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Select
the first letter of the word from the
list
above to jump to appropriate section of
the glossary.
Abstract
(of Title)
A
historical summary of all the recorded
transactions that affect the title to
the property. An attorney or a title company
will review an abstract of title to determine
if there are any problems affecting the
title to the property. All such problems
must be cleared before the buyer can be
issued a clear and insurable title.
Acceleration
Clause
A
loan provision giving the lender the power
to declare all sums owing lender immediately
due and payable upon the violation of
a specific loan provision, such as the
sale of the property, or the failure to
make loan payments on time.
Example:
John sells his property to Mary who takes
over John's mortgage payments. They do
not notify the lender of this transaction.
The lender finds out that the title to
the property has transferred and calls
the loan, since the loan documents state
that the loan is due on the sale of the
property. John is now liable to pay his
lender in full.
Accretion
The
addition to land through natural forces
like wind or water.
Example:
Deposit of soil carried by a river
Agreement
of Sale
A
written signed agreement between the seller
and the purchaser in which the purchaser
agrees to buy certain real estate and
the seller agrees to sell upon terms of
the agreement. Also known as contract
of purchase, purchase agreement, offer
and acceptance, earnest money contract
or sales agreement.
Acknowledgment
Formal
declaration before a public official (typically
a Notary Public) that one has signed a
document. Required before recording real
estate legal documents, such as a deeds
of trust.
Acre
A
measure of land equal to 43,560 square
feet.
ARM
- Adjustable Rate Mortgage
Also known as a variable rate mortgage.
The interest rate on these mortgages changes
periodically.
Adjustment
Period
This
is the length of time for which the interest
rate is fixed on an adjustable. Therefore
if the adjustment period is six months,
then the interest rate will remain fixed
for six months, after which time it will
adjust.
Amortization
A
gradual paying off of a debt by periodic
installments which pay principal and interest.
APR
- Annual Percentage Rate
The effective rate of interest for a loan
per year. This rate is typically higher
than the note rate because it takes into
account closing costs. This is one way
to compare loan programs offered by different
lenders. Caution: The APR is sometimes
computed differently by different lenders
and can be misleading.
Appraisal
An
opinion or estimate of the value of a
property at a given date.
Arm's
length transaction
A
transaction among parties each of who
acts in his or her own best interest.
Example:
A transaction between a father and his
son would NOT be an an Arm's length transaction
Assessment
A
local tax levied against a property for
a specific purpose such as street lights.
Assumable
Mortgage
A
mortgage loan which allows a new home
buyer to take over the obligation of making
loan payments with no change in the terms
of the loan. Assumable loans do not have
a due-on-sale clause. The lender has to
be notified and agree to the assumption.
The lender may require the buyer to qualify
for the loan and may charge an assumption
fee. The seller should obtain a written
release from the lender stating clearly
that he/she is no longer liable to make
mortgage payments. See also "Subject To".
Attorney
In Fact
One
who is authorized to act for another under
a power of attorney which may be general
or limited in scope.
Example:
John wants to sell his house but has to
be out of the country for 4 months. John
gives authorization to Mary to sign the
grant deed to sell the property to a buyer.
Mary becomes John's Attorney In Fact.
Balloon
(payment) 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.
Example:
A balloon mortgage for $25,000 has interest
only payments for 5 years at 12% ($250
per month), with the full principal of
$25,000 due and payable after 5 years.
Bankruptcy
The
financial inability to pay one's debts
when due. The debtor surrenders his assets
to the bankruptcy court. An individual
typically files for Chapter 7 (all debts
wiped out) or Chapter 13 (establishes
a payment plan to pay off debts). A bankruptcy
stays on an individual's credit report
for 7 years.
Beneficiary
The
person who receives or is to receive the
benefits resulting from certain acts.
Example:
The lender is named as the beneficiary
on a mortgage loan.
Example:
John has a life insurance policy for $100,000
with Jane as his beneficiary. Should John
die - Jane will receive the benefits i.e.
$100,000.
Binder
Definition
#1: A title insurance binder is the written
commitment of a title insurance company
to insure title to the property subject
to the conditions and exclusions shown
on the binder.
