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Home Loans Glossary
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1003 - The number assigned to the form all potential customers must complete to apply for a home loan. This application is commonly referred to as "the 1003"
and is produced by the Federal government. See LOAN APPLICATION (1003).
1040 FEDERAL TAX RETURN - The Federal tax form used by U. S. citizens and residents to report their annual income to the Federal government. The 1040 tax return
must be accompanied by any applicable schedules, which provide line-item detail of various sources of income. Schedule A details itemized deductions. Schedule B details
investment income. Schedule C details business income. Schedule D details capital gains/losses. Schedule E details supplemental income, such as rental income. Schedule F
details farming profit/loss.
1065 FEDERAL TAX RETURN - The Federal tax form used by U. S. partnerships to report their annual income to the Federal government.
1099 - A document that reports to the Federal government gross and net income earned by individuals who receive pension, social security or miscellaneous income,
such as income from contract work. 1099s must be mailed to recipients by January 31 of each year for the previous year.
1120 FEDERAL TAX RETURN - The Federal tax form used by U. S. corporations to report their annual income to the Federal government.
1st POSITION LIEN - A secured claim against a property that will be the first claim to be repaid should the property owner declare bankruptcy or default on the secured loan.
2-4 UNIT PROPERTY - A property that consists of a structure that provides living space for 2 to 4 families, although a single mortgage or deed of trust evidences ownership
of the structure.
3 Cs - Lenders consider three factors, credit, capacity and collateral when considering a credit application. Credit is the borrower's proven willingness to repay a debt.
Capacity is the borrower's financial ability to repay a debt. Collateral refers to the property used to secure a loan transaction.
30-DAY LATES, 60-DAY LATES, ETC. - Designations of the severity of mortgage delinquency. A mortgage payment is considered 30 days late when 2 payments are due. A mortgage
payment is considered 60 days late when 3 payments are due.
80-10-10 - A home loan split into a first and second lien requiring a 10% down payment. With a first mortgage at 80% and a second mortgage at 10%, homebuyers may avoid
paying private mortgage insurance (PMI)or higher Jumbo interest rates. A common variation of this loan is the 80-15-5 program, which lowers the down payment to 5%.
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ABSTRACT - A summary; an abridgment. Before the use of photo static copying public records were kept by abstracts of recorded documents.
ABSTRACT OF JUDGMENT - A summary of the essential provisions of a court judgment which, when recorded in the county recorder's office, creates a lien upon the
property of the debtor in that county, both presently owned or after acquired.
ABSTRACT OF TITLE - A history of a property's title record used in some states to prepare the Preliminary or Title Commitment report. An Abstract of Title lists
anyone who's ever had a claim to the property, past and present. Some states require mortgage lenders to obtain a complete Abstract of Title. However, most states condense
the abstract into a document called either the Preliminary or Title Commitment which lists only current claims to the property.
ACCELERATION CLAUSE - Provision in a mortgage document stating that if a payment is missed or any other provision is violated the whole debt becomes immediately
due and payable.
ACKNOWLEDGEMENT - Formal declaration before a public official that one has signed a document. Prior to recording real estate legal documents, such as grant deeds and deeds
of trust, a Notary Public acknowledges the person's signature on the document.
ACRE - A measure of land equal to 43,560 square feet.
ACTION TO QUIET TITLE - A court action to establish ownership of real property. Although technically not an action to remove a cloud on title, the two actions are usually
referred to as "Quiet Title" actions.
ACCRUED INTEREST - Interest on a note, bond, etc. , which has been earned but not yet paid.
AD VALOREM - Designates an assessment of taxes against property. Literally, according to value; based on the "ability to pay" theory.
ADDENDUM - An attachment to a contract, deed or other document that incorporates additional terms of information to the original.
ADJUSTABLE RATE MORTGAGE (ARM) - Adjustable rate mortgages, or ARMs, usually start with a lower fixed rate, and then adjust according to a specified index after an initial
period. ARM terms can be 3/1, 5/1, 7/1, 10/1 and a handful of other options. The first number indicates how many years the interest rate is fixed, and the second number indicates
how often the rate adjusts after that initial period is over. For example, in a 7/1 ARM, your interest rate stays the same the first seven years, and then adjusts every year. These
mortgages adjust periodically based on an index that changes with market conditions. The rate of interest is the sum of the index plus a margin (the margin remains fixed for the
life of the loan). Most ARMs have periodic interest rate and payment caps, as well as a life cap. ARM's may also be referred as re-negotiable rate mortgage, the variable rate mortgage
(VRM's) or the Canadian rollover mortgage.
ADJUSTABLE-RATE RIDER - A rider is an addition to a security instrument. The adjustable-rate rider outlines terms and conditions specific to an adjustable-rate loan.
It must be recorded along with the security instrument at the county recorder's office. See SECURITY INSTRUMENT.
ADJUSTMENT CAP - The adjustment cap limits the degree of interest rate changes during a specific period, during the life of the loan.
ADVERSE POSSESSION - The actual, exclusive, open notorious, hostile and continuous possession and occupation of real property under an evident claim of right or title.
The time required legally to obtain title by adverse possession varies from state to state.
AGENCY - A contract by which the agent undertakes to represent the principal in business transactions, using some degree of discretion.
AGENT - Person authorized to act on behalf of another in dealings with third parties.
AGREEMENT OF SALE - An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract.
In Texas it is known as an Earnest Money Contract.
ALIENATION CLAUSE - Provision in a mortgage document stating that the loan must be paid in full if ownership is transferred.
ALIMONY - Periodic payments made under a divorce decree or a written separation agreement toward the support of a former spouse. Alimony may be taken as a deduction from
adjusted gross income by the person who pays it, while the person who receives it must claim it as a taxable income.
ALTA - An acronym for American Land Title Association. Commonly used in reference to a particular type of Title policy. See AMERICAN LAND TITLE ASSOCIATION (ALTA).
AMENITIES - The qualities and state of being pleasant and agreeable. In appraising, those qualities that attach to property in the benefits derived from other than monetary.
