A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
(Of Title) - A summary of the public records relating to the
title to a particular piece of land. An attorney or title insurance
company reviews an abstract of title to determine whether there
are any title defects which must be cleared before a buyer can
purchase clear, marketable, and insurable title.
Clause - Condition in a mortgage that may require the balance
of the loan to become due immediately, if regular mortgage payments
are not made or for breach of other conditions of the mortgage.
- The date when both parties, seller and buyer, have agreed to
and completed signing and/or initialing the contract.
rate mortgage loan (ARM) - A type of alternative mortgage
instrument in which the interest rate adjusts periodically according
to a predetermined index and margin. This adjustment results in
the mortgage payment either increasing or decreasing.
Period The length of time between interest rate changes
on ARM. For example, a loan with an adjustment period of one-year
ARM, which means that the interest rate can change once a year.
of Sale - Known by various names, such as contract of purchase,
purchase agreement, or sales agreement according to location or
jurisdiction. A contract in which a seller agrees to sell and
a buyer agrees to buy, under certain specific terms and conditions
spelled out in writing and signed by both parties.
- A payment plan which enables the borrower to reduce his debt
gradually through monthly payments of principal.
percentage rate (APR) - A rate which represents the relationship
of the total finance charge (interest, loan fees, point) to the
amount of the loan.
- A form used to apply for a mortgage loan and to record pertinent
information concerning a prospective mortgagor and the proposed
- An expert judgment or estimate of the quality or value of real
estate as of a given date.
value - An opinion of value reached by an appraiser based
upon knowledge, experience, and a study of pertinent data.
A person qualified by education, training, and experience to estimate
the value of real and personal property.
- An increase in value; the opposite of depreciation.
- The process of placing a value on property for the strict purpose
of taxation. may also refer to a levy against property for a special
purpose, such as a sewer assessment.
of Mortgage - An obligation undertaken by the purchaser of
property to be personally liable for payment of an existing mortgage.
In an assumption, the purchaser is substituted for the original
mortgagor in the mortgage instrument and the original mortgagor
is to be released from further liability in the assumption, the
mortgagee's consent is usually required. The original mortgagor
should always obtain a written release from further liability
if he desires to be fully released under the assumption. Failure
to obtain such a release renders the original mortgagor liable
if the person assuming the mortgage fails to make the monthly
payments. An "Assumption of Mortgage" is often confused
with "purchasing subject to a mortgage." When one purchases
subject to a mortgage, the purchaser agrees to make the monthly
mortgage payments on an existing mortgage, but the original mortgagor
remains personally liable if the purchaser fails to make the monthly
payments. Since the original mortgagor remains liable in the event
of default, the mortgagee's consent is not required to a sale
subject to a mortgage. Both "Assumption of Mortgage"
and "Purchasing Subject to a Mortgage" are used to finance
the sale of property. They may also be used when a mortgagor is
in financial difficulty and desires to sell the property to avoid
mortgage - A mortgage with periodic installments of principal
and interest that do not fully amortize the loan. The balance
of the mortgage is due in a lump sum at the end of the term.
payment- The unpaid principal amount of a mortgagee or other
long-term loan due at a certain date in he future, usually the
amount that must be paid in a lump sum at the end of the term.
insurance - A written evidence of temporary hazard or title
coverage that only runs for a limited time and must be replaced
by a permanent policy.
- Something not of like kind received in a tax-deferred exchange
such as cash or equivalent, or net mortgage relief.
- One who receives funds with the expressed or implied intention
of repaying the loan in full.
- (See real estate broker)
Line or Setback - Distances from the ends and/or sides of
the lot beyond which construction may not extend. The building
line may be established by a filed plat of subdivision, by restrictive
covenants in deeds or leases, by building codes, or by zoning
Permanentprepaid interest bringing the note rate
on the loan down to a lower, permanent rate. Temporaryprepaid
interest lowering the note rate temporarily on the loan, allowing
the buyer to more readily qualify and to increase payments as
Rate or Cap Rate - a
ratio used to estimate the value of income producing properties.
