an adjustable
rate mortgage.
Agreement
of Sale: Known
by various names, such as contract of purchase, purchase
agreement, or sales agreement according to location or jurisdiction.
A contract in which a seller agrees to sell and a buyer
agrees to buy, under specific terms spelled out in writing
and signed by both parties
Amortization:
Loan payment calculated
to pay off the debt at the end of a fixed
period, including interest on the outstanding balance.
Annual
Percentage Rate (APR): The
total cost of the loan, including interest and other finance
charges, expressed as a yearly rate.
Application:
A request for
a loan completed by a borrower and submitted to a lender.
The document is used to determine creditworthiness that
details income, debt, and other obligations.
Application
Fee: A fee some
lenders charge to process a loan application.
Appraisal:
An estimate of
the value of property, made by a professional appraiser.
Appraisal
Fee: The charge
for estimating the value of property.
Appraisal
Report: A
detailed written report regarding the fair market value
of a property based on its condition and recent sales of
comparable properties in the particular area.
Appreciation:
An increase in
the value of a property.
APR
(Annual Percentage Rate): The
total cost of the loan, including interest and other finance
charges, expressed as a yearly rate.
ARM
(Adjustable Rate Mortgage): A
mortgage loan with an interest rate that changes periodically
to reflect changes in a specified financial index.
As-Is
Condition: A property
being purchased or sold in its existing condition.
Asking
Price: The initial
price for a property, as determined by the seller.
Assessment
Value: The value
of a property as determined by a tax assessor in order to
calculate a tax base.
Assessment
Rolls: A list
of taxable properties compiled by a tax assessor.
Assets:
Any items of value,
including cash, real estate, investments, and securities.
Assignor:
An individual
who transfers rights and interests of a property to another.
Assumable
Mortgage: The
agreement between buyer and seller where the buyer takes
over the payments on an existing mortgage from the seller.
Assuming a loan can usually save the buyer money since this
is an existing mortgage debt.
B
Back End
Ratio: A
borrower’s debt-to-income ratio, expressed as a percentage,
calculated by adding the new mortgage payment (including
principal, interest, taxes, and insurance) and rental or
consumer credit obligations divided by gross monthly income.
Balloon
Mortgage: Usually
a short-term fixed-rate loan which involves small payments
for
a certain period of time and one large payment for the remaining
amount of the principal at a specific time.
Balloon
Payment: The
final lump sum payment of a balloon mortgage.
Bankruptcy:
A
court proceeding authorizing reorganization or discharge
of debts.
Before Tax
Income: Gross
income before taxes are deducted.
Betterment:
An
improvement that increases a property’s value.
Bilateral
Contract: A
contract in which the involved parties offer mutual promises;
also called a reciprocal contract.
Bill of
Sale: A
document that transfers personal property ownership from
one party to another.
Binder:
A
preliminary agreement, secured by the payment of earnest
money, between a buyer and seller as an offer to purchase
real estate. A binder secures the right to purchase real
estate upon agreed terms for a limited period of time. If
the buyer changes his mind or is unable to purchase, the
earnest money is forfeited unless the binder expressly provides
that it is to be refunded.
Bona Fide:
A
legal term referring to actions or individuals that are
acting honestly and in good faith.
Bond: An
agreement that insures a party against loss by acts or defaults
of another party.
Breach of
Contract: Failure
to perform the provisions of a contract.
Broker:
An
individual in the business of assisting in arranging funding
or negotiating contracts for a client but who does not loan
the money himself.
Buy-Down:
Paying
a premium to the lender to reduce the interest rate of a
loan.
Buyer’s
Broker: A
real estate broker who represents only the buyer’s
interest and whose commission is paid by the buyer.
Buyer’s
Market: A
slow real estate market, in which buyers have the market
advantage.
Bylaws:
Rules
and regulations that govern a homeowner’s association
or corporation.
C
Call (Demand)
Option: A
clause in a loan agreement that lets the lender request
the balance of the loan at any time during the life of the
loan.
Cancellation
Clause: A
clause that explains the conditions under which a party
may terminate an agreement.
Cap: The
limit on the amount that the monthly payment and interest
rate can increase on an adjustable rate mortgage.
Capital:
Money
used to create additional wealth, such as money invested
in rental property.