Satisfactions of possession and use arising from architectural excellence, scenic beauty and social environment.
AMERICAN LAND TITLE ASSOCIATION (ALTA) - An organization composed of title insurance companies, which has adopted certain insurance policy forms to standardize title
insurance coverage on a national basis. See TITLE INSURANCE.
AMORTIZATION - Gradual payment of a debt through regular installments that cover both interest and principal.
ANNUAL FEE - A yearly cost charged in connection with maintaining a home equity line of credit.
ANNUAL PERCENTAGE RATE (APR) - Developed to provide you with a clearer description of how much your loan cots, the APR is the true cost of your credit stated at an annual,
or yearly rate. The APR also takes into account any costs associated with your loan other than the interest rate. These may include origination fees, loan discount points, and
private mortgage insurance premiums. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the
cost of loans.
APPRAISAL AND CREDIT REPORT FEES - These fees are generally collected by the lender and paid to outside companies performing the services.
APPRAISED VALUE - An expert option of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.
APPRAISAL REPORT - Estimate of real estate value, presumably by an expert. An appraisal evaluates the property at a given time based on facts regarding the location,
improvements, neighborhood and comparable sales. Generally, the value is based on three approaches: cost, market and income.
APPRECIATION - Increase in value or worth of property.
ARREARS - Payment made after it is due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.
"AS IS" - A clause that is sometimes used in the transfer of property. It means that the present property is being transferred with no guarantee or warranty provided by the
seller.
ASSESSMENT BASE - The total assessed value of all property in a given assessment district.
ASSESSED VALUATION - Value placed on real estate by governmental assessors as a basis for levying property taxes; not identical with appraised or market value.
ASSIGNMENT - Transfer of a contract from one party to another.
ASSUMPTION - When one assumes the responsibility for repaying an existing mortgage. Both FHA and VA loans are fully assumable. Some adjustable rate mortgages may be
partially assumable, but the new owners may be required to re-qualify for the loan.
ATTACHED HOMES - A home that has one or more common walls adjoining another home. Condominiums and row houses are attached homes.
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BALLOON MORTGAGE - Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount
of the principal at a time specified in the contract. Also known as a Balloon Loan.
BALLOON PAYMENT - The final payment of a mortgage which is larger than the regular payment; it usually extinguishes the debt.
BANKRUPTCY - A provision of Federal Law whereby a debtor surrenders his assets to the Bankruptcy Court and is relieved of the future obligation to repay his unsecured
debts. After bankruptcy, the debtor is discharged and his unsecured creditors may not pursue further collection efforts against him. Secured creditors, those holding deeds of
trust or judgment liens, continue to be secured by the property, but they may not take other action to collect from the debtor.
BASIS - Original cost of property plus value of any improvements put on by the seller minus the depreciation taken by the seller.
BENEFICIARY - The lender named on the mortgage note. One entitled to the proceeds of property held in trust; also proceeds of wills, insurance policies, or trusts.
BILL OF SALE - Written agreement transferring personal property from one person to another.
BINDER - Preliminary agreement of sale, usually accompanied by earnest money (term also used with property insurance).
BLANKET MORTGAGE - A mortgage covering more than one property of the mortgage.
BOND - A debt instrument in the capital markets. The US government, corporations and municipalities use bonds to raise money. Bonds can also be backed by real estate
loans and the payments from mortgages.
BRIDGE FINANCING - A form of an interim loan, generally made between a short term loan and a long term loan when the borrower needs additional time before obtaining
permanent financing.
BROKER - A person that represents another for a fee in real estate transactions. Real Estate brokers help consumers locate suitable real estate and are paid a fee for
their services. Mortgage brokers help consumers find suitable loans for their real estate purchases and are paid a fee for their services. A Mortgage broker does not loan the
money themselves.
BUILDING CODE - Government regulations specifying minimum construction standards.
BUILDING LINE OR SETBACK - Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat
of subdivision, by restrictive covenants in deeds or leased, by building codes, or by zoning ordinances.
BUY DOWN - An interest rate buy down is the temporary reduction of the note rate and resulting monthly payments a borrower pays to the lender. The shortfall between the rate
on the note and initial payment made by the borrower is usually paid by a third party such as a seller or builder.
BUYER'S BROKER - Agent who takes the buyer as a client, and is obligated to represent their interest above all others, and owes specific fiduciary duties to the buyer.
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CAPITAL - Accumulated wealth. A portion of wealth which is set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of their remaining permanently in the business.
CAPITAL GAIN - Taxable profit on the sale of an appreciated asset.
CAPS - Caps are used on adjustable rate mortgages (ARM's) to limit the interest rate and/or the payment. Most ARMs have a periodic cap that is around 2% per year and a life
cap of around 5%-6% over the life of the loan. "Payment only" caps sometimes create negative amortization where the principal balance of the loan increases rather than decreases
over time.
CAPS (interest) - Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or over the life of the loan.
CAPS (payment) - Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.
CERTIFICATE OF ELIGIBILITY - The document given to qualified veterans which entitles them to VA guaranteed loans for homes, businesses, and mobile homes. Certificates of
eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (Request for Certificate of Eligibility)
CERTIFICATE OF OCCUPANCY - Document issued by a local governmental agency that states a property meets the local building standards for occupancy.
CERTIFICATE OF REASONABLE VALUE (CRV) - An appraisal of property for the purpose of insurance by the Veteran's Administration.
CERTIFICATE OF TITLE - A certification 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 public 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.
CERTIFIED COPY - A true copy, attested to be true by the officer holding the original.
CHAIN OF TITLE - The chronological order of conveyance of a parcel of land from the original owner to the present owner.
CHATTEL - Personal property.
CLIENT - Person who employs the agent. Typically the seller is a client. The buyer can be a client (buyer's broker) or customer (seller's broker).
CLOSING - Also called settlement. Conclusion of a real estate sale where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties (seller,
old lender, real estate broker, etc.).
CLOSING AGENT - A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company or attorney.
