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Click on a letter or scroll down to a term below
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A
Abstract of Judgment - The summary of
a court judgment that creates a lien against a
property when filed with the county recorder
Abstract of Title - historical summary
of all of the recorded instruments and proceedings
that affect title to a property.
Accelerated Cost Recovery System - A tax
calculation that provides greater depreciation
in the early years of ownership of real estate
or personal property.
Acceleration Clause - a loan provision
giving the lender the right to declare the entire
amount immediately due and payable upon violation
of another specific loan provision, commonly referred
to as the Due on Sale Clause.
Acceptance - a buyers or sellers agreement
to enter into a contract and be bound by the terms
of the offer.
Accrued Interest - interest that has been
earned but not paid.
Accumulated Depreciation - in accounting,
the amount of depreciation expense that has been
claimed to date.
Acknowledgment - a declaration by a person
who has signed a document that such signature
is a voluntary act, made before a duly authorized
person.
Acquisition Cost - the price and all fees
required to obtain a property.
Acquisition Loan - money borrowed for
the purpose of purchasing a property.
Acre - a two dimensional measure of land
equaling 4,840 square yards or 43,560 square feet.
Addendum - something added as an attachment
to a contract.
Additional Principal Payment - Extra money
included in the monthly payment to help reduce
the principal and shorten the term of the loan.
Adjoining - contiguous, attached, sharing
a common border.
Adjustable Rate Mortgage (ARM) - a mortgage
loan that allows the interest rate to be changed
at specific intervals over the maturity of the
loan, based on a monitored index.
Adjusted Cost Basis - The cost of any
improvements the seller makes to the property.
Deducting the cost from the original sales price
provides the profit or loss of a home when it
is sold.
Adjusted Tax Basis - the original cost
or other basis of the property, reduced by depreciation
deductions and increased by capital expenditures.
Adjustment Period - The amount of time
between interest rate adjustments in an adjustable-rate
mortgage.
Administrator - a person appointed by
a court to administer the estate of a deceased
person who left no will.
Administrator\'s Deed - A legal document
that an administrator of an estate uses to transfer
property.
Adverse Possession - a means of acquiring
title to real estate where an occupant has been
in actual, open, notorious, exclusive and continuous
occupancy of property for the period required
by state law.
Affidavit - a written statement, sworn
to or affirmed before an officer who is authorized
to administer an oath or affirmation.
Agency - the legal relationship between
a principal and his agent arising from a contract
in which the principal engages the agent to perform
certain acts on behalf of the principal.
Agreement for Deed - see Contract for
Deed.
Alienation - to convey or transfer title
and possession of property.
All Inclusive Trust Deed - This applies
to states that use trust deeds instead of mortgages.
It is the same as a wraparound mortgage.
Amortized Loan - loan that is repaid in
a series of installments each of which contains
a portion that is applied to reduce the principal
amount of the loan and a portion that is applied
to pay interest with each successive payment allocates
a larger portion to principal reduction and a
smaller portion to interest payment until the
outstanding balance is ultimately reduced to zero.
Annual Cap - maximum amount the interest
rate on an adjustable rate mortgage can be raised
or lowered in the course of one twelve month period.
Annual Percentage Rate (APR) - effective
rate of interest rate for a loan per year including
fees and points, disclosure of which is required
by the Truth-in-Lending Law.
Anticipatory Breach - A communication
that informs a party that the obligations of the
original contract will not be fulfilled.
Appraised Value - opinion or estimate
of a value of a property, values are determined
by one of three methods: comparable sales (residential),
replacement cost (insurance), or income approach
(commercial).
Appreciation - an increase in the value
of a property.
Arrears - mortgage payment includes interest
for prior month, or overdue payments in default.
As-Is - without guarantees as to condition.
Assessed Value - the value established
for property tax purposes.
Assignee - the person to whom an agreement
or contract is sold or transferred.
Assignment - the method by which a right
or contract is transferred.
Assignor - the person who assigns or transfers
an agreement or contract to another.
Assumable Mortgage - An existing mortgage
which allows the next purchaser of a property
to be liable for the payments and other obligations
of the note and mortgage. Depending on the type
of loan, the assumption of the obligation by this
next purchaser may or may not require a qualification
and approval process and may or may not release
the original mortgagor (borrower) from further
liability. A written release from the mortgagee
(lender) is required to relieve the original mortgagor
of responsibility.
Attornment - A tenant\'s formal agreement
to be a tenant of a new landlord.
B
Backup Contract - a contract to buy real
estate that becomes effective if a prior contract
fails to be consummated.
Balance - see Principal Balance.
Balloon Loan - a loan that has level monthly
payments that will amortize it over a stated term
(e.g., 30 years) but that requires a lump sum
payment of the entire principal balance at the
end of a shorter term (e.g., 10 years).
Balloon Payment - An installment payment
which is larger (most often much larger) than
the other scheduled payments. It is usually the
last payment. If a note is written for $50,000
at a fixed 9.0% rate of interest with payments
based on an amortization schedule of 30 years
and a balloon payment due in 5 years, the first
60 payments will each be $402.31 (the normal payment
for a 30 year loan at 9.0% interest) and the last
payment will be $47,940.15 which will be the outstanding
balance remaining after the 60th payment.
Bankruptcy - the financial inability to
pay one's debts when due causes the debtor to
seek relief through court action.
Bankruptcy Discharge - the release of
a bankrupt party from the obligation to repay
debts that were or might have been proved in a
bankruptcy proceeding.
Basis Point - one 100th of 1%.
Beneficiary - the person who receives
or is to receive the benefits resulting from certain
acts.
Bilateral Contract - a contract under
which each party promises performance.
Bill of Sale - a written instrument given
to pass title of personal property.
Bird Dog - someone who identifies a potential
good real estate investment opportunity and passes
that deal on to another investor for a fee.
Biweekly Mortgage - A mortgage that requires
payments every two weeks and helps repay the loan
over a shorter term.
Blanket Mortgage - a single mortgage which
attaches to more than one property.
Board Of Equalization - A state board
charged with ensuring that local property taxes
are assessed in a uniform manner
Board of Realtors - a local group of real
estate licensees who are members of the state
and national association of Realtors.
Bond - (1) a written agreement purchased
from a bonding company that guarantees a person
will properly carry out a specific act, such as
managing funds, showing up in court, providing
good title to a piece of real estate or completing
a construction project. If the person who purchased
the bond fails at his or her task, the bonding
company will pay the aggrieved party an amount
up to the value of the bond.
Breach of Contract - a violation of the
terms of a legal agreement, default.
Bridge Loan - mortgage financing between
the termination of one loan and the beginning
of another loan.
Broker - An individual who acts as an
intermediary between two or more parties for the
purpose of negotiating a transaction agreeable
to all of the parties. In lending, the broker
arranges and negotiates loan amounts, interest
rates and loan terms between borrowers and lenders.