Capital
Expenditure: The
cost of making improvements on property.
Capital
Gains: The
profit from the sale of real estate or other long term investments.
Capital
Gains Tax: A
tax on the profit from the sale of real estate or other
long term investments.
Capital
Improvement: Any
improvement that increases the value of a property.
Cash Out
Refinancing: Refinancing
a mortgage with a loan amount that is greater than the amount
due on the loan being refinanced. The additional funds may
be used for cash to the borrower, payment of additional
outstanding liens, or personal new loan expenses.
Caveat Emptor:
A
legal principle derived from the Latin phase, meaning "let
the buyer beware."
CC&R's
(Covenants, Conditions, and Restrictions): Rules
and regulations for a particular housing development.
Certificate
of Occupancy: A
document issued by local government to a builder, stating
that the building has met all building codes and is suitable
for habitation.
Certificate
of Title: A
document issued by a title company or a written opinion
from an attorney stating that the seller of a property has
good marketable and insurable title to the property for
sale.
Chain of
Title: The
official record detailing the ownership history of a property.
Change Frequency:
The
interest rate change schedule on an adjustable rate mortgage.
Clear Title:
A
property that does not have any liens, defects, or other
legal encumbrances recorded against it.
Closing:
The
final step in the purchase of a property, in which documents
are signed and recorded and the property is transferred
to the new owner.
Closing
Costs: Various
costs related to the sale of real estate, including loan,
title, escrow, and appraisal fees.
Cloud on
Title: An
outstanding encumbrance on a property which may adversely
affect the marketability of title.
Collateral:
Property
that a borrower offers as security to obtain a loan.
Collection:
Steps
taken by a lender to obtain overdue payments on a loan.
Commercial
Property: An
area zoned for business.
Commission:
A
percentage of a sale paid to an agent of the sale as compensation
for assisting either the buyer or seller.
Commitment:
A
promise from a lender to make a loan, under certain terms.
Commitments are issued for a limited period of time.
Commitment
Fee: The
amount a lender may charge for issuing a commitment to lend.
Common Area:
An
area within a housing complex or tract that is owned by
all residents and is maintained using common funds.
Common Area
Assessments: Fees
paid by the owners of a condominium or home in a planned
unit development to operate and maintain common areas.
Common Interest
Development: A
compilation of individually-owned units that share responsibility
for and usage of common areas.
Community
Property: A
classification in certain states of property owned jointly
by a husband and wife.
Comparable:
A
property with similar characteristics used to compare with
a subject property for the purpose of determining the fair
market value of the subject property.
Condominium:
Individual
ownership of a unit within a building or development with
common areas owned by all residents. The individual owners
own the interior space of the dwelling. They do not own
the land the condominium sits on.
Conforming
Loan: Any
loan that meets the qualifications to be purchased by Fannie
Mae or Freddie Mac.
Construction
Loan: A
short term loan of which funds are disbursed in stages by
the lender, for the construction of a home.
Construction
to Permanent Loan: Converting
a construction loan to a traditional mortgage loan after
construction is complete.
Consumer Credit
: Credit
owed that is not secured by real estate.
Contract:
An
agreement between two or more parties.
Contract
to Purchase: A
contract between the seller and buyer of a home detailing
the price and terms of the transaction.
Conventional
Mortgage: A
long-term loan for the purchase of a home that is not insured
by HUD or guaranteed by the Veteran’s Administration.
Convertible
Adjustable Rate Mortgage: An
adjustable rate loan that allows the borrower to convert
to a fixed rate loan during a specific period of time.
Conveyance:
The
transfer of a property’s title from one party to another.
Conveyance
Tax: A
tax on the transfer of real property.
Co-Signer:
A
second party who signs a promissory note and assumes responsibility
for payment of the loan. A co-signer is fully responsible
for the debt in the event the borrower does not repay the
debt.
Counteroffer:
A response
to an offer to purchase property, usually requesting a change
in the terms set forth in the buyer’s offer.
Credit:
Money
lent to a borrower in exchange for a commitment to repay
the loan within a certain timeframe.
Credit Bureau:
A
company whose function is to collect credit data and issue
credit reports. A credit bureau will generally access credit
information held by a credit repository.
Credit History:
A
record of a person’s current and past payment of debts.
