the first letter of the word from the
above to jump to appropriate section of
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.
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.
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.
addition to land through natural forces
like wind or water.
Deposit of soil carried by a river
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.
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
measure of land equal to 43,560 square
- Adjustable Rate Mortgage
Also known as a variable rate mortgage.
The interest rate on these mortgages changes
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
gradual paying off of a debt by periodic
installments which pay principal and interest.
- 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.
opinion or estimate of the value of a
property at a given date.
transaction among parties each of who
acts in his or her own best interest.
A transaction between a father and his
son would NOT be an an Arm's length transaction
local tax levied against a property for
a specific purpose such as street lights.
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".
who is authorized to act for another under
a power of attorney which may be general
or limited in scope.
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.
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.
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.
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.
person who receives or is to receive the
benefits resulting from certain acts.
The lender is named as the beneficiary
on a mortgage loan.
John has a life insurance policy for $100,000
with Jane as his beneficiary. Should John
die - Jane will receive the benefits i.e.
#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.
#2: Preliminary agreement, normally secured
with earnest money, between a buyer and
a seller as an offer to purchase real
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
mortgage covering more than one piece
A developer subdivides a tract of land
into lots and obtains a blanket mortgage
on the whole tract.
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.
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.
who applies for a loan secured by real
estate and is responsible for repaying
the loan (mortgage).
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.
Real Estate Broker or Mortgage Broker.
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.
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.
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
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.
set of regulations by which an organization
conducts its business.
A condominium association prepares bylaws
that state the minimum number of owners
to conduct a meeting to decide policies.
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.
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.).
legal term meaning "let buyer beware".
The buyer must examine the property and
buy at his/her own risk.
A property may be offered in an "as is"
condition with no expressed or implied
guarantee of quality or condition.
- Covenants, conditions, and restrictions.
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
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.
- Certificate of Reasonable Value
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
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.
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
chronological order of conveyance of a
parcel of land from the original owner
to the present owner.
An abstractor can research title to property
going back to the date that the property
was granted to the United States.
marketable title, free of clouds and disputed
interests. Most lenders require a clear
title prior to closing.
The act of transferring ownership of a
property from seller to buyer in accordance
with a sales contract.
The time when a closing takes place.
incurred by the buyer and seller in a
real estate or mortgage transaction. There
are two types of costs : recurring and
costs are one time transactional costs
and origination points
fees - underwriting, processing, document
preparations, flood certificate, tax
service, wire transfer, courier, etc.
attorney or closing agent fees
and appraisal fees
estate brokerage commissions
fees are costs associated with owning
the property and they recur month after
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:
interest - interest charges from the
date of closing to the end of the month
taxes if due
insurance, fire insurance or homeowners
insurance has to be paid for one year
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
account may need money to be set up
for future payments
outstanding claim or encumbrance that,
if valid, would affect or impair the owner's
title. Compare with clear title.
written document provided by a lender
to agreeing to make a loan on specific
terms to a borrower or builder.
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
Declaring a structure unfit for use because
of violations in housing codes or other
written document provided by a lender
agreeing to make a loan provided certain
conditions are met prior to closing.
ownership of a dwelling unit and an individual
interest in the common areas and facilities
which serve the multi-unit project.
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.
of value given to induce another to enter
into a contract. Earnest money deposit
on a sales contract is consideration.
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
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
agreement between competent parties to
do or not do certain things for consideration.
To have a valid contract for the sale
of real estate there must be :
of the property
by principals or their attorney-in-fact
as the Agreement of Sale
sale or deed
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.
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.
mortgage loan other than a VA or an FHA
loan. A convention loan may be conforming
transfer of title of real from one party
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.
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.
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.
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.
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.
clause in a deed that limits the use of
A deed might require that a road cannot
be built on the land.
to meet legal obligations in a contract
- such as the failure to make the monthly
recorded instrument that would prevent
a grantor/seller from giving a clear title.
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
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.
in the value of a house due to wear and
tear, obsolescence, adverse changes in
the neighborhood, or any other reason.
paid to a lender to reduce the interest
affixed to a deed showing the amount of
rights of a widow or child to part of
a deceased husband's or fathers property.
amount paid for the purchase of a property
in addition to the mortgage, but not including
any closing costs.
John buys a house for $100,000 and obtains
a loan for $80,000. His downpayment is
on Sale Clause
clause in the Deed of Trust or Mortgage
that states that the entire loan is due
upon the sale of the property.
