AllPro Realtors
Toll Free: 800 818 8133    Local: 865 436 2849    Fax: 865 436 0403
Click on the link above to read why The Schoenfield Team provides our clients with the best real estate service found anywhere in the Smoky Mountains and to learn about the people who make our team the best!
 
Auto Home Search
Auto Home Search
Enter your criteria and get frequent updates when new listings fit your criteria.
 
Visit my Gatlinburg Blog
 
Find us on facebook
 
Join us at church!
 
Sitemap
  R E A L   E S T A T E   G L O S S A R Y  
A B C D E F G H J L M N O P Q R S T U V W Z

-- A --
Acceleration clause
A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.
 
Acceptance
An acceptance is a promise by the offeree to be bound by the exact terms proposed by the offeror. The acceptance must be communicated to the offeror.
 
Ad valorem tax
A tax levied according to value, generally used to refer to real estate tax. Also called the general tax.
 
Adjustable-rate mortgage (ARM)
A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.
 
Agency
The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions
Back to navigation
 
Agreement of sale
Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
 
Alienation clause
The clause in a mortgage or deed of trust that states that the balance of the secured debt becomes immediately due and payable at the lender's option if the property is sold by the borrower. In effect this clause prevents the borrower from assigning the debt without the lender's approval.
 
Amortization
The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
 
Annual percentage rate (APR)
This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual not rate on your loan.
 
Application fee
Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.
Back to navigation
 
Appraisal
A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.
 
Appraisal fee
A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date.
 
Appraised value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.
 
Appreciation
The increase in the value of a property due to changes in market conditions, inflation, or other causes.
 
Assessed value
The valuation placed on property by a public tax assessor for purposes of taxation.
Back to navigation
 
Asset
Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.
 
Assumption
A method of selling real estate where the buyer of the property agrees to become responsible for the repayment of an existing loan on the property.
 
-- B --
Balloon mortgage
A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.
 
Balloon payment
The final lump sum payment that is due at the termination of a balloon mortgage.
 
Bankruptcy
By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.
Back to navigation
 
Bequest
A gift of personal property by will.
 
Bill of sale
A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.
 
Biweekly mortgage
A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.
 
Blanket mortgage
A mortgage that covers more than one parcel of real estate.
 
Bona fide
In good faith.
Back to navigation
 
Bridge loan
Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.
 
Broker
Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. (See the Home Loan Library that discusses the different types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
 
Buydown
Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.
 
Buy-down mortgage
A mortgage loan with a below-market rate for a period of time.
 
Buyer agency agreement
A principal-agent relationship in which the broker is the agent for the buyer, with fiduciary responsibilities to the buyer. The broker represents the buyer under the law of agency.
Back to navigation
 
Buyer's market
Market conditions that favor buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.
 
-- C --
Call option
A provision of a note which allows the lender to require repayment of the loan in full before the end of the loan term. The option may be exercised due to breach of the terms of the loan or at the discretion of the lender.
 
Cap
Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.
 
Cash out
Any cash received when you get a new loan that is larger than the remaining balance of your current mortgage, based upon the equity you have already built up in the house.The cash out amount is calculated by subtracting the sum of the old loan and fees from the new mortgage loan. For example, if your existing loan is $100,000, you might refinance it with a loan of $120,000. After you pay off your current loan ($100,000) and any loan-origination costs for the new loan (for example $2,000 in points), you would be left with $18,000 cash out. Cash-out loans may not be available for all types of property.
 
Cashier's check (or bank check)
A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank's account instead of the customer's.
Back to navigation
 
Ceiling
The maximum allowable interest rate of an adjustable rate mortgage.
 
Certificate of eligibility
Document issued by the Veterans Administration to qualified veterans which verifies a veteran's eligibility for a VA guaranteed loan. Obtainable through local VA office by submitting form DD-214 (Separation Paper) and VA form 1880 (request for Certificate of Eligibility).
 
Certificate of veteran status
FHA form filled out by the VA to establish a borrower's eligibility for an FHA Vet loan. Obtainable through local VA office by submitting form DD 214 (Separation Paper) with form 26-8261a (request for certificate of veteran status).
 