Creditor:
Any
individual or institution to whom a debt is owed.
Credit Rating:
Credit
worthiness assigned to an individual based on current credit,
credit history, and financial standing.
Credit Report:
A
report furnished by an independent credit reporting agency
that verifies an individual’s credit and payment history
on current and previous debts, and other information pertinent
to their credit history.
Credit Repository:
A
large company that gathers financial and credit information
from multiple sources about individuals who have applied
for credit. The credit repository generally furnishes data
to credit reporting agencies or bureaus.
D
Debt: Any
amount of money, goods, or services one person owes to another.
Debt Ratio:
A
borrower’s monthly payment obligations divided by gross
monthly income.
Deed: The
legal document that transfers ownership of real property
from one person to another. There are may types of deeds
(e.g., quit claim, grant, warranty).
Default:
Failure
to make loan payments as agreed to in the terms of the mortgage
or deed of trust. A borrower may default for reasons other
than non-payment (e.g., failure to keep the property in
a safe and sound condition, failure to notify the lender
that the property has been sold).
Delinquent
Mortgage: A
mortgage that is behind on regularly scheduled payments.
Deposit:
Money
the buyer offers when extending an offer to purchase a property
in order to show good faith.
Depreciation:
A
property’s decline in value due to wear and tear, adverse
changes in the neighborhood, or any other reasons.
Discharge:
The
final step in bankruptcy proceedings, in which debts are
no longer owed or collectable.
Disclosure:
A
statement to a potential buyer of a property, including
all of the relevant information about that property.
Discount
Points: Fees
that a borrower pays to lower the interest rate on a loan.
Each point is equal to one percent of the loan amount.
Distressed
Property: Property
in poor physical condition.
Documentary
Stamps: A
state tax, in the form of stamps, that is required on deeds
and mortgages when property titles pass from one owner to
another. The fee is generally paid to the state.
Down Payment:
The
amount of money the purchaser agrees to pay to the seller
upon signing the sales agreement.
Dual Agent:
An
agent who represents both the buyer and the seller in a
transaction.
Due-On-Sale
Clause: A
statement in loan documents that states that the loan must
be paid in full when the house is sold.
E
Early Occupancy:
When the seller of a property allows the buyers to occupy
the property before the sale is complete.
Earnest
Money: The deposit money a buyer gives to a seller with
the offer to purchase a property.
Easement:
A right given to an individual or agency authorizing
access to or over the owner’s property.
Encumbrance:
A claim or lien on a property that affects a free and
clear title to the property.
Equal Credit
Opportunity Act: A federal law prohibiting lenders or
other creditors from refusing credit based on the applicant’s
race, color, religion, national origin, sex, marital status,
age (provided the applicant has the capacity to contract);
on the fact that all or part of the applicant’s income
is derived from public assistance; or the fact that the
applicant has in good faith exercised any right under the
Consumer Credit Protection Act.
Equity:
The remaining value of a homeowner’s property after
deducting existing liens.
Escrow (Escrow
Agent): A neutral third party who holds money and documents
until all conditions of the agreement are satisfied and
then directs the closing of the transaction.
Escrow (Impound)
Account: An account established to hold funds for payment
of various homeowner’s expenses, such as hazard insurance
or property taxes.
Escrow (Impound)
Analysis: An annual review of an escrow account by a
lender to determine if the lender is withholding enough
funds from the borrower’s monthly mortgage payment
to cover property taxes, insurance, or other expenses.
Escrow Closing:
When all conditions for the real estate transaction are
met and the property title is transferred to the buyer.
Escrow Instructions:
Instructions prepared by the escrow agent stating the
conditions, parameters, and contingencies of a transaction.
The escrow instructions are agreed to by all parties.
Examination
of Title: A review of public records and other documents
by a title company to establish the chain of ownership of
a property.
F
Fair Credit
Reporting Act: A
federal law that prevents old or inaccurate information
from remaining in consumer credit files and regulates credit
reporting procedures.
Fair Debt
Collection Practices Act: A
federal law that renders debtor harassment illegal and regulates
collection practices.
Fair Housing
Act: A
federal law that outlaws denying rent or refusing to sell
property to anyone based on race, color, religion, familial
status (having one or more children), handicap, or national
origin.