Definition
#2: Preliminary agreement, normally secured
with earnest money, between a buyer and
a seller as an offer to purchase real
estate.
Bi-weekly
Mortgage
A
mortgage which requires 1/2 the normal
monthly payment every two weeks. Over
the course of the year, 26 half payments
are made which is equivalent to 13 full
mortgage payments. As a result of this
extra payment the loan amortizes much
faster than a loan with normal monthly
payments.
Blanket
Mortgage
A
mortgage covering more than one piece
of property.
Example:
A developer subdivides a tract of land
into lots and obtains a blanket mortgage
on the whole tract.
Bond
1.
A debt instrument in the capital markets.
The U.S. government, corporations and
municipalities use bonds to raise money.
Bonds can also be backed by mortgages.
The best known bond is the 30 yr treasury
bond issued by the U.S. government.
2.
A sum of money given to a court to guarantee
against a loss. For example if there is
a lien on a property, the owner may remove
the lien by posting a bond.
Borrower
(Mortgagor)
One
who applies for a loan secured by real
estate and is responsible for repaying
the loan (mortgage).
Bridge
Loan
An
interim loan typically used when the buyer
is unable to sell his/her house but needs
money to close the transaction on the
house he/she is buying. The bridge loan
is made on the buyers current residence
to finance the buyers new residence. The
loan is paid off when the buyers current
residence is sold.
Broker
See
Real Estate Broker or Mortgage Broker.
Buy
Down
Obtaining
a lower interest rate (buying down the
rate) by paying additional points to the
lender. The lower rate may apply for the
full duration of the loan or for just
the first few years. A buydown may be
used to qualify a borrower who would otherwise
not qualify . This is because a buydown
results in lower payments which are easier
to qualify for.
Example:
A very popular buydown is the 2-1 buydown.
If the interest rate on the note is 9%,
the buydown results in the rate being
7% (9%-2%) for the first year, 8% (9%-1%)
for the second year, and 9% thereafter.
Buyers
Broker
An
agent hired by a buyer to locate a property
for purchase. The broker represents the
buyer and negotiates with the sellers
broker for the best possible deal for
the buyer.
Buyers
Market
Market
conditions that favor buyers i.e. there
are more sellers than buyers in the market.
As a result buyers have ample choice of
properties and may negotiate lower prices.
Buyers markets may be caused by an economic
slump or overbuilding.
Bylaws
A
set of regulations by which an organization
conducts its business.
Example:
A condominium association prepares bylaws
that state the minimum number of owners
to conduct a meeting to decide policies.
Capital
Gains
Profit
earned from the sale of real estate. A
seller may defer taxes on the capital
gain of his/her primary residence by buying
a higher priced residence within 2 years.
Cash
Flow
The
amount of cash derived over a certain
period of time from an income-producing
property. The cash flow should be large
enough to pay the expenses of the income
producing property (mortgage payment,
maintenance, utilities, etc.).
Caveat
Emptor
A
legal term meaning "let buyer beware".
The buyer must examine the property and
buy at his/her own risk.
Example:
A property may be offered in an "as is"
condition with no expressed or implied
guarantee of quality or condition.
CC&R's
- Covenants, conditions, and restrictions.
The
basic rules establishing the rights and
obligations of owners of real property
within a condominium, townhouse, PUD,
subdivision or other tract of land. An
association is organized for the purpose
of operating and maintaining property
commonly owned by the individual owners.
The association is normally made up of
property owners.
Certificate
of Eligibility
The
document issued by the Veterans Administration
to those that qualify for a VA loan which
may be used to buy a house with 0 down.
Certificates of eligibility may be obtained
by sending the form DD-214 to the local
VA office along with VA form 1880.
CRV
- Certificate of Reasonable Value
An
appraisal performed by an VA approved
appraiser which establishes the property's
current market value. This value establishes
the ceiling on the maximum VA mortgage
loan principal.
Certificate
of Occupancy
Document
issued by a local governmental agency
that states a property meets the local
building standards for occupancy and is
in compliance with public health and building
codes. This document is normally required
by a lender prior to closing the loan.