CLOSING COSTS - Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring costs and/or pro-rated portions
of recurring costs that usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and
other costs assessed at settlement The cost of closing usually is about 3 percent to 6 percent of the mortgage amount.
CLOSING STATEMENT - Also known as a settlement statment. Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.
CLOUD ON TITLE - An outstanding claim or encumbrance which, if valid, adversely affects the marketability of title.
CODE OF ETHICS - Standards subscribed to by members of the National Association of Realtors.
COLLATERAL - Property pledged to secure a loan.
CO-MAKER - Also known as a co-borrower. Equally responsible for repayment as the borrower.
COMMERCIAL PROPERTY - Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments.
COMMISSION - Fee paid to a broker or other entity for services rendered. Real estate brokers and mortgage brokers receive a commission for the services they provide; a real
estate broker secures a buyer for a property that is for sale and a mortgage broker secures a mortgage loan for the buyer to finance the purchase of a property. Commissions are
generally paid as a percentage of the sales price in a real estate transaction or the loan amount in a mortgage transaction.
COMMITMENT - A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with
specific terms or conditions.
COMMON LAW - Rules based on usage as demonstrated by decrees and judgments from the courts.
COMMUNITY PROPERTY - Property owned jointly by husband and wife.
COMPARABLES - Properties which are similar in value to a particular property and are used as comparisons to determine the fair market value of a specified 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.
CONDITIONAL COMMITMENT - A lenders promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.
CONDITIONAL OFFER - Purchase offer in which the buyer proposes to purchase property only after certain events (sale of another home, finding a loan commitment, etc.) occur.
CONDOMINIUM - A system of individual fee simple ownership of portions (units) in a multi-unit structure, combined with joint ownership of common areas. Each individual may
sell or encumber his own unit.
CONSIDERATION - Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.
CONSTRUCTION LOAN - A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.
CONTINGENCY - Condition which must be satisfied before the buyer can consummate the purchase of a property. Contingencies are generally outlined in the purchase contract
between the buyer and seller.
CONTRACT OF PURCHASE - An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract.
In Texas it is known as an Earnest Money Contract.
CONTRACT OF SALE - A purchase transaction in which the buyer receives possession of the property, but the seller retains title.
CONTRACT SALES PRICE - The full purchase price as stated in the contract.
CONVERTIBLE ARMs - ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note
and has certain restrictions.
CONVENTIONAL LOAN - Also known as a conventional mortgage. A non-government loan provided by banks, savings and loans, mortgage bankers and mortgage brokers.
COOPERATIVE HOUSING (CO-OP) - An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is
operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchase stock in the
corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy
his unit for as long as he owns the stock.
COST BASIS - Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any
depreciation claimed on tax returns over the years.
COST PLUS CONTRACT - A building contract setting the builder's profit at a set percentage of actual cost of labor and materials.
COUNTEROFFER - A new offer made as a result of another offer, which cancels the original offer
COUNTY - A division within a state, usually encompassing one or more cities or towns.
COVENANT - A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural
controls and maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner's association.
CREDIT APPROVAL - Decision by the lender given after they review the borrower's credit history and any additional supporting information provided. The approval is usually
a conditional credit approval. Conditional credit approval is subject to a satisfactory title review and appraisal of the property that will secure the loan with no substantial
changes prior to closing. Generally, this will help shop for a home in a set price range and show sellers you are likely to have the funds necessary to purchase their home.
CREDIT LIMIT - The maximum amount that can be borrowed on a home equity line of credit or credit card.
CREDIT REPORT - A report documenting the credit history and current status of a borrower's credit standing.
CUSTOMER - Typically, the buyer (before buyer agency laws), as opposed to the principal (seller).
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DEBT-TO-INCOME RATIO (DTI) - The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net
effective income (FHA/VA loans) or gross monthly income (conventional loans).
DECLARATION OF RESTRICTIONS - A set of restrictions filed by a sub divider to cover an entire tract or subdivision.
DEDICATION - The voluntary giving of private property to some public use by the owner, as the dedication of land for streets, schools, etc., in a development.
DEED - Formal written document transferring title to real estate; a new deed is used for each transfer. 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 several
types of deeds like deed of trust, general warranty deed, quitclaim deed, and special warranty deed. Deeds are usually recorded at the courthouse providing public record of the
conveyance of the real property and available should the original deed become lost or damaged.
DEED OF TRUST - A voluntary lien to secure a debt deeding the property to a Trustee. In many states, this document is used in place of a mortgage to secure the payment of a
note.
DEED OF TRUST RIDER - The document required by the lender to be recorded along with the security instrument for a deed of trust.
DEED RESTRICTION - Restrictions placed on use of real property by writing in a deed to control use and occupancy of the property by future owners.
DEFAULT - Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.
DEFECTIVE TITLE - Title to real property which lacks some of the elements necessary to transfer good title. Title to a negotiable instrument obtained by fraud.
DEFERRED INTEREST - When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the
loan balance.
DEFICIENCY JUDGEMENT - Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the loan(s) and accrued interest.
DELINQUENCY - Failure to make payments on time. This can lead to foreclosure.
DELIVERY - The final, unconditional and absolute transfer of a deed to the Grantee so that the Grantor may not revoke it. A Deed, signed but held by the Grantor, does not
pass title.
DEPARTMENT OF VETERANS AFFAIRS - An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.
DEPOSIT - Also called Earnest Money Deposit, the deposit is 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
deposit will be forfeited to the seller unless the purchase contract expressly provides conditions for its return to the buyer.
DEPRECIATION - Decrease in value to real property improvements due to wear and tear, adverse changes in the neighborhood, or any other reason.
DIRECT ENDORSEMENT - A lender that can complete the processing and closing of an FHA loan without prior approval from FHA.
DIRECT REDUCTION MORTGAGE - An amortized mortgage in which principal and interest are computed on the remaining balance.
DISBURSEMENTS - Payments made during the course of an escrow or at closing.