Fannie Mae
(FNMA): The
Federal National Mortgage Association, a congressionally
chartered company, owned by shareholders, that buys mortgages
from lenders and resells them as securities in the secondary
mortgage market.
Federal Home
Loan Mortgage Corporation: A
company, commonly known as Freddie Mac, that buys mortgages
from lenders and resells them to investors.
Federal
Housing Administration (FHA): A
government agency that operates various home loan programs.
Fee Simple:
A
type of property ownership in which the owner owns both
the land and the structures and is entitled to use the property
freely in accordance with state and local laws.
FHA Loans:
Mortgages
insured by the Federal Housing Administration.
First Mortgage:
The
primary mortgage on a property that has priority over all
other mortgages recorded against it.
Fixed Installment:
The
monthly payment on a fixed rate loan.
Fixed Rate
Mortgage: A
home loan with an interest rate that remains the same for
the entire term of the loan.
Foreclosure:
A
legal process in which a lender enforces early payment of
a mortgage in default by taking and selling the mortgaged
property to repay the loan, legal costs, and other liens
on the property.
Free and Clear:
When
a property is completely paid and has no liens attached.
Front End
Ratio: A
borrower’s debt-to-income ratio, expressed as a percentage,
calculated by dividing the mortgage payment (including principal,
interest, tax, and insurance) by gross monthly income.
G
Gift Funds:
Cash
a borrower receives from a relative or another source, used
to make a down payment on a property.
Good Faith
Estimate: An
estimate from a lender that details the estimated costs
a borrower will incur, including points, loan processing
fees, inspection fees, title, escrow, recording, and other
fees.
Government
National Mortgage Association: An
agency, commonly known as Ginnie Mae, which purchases only
government-backed loans, then resells them to investors.
Grace Period:
A
period of time after the payment due date during which a
penalty for late payment is not assessed.
Grant Deed:
The
most common type of title transfer conveyance, which has
warranties against prior conveyances or encumbrances.
Graduated Payment
Mortgage: A
mortgage with payments that gradually increase over three
to five years, then remain fixed for the remainder of the
term.
Gross Income:
Total
household income before taxes or other expenses are taken
out.
Guarantee
Mortgage: A
mortgage loan that is guaranteed by a third party, such
as a government institution.
H
Hazard Insurance:
A
type of homeowner’s insurance that protects against
damages caused to property by fire, wind, or other common
hazards.
Home Equity
Loan: A
loan in which the owner of a property borrows against any
remaining equity in the property.
Home Inspection:
An
examination of the construction, condition, and internal
systems of a home by a qualified inspector prior to purchase.
Home Warranty:
Insurance
that covers repairs to certain parts of a house and some
fixtures. It is generally offered and paid for by the seller.
Homeowner’s
Insurance: Insurance
that includes hazard insurance, personal liability, and
theft coverage.
Homeowner’s
Association: An
elected group that governs a planned community.
Housing
Expense Ratio: The
percentage of gross monthly income that goes for housing
costs.
HUD (U.S.
Department of Housing and Urban Development): A
federal agency charged with overseeing the Federal Housing
Administration and other housing and community development
programs.
HUD-1 Uniform
Settlement Statement: A
closing settlement statement that identifies the distribution
of funds and closing costs on a real estate purchase transaction.
I
Impound
(Escrows): A
portion of the monthly mortgage payment that is placed in
an account and held to pay hazard insurance, property insurance,
and private mortgage insurance.
Income Property:
Property
used to generate rental income.
Incurable
Defect: A
property defect that cannot be fixed or that would be too
costly to repair.
Inspection
Report: A
document describing the examination of a home’s exterior
and interior.
Insurance
Binder: A
temporary policy used until a permanent policy can be obtained.
It is usually valid for 30, 60, or 90 days.
Interest:
The
cost of borrowing money.
Interest
Rate: The
amount at which interest will be charged for a loan, expressed
as a percentage of the loan amount.
Interest
Rate Cap: The
limit on the amount of interest that can be charged on the
monthly payment of an adjustable rate mortgage during the
adjustment period.
Interest
Rate Ceiling: The
highest amount of interest a lender can charge for a particular
adjustable rate mortgage over its lifetime. Also known as
a life cap.