Certificate
of Title
An
opinion rendered by an attorney as to
the status of title to a property, according
to the public records. This certificate
does not the same level of protection
astitle insurance.
Chain
of Title
The
chronological order of conveyance of a
parcel of land from the original owner
to the present owner.
Example:
An abstractor can research title to property
going back to the date that the property
was granted to the United States.
Clear
Title
A
marketable title, free of clouds and disputed
interests. Most lenders require a clear
title prior to closing.
Closing
1.
The act of transferring ownership of a
property from seller to buyer in accordance
with a sales contract.
2.
The time when a closing takes place.
Closing
Costs
Expenses
incurred by the buyer and seller in a
real estate or mortgage transaction. There
are two types of costs : recurring and
non recurring.
Non-recurring
costs are one time transactional costs
which include:
- Discount
and origination points
- Lender
fees - underwriting, processing, document
preparations, flood certificate, tax
service, wire transfer, courier, etc.
- Title
insurance fees
- Escrow,
attorney or closing agent fees
- Recording
fees
- Inspection
and appraisal fees
- Real
estate brokerage commissions
Recurring
fees are costs associated with owning
the property and they recur month after
month.
These costs may include hazard insurance,
interest, property taxes, mortgage insurance
(PMI), and association fees. A pro-rated
amount of these fees may have to be paid
at closing including:
- Pre-paid
interest - interest charges from the
date of closing to the end of the month
- Property
taxes if due
- Hazard
insurance, fire insurance or homeowners
insurance has to be paid for one year
- Mortgage
insurance (PMI) - may be required if
the loan amount is more than 80% of
the value of the property. In the past
a whole year of PMI had to be paid up
front, however in recent years many
PMI companies only require 1-2 months
up front. Mortgage insurance premiums
are normally paid every month with the
loan payment
- Impound
account may need money to be set up
for future payments
Cloud
on Title
An
outstanding claim or encumbrance that,
if valid, would affect or impair the owner's
title. Compare with clear title.
Commitment
A
written document provided by a lender
to agreeing to make a loan on specific
terms to a borrower or builder.
Condemnation
1.
Taking private property for a public use
with compensation to the owner under eminent
domain. Used by governments to acquire
land for streets, schools, freeways, etc
and by utilities to acquire necessary
property.
2.
Declaring a structure unfit for use because
of violations in housing codes or other
reasons.
Conditional
Commitment
A
written document provided by a lender
agreeing to make a loan provided certain
conditions are met prior to closing.
Condominium
Individual
ownership of a dwelling unit and an individual
interest in the common areas and facilities
which serve the multi-unit project.
Construction
loan
A
short term loan to pay for the construction
of buildings or homes. These loans typically
provide periodic disbursements to the
builder as each stage of the building
is completed. When construction is completed
a take-out or permanent loan is used to
pay off the construction loan.
Consideration
Anything
of value given to induce another to enter
into a contract. Earnest money deposit
on a sales contract is consideration.
Contingency
Conditions
which must be satisfied before the buyer
can close the purchase of a property.
Contingencies are generally outlined in
the purchase contract between the buyer
and seller.
Example:
The buyer has 14 days to remove the property
contingency under the sales contract.
In this case the buyer has 14 days to
inspect the property and request the seller
to perform repairs. If the buyer is not
satisfied with the condition of the property
or if the buyer and the seller cannot
agree on repairs, the buyer may back out
of the contract with no penalty. After
14 days the buyer no longer has the right
to back out with no penalty as a result
of a problem with the condition of the
property.
Contract
An
agreement between competent parties to
do or not do certain things for consideration.
Example:
To have a valid contract for the sale
of real estate there must be :
- An
offer
- An
acceptance
- Competent
parties
- Consideration
- Legal
purpose
- Written
documentation
- Description
of the property
- Signatures
by principals or their attorney-in-fact
Contract
of Sale
Same
as the Agreement of Sale
Contract
sale or deed
A
real estate installment selling arrangement
where the buyer may occupy the property
but the seller retains the title until
the agreed upon sales price has been paid.
Also known as an installment land contract.