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
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
right to use the land of another for a
specific purpose. Easements may be temporary
The utility company may need an easement
to run electric lines.
right of the government or a public utility
to acquire property for necessary public
use by condemnation, with proper compensation
to the owner.
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.
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.
= Property Value - Loans/Liens Against
is typically expressed as a percentage
of the property value.
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
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.
Escrow payment - see impound account.
reversion of property to the state in
the event that the owner dies without
leaving a will and has no legal heirs.
(Executrix - feminine for Executor)
person named in a will to carry out its
provisions for the disposition of the
National Mortgage Association (FNMA, Fannie
loans from lenders, securitizes them and
sells FNMA mortgage backed securities
on wall street.
Home Loan Bank Board (FHLBB)
financing to farmers.
Home Administration (FmHA)
agency, within the U.S. Department of
Agriculture, that administers assistance
programs for purchasers of homes and farms
in small towns and rural areas.
Home Loan Mortgage Corporation (FHLMC,
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.
Housing Administration (FHA)
agency within the U.S. Department of Housing
and Urban Development (HUD) that administers
loan programs, issues loan guarantees
to make more housing available.
central federal banking system that regulates
and provides services to member commercial
banks. Also has the responsibility for
conducting federal monetary policy.
Simple (Fee Absolute or Fee Simple 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.
assurance, generally purchased by an employer,
to cover employees who are entrusted with
valuable property or funds.
A landlord employs a clerk who collects
rents. To safeguard these funds during
the collection process, the landlord purchases
a fidelity bond the clerk.
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.
charged by a lender.
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.
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:
- Was it intended to be part of the
is it fixed?
the fixture essential to the property?
- Was the fixture intended to be a part
of the tenant's business?
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.
insurance policy that covers property
damage due to natural flooding. Flood
insurance may be required on properties
in a flood zone.
legal process by which the lender forces
a sale of a property because the borrower
has not met the terms of the mortgage.
property that has no liens.
sale by owner. A property for sale that
is not listed with a real estate broker.
fully indexed rate = value of the index
+ margin. See adjustable loans.
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.
National Mortgage Association (GNMA, Ginnie
government agency part of HUD that buys
VA and FHA loans from lenders, securitizes
them and sells Ginnie Mae securities to
party in the deed who is the buyer or
party who is the seller or the giver.
Payment Mortgage (GPM)
mortgage that has lower payments initially
(with potential negative amortization)
which increase each year until the loan
is fully amortized.
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.
Insurance (Fire Insurance, Homeowners
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.
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.
provided to a homeowner's principal residence
in some states that protects the home
against judgements up to specified amounts.
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.
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.
that covers appliances, heating systems,
etc. Typically purchased at the time of
and Urban Development
U.S. government agency established to
implement certain federal housing and
community development programs.
local government ordinance that sets minimum
standards of safety and sanitation for
existing residential buildings.
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.
pledge a property as security without
having to give up possession of it.
to raw land such as buildings, streets,
etc that add value to the land.
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.
method used by an appraiser to estimate
the value of a property based on the income
estate that generates rental income. Examples
: apartment buildings, office buildings
and shopping centers.
statistic that indicates some current
economic of financial condition. Indexes
are used to make adjustments in variable
right to go in and out over a piece of
property but not the right to park on
it. See also Easements.
and Several Liability
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.
of a property by 2 or more people, each
of whom has an undivided interest with
the right of survivorship.
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.
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.
claim on the property of a debtor resulting
from a judgement.
size that is larger than the limit established
by Fannie Mae or Freddie Mac.
mortgage subordinate to another mortgage.
In the case of a foreclosure a senior
mortgage will be paid prior to a junior
payment required by a mortgage in addition
to normal principal and interest. Sometimes
known as a participation loan.
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.
with Option to Purchase
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
right of possession for a specific period
of time under a lease agreement.
acceptable identification of real estate
by one of the following:
government rectangular survey
plat (lot and block number)
person to whom property is rented under
a lease. (Tenant)
person who rents property to another under
a lease. (Landlord)
claim against the property for the payment
of a debt, judgement, mortgage or taxes.
Unpaid contractors may file a mechanic's
estate in real property for the life of
a living person. The estate then reverts
back to the grantor or to a third party.
