A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

ABSTRACT OF TITLE
A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.

ACCELERATION CLAUSE
Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.

ADJUSTABLE -RATE MORTGAGE (ARM)
A mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of change in a specified index. Interest rates may move up or down, as market conditions change.

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 certain specific terms and conditions spelled out in writing and signed by both parties.

AMORTIZATION
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.

ANNUAL PERCENTAGE RATE (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (point).

APPRAISAL
An expert judgment or estimate of the quality or value of real estate as of a given date.

ASSUMABLE MORTGAGE
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

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BALLOON MORTGAGE
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term. The principal and interest on the loan are amortized over a longer period then the actual term of the mortgage.

BALLOON PAYMENT
The final lump sum payment that is made at the maturity date of a balloon mortgage .

BI-WEEKLY PAYMENT MORTGAGE
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possible 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were standard 30- year fixed -rate mortgage, and they are usually drafted form the borrower's bank account. The result for the borrower is a substantial saving in interest.

CAP
A provision of an adjustable- rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.

CERTIFICATE OF TITLE
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

CLOSING COSTS
The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day.

CLOSING DAY
The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

CLOUD ON TITLE
An outstanding claim or encumbrance which adversely affects the marketability of title.

COMMISSION
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

CO-MAKER
A person who signs a promissory note along with the borrower. A co-worker's signature guarantees that the loan will be repaid, because the borrower and the co-worker are equally responsible for repayment. See endorser.

COMPARABLES
An abbreviation for "comparable properties"; used for comparative purposes in there appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

CONDEMNATION
The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

CONDOMINIUM
Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.

CONTRACTOR
In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

CONVENTIONAL MORTGAGE
A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)

CREDIT REPORT
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

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DEED
A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also deed of trust, general warranty deed, quitclaim deed, and special warranty deed.)

DEED OF TRUST
Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.

DEFAULT
Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.

DEPRECIATION
Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

DOCUMENTARY STAMPS
A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.

DOWN PAYMENT
The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the down payment amount and will acknowledge receipt of the down payment. Down payment is the difference between the sales price and maximum mortgage amount.

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EARNEST MONEY
The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

EASEMENT RIGHTS
A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.

ENCROACHMENT
An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

ENCUMBRANCE
A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive convenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.

EQUITY
The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.

ESCROW
Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.

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FANNIE MAE (FNMA)
A New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgage.

FEDERAL HOUSING ADMINISTARTION (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

FIRST MORTGAGE
A mortgage that is the primary lien against a property.

FIXED-RATE MORTGAGE (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan .

FORECLOSURE
A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.

GENERAL WARRANTY 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.

GRANTEE
That party in the deed who is the buyer or recipient.

GRANTOR
That party in the deed who is the seller or giver.

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HAZARD INSURANCE
Protects against damages caused to property by fire, windstorms, and other common hazards.

HOME EQUITY LINE OF CREDIT
A mortgage loan, which is usually in a subordinate position that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.

HOME INSPECTION
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.

HOMEOWNERS' ASSOSCIATION (HOA)
A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project, In a condominium project it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

HUD-1 SETTLEMENT STATEMENT
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on that statement include real estate commission, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The total at the bottom of the HUD-1 statement defines the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet."

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INSURANCE BINDER
A document that states that insurance is temporarily in effect. Because the coverage will expire by specified date, a permanent policy must be obtained before the expiration date.

INTEREST
A charge paid for borrowing money.

INTEREST ONLY PAYMENT
An interest only mortgage payment that does not reduce the principal balance. Additional principal payments may be made.

LEGAL DESCRIPTION
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

LIEN
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. (See also special lien.)

LIFETIME RATE CAP
For an adjustable rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap

LINE OF CREDIT
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for certain time to a specified borrower. See home equity line of credit.

LOAN-TO-VALUE (LTV) PERCENTAGE
The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with $80,000 mortgage has a LTV percentage of 80 percent.

LOCK-IN
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

LOCK-IN PERIOD
The time period during which the lender has guaranteed an interest rate to a borrower. See lock-in.

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MARGIN
For an adjustable rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.

MORTGAGE
A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government-insured or loan-guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges, and special assessments.

MORTGAGE INSURANCE PREMIUM
The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.

MORTGAGE NOTE
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

MORTGAGEE
The lender in a mortgage agreement.

MORTGAGOR
The borrower in a mortgage agreement.

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NEGATIVE AMORTIZATION
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.

NOTICE OF DEFAULT
A formal written notice to a borrower that a default has occurred and that legal action may be taken.

OFFER TO PURCHASE
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. Broker

ORIGINAL PRINCIPAL BALANCE
The total amount of principal owed on a mortgage before any payments are made.

PITI
Principal, interest, taxes and insurance (PITI) below.

POINTS
A one time charge by lender or broker for originating a loan. A point is 1 percent of the amount of the mortgage.

PREPAYMENT
Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.

PREPAYMENT PENALTY
A fee that may be charged to borrower who pays off a loan before it is due.

PRIME RATE
The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

PRINCIPAL
The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.

PROPERTY TAX
As applied to real estate, a tax imposed on property based on the property value.

PUD (PLANNED UNIT 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 PUD unit owner.

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QUITCLAIM DEED
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.

REAL ESTATE BROKER
A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

RECISSION
The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.

REFINANCING
The process of the same mortgagor paying off one loan with the proceeds from another loan.

RESTRICTIVE CONVENENTS
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

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SECOND MORTGAGE
A mortgage that has a lien position subordinate to the first mortgage.

SETTLEMENT STATEMENT
See HUD-1

SINGLE-FAMILY PROPERTIES
One to four unit properties including detached homes, townhomes, condominiums, and cooperatives.

SPECIAL ASSESSMENTS
A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.

SPECIAL LIEN
A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien.)

SPECIAL WARRANTY DEED
A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.

SURVEY
A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description .

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TITLE
As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.

TITLE INSURANCE
Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.

TITLE SEARCH
A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive convenants filed in the record, which would adversely affect the marketability or value of title.

TRUTH-IN-LENDING
A federal law that requires lenders to fully disclose in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.

TRUSTEE
A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. (See deed of trust.)

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UNDERWRITING
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of property itself.

(VA) DEPARTMENT OF VETERANS AFFAIRS
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.

ZONING ORDINANCES
The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.

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