Put simply, the cap rate is the net operating income divided by
the sales price or value of a property
expressed as a percentage. Investors, lenders and appraisers use
the cap rate to estimate the purchase price for different types
of income producing properties. A market cap rate is determined
by evaluating the financial data of similar properties which have
recently sold in a specific market. It provides a more reliable
estimate of value than a market Gross Rent Multiplier since the
cap rate calculation utilizes more of a property's financial detail.
The GRM calculation only considers a property's selling price
and gross rents. The Cap Rate calculation incorporates a property's
selling price, gross rents, non rental income, vacancy amount
and operating expenses thus providing a more reliable estimate
- A limitation on the interest rate increase of either the periodic
or lifetime rate or both for an adjustable rate mortgage.
- The amount of the buyers liquid cash remaining after making
the down payment and paying all closing costs.
Covenants, conditions and restrictions. A document that
controls the use, requirements and restrictions of the property.
Of Occupancy (CO) - Written authorization given by a local
municipality that allows a newly-completed or substantially-completed
structure to be inhabited. The issuing of a CO means that: the
home is SAFE, SOUND & SANITARY, and has matches the PLANS
& SPECIFICATIONS given to the Appraiser at the beginning of
the Loan Process.
of Commitment The lenders approval of a VA loan,
which is usually good for up to six months.
of Reasonable Value (CVR) A document that establishes
the maximum value and loan amount or a VA guaranteed mortgage.
of Title - A certificate issued by a title company or a written
opinion rendered by an attorney that the seller has good marketable
and insurable title to the property which he is offering for sale.
A certificate of title offers no protection against any hidden
defects in the title which an examination of the records could
not reveal. The issuer of a certificate of title is liable only
for damages due to negligence. The protection offered a homeowner
under a certificate of title is not as great as that offered in
a title insurance policy.
- Personal property.
Trust - Usually structured as a remainder trust, is a trust
that provides for a specified distribution, at least annually,
to at least one non-charitable income recipient (typically the
donor) for a period of time specified in the trust instrument,
with the remainder interest paid to at least one charitable beneficiary.
or Close of Escrow - The day on which the formalities of a
real estate sale are concluded. The certificate of title, abstract,
and deed are generally prepared for the closing by an attorney
and this cost charged to the buyer. The buyer signs the mortgage,
and closing costs are paid. The final closing merely confirms
the original agreement reached in the agreement of sale.
Costs - The numerous expenses which buyers and sellers normally
incur to complete a transaction in the transfer of ownership of
real estate. These costs are in addition to price of the property
and are items prepaid at the closing day. This is a typical list
for the South Bay:
of sale negotiated previously between the buyer and the seller
may state in writing who will pay each of the above costs.
Title) - An outstanding claim or encumbrance which adversely
affects the marketability of title.
- Money paid to a real estate agent or broker by the seller as
compensation for finding a buyer and completing the sale. Usually
it is a percentage of the sale price--5 to 6 percent on houses,
10 percent on land.
Period The period during which a loan approval is valid.
Market Analysis (CMA) An opinion of the market value
of a home expressed by a real estate agent and not an appraiser.
- Individual ownership of a dwelling unit and an individual interest
in the common areas and facilities which serve the multi-unit
Anything of value to induce another to enter into a contract,
i.e., money, services, a promise.
A condition that must be satisfied before a contract is
binding. For instance, a sales agreement may be contingent upon
the buyer obtaining financing.
loan - A short-term, interim loan for financing the cost of
construction. The lender makes payments to the builder at periodic
intervals as the work progresses.
- In the construction industry, a contractor is one who contracts
to erect buildings or portions of them. There are also contractors
for each phase of construction: heating, electrical, plumbing,
air conditioning, road building, bridge and dam erection, and
Mortgage - A mortgage loan not insured by HUD or guaranteed
by the Veterans' Administration. It is subject to conditions established
by the lending institution and State statutes. The mortgage rates
may vary with different institutions and between States. (States
have various interest limits.)