DOCUMENTARY TAX STAMPS - Stamps affixed to a deed showing the amount of transfer tax. The documentary tax is based on X dollars for each thousand dollars of the selling price.
DOWER - The rights of a widow to a portion of her deceased husband's property.
DOWN PAYMENT - Cash to be paid by the buyer at closing to consummate a real estate transaction. Down payment is the difference between the sales price and the mortgage amount.
Buyer cash required at closing includes the down payment, closing costs and prepaid expenses.
DUE-ON-INTEREST - A clause inserted in a mortgage that allows the lender to call the loan due and payable at its option upon the transfer of the property also known as
paragraph "17" in FNMA / FHLMC Mortgage.
DUE-ON-SALES CLAUSE - A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder
sells the home.
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EARNEST MONEY - The earnest money is 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 deposit
will be forfeited to the seller unless the purchase contract expressly provides conditions for its return to the buyer.
EASEMENT - The right to use the land of another for a specific limited purpose.
ECONOMIC OBSOLESCENCE - Impairment of desirability or useful life arising from economic forces, such as changes in optimum land use, legislative enactments which restrict
or impair property rights and changes in supply-demand relationships. Loss in the use and value of property arising from the factors of economic obsolescence is to be distinguished
from loss in value from physical deterioration and functional obsolescence.
EMINENT DOMAIN - A government right to acquire private property for public use by condemnation and the payment of just compensation.
ENCROACHMENT - Unauthorized intrusion of a building or improvement such as a wall, fence, etc. onto another's land.
ENCUMBRANCE - A legal right or interest in land that affects a good or clear title and may diminish 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 covenants. An encumbrance does not legally prevent
the transfer of real property. It is up to the buyer to determine whether to purchase with the encumbrance.
ENTITLEMENT - The VA home loan benefit is called entitlement. This entitlement is for a VA guaranteed home loan. This is also known as eligibility.
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 - The value an owner has in real estate over and above the obligation against the property.
EQUITY LOAN - An installment loan or revolving line of credit that allows you to borrow money against the portion of your home that you already own (your equity).
Generally the interest paid on equity loans is tax deductible.
ESCROW - The deposit of instruments and/or funds into the care of a neutral third party with instructions to carry out the provisions of an agreement or contract
once all instruments and/or funds have been deposited. Many closings are handled by escrow agents. In this situation, the seller deposits the deed and the buyer deposits
the funds necessary with the escrow agent. Once all requirements of the purchase contract are in the control of the escrow agent, the money and deed are distributed accordingly.
ESCROW PAYMENT - Also known as impounds in some states. That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, mortgage insurance,
hazard insurance, lease payments and other items as they become due.
ESCROW REIMBURSEMENT - The buyer reimburses the seller for the current balance of his escrow (or impounded) funds.
ESTIMATED CLOSING COSTS STATEMENT - The statement which lists the financial settlement between buyer and seller and the costs each must pay. A separate statement for
buyer and seller is sometimes prepared.
ESTOPPELS - An impediment to a law of action, whereby one is forbidden to contradict or deny one's own previous statement or act.
EXCLUSIVE AGENCY - Real estate agency with exclusive right-to-sell a property.
EXCLUSIVE RIGHT-TO-SELL - Listing agreement under which the owner promises to pay a commission if the property is sold during the listing period by anyone, even the owner.
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FANNIE MAE - see FEDERAL NATIONAL MORTGAGE ASSOCIATION.
FARMERS HOME ADMINISTRATION (FmHA) - Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FREDDIE MAC/FHLMC) - A government sponsored agency that is also a publicly traded company on the New York Stock Exchange that purchases
mortgage loans from mortgage bankers and financial depository institutions. FHLMC is a major secondary market investor.
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.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FANNIE MAE/FNMA) - FNMA is one of the major secondary market investors that purchases loans from mortgage companies and other
depository institutions. The company is a private corporation and its stock is traded on the New York Stock Exchange.
FEDERAL RESERVE BANK - The regulatory agency for certain commercial banks and bank holding companies. Sets monetary policy for the country and provides liquidity for
supervised financial institutions.
FEDERAL TAX LIEN - A lien attached to property for nonpayment of a federal tax.
FEDERAL TAX RETURN - The U.S. government's method to identify individual and company's annual tax responsibility. The tax returns identify the income and taxes.
FEE SIMPLE - Highest possible degree of ownership of land. The estate allows owners to have unrestricted powers to dispose of property, and which can be left by will or
inherited.
FHA LOAN - A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous
enough to handle moderately-priced homes almost anywhere in the country.
FHA MORTGAGE INSURANCE - The amount the FHA charges upfront when they insure a FHA loan.
FIDUCIARY - A person in a position of trust or responsibility with specific duties to act in the best interest of a client. Real estate brokers and mortgage brokers are
fiduciaries.
FINANCIAL DEPOSITOR INSTITUTIONS - Banks, savings and loans or credit unions.
FIRM COMMITMENT - A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.
FIRST MORTGAGE - Mortgage holding priority over the claims of subsequent lenders against the same property.
FIXED RATE - An interest rate that does not change from the time you obtain a loan until it is paid in full.
FIXED RATE MORTGAGE - The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.
FIXTURE - Personal property affixed to structures or land, usually in such manner that they cannot be independently moved without damage to themselves or the property housing,
supporting, or pertinent to them. Varies under state laws.
FORECLOSURE - A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also
known as a repossession of property.
FREDDIE MAC - See Federal Home Loan Mortgage Corporation.
FULL DISCLOSURE - Revealing all known facts which may affect the decision of a buyer or tenant.
FUNCTIONAL OBSOLESCENCE - Impairment of functional capacity or efficiency. For example, homes without indoor plumbing (while they may contain working
outdoor plumbing facilities) are considered functionally obsolete.
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GENERAL LIEN - A lien such as a tax lien or judgment lien, which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only
to a specific property.
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.
GOOD FAITH ESTIMATE - A document provided at application and closing of installment equity loan that provides estimates of all closing costs associated with obtaining and
closing a mortgage loan.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA/GINNIE MAE) - A government owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA guarantees the timely
principal and interest payments to investors.