Depending on the type of loan, the state wherein
the transaction is occurring and contractual arrangements,
the broker may represent the borrower, the lender
or not have a fiduciary responsibility to either.
(See definition of "fiduciary responsibility"
below.).
Building Permit - permission granted by
a local government or agency to build a specific
structure at a specific site.
Bundle of Rights - ownership in real property
implies a group of rights, such as the right of
occupancy, use and enjoyment, the right to sell
in whole or in part, the right to control the
use, the right to bequeath, the right to lease
any or all of the rights, the right to the benefits
derived by occupancy and use of the property,
etc.
Buy Down - A payment of discounts points
in exchange for a lower rate of interest. It has
the effect of providing the lender with a greater
yield today in exchange for a lower yield in the
future. (See definition of "discount points" below.).
C
Call Option - A clause in a loan agreement
that allows a lender to ask for the balance at
any time.
Cancellation Clause - a contract provision
that gives the right to terminate the obligations
upon the occurrence of specified conditions or
events.
Cap - a provision of an adjustable-rate
mortgage (ARM) that limits how much the interest
rate or loan payments may increase or decrease.
In upward rate markets, it protects the borrower
from large increases in the interest rate or monthly
payment. See lifetime payment cap, lifetime rate
cap, periodic payment cap, and periodic rate cap.
Capital - (1) money used to create income,
either as an investment in a business or an income
property. (2) the money or property comprising
the wealth owned or used by a person or business
enterprise. (3) the accumulated wealth of a person
or business. (4) the net worth of a business represented
by the amount by which its assets exceed liabilities.
Capital Expenditure - the cost of an improvement
made to extend the useful life of a property or
to add to its value, such as adding a room. The
cost of repairing a property is not a capital
expenditure. Capital expenditures are appreciated
over their useful life; repairs are subtracted
from income for the current year.
Capital Improvement - any structure or
component erected as a permanent improvement to
real property that adds to its value and useful
life. (See Capital Expenditure).
Capitalization (Cap) Rate - rate of return
used to derive the capital value of an income
stream, divide annual income by net operating
income.
Carrying Charges - expenses necessary
for holding property, such as taxes and interest
on idle property or property under construction.
Cash Flow - The net operating income minus
the total of all debt service payments. (See definition
of "net operating income" below.)
Cash Flow Basis - this calculation shows
when your monthly payment savings exceed your
estimated closing costs and discount points. It
does not consider the tax impact or differences
in principal balance reduction between your current
loan and the refinance suggestions. You can use
the Amortization Schedule Calculator to compare
principal reduction.
Cash Out - Cash given to the borrower
from the proceeds of a loan. While relatively
common as part of a refinance, it is uncommon,
but not impossible, as a benefit of a small percentage
of non-conforming loans used for a purchase.
Cash-Out Refinance - a refinance transaction
in which the new loan amount exceeds the total
of the principal balance of the existing first
mortgage and any secondary mortgages or liens,
together with closing costs and points for the
new loan. This excess is usually given to the
borrower in cash and can often be used for debt
consolidation, home improvement, or any other
purpose. The borrower effectively borrows against
the home equity.
Caveat Emptor - let the buyer beware.
Certificate of Eligibility - issues by
the Veterans Administration to those who qualify
for a VA loan.
Certificate of Insurance - a document
issued by an insurance company to verify the coverage.
Certificate of Occupancy (C.O.) - a document
issued by a local government or agency permitting
the structure to be occupied by members of the
public.
Certified Commercial Investment Member (CCIM)
- a designation awarded by the Realtors National
Marketing Institute, which is affiliated with
the National Association of Realtors.
Certified Residential Broker (CRB) - a
designation awarded by the Realtors National Marketing
Institute, which is affiliated with the National
Association of Realtors.
Certified Residential Specialist (CRS)
- a designation awarded by the Realtors National
Marketing Institute, which is affiliated with
the National Association of Realtors.
Chain of Title - a history of conveyances
and encumbrances affecting a title from the time
that the original patent was granted or as far
back as records are available.
Clear Title - a marketable title, one
free of clouds and disputed interests.
Closing - The formal meeting where loan
documents are signed and funds disbursed. Note,
however, that Federal law requires that funds
not be disbursed for three business days on certain
loans where personal residences serve as the security.
(See definition of "recission" below.)
Closing Costs - The expenses which borrowers
incur to complete the loan transaction. These
costs may include title searches, title insurance,
closing fees, recording fees, processing fees
and other charges.
Closing Date - the date on which the seller
delivers the deed and the buyer pays for the property.
Closing Statement - an accounting of funds
from a real estate transaction, also known as
a HUD-1.
Cloud on Title - an outstanding claim
or encumbrance that, if valid, would affect or
impair the owner's title.
Coinsurance Clause - a provision in a
hazard insurance policy stating the minimum amount
of coverage that must be maintained - as a percentage
of the total value of the property - in order
for the insured to collect the full amount of
a loss.
Collateral - property pledged as security
for a debt.
Collectors Deed - If the Property has
not been redeemed during the one-year redemption
period, the holder of the Certificate of Purchase
may apply for and receive a Collectors Deed to
the property
Combined Loan-to-Value (CLTV) - The total
of all loans relative to the value of the property.
If a property has a value of $100,000 and three
loans totaling $125,000, the CLTV is 125% ($125,000
/ $100,000).
Commitment - The notification that a lender
has approved a loan. Virtually all commitments
are issued conditionally; that is, subject to
some list of conditions that must be satisfied
prior to funding actually taking place. Typical
conditions include appraisals of a certain value,
clean title, verification of representations by
the borrower, etc.
Comparable Sales - As part of the appraisal
process, those relatively recently sold properties
which will be compared to the subject property
(the property being appraised) for the purpose
of forming an opinion of value for the subject
property. The facts and details of the comparable
properties will be compared to those of the subject.
In an urban setting, to be of credible assistance
in this process, comparable sales must have the
same use as the subject, have many similarities
to the subject in terms of size of house, size
of lot, construction, bedroom count, room count,
floor plan, amenities, street traffic and be in
the same neighborhood and have been sold in the
recent past (preferably no more than six months)
by way of an "arms length" transaction (i.e.,
not sold to a relative or friend and not sold
due to a forced sale or distress sale) and be
within one mile of the subject property. More
liberal standards will apply for rural property
and some suburban properties but the basic premise
holds, the more similar the comparable sales are
to the subject property, the more accurate the
value assigned to the subject property will be.
Lenders will often compensate for the less precise
nature of rural appraised values by allowing only
lower loan-to-value ratios than those in urban
settings, usually 10% lower. (See definition of
"loan-to-value" below.)
Conditions, Covenants, and Restrictions (CCR's)
- promises written into deeds and other instruments
agreeing to performance or nonperformance of certain
acts, or requiring or prohibiting certain uses
of the property.