Clause A provision in some ARMs that enables homebuyers
to change an ARM to a fixed rate loan, usually after the first
adjustment period. The new fixed rate is generally set at the
prevailing interest rate for fixed rate mortgages. This conversion
feature may cost extra.
Housing (Co-op)- An apartment building or a group of dwellings
owned by a corporation, the stockholders of which are the residents
of the dwellings. It is operated for their benefit by their elected
board of directors. In a cooperative, the corporation or association
owns title to the real estate. A resident 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.
A person who signs a legal instrument and therefore becomes individually
and jointly liable for repayment or performance of an obligation.
report - A report to a prospective lender on the credit standing
of a prospective borrower or tenant. Used to help determine creditworthiness.
- A formal written instrument 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 purchaser
at closing day. There are two parties to a deed: the grantor and
the grantee. (See also deed of trust, general warranty deed, quitclaim
deed, and special warranty deed.)
Trust - Like a mortgage, a security instrument whereby real
property is given as security for a debt. However, in a deed of
trust there are three parties to the instrument: 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 defaults in the payment of the debt, the trustee may sell the
property at a public sale, under the terms of the deed of trust.
In most jurisdictions where the deed of trust is in force, the
borrower is subject to having his property sold without benefit
of legal proceedings. A few States have begun in recent years
to treat the deed of trust like a mortgage.
-The deposit money given to the seller or his agent by the potential
buyer upon the signing of the agreement of sale to show that he
is serious about buying the house. If the sale goes through, the
earnest money is applied against the down payment. If the sale
does not go through, the earnest money will be forfeited or lost
unless the binder or offer to purchase expressly provides that
it is refundable.
- Depreciation is the loss in value of an asset / building
over time due to wear and tear, physical deterioration and age.
The cost of reproducing an income property can be recovered over
useful life of the asset which is determined by law. Depreciation
is treated as an expense and is a line item on an income statement.
Depreciation can only be applied to the building and not the land,
since land does not wear out over time. Residential income property
must be depreciated over a 27.5 year period using straight line
depreciation. Commercial income property must be depreciated over
39 years using straight line depreciation.
- Failure to make mortgage payments as agreed to in a commitment
based on the terms and at the designated time set forth in the
mortgage or deed of trust. It is the mortgagor's responsibility
to remember the due date and send the payment prior to the due
date, not after. Generally, thirty days after the due date if
payment is not received, the mortgage is in default. In the event
of default, the mortgage may give the lender the right to accelerate
payments, take possession and receive rents, and start foreclosure.
Defaults may also come about by the failure to observe other conditions
in the mortgage or deed of trust.
- Decline in value of a house due to wear and tear, adverse changes
in the neighborhood, or any other reason.
Points A loan fee charged by a lender of FHA, VA, or
conventional loans to increase the yield on the investment. One
point = 1% of the loan amount.
Stamps - A State tax, in the forms of stamps, required on
deeds and mortgages when real estate title passes from one owner
to another. The amount of stamps required varies with each State.
- The amount of money to be paid by the purchaser to the seller
upon the signing of the agreement of sale. The agreement of sale
will refer to the down payment amount and will acknowledge receipt
of the down payment. Down payment is the difference between the
sales price and maximum mortgage amount. The down payment may
not be refundable if the purchaser fails to buy the property without
good cause. If the purchaser wants the down payment to be refundable,
he should insert a clause in the agreement of sale specifying
the conditions under which the deposit will be refunded, if the
agreement does not already contain such clause. If the seller
cannot deliver good title, the agreement of sale usually requires
the seller to return the down payment and to pay interest and
expenses incurred by the purchaser.
- Scheduled payment of money to a builder during the phases of
home construction. Between each draw, the appraiser must inspect
the home to ensure that construction is proceeding as planned.
Clause - A type of acceleration clause, calling for a debt
under a mortgage or deed of trust to be due in its entirety upon
transfer of ownership of the secured property.