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.
document required by a lender prior to
loan approval. The application includes
detailed information about the borrower
and the property.
origination fee or points
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.
to Value Ratio (LTV)
loan amount divided by the value of the
act of collecting loan payments, handling
property tax and insurance escrows, foreclosing
on defaulted loans and remitting payments
to the investors.
fixed number added to the index to compute
the rate on an adjustable rate mortgage.
that is free of liens, clouds and other
legal defects and hence is readily acceptable
by a buyer.
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.
right of an unpaid contractor or subcontractor
to file a lien against property to recover
the amount due to him/her.
written instrument that creates a lien
upon real estate as security for the payment
of a specified debt.
Backed Security (MBS)
bond or other financial obligation secured
by a pool of mortgage loans.
in originating and servicing loans. They
generally sell their loans to investors,
but may continue to service them.
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.
private mortgage insurance (PMI)
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
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.
borrowers gross income minus federal income
that do not comply with Fannie Mae or
Freddie Mac guidelines.
written instrument that acknowledges a
debt and promises to pay.
authorized to take acknowledgments of
certain types of documents, such as deeds,
contracts, and mortgages.
letter sent to the defaulting party as
a reminder of the default.
expression of willingness to purchase
a property at a specified price.
who receives the offer. When the buyer
makes an offer to the seller the seller
is an offeree.
who makes the offer. When the buyer makes
an offer to the seller the buyer is an
of Comptroller Currency
oldest federal financial regulatory body
that oversees the nation's federally chartered
of Thrift Supervision
OTS charters federal thrift institutions
and is the primary regulator of all federal
and many state-chartered thrift institutions.
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.
mortgage permitting the mortgagor to borrow
additional money under the same mortgage,
with certain conditions.
Loan Origination Fee.
who receives or purchases an option.
who gives or sells an option.
verbal agreement. Verbal agreements for
the sale or use of real estate are normally
individual named on a deed that has been
recorded at the county recorders office.
tenant of a residence who also owns the
covering both real and personal property.
mortgage, deed of trust or land contract
provided in lieu of cash.
provision in a mortgage that allows some
of the property secured to be freed from
serving as collateral.
mortgage that allows the lender to share
in part of the income or resale proceeds.
in a pool of mortgages sold by mortgage
bankers to investors. Money collected
as monthly mortgage payments is distributed
to those who own certificates..
Loan or Mortgage
mortgage for a long period of time. Often
referred to as the mortgage that pays
off a construction loan on a completed
document issued by a government regulatory
authority that allows the bearer to take
some specific action.
occupancy permit allows the owner of a
building to occupy or rent the building.
for principal, interest, taxes and insurance,
which may be combined in a single monthly
Unit Development (PUD)
zoning classification that allows flexibility
in the design of a subdivision. PUD's
include individually owned units as well
as some common space that is jointly owned.
plan or map of a specific land area.
public record containing maps of land,
showing the division of the land into
streets, blocks, and lots and indicating
the measurements of the individual parcels.
paid to lenders. 1 point = 1% of the loan
amount. On a $100,000 loan 1 point is
$1000. Points may be further classified
into origination points or discount points.
loan that is held as an investment by
a bank or savings and loan, and NOT sold
on the secondary market to investors.
written document authorizing a person
to act on the behalf of another person.
That person does not have to be an attorney.
interest is the interest charged to borrowers
at closing to pay for the cost of borrowing
for a balance of the month. For example,
if a loan closes on the 19th of the month
and the first payment is due on the 1st
of the following month, the lender will
charge 12 days of prepaid interest.
or partial payment of the principal before
the due date. This might occur if the
borrower makes extra payments, sells the
property, or refinances the existing loan.
paid by the borrower if they pay the loan
before its due date.
that originate and service mortgage loans
(banks, savings & loans, credit union,
mortgage bankers, institutional lenders)
make up the primary mortgage market. See
also secondary mortgage market.
lowest commercial interest rate charge
by a bank on short term loans to their
most credit worthy customers. View current
outstanding balance on a loan.
Mortgage Insurance (PMI)
the event that you do not have a 20 percent
down payment, lenders will allow a smaller
down payment - as low as 2 percent in
some cases. With the smaller down payment
loans, however, borrowers are usually
required to carry private mortgage insurance.
