Real Estate Glossary

A
Abstract of Judgment -A summary of the essential provisions of a court judgment, which when recorded in the county recorder's office, creates a lien upon the property of the defendant in that county.

Abstract of Title - An abstract of title is a written history of all the recorded documents and proceedings related to a specific property.

Accelerated Cost Recovery System - The system for figuring depreciation (cost recovery) for depreciable real property acquired and placed into service after January 1, 1981.

Acceleration Clause - A provision that allows a lender to demand payment of the total outstanding balance or demand additional collateral under certain circumstances, such as failure to make payments, bankruptcy, nonpayment of taxes on mortgaged property, or the breaking of loan covenants.

Acceptance - An offer of purchase that has been signed by both buyer and seller. A firm contract that outlines all details of the property transaction.

Accrued Interest - Interest that is earned but not paid, adding to the amount owed.

Accumulated Depreciation - in accounting, the amount of depreciation expense that has been claimed to date. Same as accrued depreciation.

Acknowledgment - the confirmation by a party executing a legal document that this is his signature and voluntary act. This confirmation is made to an authorized officer of the Court or notary public who signs a statement also called an acknowledgment.

Acquisition Cost - Cost of an asset after deducting discounts, and adding normal incidental costs (except taxes).

Acquisition Loan - Money borrowed in order to purchase a property.

Acre - an area of land measuring 4,840 square yards or 43,560 square feet.

Addendum - Document or information attached or added to clarify, modify, or support the information in the original document or written work.

Additional Principal Payment - A payment by a borrower of more than the scheduled principal amount due in order to reduce the principal. This also enables the borrower's future interest payments to be reduced.

Adjoining - contiguous, attached, sharing a common border.

Adjustable Rate Mortgage (ARM) - Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan

Adjusted Cost Basis - The value of real property for accounting or appraisal purposes. Cost basis plus improvements, minus depreciation claimed during the years of ownership.

Adjusted Tax Basis - the original cost or other basis of the property, reduced by depreciation deductions and increased by capital expenditures.

Adjustment Period - The adjustment interval is the time between changes in the interest rate and/or monthly payment for an adjustable rate mortgage, usually one, three or five years.

Administrator - A person appointed by the probate court to carry out the administration of a decedent's estate when the decedent has left no will

Administrator's Deed - A Deed conveying the property of one who died without a will (intestate).

Adverse Possession - A process of acquiring title to real property by possession for a certain (statutory) period of time, in addition to fulfilling other conditions.

Affidavit - a written statement, sworn to or affirmed before an officer who is authorized to administer an oath or affirmation.

Agency - The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal, and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal and owes to that principal the duties of accounting, care, loyalty, and obedience.

Agreement for Deed - see Contract for Deed.

Alienation - The voluntary transfer of property from one party to another, including possession of the land or tenements.

All Inclusive Trust Deed - A State-approved document used for security, usually in seller financing. Typically the financing is structured as a wraparound loan.

Amortized Loan - A loan that is paid off, both interest and principal, by regular payments that are equal or nearly equal.

Annual Cap - a limit on the amount of adjustment in the interest rate on an Adjustable Rate Mortgage over a twelve-month period.

Annual Percentage Rate (APR) - The yearly interest percentage of a loan, as expressed by the actual rate of interest paid.

Anticipatory Breach - A communication that informs a party that the obligations of the original contract will not be fulfilled.

Appraised Value - An opinion of the current market value of a property.

Appreciation - An increase in the value of a home or other property.

Arrears - mortgage payment includes interest for prior month, or overdue payments in default.

As-Is - The purchase or sale of a property in its existing condition.

Assessed Value - A tax assessor's determination of the value of a home in order to calculate a tax base.

Assignee - A person to whom a property right is transferred.

Assignment - A transfer of property rights from one person to another, called the assignee.

Assignor - A person who transfers rights and interests of a property.

Assumable Mortgage - An existing mortgage that can be taken over by the buyer on the same terms given to the original borrower.

Attornment - A tenant's formal agreement to be a tenant of a new landlord.

B
Backup Contract - a secondary contract on the purchase of a property that cannot become a primary contract unless the primary contract becomes null and void

Balance - Amount of loan remaining unpaid, not including interest and other charges (Principal Balance).

Balloon Loan - A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.

Balloon Payment - A large final payment due at the end of a loan, typically a home or car loan, to pay off the amount your monthly payments didn't cover.

Bankruptcy - A proceeding in a federal court in which an insolvent debtor's assets are liquidated and the debtor is relieved of further liability.

Bankruptcy Discharge - A court order terminating bankruptcy proceedings, usually relieving the debtor of his/her obligation.

Basis Point - one one-hundredth of one percentage point.

Beneficiary - The lender who makes a loan, also called a mortgagee. The person borrowing money is the mortgagor.

Bilateral Contract -A contract in which the parties involved give mutual promises. Also called "reciprocal" contracts.

Bill of Sale - A written agreement by which one person sells, assigns or transfers his right to, or interest in, personal property to another.

Bird Dog - someone who identifies a potential good real estate investment opportunity and passes that deal on to another investor for a fee.

Biweekly Mortgage - A mortgage loan that requires borrowers to pay interest and principal payments for a mortgage loan twice a month.