Example:
John sells Mary a house. Mary has to put
$10,000 and pay $1,000 per month for 24
months, after which time she will receive
title to the property.
Conventional
Loan
Any
mortgage loan other than a VA or an FHA
loan. A convention loan may be conforming
or non-conforming.
Conveyance
The
transfer of title of real from one party
to another.
Co-op
- cooperative
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 purchases
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.
Convertible
ARMs
Some
variable loans come with options to convert
them to a fixed loan based on a pre-determined
formula, during a given time period. For
example the 1 yr tbill adjustable may
be converted to a fixed during the first
five years on the adjustment date. The
means that you could convert during the
13th, 25th, 37th, 49th and 61th months
of the loan.
Credit
Report
A
report detailing a borrowers credit history
including payment history on revolving
accounts (eg. credit cards) and installment
accounts (e.g.. car loan). A credit report
also includes information found from public
records including tax liens and judgements.
Deed
A
written document by which title to real
property is transferred from one owner
to another. The deed should contain an
accurate description of the property being
conveyed, should be signed and witnessed
according to the laws of the State where
the property is located, and should be
delivered to the buyer at closing.
Deed
of Trust
Used
in many states in lieu of a mortgage to
secure the payment of a note. In a deed
of trust there are three parties - the
borrower, the trustee, and the lender,
(or beneficiary). In such a transaction,
the borrower transfers the legal title
for the property to the trustee who holds
the property in trust as security for
the payment of the debt to the lender
or beneficiary. If the borrower pays the
debt as agreed, the deed of trust becomes
void. If, however, he/she defaults in
the payment of the debt, the trustee may
sell the property without a court proceeding.
Deed
Restriction
A
clause in a deed that limits the use of
land.
Example:
A deed might require that a road cannot
be built on the land.
Default
Failure
to meet legal obligations in a contract
- such as the failure to make the monthly
mortgage payment.
Defective
Title
Any
recorded instrument that would prevent
a grantor/seller from giving a clear title.
Example:
The seller has a contractor lien on the
property that was filed when he/she failed
to pay the contractor for the kitchen
remodel. The seller may obtain clear title
by paying the contractor and removing
the lien.
Deficiency
Judgment
Personal
claim against the debtor when the sale
of foreclosed property does not yield
sufficient proceeds to pay off the mortgages,
accrued interest, legal fees, etc.
Depreciation
Decline
in the value of a house due to wear and
tear, obsolescence, adverse changes in
the neighborhood, or any other reason.
Discount
Points
Fees
paid to a lender to reduce the interest
rate.
Documentary
Tax Stamps
Stamps
affixed to a deed showing the amount of
transfer tax.
Dower
The
rights of a widow or child to part of
a deceased husband's or fathers property.
Downpayment
The
amount paid for the purchase of a property
in addition to the mortgage, but not including
any closing costs.
Example:
John buys a house for $100,000 and obtains
a loan for $80,000. His downpayment is
$20,000.
Due
on Sale Clause
A
clause in the Deed of Trust or Mortgage
that states that the entire loan is due
upon the sale of the property.
Dragnet
Clause
A
provision in a mortgage that pledges several
properties as collateral. A default in
the mortgage could lead to foreclosure
proceedings on any of the properties in
the dragnet.
Earnest
Money
A
deposit made by a buyer of real estate
towards the down payment to evidence good
faith. This money is typically held by
the real estate brokers or the escrow
company.
Easement
The
right to use the land of another for a
specific purpose. Easements may be temporary
or permanent.
Example:
The utility company may need an easement
to run electric lines.
Eminent
Domain
The
right of the government or a public utility
to acquire property for necessary public
use by condemnation, with proper compensation
to the owner.
Encroachment
A
building, a part of a building, or an
obstruction (e.g.. a fence or a wall)
that physically intrudes upon or overlaps
into the property of another.
Encumbrance
A
legal right or interest in land that affects
a good or clear title, and diminishes
the land's value. It can take numerous
forms, such as zoning ordinances, easement
rights, claims, mortgages, liens, charges,
a pending legal action, unpaid taxes,
or restrictive convenants. An encumbrance
does not legally prevent transfer of the
property to another. A title search is
all that is usually done to reveal the
existence of such encumbrances, and it
is up to the buyer to determine whether
he wants to purchase with the encumbrance,
or what can be done to remove it.
