Allows the lender to speed up the rate at which your
loan comes due or even to demand immediate payment of the entire outstanding
balance of the loan should you default on your loan.
An offerees consent to enter into a contract and
be bound by the terms of the offer.
Additional Principal Payment
A payment by a borrower of more than the scheduled principal
amount due in order to reduce the remaining balance on the loan.
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically
based on a preselected index. Also sometimes known as the renegotiable
rate mortgage, the variable rate mortgagee or the Canadian rollover
A detailed analysis of your ability to afford the purchase
of a home. An affordability analysis takes into consideration your income,
liabilities, and available funds, along with the type of mortgage you
plan to use, the area where you want to purchase a home, and the closing
costs that you might expect to pay.
On an adjustable rate mortgage, the time between changes
in the interest rate and/or monthly payment, typically one, three or
five years, depending on the index.
A legal relationship resulting from an agreement or contract,
either expressed or implied, written or oral, whereby one person, called
the agent, is employed by another, called the principal, to do certain
acts in dealing with a third party.
In real estate, amenities refer to such circumstances,
in regard to location outlook, or access to a park, lake, highway, view
or the like which enhance the pleasantness or desirability of real estate
and which contribute to the pleasure and enjoyment of the occupants.
Loan repayment by equal periodic payments calculated
to pay off the debt at the end of a fixed period, including accrued
interest on the outstanding balance.
Mathematical table that shows how a mortgage or other
loan is gradually repaid by applying the appropriate amounts of the
loan payment to principal and interest. In the beginning of the repayment
period, only a small portion is applied to reducing the loan principal.
As the loan approaches maturity, the portion of the payment applied
to principal rises.
Annual Mortgagor Statement
A report sent to the mortgagor each year. The report
shows how much was paid in taxes and interest during the year, as well
as the remaining mortgage loan balance at the end of the year.
Annual Percentage Rate (APR)
An interest rate reflecting the cost of a mortgage as
a yearly rate. This rate is likely to be higher than the stated note
rate or advertised rate on the mortgage, because it takes into account
points and other costs. For example, if a borrower pays $500 in closing
costs to obtain a $10,000 loan, the APR is higher than the simple interest
rate because the borrower is repaying a $10,000 loan but only receiving
net proceeds of $9,500. The federal Truth-in-Lending Act requires lenders
to disclose the APR.
In real estate, an estimate of the quality or value of
property, made by a qualified professional called an "appraiser"
That which belongs to something else; something adapted
to the use of the real property to which it is connected or belongs,
and which was intended to be a permanent addition to the land, and which
passes as an incident to said land, as a house, barn, garage, right
The estimate of value by a unit of government for taxation
The party to whom a legal right has been assigned or
A transfer to another of a legal right.
The party who assigns or transfers a legal right.
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, unlike a new mortgage where closing costs and new, possibly higher,
market rate interest charges will apply.
A type of encumbrance, permitted only under special circumstances,
which is placed against the real estate of a defendant in a pending
lawsuit for money damages.
When credit is advanced by note or contract and payment
is required in regular equal installments and the note or contract will
mature before the note or contract is paid in full, a payment which
may be larger than the regular payment will fall due. This payment is
called a "balloon payment".
The person who receives or is to receive the benefits
resulting from certain acts; one receiving benefits, profits or advantage;
one for whose benefit a trust is created.
Bill of Sale
A written instrument by which one person transfers or
conveys right, title or interest in personal property to another.
A single mortgage which covers more than one piece of
An individual in the business of assisting in arranging
funding or negotiating contracts for a client but who does not loan
the money him/herself. Brokers usually charge a fee or receive a commission
for their services.
Regulations established by local governments setting
forth the structural requirements of buildings.
When the lender and/or the homebuilder subsidizes the
mortgage by lowering the interest rate during the first few years of
the loan. While the payments are initially low, they will increase when
the subsidy expires.
Consumer safeguards which limit the amount the interest
rate on an adjustable rate mortgage may change per year and/or the life
of the loan.
Consumer safeguards which limit the amount the monthly
payment on an adjustable rate mortgage may change.
"Let the Purchaser beware". The buyer is duty-bound to
examine the property he is purchasing and he assumes conditions which
are readily known upon view.
Certificate of Reasonable Value
Commonly referred to as a "CRV" Veterans Administration's
certified appraisal of value of real property.