Private mortgage insurance payments are
normally made annual or monthly. An impound
account may be required.
process to establish the validity of the
will of a deceased person.
mortgage used to finance the purchase
of a property.
government levy based on the market value
(as assessed by the county assessor's
office) of the property.
auction of property with notice to the
Agreement of Sale.
court action to settle a title dispute.
deed which transfers whatever interest
the maker of the deed may have in the
particular parcel of land. A quitclaim
deed is often given to clear the title
when the grantor's interest in a property
is questionable. By accepting such a deed
the buyer assumes all the risks. Such
a deed makes no warranties as to the title,
but simply transfers to the buyer whatever
interest the grantor has.
real estate professional who is a member
of the National Association of Realtors.
individual who often owns a real estate
company or is in a management position,
and who is licensed to represent a buyer
or a seller in a real estate transaction.
Estate Settlement Procedure Act (RESPA)
law that states how mortgage lenders must
treat those who apply for real estate
loans on property with 1-4 units.
A lender is required to provide a good
faith estimate of closing costs within
3 days of an application being filed.
practice of refusing to provide loans
or insurance in a certain neighborhood.
an existing loan from the proceeds of
a new loan on the same property.
a mortgage is paid off in full, the lender
conveys the property back to the owner.
act of entering into a book of public
records instruments affecting title to
the real property. A lender requires that
a deed of trust or a mortgage be recorded
to evidence the debt against the property.
cancellation of a contract. When refinancing
a mortgage on a principal residence the
law gives the homeowner three days to
cancel the contract
right of the holder of a note secured
by a mortgage or deed of trust to claim
money from the borrower in default in
addition to the property pledged as a
Z (Reg Z)
federal regulation requiring creditors
to provide full disclosure of the terms
of a loan including the terms of the loan
and the annual percentage rate (APR).
Estate Investment Trusts (REIT)
trust that uses investors money to purchase
and manage real estate. Investors realize
some of the tax advantages in owning real
right of a surviving joint tenant to acquire
the interest of a deceased joint owner.
mortgage used by the elderly that provides
income as long as they live in exchange.
Payments made cause the loan principal
loan that is amortized over a long period
of time (e.g. 30 yrs) but the interest
rate is fixed for a short period (e.g.
5 yrs). The loan may be extended or rolled
over, at the end of the shorter term,
based on the terms of the loan.
restrictions limiting the use of real
property. Restrictive covenants are created
by deed and may "run with the land," binding
all subsequent purchasers of the land,
or may be "personal" and binding only
between the original seller and buyer.
Agreement or Sales Contract
Agreement of Sale.
institutions that specialize in originating,
servicing and holding mortgage loans primarily
on owner occupied residential property.
market where banks, savings & loans
and mortgage bankers can sell mortgages
to investors like Fannie Mae or Freddie
known as a vacation home. This home is
different from an investment property
as it is not rented, but used occasionally
by the owners.
subordinated lien, created by a mortgage
loan, over the amount of a first mortgage.
Second mortgages generally carry a higher
rate than a first mortgage since they
represent a higher risk for an investor.
owned rental units participating in the
low-income rental assistance program.
Landlords receive subsidies on behalf
of qualified low-income tenants, allowing
the tenants to pay a limited proportion
of their incomes toward the rent.
section of the IRS that deals with tax
free exchanges of certain property. General
rules for tax free exchanges are :
properties must be :
for business or as an investment
that serves as collateral for a debt.
act of billing, collecting payment, filing
reports, managing impound accounts and
handling defaults on a mortgage.
Cost (HUD guide)
booklet that provides an overview of the
lending process and is required to be
given to consumers after the loan application
special tax imposed on property, individual
lots or all property in the neighborhood
to pay for improvements - street lights,
grantor does not warrant against title
defects arising from conditions that existed
before he/she owned the property. The
seller warrants that he/she has done nothing
to impair title.
residential loan with a fixed interest
rate that is below market, with the lender
entitled to a specified share of appreciation
of the property over an agreed upon time
deed given at the sheriff's sale in the
foreclosure of a mortgage.
Family Housing (SFR)
type of residential structure designed
to include one dwelling.
Town houses, detached units.
single family dwelling constructed by
a builder in anticipation of finding a
legal action in which the court requires
a party to a contract to perform the terms
of the contract when the party has refused
to fulfill its obligations.
Uniform Loan Application (Form 1003)
standard loan application widely used
in the mortgage industry.
tract of land divided into lots suitable
for home building purposes.
loan in a lower priority, for example
a second mortgage is subordinate to a
To (Purchasing subject to a mortgage)
buyer agrees to make payments on the existing
mortgage, without notifying the lender.