Conforming Loan - A loan which has underwriting
criteria consistent with (i.e., conforming to)
those strict guidelines of Fannie Mae, Freddie
Mac, FHA or VA. These are typically the lowest
interest rate loans with very good terms. (See
definitions of "Fannie Mae", "Freddie Mac", "FHA",
"VA" and "underwriting" below.).
Consideration - anything of value given
to induce entering into a contract.
Contiguous - actually touching, having
a common boundary.
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 - an agreement between competent
parties to do or not do certain things for consideration.
Contract For Deed - a real estate installment
selling arrangement whereby the buyer may use,
occupy, and enjoy land, but no deed is given by
the seller until all or a specified part of the
sale price has been paid, same as land contract.
Contractor - one who contracts to provide
specific goods or services.
Conventional Loan - A conforming loan
with no government guarantee; that is, a Fannie
Mae or Freddie Mac loan. (See definition of "conforming
loan" above.).
Conversion - changing property to a different
use or form of ownership.
Convey - to deed or transfer title to
another.
Cooperative (co-op) - a type of multiple
ownership in which the residents of a multi-unit
housing complex own shares in the cooperative
corporation that owns the property, giving each
resident the right to occupy a specific apartment
or unit.
Counteroffer - rejection of an offer with
a simultaneous substitute offer.
Creative Financing - any financing arrangement
other than a traditional mortgage from a third
party lending institution.
Credit Line - A loan that allows revolving
use of the credit; that is, after funds have been
borrowed and repaid they may be borrowed again
without applying for a new loan. Typically, a
credit limit is established and some or all of
the available funds can be optionally disbursed
at closing. Undisbursed funds are available for
the borrowers use at any time. Payments are required
only on the outstanding balance. They are similar
in use to a credit card except that they typically
use checks to access the funds. They are inexpensive,
effective tools for investors.
D
Dealer - one who holds real property
primarily for sale to customers, merchandise is
inventory and gain on sale is treated as ordinary
income.
Debt Coverage Ratio (DCR) - A ratio used
in underwriting loans for income producing property
which is created by dividing net operating income
by total debt service. Ratios of at least 1.10
are generally required with ratios of 1.20 and
higher considered the norm. (See definition of
"underwriting" below.).
Debt Ratio (DR, D:I) - Also known as debt
to income. The ratio of the total of minimum monthly
debt payments to gross monthly income. If minimum
monthly payments on a credit card, auto lease,
and mortgage (PITI) were $30, $220 and $750 respectively
and the gross monthly income was $3000, the debt
ratio would be 33.33% ($1000 / $3000). Only debt
obligations that will be in place after the loan
has funded are considered. Payments for food,
utilities, entertainment, medical bills, etc.
are not included in the calculation. Contractual
obligations for rent (e.g., a lease) would be
included in the calculation. The housing ratio
in this example would be 25.0% ($750 / $3000).
The preferred candidate for conventional loans
typically would have debt ratios of 28% for housing
and 36% for the total with the maximum ratios
allowed (on a case by case basis with compensating
factors; i.e., some other strong positive to offset
the negative of the higher debt ratio) being around
30% / 40% (housing / total). FHA and VA loans
allow a total of approximately 41.0%. Non-conforming
loans may allow total debt ratios as high as 55%
or so. True "hard money" loans seldom consider
debt ratios. (see definitions of "PITI", "Housing
Ratio", "Non-conforming Loan" below).
Decree - an order issued by one in authority,
a court order or decision.
Deed - written document, properly signed
and delivered, that conveys title to real property.
Deed in Lieu of Foreclosure - the act
of giving property back to the lender without
foreclosure.
Deed of Trust (DOT) - DOT's are similar
to mortgages in that they serve as security for
a loan by encumbering real estate. However, a
mortgage is between two parties (borrower and
lender) and a deed of trust involves three parties
(borrower, lender and trustee). The trustee holds
the property in trust as security for the payment
of the debt and can sell the property if the borrower
defaults.
Deed Restriction - see Conditions,
Covenants, and Restrictions.
Default - Failure to meet all of the commitments
and obligations specified in the mortgage or deed
of trust. Defaults usually give the lender the
right to accelerate payments and start foreclosure.
Defeasance - clause in mortgage that gives
the borrower the right to redeem the property
after default by paying the full indebtedness
and fees incurred.
Deferred Maintenance - a type of physical
depreciation due to lack of normal upkeep.
Deferred Payments - payments to be made
at some future date.
Deficiency Judgment - a court order stating
that the borrower still owes money when the security
for a loan does not entirely satisfy a defaulted
debt.
Density - the intensity of land use.
Density Test - An analysis of soil to
determine if the surface can support the foundation
of a house.
Depreciation Recapture - when real property
is sold at a gain and accelerated depreciation
has been claimed, the owner may be required to
pay tax at ordinary income rates to the extent
of the excess accelerated depreciation.
Discount Points - One point equals one
percent of the loan amount. Paying points has
the effect of giving the lender a higher yield.
Two points on a $100,000 mortgage would cost $2,000
($100,000 x 0.02).
Document Preparation - this fee covers
the expenses associated with this process of preparing
some of the legal documents that you will be signing
at the time of closing, such as the mortgage,
note, and truth-in-lending statement
Down Payment - The portion of the purchase
price paid by a buyer to a seller from sources
of funds outside of those provided by a lender.
Draw - a periodic advance of funds from
a lender.
Due Diligence - The act of carefully reviewing,
checking and verifying all of the facts and issues
before proceeding. In lending it is, among other
things, verification of employment, income and
savings; review of the appraisal; credit report;
and status of the title.
Due-on-Sale - see Acceleration Clause
- reservation of lender's right to call the loan
due and payable upon sale
of the property.
E
Earnest Money - a deposit made by a purchaser
of real estate to show good faith.
Easement - the right, privilege, or interest
that one party has in the land of another.
Easement by Necessity - the right of an
owner to cross over another's property for a special
necessary purpose.
Easement by Prescription - continued use
of another's property for a special purpose can
convert to permanent use if certain conditions
are met.
Egress - a means of access or exit.
Eminent Domain - the right of the government
or a public utility to acquire property for necessary
public use by condemnation, but the owner must
be fairly compensated.
Employer-Assisted Housing - a special
Fannie Mae housing initiative that offers several
different ways for employers to work with local
lenders to develop plans to assist their employees
in purchasing homes.
Encroachment - a building, part of a building,
or obstruction that physically intrudes upon,
overlaps, or trespasses upon the property of another.
Encumbrance - any right to or interest
in land that affects its value, including mortgage
loans, unpaid taxes, easements, junior liens,
or deed 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.
Equitable Conversion - a legal doctrine
in some states in which, under a contract of sale,
buyers and sellers are treated as though the closing
has taken place in that the seller in possession
has an obligation to take care of the property.