Certificate of Taxes Dues
A written statement or guaranty of the condition of the
taxes on a certain property, made by the County Treasurer of the county
wherein the property is located. Any loss resulting to any person from
an error in a tax certificate shall be paid by the county which such
The meeting between the buyer, seller and lender or their
agents where the property and funds legally change hands. Also called
Usually include an origination fee, discount points,
appraisal fee, title search and insurance, survey, taxes, deed recording
fee, credit reporting charge and other costs assessed at closing. The
costs of closing usually are about 3 to 6 percent of the mortgage amount.
Cloud on the Title
An outstanding claim or encumbrance which, if valid,
would affect or impair the title of the owner of the property.
Mixing money belonging to other with personal or business
funds. Illegal commingling is using the money of one beneficiary for
the benefit of another or failing to maintain such money in identified
An agreement, often in writing, between a lender and
a borrower to loan money at a future date subject to the completion
of paperwork or compliance with stated conditions.
The individual outright ownership of a single unit in
a multi-unit property together with an interest in the common elements
of that property.
One of the essential elements of a contract A promise
or an act of legal value bargained for and received in return for a
A short-term interim loan used to finance the construction
of a building. The lender advanced funds to the builder at periodic
intervals as the work progresses.
A condition that has to be removed before the transaction
can be finalized.
An agreement, enforceable at law, between two or more
competent persons, having for its object a legal purpose, wherein the
parties agree to act in a certain manner.
A mortgage securing a loan made by private investors
without governmental participation; that is, which is not FHA insured
or VA guaranteed.
An instrument in writing by which some estate, interest,
or title in real estate is transferred from one person to another, such
as a deed or mortgage.
The rejection of an initial offer to purchase with a
substitute offer that could change the price and/or terms of the original
A report documenting the credit history and current status
of a borrowers credit standing.
The ratio, expressed as a percentage, which results when
a borrower's monthly payment obligation on long-term debt is divided
by his or her net effective income (FHA/VA loans) or gross monthly income
A legal instrument, duly executed and delivered, whereby
the owner of real property (grantor) conveys to another (grantee) some
right, title or interest in or to real estate.
A provision in a deed controlling or limiting the use
of the land.
Failure to meet legal obligations in a contract, specifically,
failure to make the monthly payments on a mortgage.
Postponed or delayed maintenance causing decline in building's
physical condition. Delinquency Failure to make payments on time. This
can lead to foreclose.
The loss in value due to deterioration through ordinary
wear and tear, action of the elements, functional or economic obsolescence.
Money paid to make up the difference between the purchase
price and the mortgage amount. Down payments usually are 10 percent
to 20 percent of the sales price on conventional loans, and up to 5
percent on FHA and VA loans.
If a real estate broker represents both the buyer and
the seller in the same transaction.
A provision in a mortgage or trust deed which allows
the lender to call a promissory note immediately due and payable in
full upon the sale or transfer of a secured property; Allows the lender
to raise the interest rate or demand other changes in terms upon assumption
of the loan.
Down payment made by a purchaser of real estate as evidence
of good faith.
A right or interest in the real property of another The
right to use another's land for a specific purpose, as a right of way.
The period of time over which a property may be profitability
used. It is reduced to a percent in the capitalization process. Example
100% divided by 50 years equals 2% anticipated depreciation per year.
The right of a government to take private property for
public use upon the payment of just compensation. The legal proceeding
by which the government exercises this right is called "condemnation
The illegal intrusion of a structure, part of a building,
or obstruction over or upon a highway, sidewalk or the property of another.
Encumbrance A claim, lien, charge, or liability attached to and binding
upon real property, such as a judgment, mortgage, mechanics lien, lien
or unpaid taxes, right of way.
Writing one's name, either with or without additional
words, on a negotiable instrument or on an attachment thereto.
In real estate, the interest or value of the real estate
over and above amount of indebtedness thereon.
The revision of property to the state in the event the
owner of the property dies without leaving a will and has no blood heirs
or relatives to whom the property may pass by lawful decent.
In real estate, it is the state or condition of a deed
which is conditionally held by a third party, called the escrow agent,
pending the performance or fulfillment of some act or condition.
A written agreement between two or more parties whereby
the grantor, promisor or obligor delivers certain instruments or property
into the hands of a third party, the escrow agent, to be held by said
third party until the happening of a contingency or performance of a
condition, and then to be delivered to the grantee, promisee or obligee.
In real estate, it refers to the degree, quantity, nature
and extent of interest which a person has in real property; such as
a fee simple absolute estate, an estate for years.