Money - The deposit money given to the seller or his agent
by the potential buyer upon the signing of the agreement of sale
to show that he is serious about buying the house. If the sale
goes through, the earnest money is applied against the down payment.
If the sale does not go through, the earnest money will be forfeited
or lost unless the binder or offer to purchase expressly provides
that it is refundable.
Rights - A right-of-way granted to a person or company authorizing
access to or over the owner's land. An electric company obtaining
a right-of-way across private property is a common example.
domain - The right of a government to take private property
for public use upon payment of its fair value.
- An obstruction, building, or part of a building that intrudes
beyond a legal boundary onto neighboring private or public land,
or a building extending beyond the building line.
- 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
covenants. 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.
- The value of a homeowner's unencumbered interest in real estate.
Equity is computed by subtracting from the property's fair market
value the total of the unpaid mortgage balance and any outstanding
liens or other debts against the property. A homeowner's equity
increases as he pays off his mortgage or as the property appreciates
in value. When the mortgage and all other debts against the property
are paid in full the homeowner has 100% equity in his property.
- Funds paid by one party to another (the escrow agent) to hold
until the occurrence of a specified event, after which the funds
are released to a designated individual. In FHA mortgage transactions
an escrow account usually refers to the funds a mortgagor pays
the lender at the time of the periodic mortgage payments. The
money is held in a trust fund, provided by the lender for the
buyer. Such funds should be adequate to cover yearly anticipated
expenditures for mortgage insurance premiums, taxes, hazard insurance
premiums, and special assessments.
payment - That portion of a mortgagor's monthly payment held
by the lender to pay for taxes, hazard insurance, mortgage insurance,
lease payments, and other items as they become due. Known as impounds
or reserves in some states.
right to sell (Listing) - A written contract giving a licensed
real estate agent the exclusive right to sell a property for a
specified time. The owner agrees to pay a full commission to the
broker even though the owner may sell the property.
- A loan insured by the Federal Housing Administration (of the
Department of Housing and Urban Development).
Value - The price at which property is transferred between
a willing buyer and a willing seller, each of whom has a reasonable
knowledge of all pertinent data and neither of whom is under any
compulsion to buy or sell.
Home Loan Mortgage Corporation (FHLMC) - A private corporation
authorized by Congress to provide secondary mortgage market support
for conventional mortgages. Also know as Freddie Mac.
Housing Administration (FHA) - A division of HUD. Its main
activity is the insuring of residential mortgage loans made by
private lenders. FHA does not lend money.
National Mortgage Association (FNMA) - A privately owned corporation
created by Congress to support the secondary mortgage market.
Also known as Fannie Mae.
- An estate under which the owner is entitled to unrestricted
powers to dispose of the property, and which can be left by will
or inherited. The greatest interest a person can have in real
- A person in a position of trust and confidence for another.
- A lender's agreement to make a loan to a specific borrower of
a specific property.
- A mortgage having priority over all other voluntary liens against
- A legal term applied to any of the various methods of enforcing
payment of the debt secured by a mortgage, or deed of trust, by
taking and selling the mortgaged property, and depriving the mortgagor
Rate The maximum interest rate on an ARM that can be
reached at the first adjustment.
Warranty Deed - A deed which conveys not only all the grantor's
interests in and title to the property to the grantee, but also
warrants that if the title is defective or has a "cloud"
on it (such as mortgage claims, tax liens, title claims, judgments,
or mechanic's liens against it) the grantee may hold the grantor
A letter from a relative stating that an amount will be
gifted to the buyer and that said amount is not to be repaid.
National Mortgage Association (GNMA) Called Ginnie
Mae, a governmental part of the secondary market that deals
in primarily in recycling VA and FHA mortgages, particularly those
that are highly leveraged.
Payment Mortgage - Residential mortgage which has monthly
mortgage payments that start at a low level and increase at a
- That party in the deed who is the buyer or recipient.
- That party in the deed who is the seller or giver.