Equitable Title - the interest held by
one who has agreed to purchase, but has not yet
closed the transaction.
Equity - The value of the unencumbered
interest in real estate as determined by subtracting
the total of the unpaid mortgage balances plus
the sum of any current liens against the property
from the property's fair market value.
Escheat - the reversion of property to
the state in the event that the owner dies without
leaving a will and has no legal heirs.
Escrow - an agreement between two or more
parties providing that certain instruments or
property be placed with a third party for safekeeping,
pending the fulfillment or performance of a specified
act or condition.
Escrow Account - An account from which
funds can be disbursed only for specified reasons;
i.e. the money is held in trust for a specific
use. In lending, these accounts are most often
used to hold and disburse real estate taxes and
hazard insurance premiums which have been paid
in advance (usually on a monthly basis) by the
borrower.
Escrow Analysis - the periodic examination
of escrow accounts to determine if current monthly
deposits will provide sufficient funds to pay
taxes, insurance, and other bills when due.
Escrow Collections - funds collected by
the loan servicer and set aside in an escrow account
to pay borrower expenses such as property taxes,
mortgage insurance, and hazard homeowners insurance.
Escrow Disbursements - the use of escrow
funds to pay real estate taxes, homeowners insurance,
mortgage insurance, and other property expenses
as they become due.
Escrow Payment - the portion of a borrower\'s
monthly payment that is held by the loan servicer
to pay for taxes, hazard homeowners insurance,
mortgage insurance, lease payments, and other
items as they become due. Known as \"impounds\"
or \"reserves\" in some states.
Estate - the degree, nature, and extent
of interest that a person has in real property.
Estate at Sufferance - the wrongful occupancy
of property by a tenant after the lease has expired.
Estate for Life - see Life Estate.
Estate Tax - a tax on the value of property
left by the deceased, subject to certain tax rules.
Estoppel - a doctrine of law that stops
one from later denying facts which that person
once acknowledged were true and others accepted
on good faith.
Eviction - legal proceeding by a lessor
(landlord) to recover possession of property.
Exchange - under Section 1031 of the IRS
Tax Code, like-kind property used in a trade or
business or held as an investment can be exchanged
tax-free, subject to certain conditions.
Exclusive Listing - a written contract
that gives a licensed real estate agent the exclusive
right to sell a property for a specified time,
but reserving the owner\'s right to sell the property
alone without the payment of a commission.
Exculpatory Clause - provision in a mortgage
allowing the borrower to surrender the
property to the lender without personal liability.
F
Facade - the outside front wall of a
building.
Face Value - the dollar amount, shown
by words and/or numbers on a document.
Fair Credit Reporting Act - a federal
law that allows individuals to examine and correct
information used by credit reporting services.
Fannie Mae (FNMA) - Federal National Mortgage
Association, a federally chartered corporation
that purchases mortgages and packages them to
sell as securities.
Federal Fair Housing Law - a federal law
that forbids discrimination on the bais of race,
color, sex, religion, or national origin in the
selling or renting of property.
Federal Housing Administration (FHA) -
an agency within HUD that administers many loan
programs designed to make housing more available.
Fee Agreement - An agreement between a
borrower and a broker which normally specifies
the relationship between them and the amount of
compensation to the broker.
Fee Simple - absolute ownership of real
property.
Fiduciary Responsibility - An obligation
to act in the best interest of another party.
This type of obligation typically exists when
one person places special trust and confidence
in another person and that responsibility is accepted.
First Mortgage - That mortgage which is
recorded at the earliest time. The time of recording
is the sole criteria. Size of loan and type of
mortgage are immaterial. When the first mortgage
is paid off and released, the second mortgage
(if any existed) becomes the first mortgage.
Fixed Payment Mortage - a loan secured
by real property which features a periodic payment
of interest and principal which is constant over
the term of the loan.
Fixed Rate Mortgage - A mortgage with
an interest rate that remains the same through
the life of the loan.
Floodplain - A level land area subject
to periodic flooding from a contiguous body of
water.
Foreclosure - The process by which the
mortgagor's (borrower's) rights to a property
are terminated. While the general process is similar
from state to state, the actual procedures tend
to vary greatly.
FRBO - for rent by owner.
Freddie Mac (FHMLC) - Federal Home Loan
Mortgage Corporation, a federally chartered corporation
that purchases mortgages and packages them to
sell as securities.
FSBO - for sale by owner.
Fully Amortized Adjustable-Rate Mortgage
- A mortgage that amortizes, or pays down, the
balance of a loan.
G
Gable Roof - one with a triangle, with
the ridge forming an angle at the top and each
eave forming an angle at the bottom.
Gain - an increase in money or property
value.
Garden Apartments - a housing complex
whereby some or all tenants have access to a lawn
area.
General Contractor - one who constructs
a building or other improvement for the owner
or developer.
General Lien - a lien that includes all
of the property owned by the debtor, rather than
a specific property.
General Warranty Deed - a deed in which
the grantor agrees to protect the grantee against
any other claim to title of the property.
Gentrification - the displacement of lower
income residents by higher income residents in
a neighborhood.
Graduated-Payment Mortgage(GPM) - A mortgage
that requires a borrower to make larger monthly
payments over the term of the loan. The payment
is unusually low for the first few years but gradually
rises until year three or five, then remains fixed.
Grantee - the party to whom title to real
property is conveyed.
Grantor - the party who gives the deed.
Gross Debt Service - the amount of money
needed to pay principal, interest and taxes, and
sometimes energy costs. If the dwelling unit is
a condominium, all or a portion of common fees
are excluded, depending on what expenses are covered.
Gross Monthly Income - Income before deductions
for taxes, social security, saving plans, court
ordered child support, etc.
Gross Rent Multiplier - the sales price
divided by the gross annual rental rate.
Ground Lease - one that rents the land
only.
H
Habendum Clause - The \"to have and to
hold\" clause that defines the quantity of the
estate granted in the deed.
Hard Money Loan - A loan that is underwritten
with the condition and value of the property as
the primary criteria for approval. Secondary issues
may include the credit of the borrower, the ability
of the borrower to repay the loan and/or the ability
of the borrower to manage the property or successfully
complete a rehab and sell the property. Owner
occupancy, debt ratios and other issues are seldom
a factor. Appraisals rather than purchase prices
are used to determine value. Cash out purchases
are often allowed and are another key benefit.
These loans are usually approved within days and
are often funded in two weeks or under with times
as short as two or three days not uncommon. The
cost for the benefits of speed of funding, lax
underwriting and other advantages is typically
a moderately high interest rate (usually low to
mid teens) and high points (usually 5 to 10).
(See definition of "underwriting" below.)
Hazard Insurance - Insurance to provide
compensation if the improvements are damaged or
destroyed. It is almost always a requirement of
loans.
Hereditaments - property, personal and
real, capable of being inherited
Hiatus - A gap between two parcels of
land that is not included in the legal description
of either property.