Interest-Only
Loan: A
loan in which the monthly payment covers only the interest;
the principal balance does not decline with each payment.
Investment
Property: Real
estate that generates rental income.
J
Joint Liability:
When
two or more individuals are responsible to fulfill the terms
of a loan or agreement.
Joint Tenancy
: Ownership
of a property in which two or more individuals have equal
shares of a piece of property, and survivorship rights pass
to the surviving owner or owners.
Judgment:
The
decision of a court of law.
Jumbo Loan:
A
loan that exceeds loan amount limits set by Fannie Mae and
Freddie Mac.
L
Land Contract:
A
contract in which the seller does not transfer title to
the buyer until the full purchase price of the property
is paid.
Late Charge:
A
fee charged to a borrower when their payment is not received
on time or within the grace period (if provided).
Late Payment:
A
payment received by the lender after the due date.
Legal Description:
A
method of geographically describing the location of a property
that is acceptable in a court of law.
Lender:
Any
bank, credit union, mortgage company, or savings institution
that offers home loans.
Letter of
Intent: A
formal statement in which an individual indicates the intention
to purchase property for a certain price and on a specific
date.
Liabilities:
A
individual’s debts and financial obligations.
Liability
Insurance: An
insurance policy that protects property owners against claims
of negligence, property damage, or personal injury.
LIBOR: The
London Interbank Offered Rate, which is the base interest
rate paid on deposits between banks in the Eurodollar market.
Lien: An
attachment by an individual or company to the property of
another as security for repayment of a debt.
Life Cap:
The
limit on the amount that a loan rate can change during the
term of an adjustable rate mortgage.
Liquid Assets:
Cash
and all other assets that can be quickly converted to cash.
Loan Approval:
The
decision a lender makes about the amount that can be borrowed
for the purchase of a property.
Loan-to-Value
Ratio: A
measure used by lenders to assess the relationship between
the value of the property and the amount of the loan. The
loan-to-value ratio is determined by dividing the loan amount
by the fair market value of the property.
Loan Officer:
A
representative of a lending institution who is authorized
to act on behalf of a lender in order to obtain new borrowers.
Loan Origination
Fee: The
lender’s fee (price) for a particular loan type, loan
amount, interest rate, and term.
Loan Processing
Fee: A
fee charged for gathering information to process a loan.
Loan Term:
The
length of time set by a lender for a borrower to repay a
mortgage loan.
Lock In:
A
period of time during which a potential borrower and a lender
have agreed to a specific interest rate.
M
Margin:
Percentage
points added to an index to determine the interest rate
of the loan.
Marketable
Title: A
title that is free and clear of all objectionable liens,
clouds, or other title defects.
Market Conditions:
Factors
affecting the sale and purchase of homes at a point in time.
Market Value:
The
likely selling price of a property if sold in a reasonable
length of time after being put up for sale.
Mechanic’s
Lien: An
encumbrance filed by a subcontractor or supplier against
a property to ensure payment of goods or services.
Mortgage:
A
lien or claim against real property given by the buyer to
a lender as security for repayment of the loan.
Mortgage
Acceleration Clause: A
statement in the mortgage documents that permits a lender
to request payment in full of the loan as a lump sum in
certain cases, such as when the home is sold, the title
is changed, the loan is refinanced, or if the borrower defaults
on a payment.
Mortgage
Banker: A
company that provides home loans using its own capital,
then usually sells the loans to investors.
Mortgage
Broker: An
individual or company that receives a commission for matching
prospective borrowers with lenders.
Mortgagee:
The
lender in a mortgage agreement.
Mortgage
Insurance: Insurance
often required on conventional loans with less than a 20%
down payment to protect the lender from possible default
on the loan.
Mortgage
Life Insurance: Insurance
that will pay off a mortgage if the borrower dies before
the loan is paid off.
Mortgage
Note: A
legal document in which a borrower agrees to repay a loan.
Mortgagor:
The
borrower in a mortgage agreement.
Move-In
Condition: A
house that is ready for a new occupant to move in without
any repairs, upgrades, or changes to the house.
N
Negative
Amortization: When
monthly mortgage payments do not cover the principal and
interest of a loan and the outstanding balance of the loan
grows larger with each payment.
Net Cash
Flow: An
investment property that generates income after all of the
expenses, such as mortgage, taxes, and insurance, have been
paid. The cash flow may either be positive or negative.