Multiplier (GRM) - a ratio that is used to estimate the value
of income producing properties. The GRM provides a rough estimate
of value. Only two pieces of financial information are required
to calculate the Gross Rent Multiplier for a property, the sales
price and the total gross rents possible. If this information
is available for multiple sales of similar types of income properties
in a particular area, it can then be used to estimate the market
value of other similar properties in that area. Some investors
use a monthly Gross Rent Multiplier and some use a Yearly GRM.
The monthly Gross Rent Multiplier is equal to the Sales Price
of a property divided by the potential monthly gross income and
the Yearly GRM is the Sales Price divided by the yearly potential
Insurance - Protects against damages caused to property by
fire, windstorms, and other common hazards.
- That portion of a loan commitment not funded until some additional
requirement such as rental or completion is attained. In construction
it is a percentage of the contractor's draw held back to provide
additional protection for the interim lender, often in an amount
equal to the contractor's profit.
Report A qualified inspectors report on a propertys
overall condition. The report usually included an evaluation of
both the structure and mechanical systems.
Plan Protection against failure of mechanical systems
within the property. Usually includes plumbing, electrical, heating
systems and installed appliances.
- U.S. Department of Housing and Urban Development. Office of
Housing/Federal Housing Administration within HUD insures home
mortgage loans made by lenders and sets minimum standards for
- An economic measurement that is used to measure periodic interest
rate adjustments for an adjustable rate mortgage.
Sale - A sale that permits the taxpayer to prorate the tax
on the capital gain over the term of the installment contract,
provided at least one payment is received after the tax year in
which the sale occurs.
- A charge paid for borrowing money. (See mortgage note)
rate- The percentage of an amount of money which is paid for
its use for a specified time. Usually expressed as an annual percentage.
- An person or institution investing in mortgages.
lien - A lien imposed against property without consent of
an owner. Examples include taxes, special assessment, federal
income tax liens, mechanics liens, and materials liens.
- An equal undivided ownership of property by two or more persons.
Upon the death of any owner, the survivors take the decedent's
interest in the property.
Mortgage loans that exceed the loan amounts acceptable
for sale in the secondary market; these jumbos must be packaged
and sold differently to investors and therefore have separate
- Using a licensed Realtor who is kept abreast of the latest real
estate changes and practices, will affect the bottom line.
- A contract ordinarily used in connection with the sale of property
in cases where the seller does not wish to convey title until
all or a certain part of the purchase price is paid by the buyer.
This financing vehicle is often used when property is sold on
a small down payment.
- A written document containing the conditions under which the
possession and use of real or personal property are given by the
owner to another for a stated period and for a stated consideration.
- A property description recognized by law which is sufficient
to locate and identify the property without oral testimony.
(tenant) - The person or persons holding rights of possession
and use of property under terms of a lease.
(landlord) - The one leasing property to a lessee.
Mortgage Broker - The licensed person who, for a commission
or a fee, brings parties together and assists in negotiating contracts
between them. A firm or individual bringing the borrower and lender
together and receiving a commission. A mortgage broker does not
- A claim by one person on the property of another as security
for money owed. Such claims may include obligations not met or
satisfied, judgments, unpaid taxes, materials, or labor.
partnership - A partnership that consists of one or more general
partners who are fully liable and one or more limited partners
who are liable only for the amount of their investment.
- A sum of money loaned at interest to be repaid.
A written promise to make a loan for a specified amount
on specified terms.
- Also known as loan origination fees and loan discount, Loan
Points are a fee charged to a borrower by lending institutions
for the privilege of obtaining a loan. Lending institutions use
origination fees to generate income via lending activities. Each
point is equivalent to one percent of the amount borrowed. Loan
origination fees are usually paid up front in cash when you obtain
a loan or mortgage.
- (1) A System by which a Buyer is evaluated for loan approval.
The system compares the stated income, debt, savings and credit
against documentation provided by the buyer (or alternative Federal
documents). Calculations of Debt-To-Income, Loan-To-Value, Net
Worth, Cash Reserves and Compensating Factors are used to develop
and Underwriting Opinion. (2) The system of structuring a Buyer's
financial situation and documentation in such a way that an Underwriting
Opinion can be reached.
