Abstract of Title:
Concise information for a construction, purchase, resale, loans, refinance and all available transitions in ownership can be found at the state or county registry
Acre:
A measurement of land (One acre = 43,560 sq.ft)
Acknowledgment of sale:
A written statement by seller attested by a public official i.e. a notary public, that an item or items was purchased and paid in full by a designated person or persons. This is a criteria for recording real estate legal documents (like mortgage deeds, deeds of trust etc.) at the government public registries.
Actual Cash Value:
Total payable replacement amount for a property, after deduction of all depreciation, damages after loss due to theft or other natural disasters
Adjustment Period:
In a variable rate contract is the length of time before the rate changes. Frequent occurrences in the contract is low for the first 6 (six) months to 12 (twelve) months adjusted to a higher rate for another 48 to 60months and so forth.
ARM:
Adjustable Rate Mortgage OR Variable Rate Mortgage: Adjustable /Variable meaning the rate in a specific contract will change over the life of the contract as expressly stated in such contract. A contract with variable OR adjustable rate will be stated in the contract.
Amenities:
Swimming pool, Jacuzzi, tennis court, pool room, bar, and any addition that increases beauty or value of a house, but is really not necessary
Amortization:
A term OR word meaning a gradual monthly distribution of the total cost of a purchase i.e. principal + interest over the term of the loan
Amortization Schedule:
To amortize is to allocate property value to a term or number of terms, thus allowing you the homeowner to determine how much of the home value you have used up, or how much of it has been lost due to changes in your geographical location, property market, or as result of disuse and neglect.
The amortization schedule is a monthly cost allocation for the life of the loan
APR:
Annual Percentage Rate: Interest Payment on a loan. Annual meaning 12 calendar months
Appraisal:
An estimate of property value based on current market conditions, geographical location and replacement costs. Criteria for determining adequate loan amount by the lender and funding banks. Appraisals are acceptable only from licensed and registered appraisers.
Appraiser:
A real estate professional who uses specific guidelines determine the market worth or value of a property
Appreciation:
Property values respond to market activities called supply and demand. If demand remains steadily high in comparison with supply, prices will rise along with value, and if supply supersedes demand on a steady basis, prices will drop along with value. The increase in value of a home over a specific length of time is called “Appreciation”.
A.P.R (Annual Percentage Rate):
Total cost of a loan in a calendar year (12 month period) calculated as a percentage
Arbitration:
Is the preferred conflict resolution method for most mortgage contracts, arbitration means that all concerned parties, realtor , lender, borrower will not go to court over a dispute, but will allow an unbiased independent panel or judge resolve any dispute. Arbitration clauses are almost always present in most mortgage notes.
ARM: (Adjustable Rate Mortgage)
Historically rate s are tied to treasury rate, stock market rates, and real estate market rates and trends. An arm then will respond to these fluctuations based on your particular loan contract.
Arms Length Transaction:
Arms length indicating “distance” where both parties are independent and neither party can be intimidated into a biased decision. Both parties act and arrive at a decision serving their own interests. Hence neither the seller nor buyer can coerce each other for a higher or lower price.
Asbestos
A material commonly found in building materials, whose use has been discontinued, because of its harmful contents. Exposure to asbestos has been proven to make you susceptible to lung disease.
Asset:
Any valuable property
Assumption:
A clause allowing a new potential home owner to take on the title to a property before the primary loan is paid in full.
Assessments:
A local tax levied against a property by state OR county. Popular examples are annual vehicle tax, annual residential property tax. Assessments are based on local market conditions and local government edicts and orders.
Assumable Mortgage:
A mortgage loan which allows a potential home buyer begins making the same mortgage payments as was with a previous owner without changing lenders. For assumable mortgages the contract or agreement is first between the mortgage holder or home owner and the lender, potential home buyer and the mortgage holder. When the loan is fully assumed the home owner is legally released from the mortgage payments by the lender.
Attorney in Fact:
Someone not necessarily an attorney who acts the role of a legal representative. Example: A property owner gives the right to represent to a trusted person for a limited time period either to oversee an operation, collect fees due OR sell on behalf of the property or entity owner.
Balloon (Payment) Mortgage:
A fixed rate loan involving small dollar amounts for a fixed period of time and one final (Balloon) Large payment at a time specified in the mortgage contract.