The seller remains liable for making payments
on the loan if the buyer does not make
the mortgage payment. The buyer is not
personally liable for mortgage payments,
but must make payments to keep the property.
See also Assumable Mortgage
made by a licensed surveyor who measures
land and charts its boundaries, improvements
and relationship to the property surrounding
added to a property due to improvements
made personally by the owner.
commitment to provide permanent financing
upon completion of construction. The take
out loan normally pays off the construction
for nonpayment of taxes
sale of a property at an auction by a
government authority as a result of non-payment
low initial interest rate on a mortgage.
established when a person who had been
a lawful tenant wrongfully remains in
possession of property after expiration
of a lease.
license to use or occupy land and buildings
at the will of the owner. The tenant may
decide to leave the property at any time
or must leave at the landlords will.
by the Entirety
form of ownership by husband and wife
whereby each owns the entire property.
In event of the death of one, the survivor
owns the property without probate
by a lease for a fixed term, such as 6
months, 2 years, etc.
of a property by 2 or more persons, each
of whom has an undivided interest, without
the right of survivorship. Upon the death
of one of the owners, the ownership share
of the deceased is inherited by the beneficiary
designated on the owner's will.
of property by one person.
is of the Essence
phrase in a contract requiring all references
to specific dates and times noted in the
contract be interpreted exactly.
form of property ownership under which
a property is held by a number of people,
each with the right of possession for
a specified time interval. Time sharing
is used mostly for vacation properties.
that the owner of the property is in lawful
possession. Evidence of ownership.
insurance policy which protects the insured
against loss arising from defects in title.
Title insurance policies are typically
obtained for the buyer and the lender.
document indicating the current state
of title. The report includes information
on the current ownership, outstanding
deeds of trust or mortgages, liens, easements,
convenants, restrictions, and any defects.
examination of the public records to determine
the ownership and encumbrances affecting
which normally has 2 or more floors and
is attached to other similar units. Town
houses are commonly found in planned unit
developments (PUDs) and condominiums.
parcel of land, generally held for subdividing.
paid to the city, county, state or other
government entity upon sale of a property.
in which the tenant pays all operating
expense of the property. The landlord
receives the net rent.
separate bank account maintained by a
broker or escrow company to handle all
money collected for clients. A broker
may not commingle these funds with his/her
Deed of Trust.
party who is given legal responsibility
to hold property in the best interest
of or "for the benefit of" another. The
trustee is one placed in a position of
responsibility for another, a responsibility
enforceable in a court of law.
mortgage in which the borrower receives
a fixed rate for a specified number of
years (most often 5 or 7), and then receives
a new interest rate based on the terms
in the note.
decision whether to make a loan to a potential
home buyer based on credit, income, employment
history, assets, etc.
ownership right to use and possess a property
that is shared among co-owners, with no
one co-owner having exclusive rights to
any portion of the property.
estate with free and clear title.
that has received no development.
document that transfers title from the
grantor to the grantee without recording
(i.e. providing public notice).
a rate of interest greater than that permitted
loan guaranteed by the U.S. Veterans Administration,
enabling a veteran to buy a home with
no money down.
Adjustable Rate Mortgage
of Deposit (VOD)
document signed by the borrower's bank
or other financial institution verifying
the account balance and history.
document signed by the borrower's employer
verifying his/her starting date, job title,
salary and probability of continued employment.
voluntary renunciation, abandonment, or
surrender of some claim, right, or privilege.
bankers and other financial institutions
make loans that are then periodically
sold on the secondary market. After the
loan is made but before it is sold - the
loan is said to be in the lenders warehouse.
deed conveying the title to a property
with a warranty of a clear marketable
loan arrangement whereby the existing
loan is retained an a new loan is added
to the property.
The seller sells his/her property for
$200,000. The buyer puts $80,000 down.
The seller has an existing loan balance
of $100,000 for a remaining period of
25 years at an interest rate of 6%. The
seller then makes a wraparound mortgage
to the buyer, (where the seller acts as
a lender) for $120,000 at 8%. The seller
has to continue making payments on his
old loan. They buyer has to pay the seller
on the new loan. The buyer may at a later
date refinance the property and close
form of housing where individual units
are on separate lots, but are attached
to one another. Example: PUD, townhouse.
may be zoned to specify use of a property
i.e. residential, commercial, agricultural.
These zoning ordinances are normally enforced
by the city or the county.