Certification of title
Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.
 
Chain of title
An analysis of the transfers of title to a piece of property over the years.
Back to navigation
 
Chain of title
The chronological order of conveyance of a property from the original owner to the present owner.
 
Closing
This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands.
 
Closing costs
Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.
 
Closing statement
The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).
 
Cloud on title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.
Back to navigation
 
Code of Ethics
A written system of standards of ethical conduct. Because of the nature of the relationship between a broker and a client or other persons in a real estate transaction, a high standard of ethics is needed to ensure that the broker acts in the best interests of both his or her principal and any third parties.
 
Collateral
In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.
 
Commission
Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others.(top)
 
Commitment
A promise to lend and a statement by the lender of the terms and conditions under which a loan is made.
 
Common areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Back to navigation
 
Community property
In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.
 
Comparable sales
Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."
 
Comparative market analysis (CMA)
This is a term often used by real estate brokers in preparing a report for prospective sellers and buyers, indicating market trends in various neighborhoods, based on computer statistics generated from multiple-listing service data. Generally, these analyses are used for clients to determine a listing price for the sale of a home or for buyers to determine if a list price is reasonable for a given location.
 
Condominium
A form of property ownership in which the homeowner holds title to an individual dwelling unit and a proportionate interest in common areas and facilities of a multi-unit project.
 
Conforming loan
A mortgage loan which meets all requirements to be eligible for purchase by federal agencies such as FNMA and FHLMC. The maximum conforming loan amount is $240,000 for a one-unit property.
Back to navigation
 
Contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
 
Contract of sale
The agreement between the buyer and seller on the purchase price, terms, and conditions of a sale.
 
Conventional mortgage
Refers to home loans other than government loans (VA and FHA).
 
Conversion clause
A provision in some ARMs that allows you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate will be set at current rates, and there may be a charge for the conversion feature.
 
Conveyance
The document used to effect a transfer, such as a deed, or mortgage.
Back to navigation
 
Counter offer
A rejection of an offer by a seller along with an agreement to sell the property to the potential buyer on terms differing from the original offer.
 
Crawl space
1. The space between the ground and the first floor, often found in homes with no basement. 2. The space found between the top floor and the roof, often found in the place of an attic.
 
Credit history
A record of an individual's repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.
 
Credit score
A snapshot of a borrower's credit worthiness; a numerical score based on statistics showing the risk of default on a loan; takes into condiseration available credit, management of existing credit, and any detrimental credit information.
 
-- D --
Deed
The legal document conveying title to a property.
Back to navigation
 
Deed of trust
A legal document that conveys title to real property to a third party. The third party holds title until the owner of the property has repaid the debt in full.
 
Deed-in-lieu
Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.
 
Default
Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.
 
Defeasance clause
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.
 
Delinquency
Failure to make payments as agreed in the loan agreement.
Back to navigation
 
Deposit
A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an "earnest money deposit."
 
Depreciation
A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.
 
Discount points
In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any "points" paid in addition to the one percent loan origination fee. A "point" is one percent of the loan amount.
 
Down payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
 
Due on sale clause
Provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance upon sale of the property.
Back to navigation
 
-- E --
Earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house
 
Easement
A right of way giving persons other than the owner access to or over a property.
 
Effective age
An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
 
Eminent domain
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
 
Encroachment
An improvement that intrudes illegally on another’s property.
Back to navigation
 
Encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
 
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
 
Equity
A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
 
Escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.
 
Escrow account
Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.
Back to navigation
 
Escrow agent
A person with fiduciary responsibility to the buyer and seller, or the borrower and lender, to ensure that the terms of the purchase/sale or loan are carried out.
 
Exclusive listing
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
 
Exposure
The degree to which a property for sale is made noticeable to potential buyers, through advertising, multiple listing services, etc.
 
-- F --
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
 
Fair market value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Back to navigation
 
Fannie Mae (FNMA)
The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.
 
Federal Deposit Insurance Corporation (FDIC)
Independent deposit insurance agency created by Congress to maintain stability and public confidence in the nation's banking system.
 
Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac)
This agency buys loans that are underwritten to its specific guidelines. These guidelines are an industry standard for residential conventional lending.
 
Federal Housing Administration (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. top)
 
Fee simple
The greatest possible interest a person can have in real estate.
Back to navigation
 
Fee simple estate
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
 
FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.
 
First mortgage
The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions.
 
Fixed-rate mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
 
Fixture
Personal property that becomes real property when attached in a permanent manner to real estate.
Back to navigation
 
Flood insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
 
Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
 
-- G --
Good faith estimate
Written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.
 
Government loan (mortgage)
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.
 
Government National Mortgage Association (Ginnie Mae)
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA)
Back to navigation
 
Grace period
Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note.
 
Grantee
The person to whom an interest in real property is conveyed.
 
Grantor
The person conveying an interest in real property.
 
Gross income
Total income before taxes or expenses are deducted.
 
-- H --
Hazard insurance
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
Back to navigation
 
Home Equity Conversion Mortgage (HECM)
Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.
 
Home equity line of credit
A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.
 
Home inspection
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
 
Homeowners' association
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.
 
Homeowner's insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
Back to navigation
 
Homeowner's warranty
A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.
 
HUD median income
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
 
HUD-1 settlement statement
A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the "closing statement" or "settlement sheet."
 
-- J --
Joint liability
Liability shared among two or more people, each of whom is liable for the full debt.
 
Joint tenancy
A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
Back to navigation
 
Judgment
A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.[Top]
 
Judicial foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.
 
Jumbo loan
A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently at $227,150. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
 
Junior mortgage
A mortgage subordinate to the claim of a prior lien or mortgage. In the case of a foreclosure, a senior loan or lien will be paid first. (see senior loan)
 
-- L --
Land contract
A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.
Back to navigation
 
Late charge
The penalty a borrower must pay when a payment is made a stated number of days. On a first trust deed or mortgage, this is usually fifteen days.
 
Lease
A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.
 
Lease option
An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
 
Leasehold estate
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
 
Legal description
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
Back to navigation
 
Lender
A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."
 
Liabilities
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
 
Liability insurance
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.
 
Lien
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.
 
Life cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage.
Back to navigation
 
Line of credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
 
Loan application
An initial statement of personal and financial information required to apply for a loan.
 
Loan application fee
Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.
 
Loan officer
Also referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.
 
Loan origination fee
Fee charged by a lender to cover administrative costs of processing a loan.
Back to navigation
 
Loan ratio
The ratio, expressed as a percentage, of the amount of a loan to the value or purchase price of real property.
 
Loan-to-value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).
 
Lock-in
An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.
 
Lock-in period
The time period during which the lender has guaranteed an interest rate to a borrower.
 
-- M --
Margin
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.
Back to navigation
 
Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
 
Merged credit report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.
 
Mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
 
Mortgage banker
For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.
 
Mortgage broker
A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
Back to navigation
 
Mortgage insurance (MI)
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.
 
Mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
 
Mortgage life and disability insurance
A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.
 
Mortgagee
The lender in a mortgage agreement.
 
Mortgagor
The borrower in a mortgage agreement.
Back to navigation
 
Multiple listing
Multiple Listing is the name given a service performed by the Local Board of Realtors (Multiple Listing Service). MLS provides necessary information to aid in the sale of listings. It is a marketing tool used by members of the Service to expose properties to a wider market base.
 
-- N --
Negative amortization
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
 
No cash-out refinance
A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."
 
No-cost loan
Almost all lenders offer loans at "no points." You will find the interest rate on a "no points" loan is approximately a quarter percent higher than on a loan where you pay one point.
 
No-cost loan
Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
Back to navigation
 
Non-assumption clause
A statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.
 
Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
 
Note rate
The interest rate stated on a mortgage note.
 
Notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
 
-- O --
Offeree
The person to whom an offer is made - usually the owner.
Back to navigation
 
Offeror
The party who makes an offer - usually the buyer.
 
Original principal balance
The total amount of principal owed on a mortgage before any payments are made.
 