Highest and Best Use - the use that is
most likely to produce the greatest net return
to the land and/or building over a given period.
Holdover Tenant - a tenant who remains
in possession of leased property after the expiration
of the lease term.
Home Equity Loan - In the most literal
sense, this expression applies to virtually all
loans (first mortgages and second mortgages, fixed
and adjustable interest rates, credit lines and
fully amortizing loans, etc.) placed on an owner
occupied property when the loan-to-value after
the Home Equity Loan closes is no higher than
100%. That is, it is a loan secured by the available
equity of an owner occupied residential property.
Homeowner Association (HOA) - an organization
of the homeowners in a particular subdivision,
planned unit development, or condominium created
to enforce deed restrictions and manage common
elements of the development.
Homeowners\' Warranty - A special insurance
policy that covers certain home repairs for a
specified amount of time.
Homeowner\'s Insurance (Hazard Insurance)
- insurance coverage that compensates for physical
damage to a property from fire, wind, vandalism,
or other hazards. The policy typically combines
personal liability insurance and property hazard
insurance coverage for a dwelling and its contents.
See also homeowner\'s insurance.
Homestead - status provided to a homeowner's
principal residence by some state statutes to
protect the home against judgments up to specified
amounts.
Homestead Exemption - in some jurisdictions
a reduction in the assessed value allowed for
one's personal residence.
Housing and Urban Development (HUD) -
a federal government agency established to implement
certain federal housing and community development
programs.
Housing Code - local government ordinance
that sets minimum standards of safety and sanitation
for existing residential buildings.
Hypothecate - to pledge somehing as security
without having to give up possession of it.
I
Implied Warranty of Habitability - a legal
doctrine that requires landlords to offer and
maintain livable premises for their tenants. If
a landlord fails to provide habitable housing,
tenants in most states may legally withhold rent
or take other measures, including hiring someone
to fix the problem or moving out.
Impound Account - see Escrow Account.
Improvements - additions to raw land such
as buildings, streets, sewers, etc. that increase
the value of the property.
Incidents of Ownership - any control over
property. If you give away property but keep an
incident of ownership--for example, you give away
an apartment building but retain the right to
receive rent--then legally, no gift has been made.
This distinction can be important if you\'re making
large gifts to reduce your eventual estate tax.
Indemnify - to protect another person
against loss or damage.
Index - The published cost of money that
serves as the minimum basis for determining the
interest rate for an adjustable rate mortgage.
Among the commonly used indices are the Prime
Rate (Prime), the London Interbank Offering Rate
(LIBOR), the Cost of Funds (COF) and the 1 year
Treasury Bill (1 year T). The particular index
is generally, though not always, selected based
on how often an interest rate is supposed to adjust.
Loans which allow monthly interest rate adjustments
commonly use the Prime Rate. Loans that adjust
semi-annually may use LIBOR. The 1 year Treasury
and the Cost of Funds are often used for loans
which adjust on an annual basis. There are other
Treasury instruments which are used for 3 and
5 year adjustment periods. The interest rate of
the loan is determined by adding a margin to the
index. The size of the margin is typically a function
of the index used and the credit worthiness of
the borrower. Typical margins on a Prime Rate
based loan would be 0.0 to 5.0 so that if the
Prime Rate were 8.25% and the margin were 2.0
(typical for an "average" borrower), the interest
rate would be 10.25% (8.25 + 2.0).
Initial Note Rate - With regard to an
adjustable rate mortgage, the note rate upon origination.
This rate may differ from the fully indexed note
rate.
Installment Contract - see Contract
for Deed
Installment Sale - when a seller accepts
a mortgage for all or part of the sale, tax on
the gain is paid as the mortgage principal is
collected.
Insurance Binder - a document that states
that insurance is temporarily in effect. Because
the coverage will expire by a specified date,
a permanent policy must be obtained before the
expiration date.
Insured Mortgage - a mortgage that is
protected by the Federal Housing Administration
(FHA) or by private mortgage insurance (PMI).
If the borrower defaults on the loan, the insurer
must pay the lender the lesser of the loss incurred
or the insured amount.
Inter Vivos - during one's life.
Interest Accrual Rate - the percentage
rate at which interest accrues on the mortgage.
In most cases, it is also the rate used to calculate
the monthly payments.
Interest Rate - The percentage of the
loan amount charged for borrowing money; i.e.,
the cost of the money expressed as a percentage.
Interest Rate Buydown Plan - a temporary
buydown gives a borrower a reduced monthly payment
during the first few years of a home loan and
is typically paid for in an initial lump sum made
by the seller, lender, or borrower. A permanent
buydown is paid the same way but reduces the interest
rate over the entire life of a home loan.
Interim Financing - a loan, including
a construction loan, used when the property owner
is unable or unwilliing to arrange permanent financing.
Intestate - having made no valid will.
J
Joint and Several Liability - a creditor
can demand full repayment from any and all of
those who have borrowed, each borrower is liable
for the full debt, not just the prorated share.
Joint Tenancy - ownership of realty by
two or more persons, each of whom has an undivided
interest.
Joint Venture - an agreement between two
or more persons who invest in a single business
or property.
Judgment - a decree of a court stating
that one individual is indebted to another and
fixing the amount of the indebtedness.
Judgment Creditor - one who has received
a court decree or judgment for money due from
a debtor.
Judgment Lien - the claim upon the property
of a debtor resulting from recording a judgment.
Judicial Foreclosure - having a defaulted
debtor's property sold where the court ratifies
the price paid.
Jumbo Loan - A loan larger than the maximum
allowed by conforming loans. The threshold amount
has traditionally been adjusted more or less on
an annual basis and has been in the low $200,000's.
Banks and mortgage brokers can quote the current
threshold. They are typically available at interest
rates slightly higher than those of conforming
loans and typically require the same underwriting
standards as conforming loans. (see definition
of "conforming loan" above).
Junior Mortgage - a mortgage whose claim
against the property will be satisfied only after
prior mortgages have been repaid.
K
Kicker - A payment required by a mortgage in addition to normal principal and interest.
L
Lien - A claim on a property of another
as security for money owed. Examples of types
of liens would include judgments, mechanic's liens,
mortgages and unpaid taxes.
Land Contract - see Contract for Deed.
Land Lease - see Ground Lease.
Land Trust - A revocable, living trust
primarily used to hold title to real estate for
privacy and anonymity. Also known as an Illinois
Land Trust or Nominee Trust. The land trustee
is a nominal title holder, with the beneficiaries
having the exclusive right to direct and control
the actions of the trustee.
Landlocked - condition of a lot that has
no access to public thoroughfare except through
an adjacent lot.
Lease - a contract in which, for a rent
payment, the one entitled to the possession of
the real property (lessor) transfers those rights
to another (lessee) for a specified period of
time.