Dispossession by process of law; the act of depriving
a person of the possession of lands, in pursuance of the judgment of
Exclusive Right to Sell Listing
A listing whereby the owner appoints one real estate
broker as his sole agent for a specified period of time. No matter who
sells the property, including the owner himself, the broker is entitled
to a commission.
A common term used in real estate finance taken from
FNMA (Federal National Mortgage Association). It provides a market for
government secured mortgages held by primary lenders and provides them
with a ready market so as to permit a greater turnover of money for
Farmers Home Administration (FMHA)
Provides financing to farmers and other qualified borrowers
who are unable to obtain loans elsewhere.
Federal Home Loan Mortgage Corporation (FHLMC)
Also called "Freddie Mac", is a quasi-governmental agency
that purchases conventional mortgages from insured depository institutions
and HUD-approved mortgage bankers.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development.
Its main activity is the insuring of residential mortgage loans made
by private lenders. FHA also sets standards for underwriting mortgages.
Fee Simple Absolute
Often called a fee or fee simple; the most comprehensive
ownership of real property known to the law; the largest bundle of ownership
rights possible in real estate.
FHA Insured Mortgage
A mortgage under which the Federal Housing Administration
insures loans made according to its regulations by approved lenders.
A person or a position of trust or confidence. Fiduciary
refers to the relationship of an agent to his principle.
Fixed Rate Mortgage
A loan in which the interest rate and the monthly payment
do not change over the life of the loan.
An article of personal property which has been installed
in or attaches to land or a building thereon, in a permanent manner,
so that is now considered to be a part of the real estate.
A termination of the rights of the mortgagor in the property
covered by the mortgage; a court process instituted by a mortgage or
lien creditor to defeat any interest of equity of redemption which the
mortgagor or debtor-owner may have in the property.
A form of insurance in which the insurance company protects
the insured from specified losses, such as fires, windstorm and the
Often called "homestead" or "homestead right"; a right
given by statue to a householder or head of a family to designate real
estate as his homestead and said homestead is exempt, up to a stated
amount, from execution by his creditors.
Housing Expenses-To-Income Ratio
The ratio, expressed as a percentage, which results when
a borrower's housing expenses are divided by his/her net effective income
(FHA/VA loans) or gross monthly income (conventional loans). See debt-to-income
That portion of a borrower's monthly payments held by
the lender or servicer to pay for taxes, hazard insurance, mortgage
insurance, and other items as they become due. Typically, a monthly
mortgage payment has four components: principal, interest, taxes and
insurance ("PITI"). The taxes and insurance portions represent property
taxes and homeowner's insurance premium, respectively. These are often
required by the lender to be included in a monthly payment since regular
and timely payment of both of these obligations improves the lender's
To insure; to secure against loss.
A 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 US Treasury security yields, the monthly average interest
rate on loans closed by saving and loan institutions, and the monthly
average cost-of-funds incurred by savings and loans), which is then
used to adjust the interest rate on an adjustable mortgage up or down.
Interest Rate Cap
A limit on the amount the interest rate can increase.
A periodic cap limits how much the rate can increase at each adjustment
period. A lifetime cap limits how much the rate can increase during
the term of the loan. Also called an interest rate ceiling.
A type of co-ownership of real property, held by two
or more persons, with all co-owners being equally entitled to the use,
enjoyment, control and possession of the land and with the right of
A loan which is larger than the limits set by the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation.
Because jumbo loans cannot be funded by these two agencies, they usually
carry a higher interest rate.
Real property; the surface of the earth and that which
is affixed to it permanently, that which is below it, and the space
above it; synonymous with "real property", "realty", and "real estate"
Sometimes used to mean only the unimproved surface of the earth.
An agreement under which a tenant receives the possession
and use of real property for a certain period of time and the landlord
receives the payment to rent and/or the performance or other conditions.
A description recognized by law which is sufficient to
locate and identify the property without oral testimony.
The party who possesses a right or estate in realty,
holding under a lease; also commonly referred to as the tenant.
The party who conveyed a right or estate in realty to
the lessee under a lease; commonly referred to as the landlord.
A right given by law to a creditor to have a debt or
charge satisfied out of the real or personal property belonging to the
A public notice, filed against specific lands, that an
action at law is pending that may affect the title to the land.
An agreement or contract of employment, either oral or
written, whereby the owner authorizes the real estate broker to sell,
exchange or lease real estate.
Amount charged by a lender to increase the loan yield.
Usually a percentage such as 1% of the loan, which would equal one point.