Origination fee
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
 
Owner financing
A property purchase transaction in which the property seller provides all or part of the financing.
 
-- P --
Package loan
A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings and major appliances.
Back to navigation
 
Partial payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.
 
Payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.
 
Per diem interest
Interest calculated per day. (Depending on the day of the month on which closing takes place, you will have to pay interest from the date of closing to the end of the month. Your first mortgage payment will probably be due the first day of the following month.)
 
Percolation
1) The movement of water downward and in a circular direction through subsurface soil layers, usually continuing downward to ground water. Can also involve upward movement of water. 2) Slow seepage of water through a filter.
 
Percolation test
A test of the soil to determine if it will absorb and drain water adequately to use a septic system for sewage disposal.
Back to navigation
 
Periodic payment cap
For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.
 
Periodic rate cap
For an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
 
Personal property
Any property that is not real property.
 
PITI
This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.
 
PITI reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
Back to navigation
 
Planned unit development (PUD)
A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.
 
Plat map
A map of a town, section or subdivision indicating the location and boundaries of individual properties.
 
Point
A point is 1 percent of the amount of the mortgage.
 
Power of attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
 
Pre-approval
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification.
Back to navigation
 
Prepaid expenses
Taxes, insurance and assessments paid in advance of their due dates. These expenses are included at closing.
 
Prepaid interest
Interest that is paid in advance of when it is due. Typically charged to a borrower at closing to cover interest on the loan between the closing date and the first payment date.
 
Prepayment
Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
 
Prepayment penalty
A fee that may be charged to a borrower who pays off a loan before it is due.
 
Pre-qualification
This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.
Back to navigation
 
Prime rate
The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
 
Principal
A main party to a transaction--the person for whom the agent works. (Principal Broker)
 
Principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
 
Principal balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.
 
Principal, interest, taxes, and insurance (PITI)
principal, interest, taxes, and insurance (PITI) The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
Back to navigation
 
Private mortgage insurance (PMI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
 
Probate
The formal judicial proceeding to prove or confirm the validity of a will, to collect the assets of the decedent's estate, to pay the debts and taxes and to determine the persons to whom the remainder of the estate is to pass.
 
Profit and loss statement
A detailed statement of income and expenses of a business that reveals the operating position of the business over a period of time. Commonly referred to a P&L.
 
Promissory note
A written promise to repay a specified amount over a specified period of time.
 
Property brief
Produced by the real estate agent, a property brief is simply a one-page flier about the property pointing out attractive features. It usually contains a drawing or photograph of the home. They are given to people the agent feels are especially interested in the property.
Back to navigation
 
Prorations
Expenses, either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing.
 
Protected class
Any group of people designated as such by the Department of Housing and Urban Development (HUD) in consideration of federal and state civil rights legislation. Currently includes ethnic minorities, women, religious groups, the handicapped and others.
 
Public auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.
 
Purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
 
Purchase money transaction
The acquisition of property through the payment of money or its equivalent.
Back to navigation
 
-- Q --
Qualifying ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The "top" or "front" ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The "back" or "bottom" ratio includes housing costs as will as all other monthly debt.
 
Quitclaim deed
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
 
-- R --
Rate lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.
 
Real estate agent
A person licensed to negotiate and transact the sale of real estate.
 
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
Back to navigation
 
Real property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
 
Real property
Land and any improvements permanently affixed to it, such as buildings.
 
Realtor®
A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
 
Reconveyance
The transfer of property back to the owner when a mortgage loan is fully repaid.
 
Recorder
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
Back to navigation
 
Recording
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
 
Recording fee
Money paid to an agent for entering the sale of a property into the public records.
 
Refinancing
The process of paying off one loan with the proceeds from a new loan secured by the same property.
 
Remaining balance
The amount of principal that has not yet been repaid. See principal balance.
 
Remaining term
The original amortization term minus the number of payments that have been applied.
Back to navigation
 
Replacement reserve fund
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.
 
Restrictive covenants
A clause in a deed that limits the way the real estate ownership can be used.
 