Lease Option - a lease combined with an
option agreement that gives the lessee (tenant)
the right to purchase the property under specified
conditions.
Lease Purchase - a lease combined with
a purchase agreement that obligates the lessee
(tenant) to purchase the property under specified
conditions.
Leasehold - the interest or estate on
which a lessee (tenant) of real estate has a lease.
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 Blemish - Blemishes on a piece of
property, such as a zoning violation or fraudulent
title claim.
Legal Description - legally acceptable
identification of real estate by government survey,
metes and bounds, or recorded plat.
Lessee - a person to whom property is
rented under a lease.
Lessor - one who rents property to another
under a lease.
Let - to rent a property to a tenant.
Letter of Intent - written expression
of desire to enter into a contract without actually
doing so.
Liabilities - a person\'s debts or financial
obligations. Liabilities include long-term and
short-term debt, as well as potential losses from
legal claims.
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. See also homeowners insurance.
Lien Theory State - Texas is a Lien Theory
State, where legal title of mortgaged property
resides with the mortgagor (borrower), with the
mortgage as a lien against the property. Contrast
with title theory state.
Life Estate - an interest in property
that terminates upon the death of a specified
person.
Life Tenant - one who is allowed to use
property for life or the lifetime of another designated
person.
Lifetime Cap - The highest amount over
the initial interest rate that an adjustable mortgage
can be raised. Lifetime caps are typically in
the range of 5.0% - 7.0%. If the initial interest
rate is 5.25% and the lifetime cap is 6.0%, the
highest interest rate a borrower could pay during
the course of the loan would be 11.25% (5.25%
+ 6.0%).
Like-Kind Property - property having the
same nature.
Limited Partnership - one in which there
is at least one partner who is passive and limits
liability to the amount invested and at least
one partner whose liability extends beyond monetary
investment.
Line Of Credit - an agreement by a lender
to extend credit up to a certain amount for a
certain time without the need for the borrower
to file another application.
Liquidated Damages - an amount agreed
upon in a contract that one party will pay the
other in the event of a breach of contract.
Liquidity - ease of converting assets
to cash.
Lis Pendens - Latin for "suit pending",
recorded notice of the filing of a lawsuit, the
outcome of which may affect title to real property.
Listing - written agreement between a
principal and an agent authorizing the agent to
perform services for the principal involving the
principal's property.
Loan Application (1003) - A loan application
that is required for conforming loans. It has
become the standard application for most residential
loans, even non-conforming loans.
Loan Origination Fee - Most lenders charge
borrowers an origination fee--or points--for processing
a loan. A point is 1 percent of the total loan
amount.
Loan Package - The organized group of
documents that contains all of the information
required to obtain an underwriting decision of
loan approval or loan denial. Depending on the
type of loan and the particular lender, a package
may contain some or all of the following as well
as other documents: loan application, statement
of use of funds, statement of net worth, P &
L statements, tax returns, pay stubs, statements
from various types of banking and investment accounts,
property appraisal, letters of explanation, credit
report, verification of employment, verification
of housing payments, purchase agreement, etc.
(See definition of "underwriting" below.)
Loan-to-Value (LTV) - The ratio of the
size of the loan to the value of the property.
If the loan is $80,000 and the value of the property
is $100,000 the LTV is 80% ($80,000 / $100,000).
Lot and Block - method of identifying
legal description of property, see Legal Description.
Lot Line - a line bounding a lot as described
in a property survey.
Low-Documentation Loan - A mortgage that
requires only minimal verification of income and
assets
Low-Down-Payment loan - A home loan that
requires the borrower to make only a small down
payment before obtaining the
financing needed to purchase a house.
M
Management Agreement - a contract between
the owner of property and someone who agrees to
manage it.
Margin - A constant (fixed) amount over
an index that determines a lender's yield on an
adjustable rate loan. The interest rate of an
adjustable rate loan is determined by adding a
margin to an index. The size of the margin is
typically a function of the index used and the
credit worthiness of the borrower. Typical margins
on a Prime Rate based loan would be 0.0 to 5.0
so that if the Prime Rate were 8.25% and the margin
were 2.0 (typical for an "average" borrower),
the interest rate would be 10.25% (8.25 + 2.0).
(See definition of "index" above.).
Marketable Title - a title free from defect.
Master Lease - a controlling lease.
Maturity - The date on which the principal
balance of a loan, bond, or other financial instrument
becomes due and payable
Maximum Financing - A loan amount within
5 percent of the highest loan-to-value ratio allowed
for a property.
Mechanic's Lien - a lien given by law
upon a building or other improvement upon land
as security for the payment of labor and materials
furnished for improvement.
Merged Credit Report - A report that draws
information from the Big Three credit-reporting
companies: Equifax, Experian, and Trans Union
Corp.
Minimum Payment - the minimum amount that
must be paid monthly on an account. On the HELOC
product, the minimum payment is interest only
during the draw period. On the Fixed Rate Second
products, the minimum payment is principal and
interest.
Monthly Mortgage Insurance (MI) Payment
- portion of monthly payment that covers the cost
of Private Mortgage Insurance.
Monthly Payment (P&I) - this is the monthly
mortgage payment on a home loan, this includes
principal and interest, but excludes any amounts
that are applied to taxes and insurance.
Monthly Principal & Interest (P&I) Payment
- portion of monthly payment that covers the principal
and interest due on the loan.
Monthly Taxes & Insurance (T&I) Payment
- portion of monthly payment that funds the escrow
or impound account for taxes and insurance.
Mortgage - A lien against real property
given by a borrower to a lender as security for
money borrowed.
Mortgage (Open-End) - A mortgage that
allows additional money to be borrowed (up to
the original loan amount) without refinancing
the loan or paying additional financing charges
.
Mortgage Balance - see Principal Balance.
Mortgage Insurance Premium (MIP) - The
payment made by a borrower of FHA insured mortgages
to provide a reserve that protects lenders against
losses from very high loan-to-value loans.
Mortgage Loan - A loan which is secured
by a mortgage lien filed against real property.
Mortgage-Interest Deduction - The tax
write-off that the Internal Revenue Service allows
most owners to claim for annual interest payments
made on real estate loans. mortgagee
Mortgagee - The entity to whom the mortgage
is given; i.e., the lender.
Mortgagor - The entity who gives the mortgage;
i.e., the borrower.
Multi-Dwelling Property - A property that
contains individual units for several households
but carries only one mortgage.
N
Needs-Based Pricing - A seller\'s asking
price that is based on factors such as the required
funds to pay off the mortgage, the cost of remodeling
or the purchase of another house.
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.
Negotiation - The process of bargaining
that precedes an agreement.
Net Cash Flow - Investment property that
generates income after expenses such as principal,
interest, taxes and insurance are subtracted
Net Operating Income (NOI) - From income
producing property, the gross income minus the
total of all expenses except for debt service.