GRANDFATHER CLAUSE - The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer
permissible.
GROUND RENT - Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only.
GRADUATED PAYMENT MORTGAGE (GPM) - A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage
has negative amortization built into it.
GRANTEE - The buyer, who receives a deed.
GRANTOR - The seller, who gives a deed.
GUARANTY - A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.
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HAZARD INSURANCE - A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.
HEIRS AND ASSIGNS - One who might inherit or succeed to an interest in a property under the rules of law applicable when a property owner dies.
HOMEOWNERS ASSOCIATION - An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.
HOMEOWNER'S POLICY - Policy which expands the insurance for a homeowner. It may include theft, liability, earthquake, etc.
HOMEOWNER'S OR MAINTENANCE FEES - Payments made by property owner(s) of a condominium or a unit in PUD to the homeowners' association for expenses incurred in upkeep of
the common areas.
HOMESTEAD - Tract of land occupied as a family home.
HOUSING AND URBAN DEVELOPMENT (HUD) - The federal government agency that oversees FHA.
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).
HUD 1 - A closing document required by HUD that outlines the settlement cost of a loan. The closing agent generally prepares the document and buyer receives it shortly after
the loan is closed.
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IMPOUND - That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other
items as they become due. Also known as reserves.
IMPOUND ACCOUNT - Account held by a lender for payment of taxes, insurance or other related expenses. Also known as an escrow account.
IMPROVEMENT - Valuable additions to property which raise the value of the property.
INCIDENTALS - (Recording, Delivery, Wire, etc.) - Fees and other costs that are incurred when a real estate loan is closed.
INDEX - 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 U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly
average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.
INSTALLMENT SALE - A tax term used to describe a sale which is usually accomplished by use of a land contract.
INSURED MORTGAGE - A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the mortgaged property to satisfy the balance owing plus
cost of foreclosure.
INTEREST - The sum paid for borrowing money.
INTEREST-ONLY LOAN - This type of mortgage works best for people with fluctuating income from commissions or bonuses, or for those who expect to earn more money over the next
few years. Borrowers pay only the interest on these loans for a fixed period of time, usually five or seven years.
INTEREST PAYMENT NOTIFICATION (1098) - A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year.
INTEREST RATE - The percentage of an amount of money which is paid for its use for a specified time.
INTERIM FINANCING - A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion
INVESTMENT PROPERTY - A property that is not occupied by the owner and in most cases produces income or is held for gains from appreciation.
INVESTOR - A money source for a lender.
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JOINT OWNERSHIP AGREEMENT - An agreement between owners defining their rights, ownership, monetary obligations and responsibilities. This could be between an investor and an occupant or the occupants. If an investor is involved, the investor does not take depreciation deductions and none of the occupant's payment is deemed rent for tax purposes.
JOINT TENANCY - An undivided interest in property taken by two or more joint tenants. The interests must equal, accruing under the same conveyance and beginning at the same time.
Upon death of a joint tenant, the interest passes to the surviving joint tenants rather than to the heirs of the deceased.
JUDGEMENT - The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.
JUMBO LOAN - A loan which is larger than the limits set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
JUNIOR MORTGAGE - A mortgage subordinate to another mortgage.
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KHAM - Abbreviation referring to K. Hovnanian American Mortgage, LLC.
KHOV - Abbreviation referring to K. Hovnanian et. al.
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LAND - In a legal sense, the solid part of the surface of the earth, as distinguished from water; any ground, soil or earth whatsoever regarded as the subject of ownership
and everything annexed to it, whether by nature, e.g., trees and everything in or on it, such as minerals and running water, or annexed to it by man; e.g., buildings, fences, etc.
In an economic sense, land consists of all those elements in the wealth of a nation which is supposed to be furnished by nature as distinguished from those improvements which owe
their value to the labor and organizing power of man.
LAND CONTRACT - Installment plan for buying a house. It is used as an alternative to obtaining a loan from a traditional, source such as a mortgage banker or savings and loan.
LATE CHARGE - A penalty for failure to pay an installment on time.
LATENT DEFECT - Hidden structural defect.
LEASE WITH OPTION TO PURCHASE - A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of
the lease period.
LEGAL DESCRIPTION - An expanded and unique description of a property that is used on legal documents, such as deeds and deeds of trust. Recorded documents generally require a
legal description.
LENDER - A general term encompassing all mortgages, and beneficiaries under deeds of trust.
LENDER'S INSTRUCTIONS - A document that lenders prepare for the closing agent that outlines the requirements for loan closing.
LESSEE - One who possesses the right to use or occupy a property under lease agreement.
LESSOR - One who holds title to and conveys the right to use and occupy a property under lease agreement.
LETTER OF INTENT - A formal method of stating that a prospective developer, buyer or lessee is interested in property.
LIEN - An encumbrance against property for the payment of debt; a lien may be a mechanic's lien, mortgage, unpaid taxes or judgment.
LIMITED PARTNERSHIP - A partnership consisting of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, who
contributes capital and are liable only to the amount contributed.
LIS PEN DENS - A public notice that litigation is pending on a property.
LISTING - A record of property for sale by a broker who has been authorized by the owner to sell. Also used to denote the property so listed.
LISTING AGREEMENT - Agreement between a property owner and a real estate broker, authorizing the broker to find a buyer for the property. If the sale is consummated, the
listing broker will be paid a fee.
LOAN DISCOUNT/PREMIUM FEES - Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to the yield requirement of the investor. Loan discount denotes an
investor yield requirement higher than the note rate. Loan premium denotes an investor yield requirement lower than the note rate.
LOAN LOCK - Guarantee from a lender that a borrower will receive the interest rate in effect at the time of loan application.
LOAN OFFICER - A person that helps borrowers through the loan selection, processing, and closing of a mortgage loan. Loan officers can be paid a commission or salary for their
services and can work for mortgage brokers, mortgage bankers, or depository institutions.