Equity
Equity
= Property Value - Loans/Liens Against
the property.
Equity
is typically expressed as a percentage
of the property value.
Equity
Sharing
Joint
ownership of a property between the owner/occupant
and the owner/investor, that results in
tax advantages for both parties. Upon
sale of the property the joint owners
split profits based on the percentage
they own.
Escrow
1.
Neutral third party that handles all funds
in a real estate transaction. The buyer
puts his deposit into escrow, the lender
funds the loan into escrow. Escrow pays
the real estate brokers commission, pays
off any loans/liens against the property,
pays real estate taxes and any other fees
associated with the transaction and sends
the balance of the money to the seller.
2.
Escrow payment - see impound account.
Escheat
The
reversion of property to the state in
the event that the owner dies without
leaving a will and has no legal heirs.
Executor
(Executrix - feminine for Executor)
A
person named in a will to carry out its
provisions for the disposition of the
estate.
Federal
National Mortgage Association (FNMA, Fannie
Mae)
Purchases
loans from lenders, securitizes them and
sells FNMA mortgage backed securities
on wall street.
Federal
Home Loan Bank Board (FHLBB)
Provides
financing to farmers.
Farmer's
Home Administration (FmHA)
An
agency, within the U.S. Department of
Agriculture, that administers assistance
programs for purchasers of homes and farms
in small towns and rural areas.
Federal
Home Loan Mortgage Corporation (FHLMC,
Freddie Mac)
Purchase
loans from members of the Federal Reserve
and the Federal Home Loan Bank Systems,
securitizes them and sells FHLMC mortgage
backed securities on wall street.
Federal
Housing Administration (FHA)
An
agency within the U.S. Department of Housing
and Urban Development (HUD) that administers
loan programs, issues loan guarantees
to make more housing available.
Federal
Reserve System
The
central federal banking system that regulates
and provides services to member commercial
banks. Also has the responsibility for
conducting federal monetary policy.
Fee
Simple (Fee Absolute or Fee Simple Absolute)
Absolute
ownership of real property; owner is entitled
to the entire property with unconditional
power of disposition during the owners
life and upon his death the property descends
to the owner's designated heirs.
Fidelity
Bond
An
assurance, generally purchased by an employer,
to cover employees who are entrusted with
valuable property or funds.
Example:
A landlord employs a clerk who collects
rents. To safeguard these funds during
the collection process, the landlord purchases
a fidelity bond the clerk.
Fiduciary
A
person in a position of trust or responsibility
with specific duties to act in the best
interest of a client. A real estate broker
is a fiduciary for his/her clients.
Finance
Charge
Interest
charged by a lender.
First
Mortgage
A
mortgage that has priority as a lien over
all other mortgages. In the case of a
foreclosure the first mortgage will be
satisfied before other mortgages. See
also second mortgage.
Fixture
Improvements
or personal property attached to the land
so as to become a part of the real estate.
Fixtures are transferred to the buyer
upon sale of the property. To determine
whether an item is a fixture include:
- Intent
- Was it intended to be part of the
property?
- How
is it fixed?
- Is
the fixture essential to the property?
- Relationship
- Was the fixture intended to be a part
of the tenant's business?
Example:
John sells his house to Mary. John wants
to take the chandelier because he states
it is personal property. Mary wants the
chandelier to stay because she believes
it is a fixture.
Flood
Insurance
An
insurance policy that covers property
damage due to natural flooding. Flood
insurance may be required on properties
in a flood zone.
Foreclosure
(Repossession)
A
legal process by which the lender forces
a sale of a property because the borrower
has not met the terms of the mortgage.
Free
and clear
A
property that has no liens.
FSBO
For
sale by owner. A property for sale that
is not listed with a real estate broker.
Fully
indexed rate
The
fully indexed rate = value of the index
+ margin. See adjustable loans.
General
Warranty Deed
A deed in which the grantor (seller) agrees
to the protect the grantee (buyer) against
any other claim to title of the property.