Balloon (Payment) Mortgage:
A fixed rate loan involving small dollar amounts for a fixed period of time and one final (Balloon) large payment at a time specified in the mortgage contract
Bankruptcy:
A decision by an entity, business or an individual to surrender asset to bankruptcy court as a result of inability to meet financial obligations
Chapter (7) Bankruptcy:
All debts are wiped out with some restrictions on borrowing that may last up to 7yrs
Chapter (13) Bankruptcy:
Establishes a payment plan to pay off debts. Bankruptcy record may stay on an individual or entity’s credit record for up to 7yrs
Beneficiary:
One who gains from an event OR one who is named recipient of a gift OR an award. Popular examples include those receiving distributions from a will and Life Insurance proceeds
Biweekly Mortgage:
A mortgage contract requiring payments biweekly and not the traditional monthly schedule
Binder:
Preliminary agreement between the seller and the buyer, normally drawn by the realtor, offering to purchase a house and depositing a token called earnest money, as a security deposit OR good faith deposit
Blanket Mortgage:
Mortgage contract covering more than one property
Borrower:
The person, persons, OR entity who applies for a loan and is responsible for mortgage loan repayment
Broker – see also Mortgage Broker
Bridge Loan:
An instrument OR temporary loan for loan insufficient funds to a home owner during transition to a new home. Until an old OR current home can be sold to make funds available. The interim OR temporary loan is paid off, when the old home is sold
Buy Down:
A clause in the mortgage contract designed to reduce interest rates by “paying” extra fees to buy off OR buy down specified amounts of points or rates. A buyer with lower income may qualify for a loan if he / she has cash to buy down the rates, hence obtaining lower monthly payments
Buyers Brokers:
An intermediary who is contracted by a buyer to review, recommend fair cost, location and other legal issues on the purchase of a commercial or residential property
Buyer’s Market:
A period of time, a day of the week, month or year, where supply of particular product is more than the demand, hence sellers have more incentive to yield to the buyers demands or price dictation
CAP
The price limit where the price, and the interest charges and fees, on a property for sale can not go higher
Capitalization Rate OR CAP Rate
The yearly rate of return (revenue) on a property or an asset which is being invested, CAP rate is calculated thus:
(Annual income from property / The Value of the Property)
Capacity:
In mortgage lending refers to the amount or volume to which a lender is authorized to approve for a borrower, or to hold in it’s control as a deposit. Hence the borrower’s and the seller’s transaction risk is covered.
Capital Gains:
Profit from real estate sales. Use this formula to arrive at gains estimate [sales receipts + sales expense – all applicable taxes
Caveat Emptor:
Sometimes some sellers either do not see economic benefits of improving the property prior to sales or they do not have extra funds and need to sell quickly, OR want no after sale maintenance and repair issues to deal with. In either of these cases they quote the “term buyer beware” OR “Caveat Emptor” The buyer will buy the property “as is’, with no obligation after payment for sales
Certificate of Eligibility:
Issued by the veterans administration (VA), to those service men who qualify to obtain loans to buy a home with “no money down”
Certificate of Reasonable Value:
Valuation certificate from a veterans administration’s (VA) approved appraiser, stating current market value of a property. Lenders and Loan officer sometimes need to verify the level of seniority and tenure, hence the maximum amount which will be secured by the VA. The CRV is a valuable tool to determine V.A approved loan amount maximum OR ceiling
Certificate of Occupancy:
Is issued as a result of inspection by a certified inspector of the housing authority attesting to the safety of the building to be occupied. Safety considerations include structural integrity, fire safety, water and drainage safety etc.
Certificate of Title:
A statement indicating the legal owner of a property – Drawn by an attorney and filled with state, local and community public registry. Certificate of Title is “not” the same as Title of Insurance
Certified Funds:
Certified refers to a guarantee that payment for a property is really available in the account which the home buyer specified. Guarantee is an assurance by a fellow financial institution that the money has been verified to really be in the specified account
Chain of Title:
A record by “date order” OR chronological order stating all legal owners past and present holder to a property
Clear Title:
Legal claim to a property without any dispute by other party to ownership. “Not” the same as late payments or delinquent payment claims
Closing:
A meeting convened to sign the approved loan and sales contract of a property. Represented at such meetings are the buyers and the lender and sometimes the realtor also.
Closing Agent:
A trained mortgage professional who acts on behalf of the lender, seller, buyer and realtor after the loan is approved, to ensure all mortgage documents is adequately signed and explained to the borrower and that these documents are safely and promptly delivered to the lender.