Loan to Value (LTV) Ratio
Loan amount divided by the fair market value of the collateral,
generally the appraisal value. For instance, a lender considering an
80% LTV on a home appraised at $250,000 would consider a loan request
of $200,000. When considering a home equity loan, the lender will consider
the combined LTV, assuming full disbursement of the equity loan. For
instance, if a lender will consider a 90 percent combined LTV in the
same example, he would consider a home equity loan request of $25,000
for combined debt that equals 90 percent of the appraisal value.
The amount a lender adds to the index on an adjustable
rate mortgage to establish the adjusted interest rate. For instance,
if a one-year ARM is priced at a margin of 300 basis points (100 basis
points is equal to one percent) over the yield on the one-year constant
maturity-adjusted Treasury bill, and the T-bill's yield is 6.5 percent,
the one-year ARM rate would be 9.5 percent.
Marketable or Merchantable Title
A title which is free from reasonable doubt of defect
which can be readily sold or mortgaged to a reasonably prudent purchaser
or mortgagee; a title free from material defects or grave doubts and
reasonably free from possible litigation.
The price, in terms of dollars, which a ready and able
buyer, not forced to buy, would pay and which a ready and willing seller,
not forced to sell, would accept, assuming further that both parties
are fully informed, act reasonably, and have sufficient time to consider
the transaction with due care.
A lien created by statute which exists against real property
in favor of persons who have performed work of furnished materials for
the improvement of the real estate.
A conditional conveyance of property as security for
the payment of a debt or fulfillment of some obligation. Upon payment
of the debt or performance of the obligation the mortgage becomes void.
Money paid to insure the mortgage when the down payment
is less than 20 percent. See private mortgage insurance, FHA mortgage
Multiple Listing Service
An arrangement among real estate brokers whereby they
share their listings. The commission is divided, according to previous
agreement, between the listing broker and the selling broker.
One of the essential elements of a contract, often called
Meeting of the Minds; the agreement of the parties to the contract,
mutually consenting to be bound by the exact terms thereof.
A national association of real estate personnel whose
goal is the professional advancement of the real estate industry and
whose membership is comprised of state and Local real estate boards.
Often abbreviated NAR.
The opposite of amortization. In the case of an adjustable-rate
mortgage with a payment cap, an upward adjustment in the interest rate
may cause the loan payment to be insufficient to cover even the interest
portion of the scheduled payment. In this case, the unpaid interest
is added to the mortgage loan principal (if the loan agreement permits)
and the loan amount increases.
A written instrument signed by a maker or drawer, containing
an unconditional promise to pay a certain sum of money, which can be
passed freely from one person to another.
A written instrument acknowledging a debt and promising
Principle, interest, taxes and insurance. Also called
monthly housing expense.
A wall erected on a line between adjoining properties
for the use of both properties.
Generally, all things which are not real property; things
of a temporary or movable nature.
Points (Loan Discount Points)
Prepaid interest accessed at closing by the lender. Each
point is equal to 1 percent of the loan amount. For example, 2 points
on a $100,000 mortgage would be $2,000.00 The IRS considers points to
be a form of prepaid interest which means they can be deducted from
taxable income. Lenders often require that the borrower pay one or two
points at closing in exchange for a lower mortgage rate (the lender's
target APR remains the same).
Power of Attorney
A legal instrument which authorizes another person to
act, either a specific act or generally, in the stead of the person
drawing the instrument.
Expenses necessary to create an escrow account or to
adjust the seller's existing escrow. Can include taxes, hazard insurance,
private mortgage insurance and special assessments.
Paying off a loan before its due date.
Money charged for an early repayment of a debt. Prepayment
penalties are allow in some form (but not necessarily imposed) in 36
states and the District of Columbia.
Any person, partnership, association or corporation who
authorizes or employs another, called the agent, to do certain acts
on his behalf.
The promissory note which is secured by the mortgage
or trust deed.
Private Mortgage Insurance (PMI)
Paid by a borrower to protect the lender in case of default.
PMI is typically charged to the borrower when the loan-to-value ratio
is greater than 80 percent. The Homeowners Protection Act of 1998 mandates
that a lender notify a borrower when the LTV falls below 80 percent,
at which time a borrower is allowed to cancel the PMI coverage.
The cause that results from an agent's employment in
the sale or leasing of property, finding a buyer.
The rights of ownership; the right to use, possess, enjoy,
and dispose of a thing in every legal way and to exclude everyone else
from interfering with these rights. Property is generally classified
into two groups; persona property and real property.
the public official in each county, whose office has
been created by statute, to whom title to real property is conveyed
by Trust Deed for the use and benefit of the beneficiary, who usually
is the lender.