See also warranty deed.
Government
National Mortgage Association (GNMA, Ginnie
Mae)
A
government agency part of HUD that buys
VA and FHA loans from lenders, securitizes
them and sells Ginnie Mae securities to
investors.
Grantee
That
party in the deed who is the buyer or
recipient.
Grantor
That
party who is the seller or the giver.
Graduated
Payment Mortgage (GPM)
A
mortgage that has lower payments initially
(with potential negative amortization)
which increase each year until the loan
is fully amortized.
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.
Hazard
Insurance (Fire Insurance, Homeowners
insurance)
Insurance
on a property against fire and other risks.
A homeowners policy may have additional
coverage for theft, liability, etc that
a fire insurance policy may not cover.
Homeowners
Association
An
association of homeowners in a particular
subdivision, planned unit development
(PUD), or condominium organized to manage
the common area of the development and
to enforce the association rules and regulations.
Homestead
Status
provided to a homeowner's principal residence
in some states that protects the home
against judgements up to specified amounts.
Homestead
Exemption
Available
in some states - this causes the assessed
value of a principal residence to be reduced
by the amount of the exemption for the
purposes of calculating property tax.
Example:
John's principal residence is assessed
at $100,000 and the homestead exemption
is $7,000. His property taxes will be
based on $93,000.
Home
Warranty Plan
Insurance
that covers appliances, heating systems,
etc. Typically purchased at the time of
closing.
Housing
and Urban Development
A
U.S. government agency established to
implement certain federal housing and
community development programs.
Housing
Code
A
local government ordinance that sets minimum
standards of safety and sanitation for
existing residential buildings.
HUD
1
A
closing document required by HUD that
outlines the settlement cost of a loan.
The closing agent prepares this document
and sends it to the buyer upon closing.
Hypothecate
To
pledge a property as security without
having to give up possession of it.
Improvements
Additions
to raw land such as buildings, streets,
etc that add value to the land.
Impound
Account
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.
Income
Approach
A
method used by an appraiser to estimate
the value of a property based on the income
it generates.
Income
Property
Real
estate that generates rental income. Examples
: apartment buildings, office buildings
and shopping centers.
Index
A
statistic that indicates some current
economic of financial condition. Indexes
are used to make adjustments in variable
rate loans.
Ingress
and Egress
The
right to go in and out over a piece of
property but not the right to park on
it. See also Easements.
Installment
Sale
See
land contract.
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
Tennancy
Ownership
of a property by 2 or more people, each
of whom has an undivided interest with
the right of survivorship.
Example:
John and Mary own a house in joint tenancy.
Each owns half of the entire (undivided)
property. If John dies, Mary will own
the entire property and vice versa.
Judgement
The
decision of a court of law stating that
one individual is indebted to another
and fixing the amount of indebtedness.
Judgements, when recorded, become a lien
on real property owned by the defendant.
Judgement
Lien
The
claim on the property of a debtor resulting
from a judgement.
Jumbo
Loan
Loan
size that is larger than the limit established
by Fannie Mae or Freddie Mac.
Junior
Mortgage
A
mortgage subordinate to another mortgage.
In the case of a foreclosure a senior
mortgage will be paid prior to a junior
mortgage.
Kicker
A
payment required by a mortgage in addition
to normal principal and interest. Sometimes
known as a participation loan.
Land
Contract
A
real estate installment selling arrangement
whereby the buyer may use and occupy land,
but no deed is given by seller until the
sales price has been paid.
Lease
with Option to Purchase
A
lease under which the lessee has the right
to purchase the property. The option may
run for a portion or for the full length
of the lease
Leasehold
Estate
Tenant's
right of possession for a specific period
of time under a lease agreement.
Legal
Description
Legally
acceptable identification of real estate
by one of the following:
- The
government rectangular survey
- Metes
and bounds
- Recorded
plat (lot and block number)
Lessee
A
person to whom property is rented under
a lease. (Tenant)
Lessor
A
person who rents property to another under
a lease. (Landlord)
Lien
A
claim against the property for the payment
of a debt, judgement, mortgage or taxes.