Revolving debt
A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
 
Right of first refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
 
Right of ingress or egress
The right to enter or leave designated premises.
Back to navigation
 
Right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
 
Right to rescission
Under the provisions of the Truth-in-Lending Act, the borrower's right, on certain kinds of loans, to cancel the loan within three days of signing a mortgage.
 
-- S --
Sale-leaseback
A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
 
Sales agreement
Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
 
Second mortgage
A mortgage that has a lien position subordinate to the first mortgage.
Back to navigation
 
Secondary market
The buying and selling of existing mortgages, usually as part of a "pool" of mortgages.
 
Seller carry-back
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
 
Senior loan
A real estate loan in the first priority position. (see junior mortgage)
 
Setback
The amount of space local zoning regulations require between a lot line and a building line.
 
Settlement costs
Also known as closing costs, these costs are for services that must be performed before your loan can be initiated. Examples include title fees, recording fees, appraisal fee, credit report fee, pest inspection, attorney's fees, taxes, and surveying fees.
Back to navigation
 
Settlement statement
See HUD1 Settlement Statement
 
Severalty
Sole ownership of real property.
 
Slab
A flat piece of concrete, typically used as a walking surface, but may also serve as a load bearing device as in slab homes.
 
Special assessment
Legal charge against real estate by a public authority to pay cost of public improvements such as: street lights, sidewalks, street improvements, etc.
 
Special warranty deed
A deed in which the grantor warrants, or guarantees, the title only against defects arising during the period of his or her tenure and ownership of the property and not against defects existing before that time, generally using the language, "by, through or under the grantor but not otherwise."
Back to navigation
 
Statute of frauds
State law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable.
 
Subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
 
Subordinate financing
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
 
Survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
 
Sweat equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
Back to navigation
 
-- T --
Tax impound
Money paid to and held by a lender for annual tax payments.
 
Tax lien
Claim against a property for unpaid taxes.
 
Tax sale
Public sale of property by a government authority as a result of non-payment of taxes.
 
Tenancy in common
As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
 
Term
The period of time between the beginning loan date on the legal documents and the date the entire balance of the loan is due.
Back to navigation
 
Third-party origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
 
Title
A legal document evidencing a person's right to or ownership of a property.
 
Title company
A company that specializes in examining and insuring titles to real estate.
 
Title insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
 
Title search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
Back to navigation
 
Transfer of ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
 
Transfer tax
State or local tax payable when title passes from one owner to another.
 
Treasury index
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
 
Trust account
An account separate and apart and physically segregated from broker's own funds, in which broker is required by law to deposit all funds collected for clients.
 
Trustee
A fiduciary who holds or controls property for the benefit of another.
Back to navigation
 
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.
 
Two-step mortgage
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
 
-- U --
Underwriting
In mortgage lending, the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan.
 
Usury
Interest charged in excess of the legal rate established by law.
 
-- V --
VA mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
Back to navigation
 
Vapor barrier
The material used to prevent moisture from penetrating walls or floors.
 
Variable rate
Interest rate that changes periodically in relation to an index.
 
Variable rate mortgage
See Adjustable Rate Mortgage.
 
Verification of deposit (VOD)
Document signed by the borrower's bank or other financial institution verifying the borrower's account balance and history.
 
Verification of employment (VOE)
Document signed by the borrower's employer verifying the borrower's position and salary.
Back to navigation
 
Vested
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.
 
Veterans Administration (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
 
-- W --
Waiver
Voluntary relinquishment or surrender of some right or privilege.
 
Walk-through
A final inspection of a home to check for problems that may need to be corrected before closing.
 
Warranty deed
A deed used to convey real property which contains warranties of title and quiet possession, and the grantor agrees to defend the premises against the lawful claims of third persons.
Back to navigation
 
-- Z --
Zoning ordinances (or zoning regulations)
Local law establishing building codes and usage regulations for properties in a specified area.
 
 
 
 
Member of Realtor.com, the local MLS and Equal Housing Opportunity
Don't see what you are looking for??
Give us a call at 865-436-2849!!
All Rights Reserved Jeff Schoenfield
Website design © 2017 Prism Designs