LOAN ORIGINATION FEES - The cost to obtain a loan that is paid to the originating lender or broker.
LOAN PACKAGE - The information regarding a borrower and property necessary which is the basis for a lender's credit decision to extend or deny credit.
LOAN RATIO - The amount of a loan to the value or selling price of real property.
LOAN SERVICING - The function of collecting loan payments, managing the property tax and insurance escrows, foreclosing on defaulted loans and remitting payments to the
investor/beneficiary.
LOAN-TO-VALUE RATIO (LTV) - The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
LOW-DOC/NO-DOC MORTGAGES - This is a good option for borrowers who are self employed and/or have credit issues but a lot of cash. Lenders typically look for two of three
requirements for these loans: assets, income and credit.
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MARGIN - The fixed amount added to the index to determine the APR to be charged. Example: Prime + 2%
MARKET PRICE - The price paid for a property; the amount of money that must be given or which can be obtained at the market in exchange under the immediate conditions existing
at a certain date. To be distinguished from market value.
MARKET VALUE - The highest price estimated in terms of money which a buyer would be warranted in paying and a seller justified in accepting, provided both parties were
fully informed, acted intelligently and voluntarily and, further, that all the rights and benefits inherent in or attributable to the property were included in the transfer.
MARKETABLE TITLE - A title that is free and clear of objectionable liens, clouds or other title defects. A title which enables an owner to sell his property freely to
others and which others will accept without objection.
MARKETING - The management process through which efforts to conceive, develop and deliver goods and services are integrated to satisfy the needs and wants of selected
customers as a means of achieving company objectives.
MECHANICS LIEN - A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction
or repair of improvements to land.
MISREPRESENTATION - False statement made to or concealment of knowledge from another party with the intent to provoke action from that party.
MORTGAGE - A voluntary lien filed against property to secure a debt, usually a loan. To foreclose, the lender must often institute a court action and the borrower may have the
right to reclaim the property after foreclosure.
MORTGAGE BANKER - Financial intermediaries that originate mortgage loans through loan officers or independent mortgage brokers and sell the mortgages into the secondary
mortgage market.
MORTGAGE BROKER - A professional that helps consumers through the loan selection, processing and closing of a mortgage loan. Most mortgage brokers have access to a wide range
of mortgage products through many mortgage lenders. Mortgage brokers are paid a fee by the borrower when a suitable mortgage is found and closed.
MORTGAGE COMMITMENT - A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a
house.
MORTGAGE INSURANCE - Money paid to insure the mortgage when the down payment is less than 20 percent.
MORTGAGE INSURANCE PREMIUM (MIP) - The amount the FHA charges up front when they insure a loan under of their programs.
MORTGAGE NOTE - The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps for ARMs, the name of the lender and the borrower,
and any other material item required by the lender.
MORTGAGE WAREHOUSING - A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans which are sold to an investor shortly thereafter. The
mortgage notes are used as collateral for this interim financing.
MORTGAGEE - The lender of money or the receiver of the mortgage document.
MORTGAGOR - The borrower of money or the giver of the mortgage document.
MULTIPLE LISTING SERVICE (MLS) - A means of making possible the orderly dissemination and correlations of listing information to its members so that REALTORS may better serve the
buying and selling public.
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NATIONAL ASSOCIATION OF REALTORS - The association of REALTORS dedicated to the protection and the preservation of the free enterprise system and the right of the individual to
own real property as guaranteed by the Constitution of the United States of America. Each member of the NATIONAL ASSOCIATION OF REALTORS must adhere to a strict Code of Ethics and
Standards of Practice designed to provide assurances to the public of the REALTORS integrity and professionalism.
NEGATIVE AMORTIZATION - Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of
the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
NEGOTIABLE RATE MORTGAGE (RBM) - A loan in which the interest rate is adjusted periodically. More commonly called an adjustable rate mortgage.
NET EFFECTIVE INCOME - The borrower's gross income minus federal income tax. Used in FHA/VA loans to compute debt-to-income ratios.
NET LISTING - An arrangement whereby the Broker receives as commission all monies received above a minimum sales price agreed to by the owners and the Broker.
NON-CONFORMING LOAN - Loans that are above the loan limits set by FNMA and FHLMC. Also known as jumbo loans.
NON-CONFORMING USE - A property which does not conform to the zoning of an area.
NOTE - A written promise to pay a certain sum of money at a certain time. A negotiable note starts "Pay to the order of" and is transferable by endorsement similar to a check.
NON-ASSUMPTION CLAUSE - A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.
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OBSOLESCENCE - Impairment of desirability and usefulness brought about by changes in the art, design or process or from external influencing circumstances that make a property
less desirable and valuable for a continuity or use.
OFFER - A promise by one party to do a specified deed as the other party in turn performs a specific deed.
OFFICE OF COMPTROLLER CURRENCY - A federal government regulatory agency that oversees some commercial banks.
OFFICE OF THRIFT SUPERVISION - A federal government regulatory agency that oversees savings and loans.
OPEN END MORTGAGE - A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions.
OPEN LISTING - An authorization given by a property owner to a real estate Broker wherein said Broker is given the nonexclusive right to secure a purchaser; open listings may
be given to any number of Brokers without liability to compensate any except the one who first secures a buyer ready, willing and able to meet the terms of the listing, or secures
the acceptance by the seller of a satisfactory offer.
ORIGINATION FEE - A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.
OWNER OF RECORD - The individual(s) named on a deed that has been recorded at the local municipality.
OWNERS POLICY - Title insurance for the owner of property, rather than a lien holder.
OWNERSHIP - The right to possess and use property to the exclusion of others.
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P & I - Principal and interest. Does not consider taxes and insurance which are a required part of the monthly loan payment.
PACKAGE MORTGAGE - Mortgage covering both real and personal property.
PAPER - A mortgage, deed of trust or land contract which is given instead of cash.
PARTIAL RELEASE - A release of a portion of property covered by a mortgage.