Net Worth:
An
individual or company’s worth after subtracting total
liabilities from total assets.
Non-Assumption
Clause: A
provision in a loan agreement that prohibits the transfer
of a mortgage to another borrower.
Non-Conforming
Loans: Any
loan that is too large or doesn’t otherwise meet the
qualifications to be purchased by Fannie Mae or Freddie
Mac.
Non-Owner
Occupied: A
property not used as a residence by the owner of the property.
Non-Recurring
Closing Costs: One-time
expenses at closing for items such as appraisal, credit
report, loan points, home inspection, and title insurance.
Notary Public:
An
individual who is designated by the state and authorized
to certify the identity of a person signing various documents.
Note: The
promissory note, a document that details the terms of a
loan and legally obligates the borrower to repay the debt.
Notice of
Default: An
initial action from a lender when a borrower’s mortgage
payment is late and all other attempts to resolve the issue
out of court have been unsuccessful.
O
Option:
When
a potential buyer puts down an amount of money for the right
to purchase a piece of real estate within a certain period
of time, but is not obligated to buy.
Original
Principal Balance: The
amount of principal owed on a loan before the borrower makes
any payments.
Owner Financing:
When
the seller of a property finances all or part of a real
estate purchase.
Owner Occupied:
A
property in which the owner is also the resident of the
property.
P
Per Diem
Interest: Interest
that is charged on a daily basis.
Personal
Property: Moveable
belongings on a property.
PITI (Principal,
Interest, Taxes, Insurance): The
complete monthly cost associated with a loan payment.
Planned Unit
Development (PUD): Residential
projects that may contain clusters of homes, in which residents
own the house and land and share use and financial responsibility
for common areas.
Plat: A
map or chart of a lot, subdivision, or community showing
boundary lines, buildings, easements, and improvements,
as drawn by a surveyor.
PMI (Private
Mortgage Insurance): Insurance
required on conventional loans with less than a 20% down
payment to protect the lender from possible default on the
loan.
Point: One
percent of the principal amount of a mortgage loan.
Portfolio
Lender: A
lender that makes loans with its own funds and does not
sell the loans to the secondary market.
Power of
Attorney: A
legal document authorizing an individual to act on the behalf
of another.
Pre-Approval
(Credit Approval): When
a lender completes an assessment of individual’s creditworthiness
and ability to pay for a house and indicates the amount
that can be borrowed. Final loan approval is not given until
the property has been appraised and all other lender conditions
have been obtained.
Preliminary
Title Report: A
report issued by a title company at the beginning of the
loan application process that indicates if there are liens
on the property, who has title to the property, and any
property taxes owed.
Prepaid
Interest Charge: The
portion of interest which covers the time period between
loan funding and the beginning of the first 30-day period
covered by the first payment. Prepaid interest is collected
at the loan closing.
Prepayment:
Payment
of the entire mortgage loan, or part of it, before the due
date (maturity date).
Prepayment
Penalty: A
monetary penalty imposed by a lender on a borrower who pays
off a loan before a specified length of time. The prepayment
penalty is generally assessed only during the first five
years of the loan.
Property
Tax: Taxes
from local government that are based on the market value
of a property.
Punch List:
A
list, compiled by a buyer on a final walk-through, detailing
items to be fixed before closing.
Purchase
Agreement (Contract): A
contract between the seller and buyer of a home detailing
the price and terms of the transaction.
Q
Qualification:
When
a lender completes an assessment of a borrower’s creditworthiness
and ability to pay for a house and indicates the amount
the lender is willing to lend.
Quitclaim
Deed: A
legal document that released an individual from any interest
in a piece of real estate, whether or not the individual
actually had an interest.
R
Rate Lock:
A
period of time during which a potential borrower and a lender
have agreed to a specific interest rate.
Real Estate
Agent: An
individual who is licensed by the state to represent a buyer
or seller in a real estate transaction in exchange for a
commission.
Real Estate
Broker: A
real estate agent who is licensed by the state to represent
a buyer or seller in a real estate transaction in exchange
for a commission and who may be responsible for supervising
real estate agents in their employ.
Real Property:
Land
and anything permanently affixed to it.
Reconveyance:
A
release of lien filed with the county recorder.