- A package of pertinent papers and documents regarding specific
property or properties. It is delivered to a prospective lender
for review and consideration for the purpose of making a mortgage
ratio - ratio is calculated by dividing the loan balance of
a property by the market value and is expressed as a percentage.
For example, a property with a loan balance of $700,000 and a
market value of $1,00,000 has a Loan-to-Value Ratio of 70%.
The fixing of an interest rate or points at a certain level,
usually during the loan application process. It is usually done
for a certain period of time such as 60 days and may require a
fee or premium in the form of a higher interest rate.
- The number of basis points a lender adds to the index to determine
the interest rate of an adjustable rate mortgage.
Title - A title that is free and clear of objectionable liens,
clouds, or other title defects. A title which enables an owner
to sell his property freely to others and which others will accept
- A lien or claim against real property given by the buyer to
the lender as security for money borrowed. Under government-insured
or loan-guarantee provisions, the payments may include escrow
amounts covering taxes, hazard insurance, water charges, and special
assessments. Mortgages generally run from 10 to 30 years, during
which the loan is to be paid off.
Commitment - A written notice from the bank or other lending
institution saying it will advance mortgage funds in a specified
amount to enable a buyer to purchase a house.
Deed Companion legal document to promissory note recorded
by the county enumerating the lenders procedure to enforce
Insurance Premium - The payment made by a borrower to the
lender for transmittal to HUD to help defray the cost of the FHA
mortgage insurance program and to provide a reserve fund to protect
lenders against loss in insured mortgage transactions. In FHA
insured mortgages this represents an annual rate of one-half of
one percent paid by the mortgagor on a monthly basis.
Life Insurance - A type of term life insurance often bought
by mortgagors. The amount of coverage decreases as the mortgage
balance declines. In the event that the borrower dies while the
policy is in force, the debt is automatically satisfied by insurance
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.
(Open-End) - A mortgage with a provision that permits borrowing
additional money in the future without refinancing the loan or
paying additional financing charges. Open-end provisions often
limit such borrowing to no more than would raise the balance to
the original loan figure.
- The lender in a mortgage agreement.
- The borrower in a mortgage agreement.
Amortization - Occurs when monthly payments fail to cover
the interest cost. The interest that isn't covered is added to
the unpaid principal balance, which means that even after several
payments the borrowers could owe more than they did at the beginning
of the loan. Negative amortization can occur when an ARM has a
payment cap that results in monthly payments that aren't high
enough to cover the interest.
- Promissory note to lender detailing terms of repayment of amount
- A preliminary agreement, secured by the payment of earnest money,
between a buyer and seller as an offer to purchase real estate.
A binder secures the right to purchase real estate upon agreed
terms for a limited period of time. If the buyer changes his mind
or is unable to purchase, the earnest money is forfeited unless
the binder expressly provides that it is to be refunded.
- The process of originating mortgages. Solicitation may be from
individual borrowers, builders, or brokers.
fee - A fee or charge for the work involved in the evaluation,
preparation, and submission of a proposed mortgage loan.
- A person who solicits builder, brokers, and others to obtain
applications for mortgage loans. origination is the process by
which the mortgage lender brings into being a mortgage secured
by real property.
Cap the maximum amount the payment can adjust in any
given time frame.
(principal, interest, taxes, and insurance) - The principal and
interest payment on most loans is fixed for the term of the loan;
the tax and insurance portion may be adjusted to reflect changes
in takes or insurance costs. Note: In cases where the buyer puts
down less than 20% of the Sales Price, Mortgage Insurance may
be required as part of the Total Monthly Payment (PITI).
specifications - Architectural and engineering drawings and
specifications for construction of a building or project, including
a description of materials to be used and the manner in which
they are to be applied.
- A map or chart of a lot, subdivision or community drawn by a
surveyor showing boundary lines, buildings, improvements on the
land, and easements.