Cash flow is defined as NOI minus the
total of all debt service payments.
No Cash-Out Refinance - The amount of
the new mortgage covers the remaining balance
of the first loan, closing costs, any liens and
cash no more than 1 percent of the principal on
the new loan.
No Income Verification Loan (NIV) - A
type of loan generally limited to the self-employed
that is underwritten based on the borrower's written
representation of their annual income as stated
on the loan application. No tax returns, operating
statements or other verification of the income
is required. Debt ratios are computed based on
the stated income. The primary intent of these
programs is to allow owners of small businesses
to use their actual cash flows rather than the
net incomes normally reported in tax filings.
Higher interest rates on these products compensate
lenders for their higher risks. (See definition
of "debt ratio" above.)
Non-Assumption Clause - A loan provision
that prohibits the transfer of a mortgage to another
borrower without lender approval.
Non-conforming Loan - A loan not meeting
the underwriting requirements of Fannie Mae and
Freddie Mac. I.e., the vast majority of loans.
Non-Qualifying - buyer is not required
to qualify through traditional bank financing
requirements
Non-Recurring Closing Costs - Costs that
are one-time only fees for such items as an appraisal,
loan points, credit report, title insurance and
a home inspection
Note - A written promise to repay a certain
sum of money on specified terms.
Note Broker - An individual who acts as
an intermediary between a holder of an existing
note and a prospective purchaser of the note.
Notice of Default - A lender\'s initial
action when a mortgage payment is late and attempts
to reconcile the issue out of court have failed.raisal.
O
Obligee - The person in whose favor an
obligation is entered into.
Obligor - The person who binds himself
or herself to another.
Option - the right to purchase or lease
a property upon specified terms within a specified
period of time
Ordinances - municipal rules governing
the use of land
Origination Fee - A fee paid to either
a broker or a lender for originating a loan. It
may be the only compensation for their work in
arranging and/or processing the loan or it may
be only a portion of the compensation. Not every
loan has an origination fee.
Originator - An individual who works with
a borrower to start a loan. Usually an employee
of a financial institution, an employee of a broker
or an independent contractor affiliated with several
brokers, the originator determines the type of
loan a borrower probably qualifies for, helps
complete an accurate application, gathers documents
necessary to get an approval and acts as an intermediary
between the borrower and the underwriter.
P
Penalty - Money one will pay for breaking
a law or violating part or all of the terms of
a contract.
PITI - The shorthand way of stating the
most usual elements of a residential mortgage
payment which may consist not only of the Principal
and Interest (PI) but the property taxes (T) and
hazard insurance (I) as well. In the case where
all four elements are part of the payment, the
lender escrows the T and I and pays them on behalf
of the borrower when they come due. Some loans
are written such that the payment to the lender
consists only of the P and I in which case the
borrower pays the taxes and insurance directly.
Planned Unit Development (PUD) - A highly
designed residential project that features relatively
dense clusters of houses, which are usually surrounded
by areas of commonly owned open space maintained
by a nonprofit community association.
Portfolio Loan - A non-conforming loan
that is held by the original lender rather than
being sold on the secondary market.
Prepayment Penalty - fee charged for paying
off a loan within a relatively short period of
time after the loan has closed, provision is currently
found only in non-conforming products, time period
during which it applies is usually one to three
years
Principal Balance - outstanding dollar
amount owed on a loan exclusive of accrued interest
Principal, Interest, Taxes, Insurance (PITI)
- monthly payments required by an amortizing loan
that includes escrow deposits for taxes and insurance
in addition to the principal and interest
Private Mortgage Insurance (PMI) - insurance
premium paid by a borrower to protect lenders
against losses from loans with loan-to-value ratios
higher than 80%, default insurance for lenders
Pro Forma - refers to the presentation
of data, such as a balance of income statement,
where certain amounts are hypothetical. For example,
a pro forma balance sheet might show a debt issue
that has been proposed but has not been consummated.
Probate - The process of establishing
the validity of a will before a duly authorized
court or person. Once validity is confirmed, the
probate court then administers the sale of property
as directed by the will or as authorized by the
court to settle any financial obligations
Promissory Note - promise to pay a specified
sum to a specified person under specified terms
Purchase Money Mortgage - a mortgage which
secures a note written on a loan used in the purchase
of real estate
Purchase Subject to Mortgage - a purchase
in which a buyer agrees to make the monthly mortgage
payments on an existing mortgage and the original
borrower remains liable if the purchaser fails
to make the payments as agreed.
Purchase-Money Mortgage (PMM) - A mortgage
obtained by a borrower as partial payment for
a property.
Q
Qualifying Ratio - A ratio calculated
by a lender to determine how much a potential
buyer can borrow.
Quiet Enjoyment - right of an owner or
any other person legally entitled to possession
to the use of the property without interference.
Quiet Title Action - a suit in court to
remove a defect or cloud on the title, establishes
legal ownership.
Quitclaim Deed - a deed that conveys only
the grantor's rights or interest in a property,
without stating the nature of the rights or interest
and with no warranties of ownership.
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 Cap - The maximum interest rate charge
allowed on the monthly payment of an adjustable
rate mortgage during an adjustment period.
Rate-Improvement Mortgage - A loan with
a clause that entitles a borrower to a one-time
interest rate cut without going through refinancing.
Real Estate Owned (REO) - property acquired
through a lender through foreclosure and held
in inventory.
Real Property - the rights to use real
estate.
Realtor - designation given to licensed
real estate agents who are members of the National
Association of Realtors.
Recission Period - a federally mandated
period of three business days (beginning on the
day after a loan closes) during which the borrower
may cancel the new loan, waiting period only applies
to loans which are to be secured by a mortgage
on a personal residence for which the borrower
is in title at the time of loan origination, right
to cancel does not apply to loans used for the
purchase of property.
Recourse - ability of lender to make claims
against borrower personally in addition to the
collateral.
Redemption Period - period during which
a former owner can reclaim foreclosed property.
Refinance - process of a borrower paying
off one loan with the proceeds from another.
Regression - The principle that the value
of a better-quality property is adversely affected
by the proximity of a lesser-quality property.
Regulation Z - federal regulation requiring
creditors to provide full disclosure of the terms
of a loan.
Residential Service Contract - home warranty
or insurance contract, generally for one year,
covering plumbing, electrical, and mechanical
systems of the home.
Residual - Value or income remaining after
deducting an amount necessary to meet fixed obligations.
Reverse Mortgage - A type of mortgage
designed for elderly homeowners with substantial
equity by which a lender pays a periodic payment
to the borrower; the loan balances increase with
interest and payments causing negative amortization.
Right of First Refusal - opportunity of
a party to match the terms of a proposed contract
before the contract is executed.
S
Sale Leaseback - sale of property by seller
and simultaneous leasing of the same property
by seller.