Recording
Fee: A
fee charged by a Recorder to cover the cost of recording
documents for the public records.
Refinancing:
Replacing
a mortgage loan with a new loan that has better terms.
Rescission:
The
cancellation of a transaction or contract by law or by mutual
consent.
Restructured
Loan: A
mortgage with newly negotiated terms.
Right to
Rescission: A
provision in the federal Truth-In-Lending Act that allows
borrowers to cancel certain loans within three days of signing
loan documents.
S
Secondary
Mortgage Market: An
area of the mortgage industry that packages home loans and
resells them as securities to investors.
Secured
Loan: A
loan backed by collateral.
Security:
A
piece of property designated as collateral.
Servicer:
A
company that collects and processes mortgage payments and
manages borrowers’ escrow accounts.
Special
Assessment: A
special tax imposed on property for road construction, sidewalks,
sewers, street lights, or other municipal needs.
Square Footage:
The
number of square feet of livable space in a home.
Statement
of Information: A
form completed by a customer for the title company to give
further identification of the customer.
Step-Rate
Mortgage: A
loan that has a gradual increase in the interest rate during
the years of the loan.
Survey:
A
map made by a surveyor with the purpose of measuring land
with elevations, boundaries, improvements, and its relationship
to surrounding tracts of land.
T
Tax Lien:
A
claim placed against a property for the purpose of repaying
back taxes. Property may be sold for payment of delinquent
taxes.
Teaser Rate:
A
low, short-term rate offered on an adjustable rate mortgage
to assist borrowers in initially qualifying for a home loan.
Title Company:
A
firm that provides title insurance and confirms that the
title to a property is clear.
Title Insurance:
An
insurance policy issued to lenders and buyers to protect
against claims to the property due to prior defects in title.
Title Search:
A
check of public title records to ensure that the seller
is the legal owner of a property and that there are no claims
or liens against the property.
Transfer
of Ownership: Any
legal means by which real estate changes from one owner
to another.
Transfer
Tax: An
assessment on a piece of property by state or local authorities
when the ownership of the property changes.
Trust Account:
A
special account to safeguard funds for a buyer or seller,
primarily used by brokers and escrow agents. An escrow or
impound account is also a trust account.
Trustee:
An
individual who has legal responsibility to hold property
for another person(s).
Truth-In-Lending
Act: A
federal law that requires a Truth-In-Lending Statement to
be disclosed for all consumer loans. The Truth-In-Lending
Statement includes the annual percentage rate (APR), as
well as the other terms of the loan; the Truth-In-Lending
Act also requires the disclosure of the right of rescission,
which allows a consumer to cancel a refinance, home improvement
loan, second mortgage, or other refinancing loan program
for three business days after the contract is signed, if
the home is owner occupied.
U
Underwriting:
The
process of evaluating the creditworthiness of a borrower
and the risks associated with making a particular loan.
The underwriter established the loan amount, loan term,
interest rate, and conditions for funding the loan.
Unsecured
Loan: A
loan that is not backed by any collateral.
V
VA Loan:
A
Veterans Administration program that allows veterans to
purchase a house without a down payment.
Variable Interest
Rate: A
loan interest rate that changes with fluctuations in the index
to which it is attached, such as the U.S. Treasury bill index.
Variable
Rate Mortgage: A
mortgage loan with an interest rate that changes with fluctuations
in the index to which it is attached.
Verification
of Deposit (VOD): When
a lender, as part of the loan process, requests that the
potential borrower’s bank sign a statement verifying
the borrower’s account balances and history.
Verification
of Employment (VOE): When
a lender, as part of the loan process, requests that the
borrower’s employer confirm a borrower’s employment
position and salary.
W
Walk-Through:
A
buyer’s final inspection of a home to determine if
the conditions established in the purchase agreement have
been satisfied.
Wraparound:
Results when an existing assumable loan is combined with
a new loan, resulting in an interest rate somewhere between
the old rate and the current market rate. The payments are
made to a second lender or the previous homeowner, who then
forwards the payments to the first lender after taking the
additional amount off the top.
Z
Zoning:
The acts of an authorized local government establishing
building codes, and setting forth regulations for property
land usage.
Zoning Variance:
A one-time modification of an existing zoning regulation.
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