- Sometimes called "discount points." A point is one
percent of the amount of the mortgage loan. For example, if a
loan is for $25,000, one point is $250. Points are charged by
a lender to raise the yield on his loan at a time when money is
tight, interest rates are high, and there is a legal limit to
the interest rate that can be charged on a mortgage. Buyers are
prohibited from paying points on HUD or Veterans' Administration
guaranteed loans (sellers can pay, however). On a conventional
mortgage, points may be paid by either buyer or seller or split
- A transaction preceding the formal closing, often used to settle
outstanding issues (survey, pest inspection, hazard insurance,
flood insurance (if required), with the formal closing shortly
- Payment of mortgage loan, or part of it, before due date. Mortgage
agreements often restrict the right of prepayment either by limiting
the amount that can be prepaid in any one year or charging a penalty
for prepayment. The Federal Housing Administration does not permit
such restrictions in FHA insured mortgages.
Penalty A fee charged to a borrower who pays a loan
before it is due. Not allowed for FHA or VA loans.
- The basic element of the loan as distinguished from interest
and mortgage insurance premium. In other words, principal is the
amount upon which interest is paid.
balance - The outstanding balance of a loan.
Annuity Trust - A specially designed trust where the owner
of real estate (or other assets) "sells" the asset to
the trust, in return for an unsecured promise, by the trust, to
make periodic payments to the seller.
mortgage insurance (PMI) - Insurance written by a private
company protecting the mortgage lender against loss by a mortgage
- Ordinarily, when the ownership of California real property changes,
the property is reassessed at its current far market value and
the new owner pays property tax based on the reassessment. Proposition
60 created an exemption by providing that a taxpayer who is 55
years of age or older may transfer the Proposition 13 base year
assessment of his/her principle residence to any replacement dwelling
of equal or lesser value within the same county. (See Prop
60/90 Information page)
- Prop 90 enables such taxpayers, in certain circumstances, to
transfer their base year value to a replacement dwelling in another
county. (See Prop
60/90 Information page)
Agreement - Known by various names, such as contract of purchase,
purchase agreement, or sales agreement according to location or
jurisdiction. A contract in which a seller agrees to sell and
a buyer agrees to buy, under certain specific terms and conditions
spelled out in writing and signed by both parties.
The process where the buyer meets the requirements as set
forth by the lender when obtaining a mortgage.
Deed - A 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. (See deed.)
Broker - A middle man or agent who buys and sells real estate
for a company, firm, or individual on a commission basis. The
broker does not have title to the property, but generally represents
- A real estate broker or an associate holding active membership
in a local real estate board affiliated with the National Association
- The transfer of land from one person to the immediately preceding
owner. It is used when the performance of debt is satisfied under
the terms of a deed of trust.
period - That period of time in those states where it is allowed
in which a foreclosed mortgagor has to buy back his property by
paying principal amount and interest and fees.
- The process of the same mortgagor paying off one loan with the
proceeds from another loan.
Z The set of rules governing consumer lending issued
by the Federal Reserve Board of Governors in accordance with the
Consumer Protection Act.
- A Real Estate Investment Trust is a business trust which deals
principally with interest in land- generally organized to coform
to the Internal Revenue Code.
of lien - An instrument discharging secured property from
Option A contract, which gives one the right to lease
property at a certain sum with the option to purchase at a future
survivorship - In joint tenancy, the right of survivors to
acquire the interest of a deceased joint tenant.
- A privilege operating as an easement upon land, whereby a land
owner, by grant or agreement, gives another the right to pass
over land. Also knows as easement.
- A technique in which a seller deeds property to a buyer for
a consideration and the buyer simultaneously leases the property
back to the seller, usually on a long-term basis.
- See agreement of sale.
- Another name for a sales agreement, purchase agreement, etc.