Sandwich Lease - lease held by a lessee
(tenant) who becomes a lessor (landlord) by subletting
to another lessee (subtenant), typically the sandwich
leaseholder is neither the owner nor the user
of the property.
Seasoning - loan which has been in force
for a period of time thus establishing the borrower's
payment history, loans are tyically deemed to
be seasoned after either six months or one year.
Second Mortgage - mortgage recorded after
another mortgage has already been recorded and
not yet released, subordinated lien.
Section 1031 - section of the Internal
Revenue Code dealing with tax-free exchanges of
like-kind property.
Section 8 - privately owned rental dwelling
units participating in the low-income rental assistance
program created by 1974 amendments to Section
8 of the 1937 Housing Act.
Security Deposit - cash payment required
by landlord to be held during the term of the
lease to offset damages incurred due to actions
of the tenant.
Seller Financing - also known as Owner
Financing.
Settlement Statement - also known as Closing
Statement or HUD-1.
Short Sale - A sale of a house in which
the proceeds fall short of what the owner still
owes on the mortgage. Many lenders will agree
to accept the proceeds of a short sale and forgive
the rest of what is owed on the mortgage when
the owner cannot make the mortgage payments. By
accepting a short sale, the lender can avoid a
lengthy and costly foreclosure, and the owner
is able to pay off the loan for less than what
he owes
Special Warranty Deed - deed in which
the grantor limits the title warranty given to
the grantee, does not warrant against title defects
arising from conditions that existed before grantor
owned the property.
Specific Performance - legal action in
which the court requires a party to a contract
to perform the terms of the contract.
Subject To - buyer takes title to mortgaged
real property but is not personally liable for
the payment of the amount due, buyer must make
payments in order to keep the property.
Subordination - a clause or document that
permits a mortgage recorded at a later date to
take priority over an existing lien.
Survey - process by which a parcel of
land is measured and its area ascertained.
T
Tax and Insurance Escrow - account required
by a mortgage lender to fund annual property tax
assessments and hazard insurance premiums, funded
through monthly contributions by the mortgagor
Tax Lien - a debt attached to the property
for failing to pay taxes
Teaser Rate - contract interest rate charged
on an adjustable rate mortgage for the initial
adjustment interval that is significantly lower
than the fully indexed rate at the time
Terms - conditions and arrangements specified
within a contract
Time is of the Essence - a phrase that,
when inserted in a contract, requires that all
references to specific dates and times of day
noted in the contract be interpreted exactly,
in its absence extreme delays might be acceptable
Title - evidence of ownership, evidence
of lawful possession
Title Defect - an unresolved claim against
the ownership of property, prevents seller from
providing buyer clear title to the property
Title Insurance - an insurance policy
that protects the holder from loss sustained by
defects in the title
Title Search - an examination of the public
records to determine the ownership and encumbrances
affecting real property
Title Theory State - the system in which
the lender has legal title to the mortgaged property
and the borrower has equitable title. Texas is
not a title theory state. Contrast with lien theory
state.
Triple Net Lease - lease in which the
tenant is to pay all operating expenses of the
property so that the landlord receives net rent,
frequently used to mean tenant pays taxes, insurance,
and maintenance in addition to normal operating
expenses
Trust - an arrangement whereby property
is transferred to a trusted third party trustee
by a grantor/trustor, trustee holds the property
for the benefit of the beneficiary
Trust Deed - conveyance of real estate
to a third party to be held for the benefit of
another, commonly used in some states in place
of mortgages that conditionally convey title to
the lender, same as Deed of Trust
Trustee - one who holds property in trust
for another to secure performance of an obligation,
the neutral party in a trust deed transaction.
U
U.S. Department. of Housing and Urban Development
(HUD) - A federal agency that oversees the
Federal Housing Administration and a variety of
housing and community development programs.
Underwriting - The act of applying formal
guidelines that provide qualitative and quantitative
standards for determining whether or not a loan
should be approved.
Undivided Interest - an ownership right
to use and possession of a property that is shared
among co-owners, with no one co-owner having exclusive
rights to any portion of the property.
Unencumbered Property - real estate that
is owned free and clear.
Unilateral Contract - an obligation given
by one party contingent on the performance of
another party, but without obligating the second
party to perform.
Unimproved Property - land that has received
no development, construction, or site preparation
(raw land).
Unrealized Gain - excess of current market
value over cost for an asset that is not sold.
Unrecorded Deed - instrument that transfers
title from one party (grantor) to another party
(grantee) without providing public notice of the
change in ownership.
Urban Renewal - process of redeveloping
deteriorated sections of the city, often through
demolition and new construction, may be privately
funded, but most often associated with government
renewal programs.
Usufruct - the right to use property--or
income from property--that is owned by another.
Usury - charging a rate of interest greater
than that permitted by state law.
Utility Easement - use of another's property
for the purpose of laying gas, water, electric
and sewer lines.
V
V.A. Loan - home loan guaranteed by the
U.S. Veterans Administration under the Servicemen's
Readjustment Act of 1944 and later to compensate
lender in the event of default.
Valuation - The estimated worth or price.
The act of valuation by appraisal.
Variable Interest Rate - amount of compensation
to a lender that is allowed to vary over the maturity
of a loan, typically governed by an appopriate
index.
Variable Rate Mortgage - long-term mortgage
loan applied to residences, under which the interest
rate may be adjusted on a six month basis over
the term of the loan, according to certain restrictions.
Vendee - a buyer of real estate.
Vendee's Lien - a lien against property
under a contract of sale to secure the deposit
paid by the purchaser.
Vendor - a seller of real estate.
Veneer - wood or brick exterior that covers
a less attractive and less expensive surface.
W
Waiver - the voluntary renunciation,
abandonment, or surrender of some claim, right
or privilege.
Warehouse Fee - A closing-cost fee representing
the lender\'s cost of holding a borrower\'s loan
temporarily before it is sold on the secondary
mortgage market.
Warranty Deed - deed that contains a covenant
that the grantor will protect the grantee against
any and all claims; usually contains covenants
ensuring good title, freedom from encumbrances,
and quiet enjoyment.
Wholesale - to contract a property with
the intention of reselling it quickly at a higher
price.
Wild Deed - An improperly recorded deed
Without Recourse - words used in endorsing
a note to denote the note holder is not to look
to the debtor personally in the event of nonpayment.
Wraparound Mortgage - loan arrangement
in which an existing loan is retained and an additional
loan is made that equals or exceeds the existing
loan.
Writ of Execution - a court order which
authorizes and directs the proper officer of the
court (usually the sheriff) to carry into effect
the judgment or decree of the court.
Y
Yield - measurement of the rate of earnings of an investment.
Z
Zero Lot Line - a form of cluster housing
development in which individual dwelling units
are placed on separately platted lots, but are
attached to each other.
Zoning - legal mechanism for local governments
to regulate the use of privately owned real estate
to prevent conflicting land uses and promote orderly
development.
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