Closing Costs:
Expenses by both the buyer and the seller to complete the buying process. There are two types of closing costs.
- Recurring
- Non-Recurring
Cloud on Title:
A contest or challenge to clear title of a property, which would prevent the current property holder from selling and transferring ownership. That is if the challenge were valid
Collateral:
Any asset or property that is designated as security or deposit for a loan
Concession:
Requests to allow some discounts on the sale price of a property, because you have issues with the Amenities in the house, it’s geographical location, comparative residences in the neighborhood does not add value, limited or no access points to the public utilities. Concessions are currently pegged at 6% of home value.
Condominium:
A set of co-joined units of apartments, or houses whose tenants share amenities like hallways, heating systems, elevators, pool, tennis court, etc.
Counter Offer:
A second or third offer made by either the buyer or seller, after the initial offered price, ask for modification in price or terms of agreement
Conditional Commitment:
A document by the lender stipulating actions or events to be performed before a loan approval is finalized. Popular examples are down payment must equal 155 of loan value seasoned (in savings for at least 6months) from a local bank
Consideration:
A tangible down payment to guarantee that a buyer is committed to the purchase. A Popular example is: earnest money (an agreed upon amount deposited with the lender by the buyer OR realtor to discourage “seller’s price” from fluctuation until purchase is finalized. A clause used to discourage sale to a more generous buyer before the contract is finalized
Construction Loan:
Short term loan obtained to adequately provide for new home construction, (Residential OR Commercial) for the “term” (Start to finish) of the construction. A regular mortgage is procured at the end of the construction to pay off the construction loan
Contingency:
A decided procedure or an alternative plan agreed upon when current processes fail or when an unexpected event disrupts any operation, sales, or manufacturing, in this case alternative options making sure mortgage contract is fulfilled
Contract Sale OR Installment Sale:
A contract allowing a buyer to occupy the property, until the sale price has been paid. Common situations include a buyer with limited loan capacity OR inadequate down payment
Conveyance:
Transfer of property, title OR Ownership to a new owner OR buyer
Convertible Arm:
Most mortgage loans are for a fixed rate i.e. 5%, 6% or 7.5% etc. and fixed term i.e. 15yr, 20yr OR 30yrs. A convertible rate loan can be adjusted from 15yr to 20yrs loan on a predetermined date of the month and year
Credit:
An allowance given in the form of money or other valuable property which is payable at a future date agreed upon by both the lender and the borrower.
Credit Bureau:
A repository or library of credit data, which acts as the bureau or reporting agency for consumers in a particular country or region
Credit History:
A complete chronological listing of an individual or a business entity’s credit
Credit Report:
Credit activities and performance listed in chronological order by date.
Credit Score:
A rating given to an individual or business, based on it’s ability or in-ability to meet it’s debt’s.
Credit Worthy:
A decision to grant or refuse allowance or credit to an individual or business
Convertible – Arm:
An adjustable Rate Mortgage which can be converted to fixed rate mortgage
Counter Offer: If after an offer is made, the seller is not willing to sell at the offered price, he can ask for a different price called “counter offer”
Curtailments:
Lump sum payments made on a mortgage to pay it off –Or- to pay down or reduce principal amount.
Debt
An obligation to pay for a loan
Debt to Income Ratio:
Amount of debt allowable in comparison to your income, for mortgage loan application and approval
Deed:
A legally binding document indicating the legal title or ownership to a property
Deed of Trust:
A document which allows another trusted individual or business entity to hold in trust or act for a period on behalf of the owner of a property.
Deed-in-lieu-of-foreclosure:
Where monies or funds is loan with a property as collateral
Default:
A pre-selected plan of action, or response to any request, when a direct
solution is not available or evident
Demand:
To request immediately, mostly found on loan documents indicating the
lenders right to request immediate payment of a loan
Due on Sale:
A stipulation on a mortgage contract indicating that the full balance on the
mortgage note must be paid if the homeowner decides to sell the property
Duplex:
A real estate property containing two units with one shared wall and roof
Deed Restriction:
A stated restriction in a land or property sale contract stating that an action OR event should never be allowed to occur. Popular examples is no fixture other than already built can be erected on property. It is useful to note and ask at closing if you have any such restrictions in your closing documents. This note applies to Farmers, Land Conservators, and Real Estate Developers etc.