Not to be confused with a land contract, which is a conditional
of mortgage - The record able instrument given by the lender
to evidence payment in full of the mortgage debt. Sometimes knows
as a release deed.
financing - Financing real estate with a loan, or loans, subordinate
to a first mortgage or first trust deed.
mortgage market- The market where existing mortgages are bought
and sold. It contrasts with the primary mortgage market, where
mortgages are just originated, and packaged for delivery to the
- The duties of the mortgage lender as a loan correspondent as
specified in the servicing agreement for which a fee is received.
Consists of operational procedures covering accounting, bookkeeping,
insurance, tax records, loan payment follow-up, delinquency loan
follow-up and loan analysis.
Ownership Ownership by one person only. Sole ownership.
Assessments - A special tax imposed on property, individual
lots or all property in the immediate area, for road construction,
sidewalks, sewers, street lights, etc.
Lien - A lien that binds a specified piece of property, unlike
a general lien, which is levied against all one's assets. It creates
a right to retain something of value belonging to another person
as compensation for labor, material, or money expended in that
person's behalf. In some localities it is called "particular"
lien or "specific" lien.
Warranty Deed - A deed in which the grantor conveys title
to the grantee and agrees to protect the grantee against title
defects or claims asserted by the grantor and those persons whose
right to assert a claim against the title arose during the period
the grantor held title to the property. In a special warranty
deed the grantor guarantees to the grantee that he has done nothing
during the time he held title to the property which has, or which
might in the future, impair the grantee's title.
- A map or plat made by a licensed surveyor showing the results
of measuring the land with its elevations, improvements, boundaries,
and its relationship to surrounding tracts of land. A survey is
often required by the lender to assure him that a building is
actually sited on the land according to its legal description.
commitment - A promise to make a loan at a future specified
time. It is commonly used to designate a higher cost, shorter
term, backup commitment as a support for construction financing
until a suitable permanent loan can be secured.
-As applied to real estate, an enforced charge imposed on persons,
property or income, to be used to support the State. The governing
body in turn utilizes the funds in the best interest of the general
- A claim against property for the amount of its due and unpaid
- A holding of real estate under any kind of right of title.
At Will - A holding of real estate that can be terminated
at the will of either the lessor or the lessee, usually with notice.
by entirety - The joint ownership of property by a husband
and wife where both are viewed as one person under common law
that provides for the right of survivorship.
in common - In law, the type of tenancy or estate created
when real or personal property is granted, devised or bequeathed
to two or more persons, in the absence of expressed words creating
a joint tenancy. There is no right of survivorship.
- The period of time between the commencement date an termination
date of a note, mortgage, legal document, or the contract.
- As generally used, the rights of ownership and possession of
particular property. In real estate usage, title may refer to
the instruments or documents by which a right of ownership is
established (title documents), or it may refer to the ownership
interest one has in the real estate.
- Protects lenders or homeowners against loss of their interest
in property due to legal defects in title. Title insurance may
be issued to a "mortgagee's title policy." Insurance
benefits will be paid only to the "named insured" in
the title policy, so it is important that an owner purchase an
"owner's title policy", if he desires the protection
of title insurance.
or Examination - A check of the title records, generally at
the local courthouse, to make sure the buyer is purchasing a house
from the legal owner and there are no liens, overdue special assessments,
or other claims or outstanding restrictive covenants filed in
the record, which would adversely affect the marketability or
value of title.
- A party who is given legal responsibility to hold property in
the best interest of or "for the benefit of" another.
The trustee is one placed in a position of responsibility for
another, a responsibility enforceable in a court of law. (See
deed of trust.)
- The analysis and matching of risk to an appropriate rate and
property - A property the title to which is free and clear.
- Charging more for the use of money than allowed by law.
A loan, made by a private lender that is partially guaranteed
by the veterans Administration.
rate mortgage - A mortgage agreement that allows for adjustment
of the interest rate in keeping with a fluctuating market and
terms agreed upon in the note.
deed - A deed in which the grantor or seller warrants or guarantees
that good title is being conveyed, as opposed to a quitclaim deed
that contains no representation or warrant as to the quality of
title being conveyed.
Ordinances - The acts of an authorized local government establishing
building codes, and setting forth regulations for property land