Example:
Unpaid contractors may file a mechanic's
lien.
Life
Estate
An
estate in real property for the life of
a living person. The estate then reverts
back to the grantor or to a third party.
Lis
Pendens
Latin
for "lawsuit pending." Recorded notice
that litigation is pending on a property.
Most lenders will require the clearance
of the Lis Pendens prior to closing.
Loan
Application
A
document required by a lender prior to
loan approval. The application includes
detailed information about the borrower
and the property.
Loan
origination fee or points
Charge
by a lender or broker connected with originating
a loan. This is different from discount
points which are used to buy down the
rate of interest.
Loan
to Value Ratio (LTV)
The
loan amount divided by the value of the
property.
Loan
Servicing
The
act of collecting loan payments, handling
property tax and insurance escrows, foreclosing
on defaulted loans and remitting payments
to the investors.
Margin
A
fixed number added to the index to compute
the rate on an adjustable rate mortgage.
Marketable
Title
Title
that is free of liens, clouds and other
legal defects and hence is readily acceptable
by a buyer.
Market
Value
The
highest price that a buyer would pay and
the lowest price a seller would accept
on a property. Market value may be different
from the price a property could actually
be sold for at a given time.
Mechanics
Lien
The
right of an unpaid contractor or subcontractor
to file a lien against property to recover
the amount due to him/her.
Mortgage
A
written instrument that creates a lien
upon real estate as security for the payment
of a specified debt.
Mortgage
Backed Security (MBS)
A
bond or other financial obligation secured
by a pool of mortgage loans.
Mortgage
Banker
Specializes
in originating and servicing loans. They
generally sell their loans to investors,
but may continue to service them.
Mortgage
Broker
Arranges
financing for a borrower by placing loans
with lenders. Mortgage brokers are paid
a fee by the borrower or the lender when
a loan closes.
Mortgagee
The
lender.
Mortgagor
The
borrower.
Mortgage
Insurance
See
private mortgage insurance (PMI)
Mortgage
Note
A
written agreement to repay a loan. The
agreement is secured by a mortgage, serves
as proof of an indebtedness, and states
the manner in which it shall be paid.
The note states the actual amount of the
debt that the mortgage secures and renders
the mortgagor personally responsible for
repayment.
Negative
Amortization
An
increase in principal balance which occurs
when the monthly payments do not cover
all of the interest cost. The interest
cost which is not covered by the payment
is added to the unpaid principal balance.
Net
Effective Income
The
borrowers gross income minus federal income
tax.
Non-conforming
loan
Loans
that do not comply with Fannie Mae or
Freddie Mac guidelines.
Note
A
written instrument that acknowledges a
debt and promises to pay.
Notary
Public
One
authorized to take acknowledgments of
certain types of documents, such as deeds,
contracts, and mortgages.
Notice
of default
A
letter sent to the defaulting party as
a reminder of the default.
Offer
An
expression of willingness to purchase
a property at a specified price.
Offeree
One
who receives the offer. When the buyer
makes an offer to the seller the seller
is an offeree.
Offeror
One
who makes the offer. When the buyer makes
an offer to the seller the buyer is an
offeror.
Office
of Comptroller Currency
The
oldest federal financial regulatory body
that oversees the nation's federally chartered
banks.
Office
of Thrift Supervision
The
OTS charters federal thrift institutions
and is the primary regulator of all federal
and many state-chartered thrift institutions.
Open
House
A
method of showing a home for sale to prospective
buyers where the home is left open for
inspection by those who may be interested
in making a purchase.
Open
End Mortgage
A
mortgage permitting the mortgagor to borrow
additional money under the same mortgage,
with certain conditions.
Origination
Fee
See
Loan Origination Fee.
Optionee
One
who receives or purchases an option.
Optionor
One
who gives or sells an option.
Oral
Contract
A
verbal agreement. Verbal agreements for
the sale or use of real estate are normally
unenforceable.
Owner
of Record
The
individual named on a deed that has been
recorded at the county recorders office.
Owner
Occupant
A
tenant of a residence who also owns the
property.
Package
Mortgage
Mortgage
covering both real and personal property.
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