Purchase Money Mortgage
mortgage given by the purchaser to secure a loan for
part or all of the purchase price. Such a mortgage becomes a lien on
the property simultaneously with the passing of title, and if immediately
recorded becomes prior to any lien against the purchaser.
Land; the surface of the earth and whatever is erected,
growing upon, or affixed to the land; including that which is below
it and the space above it. Synonymous with "land", "realty" and "real
The term is a copyrighted trade name which can be used
only by those persons belonging to the National Association of Realtors.
Real property, land, real estate.
A court appointed custodian who holds property for the
Court, pending final disposition of the matter before the Court.
the cancellation of a contract With respect to mortgage
refinancing, the law that gives the homeowner three days to cancel a
contract in some cases once it is signed if the transaction uses equity
in the home as security.
The act of writing or entering an instrument in a book
of public record, usually in the office of county clerk and recorder.
Such recording constitutes notice to all persons of the rights of claims
contained in the instrument. This type of notice is called "constructive
notice or "legal notice".
Money paid to the lender for recording a home sale with
the local authorities, thereby making it part of the public records.
the right of an owner to redeem or reclaim the real estate
by paying the debt or charge (such as mortgage or tax lien) after default,
together with interest and costs. More correctly, equity of redemption
refers to the right to redeem the propertyafterdefault but before
foreclosure. The statutory right of redemption refers to the right to
redeem the property after foreclosure, or other enforcement action,
during a certain period of time specified by statue.; For example, in
Colorado, the mortgagor has the statutory right to redeem his property
any time within six months for agricultural property (75 days of platted
residential dwellings) after a mortgage foreclosure or three years after
a sale for delinquent property taxes.
The relinquishment or surrender of a right, claim or
Release of Lien;
the discharge or release of specific property from the
charge or lien of a judgment, mortgage or other claim.
A clause in a deed limiting the use to which the property
may be put.
Reverse Annuity Mortgage (RAM)
A form of mortgage in which the lender makes periodic
payments to the borrower using the borrower's equity in the home as
Right of Survivorship
A characteristic of a joint tenancy; upon the death of
one of the tenants, his rights in the property pass automatically to
the surviving tenant or tenants.
Right of Way
An easement or right of passage over another's land;
the strip of land used as roadbed or used for a public purpose by other
A type of co-ownership of real property; a holding of
an estate is land by two or more persons, each being entitled to possession
of the property according to his proportionate share distinct from a
joint tenancy in that there is no right of survivorship in a tenancy
See Balloon payment mortgage
When a person dies leaving a will.
A document that gives evidence of an individual's ownership
A policy of insurance which indemnifies the holder for
loss sustained by reason of a defect in the title, provided the loss
does not result from a defect excluded by the policy provisions.
A federal law requiring disclosure of the Annual Percentage
Rate to homebuyers shortly after they apply for the loan.
A form of mortgage by which a borrower or debtor conveys
title to his property to a Trustee, usually a Public Trustee, who holds
the title for the protection of a
lender or creditor as a pledge or as security for the repayment of the
loan or debt described in the instrument.
A long-term, low or no-dumfounded loan guaranteed by
the Department of Veterans Affairs. Restricted to individuals qualified
by military service or other entitlements.
VA Mortgage Funding Fee
A premium up to 1.875 percent (depending on the size
of the dumfounded) paid on a VA-backed loan. On a $75,000 30 year fixed-rate
mortgage with no downpayent, this would amount to $1,406 either paid
at closing or added to the amount financed.
Variable Rate Mortgage
See Adjustable Rate Mortgage.
Verification of Deposit (VOD)
A document signed by the borrowers financial institution
verifying the status and balance of his/her financial accounts.
Verification of Employment
A document signed by the borrowers employer verifying
his/her position and salary.
Often called a General Warranty Deed; a deed in which
the grantor warrants or guarantees the title to real property against
defects existing before the grantor acquired title or arising during
the grantor's ownership.
An affordability analysis that is based on a what-if
scenario. A what-if analysis is useful if you do not have complete data
or if you want to explore the effect of various changes to your income,
liabilities, or available funds or to the qualifying ratios or down
payment expenses that are used in the analysis.
A change in the amounts that is used as the basis of
an affordability analysis. A what-if scenario can include changes to
monthly income, debts, or down payment funds or to the qualifying ratios
or down payment expenses that are used in the analysis. You can use
a what-if scenario to explore different ways to improve your ability
to afford a house.
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 payment to the
first lender after taking the additional amount off the top.