PERMANENT MORTGAGE - A mortgage on completed construction on the same property under one mortgage or trust deed.
PERSONALITY - Property which is movable. All property is either personality, realty or mixed.
PHYSICAL DEPRECIATION - A term that is frequently used when physical deterioration is intended. In a broad concept it may relate to those elements contributing to depreciation
that are existent or inherent in the physical property itself, as distinguished from other and external circumstances that may influence its utilization. Not a clear or proper them
without qualification and explanation.
PITI - Abbreviation for principal, interest, taxes and insurance, often combined in a single monthly mortgage payment.
PLANNED UNIT DEVELOPMENT (PUD) - A housing development where there is a homeowners association and common areas owned by the homeowners.
PLAT - A map or chart of a lot, subdivision or community, showing boundary lines, buildings and easements.
PMI - Abbreviation for private mortgage insurance: insurance issued by a company, which insures the lender against loss in the event that the borrower defaults on the mortgage.
POINTS - Origination fees charged by the originating lender or broker and/or discount fees charge by lenders to increase the overall yield. A point is equal to one percent of
the principal amount of your mortgage.
PORTFOLIO LOAN - Loans held as an investment by a bank, savings and loan or credit union.
POWER OF ATTORNEY - A written instrument authorizing a person to act as the agent of the person granting it, and a general power authorizing the agent to act generally in
behalf of the principle. A special power limits the agent to a particular or specific act as: a landowner may grant an agent special power of attorney to convey a single and
specific parcel of property. Under the provisions of a general power of attorney, the agent having the power may convey any or all property of the principal granting the general
power of attorney..
PREPAID INTEREST - Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on
the 15th of the month and the first payment is due 45 days later, the lender will charge 15 days of prepaid interest.
PREPAID ITEMS OF EXPENSE - Perorations of prepaid items of expense which are credited to the seller in the closing statement.
PREPAYMENT - Full payment of the principal before the due date; occurs when a property is sold or the borrower refinances the existing loan.
PRE-PAYMENT PENALTY - An additional charge imposed by the lender for paying off a loan before the due date.
PRE-QUALIFICATION - A lender's written opinion of a borrower's ability to qualify a specified loan amount.
PRIMARY MORTGAGE MARKET - Lenders making mortgage loans directly to borrower's such as savings and loan associations, commercial banks, and mortgage companies. These lenders
sometimes sell their mortgages into the secondary mortgage markets.
PRIMARY RESIDENCE - Considered the permanent location of residency.
PRINCIPAL - 1) The outstanding balance of a loan. 2) A party to a real estate transaction. 3) The head of a real estate firm.
PRIVATE MORTGAGE INSURANCE (PMI) - In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases.
With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance.
PROCESSING, UNDERWRITING AND DOCUMENT FEES - Charges for the lender's services associated with making the loan.
PROPERTY - 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, personal property and real property.
PROPERTY TAX - A tax levied by the local municipality or county on real and personal property.
PRORATE - To divide in proportionate shares, such as taxes, insurance, rent, or other items.
PRORATIONS - The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing.
PUD (PLANNED UNIT DEVELOPMENT) - A housing development where there is a homeowners association and common areas owned by the homeowners.
PURCHASE MONEY MORTGAGE - A mortgage used to finance the purchase of real property.
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QUITCLAIM DEED - A deed releasing whatever interest you may hold in a property but making no warranty whatsoever.
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RATIO - Ratios are used to determine a borrower's ability to repay a loan. This ratio usually compares the borrower's fixed monthly expenses to their
gross monthly income, and certain lenders have different ratio requirements. For example, the FHA requires a monthly mortgage payment of no more than 29% of
monthly gross income, and that the total mortgage payment and non-housing debt is less than 41% of income.
REAL ESTATE - Land and anything permanently affixed to the land and those things attached to the building.
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.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) - RESPA is a federal law that allows consumers to review information on known or estimated settlement costs
once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.
REAL ESTATE TAX - A pecuniary charge laid upon real property for public purposes.
REALTORŪ - A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of
Realtors.
REALTOR ASSOCIATE - Salesperson associated with a broker who is a member of a the NATIONAL ASSOCIATION OF REALTORS.
REALTY - A synonym for real estate.
RECISION - 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.
RECITAL - Setting forth in a deed or other writing some explanation for the transaction.
RECORDING - The act of writing or entering an instrument in a book or public record, usually in the office of the county clerk and recorder. Such
recording constitutes notice to all persons of the rights or claims contained in the instrument. This type of notice is called "constructive notice" or "legal
notice."
RECORDING FEES - Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.
RECOURSE - The right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment.
REFINANCE - Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.
REFINANCING - The repayment of a debt from the proceeds of a new loan using the same property as security.
REISSUE RATE - A charge for a title insurance policy if a previous policy on the same property was issued within a specified period of time. Reissue is
less than the original charge.
RELEASE - An instrument releasing property from the lien of the mortgage, judgment, etc.
RESPA) - See REAL ESTATE SETTLEMENT PROCEDURES ACT.
RESTRICTIVE COVENANTS - 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 be binding only between the original seller and buyer.
REVERSE ANNUITY MORTGAGE - Form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as
Satisfaction of Mortgage.
REVERSE MORTGAGE - a home loan that gives cash advances to a homeowner, requires no repayment until a future time, and is capped by the value of the home
when the loan is repaid.
RIGHT OF RECISSION - a borrower's right to cancel a home loan within three business days of the closing.
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SALES AGREEMENT - See agreement of sale.
SATISFACTION OF MORTGAGE - Document issued by mortgagee when the mortgage is paid off.
SECOND HOME - Commonly known as a vacation home. This home is not rented and is occupied occasionally by the owners.
SECOND MORTGAGE - A mortgage made subsequent to another mortgage and subordinate to the first one.
SECONDARY FINANCING - A loan secured by a mortgage or trust deed, which lien is junior to another mortgage or trust deed.
SECONDARY MARKET - The buying and selling of mortgage notes between sophisticated investors such as pension funds, commercial banks, savings and loans
and wall street firms.