Delinquency:
Refers to the expiration of a deadline for monthly payment of your loan
Depreciation:
A gradual monthly reduction in principal value of a property, value reduction calculation is based on original cost, term of mortgage contract, and prevailing interest costs
Discount Points:
Discount points- refer to the extra fees you pay to reduce monthly payments on your mortgage. Discounting your mortgage can be very useful when you have extra cash but your credit isn’t quite spotless
Down Payment:
Your equity in the property you are buying is called down payment. It is how you show the lender that you are committed to pay something of your own to ensure the loan contract will be honored and that you intend and have the capacity to make all payments.
Dower:
“Specified”, right given to a daughter OR child of a deceased to claim a percentage of the estate
Dragnet Clause:
A package “bundling” several properties as collateral for purchase of a property. The contract is said to contain a dragnet clause
Ernest Money:
sometimes called good “faith money” a fixed amount paid to a realtor OR escrow company, on behalf of the seller as a token to ensure the property for sale is held for that buyer for a fixed period of time until the token closes OR is funded. Ernest money is mostly non-refundable
Easement:
A temporary permission given to an entity to use another land for a specific purpose and period. An example is a utility company obtaining local government permission to run cable through a schools sporting grounds, or commercial property’s parking lot.
ECOA – The Equal Credit Opportunity Act:
Is a law enacted in 1974, which discrimination against any loan applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age, illegal. This law also covers persons on public assistance like disability, veteran administration recipients, and social security beneficiaries
Eminent Domain:
The right of the government OR a public utility to acquire Property “after due process” for public use, mostly by condemning the land or property, rebuilding it , and paying adequate compensation to the property owner
Encroachment:
A physical obstruction to any property, infringing, protruding or seeping out of its’ legal boundaries onto another’s legal domain, land, field or house
Encumbrance:
Anything, an action, absence of a prove document, or inaction, which has a negative effect on a property so that its value is depleted
Equity Sharing:
If a contract exists where two more parties agree to pay for a property, at year end when revenues are reported, the taxes are shared according to investment / ownership percentage. The same principle applies to profit sharing at the sale of the property
Equity:
Is the term used for the dollar value of your ownership in a property. Alternatively : equity = (property value) – (unpaid liability on the property, e.g. loans)example : 250,000 (property value) -200,000(loan amount) = 50,000 (your equity)
Escheat:
If the unfortunate happens and a deceased dies without any legal heirs and has no “legal will’, the estate of the deceased reverts to the state
Executor:
The title for the person (mostly an attorney OR a trusted member of the family or friend
Escrow:
A deposit account different from a loan, earnest money OR closing fees, commonly administered by a neutral entity other than the lender or the seller. The deposits are mostly interest charges, taxes etc., disbursed throughout the year according to the terms of the loan contract
Earnest Money:
Cash amount deposited with the realtor before the loan is approved to guarantee that the current home owner does not sell to a more attractive buyer after agreeing to sell to you
Fee Simple OR Fee Simple Absolute:
An unconditional ownership right to a property to remodel, repair, rebuild and dispose a property is automatically inherited by the owner(s) legal heirs
Fidelity Bond:
An insurance against risk on behalf of employees responsible for the safekeeping of valuable items in an organization, if in the unlikely event that items should go missing or destroyed, the items and the people are covered
Fiduciary:
A professional acting in behalf of his client on a matter of law, trust or business responsibility, with instructions to act and speak interest of his client
Finance Charge:
Interests, fee’s etc which is charged by a lender for a loan. Interests and fees are a major source of revenue for lenders
First Mortgage:
A mortgage or a loan contract placed ahead of every loan by the borrower. First mortgages are paid off before request for payment on the other loans is honored. This is necessary when there is more than one loan contract on the same property
Fixture:
A permanent item or structure in a property, originally intended to compose an essential part of the property, or later added to the property and meant to become a fixed aspect of the property
Fixed Rate Mortgage:
Monthly mortgage premiums that do not increase or decrease during the life of the loan.
Forbearance:
Temporary suspension of monthly mortgage payments due to temporary unemployment, poor credit making a homeowner ineligible to refinance
Foreclosure:
A last resort decision, to retrieve a property used as collateral in a mortgage contract from the borrower, as a result of inability, or refusal to pay monthly mortgage, the property may then be sold at an auction.
Flood Insurance:
Insurance specifically for damage caused by flood. Property may or may not be in a flood zone and is purchased separate from hazard and fire insurance
FSBO – OR for sale by owner:
A property listed for sale by the mortgage holder. A FSBO sale is an attempt to avoid the realtor ( a middle man)