SECONDARY MARKET INVESTOR - An entity, such as FNMA or FHLMC, that buys mortgage loans for investment or sells them again to another secondary market
investor. Secondary market investors do not service loans and do not collect payments from borrowers.
SECURITY - Real or personal property pledged by a borrower as additional protection for the lender's interest.
SELLER'S BROKER - Agent who takes the seller as a client, is legally obligated to a set of fiduciary duties and is required to put the seller's
interests above all other's.
SEPTIC TANK - An Underground tank in which sewage from the house is reduced to liquid by bacterial action and drained off.
SERVICING - All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance,
property inspections and the like.
SET BACK ORDINANCE - Regulates the distance from the lot line to the point where improvements may be constructed.
SETTLEMENT - See "closing".
SETTLEMENT COST, A HUD GUIDE - This booklet gives an overview of the lending process and is required by HUD. It is provided to consumers after the loan
application is completed.
SETTLEMENT STATEMENT - A statement prepared by broker, escrow or lender giving a complete breakdown of the cost associated with a real estate
transaction.
SHERIFF'S DEED - A deed given at the sheriff's sale in foreclosure of a mortgage.
SIMPLE INTEREST - Interest which is computed only on the principle balance.
SINGLE FAMILY DETACHED HOME - A residential home that is not attached physically to another home.
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.
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.
SPECIFIC PERFORMANCE - Lawsuit requesting that a contract be exactly carried out, usually asking that the seller be ordered to convey the property as
previously agreed.
STANDARD UNIFORM APPLICATION - An application developed by FNMA and FHLMC that is widely used in the mortgage industry.
STATE AND LOCAL HOUSING PROGRAMS - Unique housing finance programs to assist first time home buyers and low to moderate housing groups. Each state and
local group has different sets of criteria.
STATUTE OF FRAUDS - The law requires that certain contracts, such as agreements of sale, to be in writing in order to be enforceable.
STATUATORY LIEN - An involuntary lien, includes tax liens, judgment liens, mechanic liens, etc.
SUBSTITUTE OF TRUSTEE - A document which is recorded to change the trustee under the deed of trust.
SURVEY - A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions,
and the location and dimensions of any buildings as well as their relationships to the property surrounding them.
SURVIVORSHIP - All rights of a joint tenant passes to the surviving joint tenant.
SWEAT EQUITY - Equity created by the labor of the purchaser or borrower that increases the value of the property.
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TAX - Tax as applied to real estate is an enforced charge imposed on persons, property, or income to be used to support the State. The governing body
in turn utilizes the funds in the best interest of the general public.
TAX LIEN - Lien for nonpayment of taxes.
TAX SALE - Public sale of property at an auction by a governmental authority, due to non payment of property taxes.
TENANCY - A holding, as of land, by any kind of title, occupancy of land, a house or the like under a lease or on payment of rent or tenure.
TENANCY AT WILL - A tenancy which may be terminated at the will of either the Lessor or lessee.
TENANT - Any person in possession of real property with the permission of the owner.
TENANT IN COMMON - Two or more persons own the property with no right of survivorship. If one dies, his interest passes to his heirs, not necessarily
the co-owner. Either party, or a creditor of one, may sue to partition the property.
TENANTS BY THE ENTIRETY - A husband and wife own the property with the common law right of survivorship so, if one dies, the other automatically inherits.
TESTATE - Having made a will before death.
TIME IS OF THE ESSENCE - Legal phrase in a contract requiring punctual performance of all obligations.
TITLE - Document that gives evidence of an individual's ownership of property
TITLE, ESCROW AND CLOSING AGENT FEES - These companies charge various fees for their services.
TITLE INSURANCE - An insurance policy which protects the insured (purchaser and lender) against loss arising from defects in title.
TITLE SEARCH - A review of the public 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 covenants filed in the records, which would adversely affect the
marketability or value of title.
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.
TRUTH-IN-LENDING ACT (TILA) - Federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan.
TRUTH IN LENDING STATEMENT (REGULATION Z) - A federal government regulation that provides details of the cost of obtaining a mortgage loan. Lenders must
provide this shortly after the loan application has been completed.
TWO-STEP MORTGAGE - Mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often 7 or 10), and then
receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with
30 days notice at the end of 7 or 10 years.
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UNDERWRITING - The process a lender goes through to decide whether or not to make a loan based on credit history, assets, ability to repay, and
other factors and the matching of this risk to an appropriate rate and term or loan amount.
USURY - Interest charged in excess of the legal rate established by law.
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VA LOANS - Long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service
or other entitlements.
VA MORTGAGE FUNDING FEE - The VA Funding Fee is required by law and enables the Veteran who obtains a VA home loan with low or no downpayment to contribute
toward the cost of this benefit, and thereby reducing the cost to taxpayers. The Funding Fee can be financed and the percentage is based on the type and length of time
in the service, in addition to being a first time user or subsequent user.
VALUATION - The act or process of estimating value; the amount of estimated value.
VARIABLE RATE - An interest rate that may change periodically in relation to an index. Rates could increase or decrease according to market conditions.
VERIFICATION OF DEPOSITS (VOD) - Document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.
VERIFICATION OF EMPLOYMENT (VOE) - Document signed by the borrower's employer verifying his/her position and salary.
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W2 FORM - Income tax form that is provided by employers to employees that states the income and taxes paid in a calendar year.
WAREHOUSE FEE - Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage
market (or to investors). When the prime rate of interest is higher on short term loans than on mortgage loans, the mortgage firm has an economic loss which is
offset by charging a warehouse fee.
WARRANTY DEED - Most valuable type of deed in which the grantor makes formal assurance of title.
WRAPAROUND - The debt secured includes an existing debt already on the property. The payments made to the holder of the wraparound include payments due on
the existing loan and the holder must forward the appropriate portion of each payment to the existing noteholder.
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YIELD - The interest earned by an investor on his investment (or bank on the money it has lent). Also called Return.
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ZONING ORDINANCES - The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.
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