Blanket Mortgage - A mortgage that covers more than one property owned by the same borrower.

Board Of Equalization - A government entity whose purpose is to assure uniform property tax assessments.

Board of Realtors - Local group of real estate brokers who are members of the State and National Board of Realtors.

Bond - An agreement that insures one party against loss by acts or defaults of another party.

Breach of Contract - When one party fails to meet the agreed upon terms of a contract. This is also known as a "default."

Bridge Loan -A short-term loan for borrowers who need more time to find permanent financing.

Broker - One who acts as an intermediary between parties to a transaction. A real estate broker is a properly licensed person who, for a valuable consideration, serves as an agent to others to facilitate the sale or lease of real property.

Broker Price Opinion (BPO) - a method that a real estate broker uses to estimate the probable selling price of a real estate property/house.

Building Permit - A permit issued by a local government agency that allows the construction of home or renovation of a house.

Bundle of Rights - A term often applied to the rights of ownership of real estate, including the rights of using, renting, selling or giving away the real estate or not taking any of these actions.

Buy Down - A cash payment, usually measured in points, to a lender in order to reduce the interest rate a borrower must pay.

C
Call Option - A clause in a loan agreement that allows a lender to ask for the balance at any time.

Cancellation Clause - A clause that details the conditions under which each party may terminate the agreement.

Cap - The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

Capital - (1) money used to create income, either as an investment in a business or an income property. (2) the money or property comprising the wealth owned or used by a person or business enterprise. (3) the accumulated wealth of a person or business. (4) the net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure - The cost of making improvements on a property.

Capital Improvement - The addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property's overall value or increases its useful life.

Capitalization (Cap) Rate - The rate of expected return on investment property. A ratio of income to value.

Carrying Charges - A cost associated with holding a financial instrument or storing a physical commodity over a defined period of time.

Cash Flow - The amount of cash a rental property investor receives after deducting operating expenses and loan payments from gross income

Cash Flow Basis - this calculation shows when your monthly payment savings exceed your estimated closing costs and discount points.

Cash Out - Receiving money back when refinancing your present mortgage.

Cash-Out Refinance - A refinance trans-action in which the borrower receives additional funds over and above the amount needed to repay the existing mortgage, closing costs, points, and any subordinate liens.

Caveat Emptor - A legal principle derived from Latin than means "let the buyer beware."

Certificate of Eligibility - A document issued by the U.S. Department of Veterans Affairs (VA) certifying a veteran's eligibility for a VA-guaranteed mortgage loan.

Certificate of Insurance -A document, issued by the insurance company, setting out the particulars of the insurance coverage for a particular property.

Certificate of Occupancy (C.O.) - a document issued by a local government or agency permitting the structure to be occupied by members of the public.

Certified Commercial Investment Member (CCIM) - (CCIM) is a recognized expert in the disciplines of commercial and investment real estate. The designation is awarded by CCIM Institute.

Certified Residential Broker (CRB) - A person who has met the requirements of the Realtors National Marketing Institute.

Certified Residential Specialist (CRS) - A person who has met the requirements of the Realtors National Marketing Institute.

Chain of Title - The history of all of the documents that have transferred title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Clear Title - Ownership that is free of liens, defects, or other legal encumbrances.

Closing - The conclusion of the sales transaction when the seller transfers title to the buyer in exchange for consideration.

Closing Costs - Costs the buyer must pay at the time of the closing in addition to the down payment which may include points, title charges, credit report fee, document preparation fee and other charges.

Closing Date -The date on which the sale of a property is to be finalized and a loan transaction completed.

Closing Statement - A detailed written summary of the financial settlement of a real estate transaction, showing all charges and credits made, and all cash received and paid out.

Cloud on Title - A claim or encumbrance that may effect title to land.

Coinsurance Clause - A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.

Collateral - An asset that guarantees the repayment of a loan.

Collectors Deed - If the Property has not been redeemed during the one-year redemption period, the holder of the Certificate of Purchase may apply for and receive a Collectors Deed to the property

Combined Loan-to-Value (CLTV) - Sum of the face value of all mortgages on a property divided by the market value of that property.

Commitment - A promise, usually in writing, to provide a mortgage or other loan.

Comparable Sales - Used in assessing or establishing the fair market value of a property, a property which has been sold recently that is similar in size, condition, location and amenities to the subject property.

Conditions, Covenants, and Restrictions (CCR's) -rules written into the deeds or bylaws, that define how property may be used.

Conforming Loan - a conventional loan characterized by loan limits that fall within those guidelines laid out by the Government Sponsored Enterprises (GSEs) such as Freddie Mac and Fannie Mae.

Consideration - Anything that is legal, has value and induces a person to enter into a contract.

Contiguous - Sharing a common boundary, touching.

Contingency - An event which may (or may not) happen in the future, a condition that must be fulfilled before a contract becomes firm and binding.

Contract - A legally binding agreement (oral or written) between two or more persons regarding an exchange of some sort.

Contract For Deed - An agreement for the sale of property where the buyer takes possession while making payments, but the seller holds title until full payment is received. Also called a land contract.

Contractor - A tradesman who works in the construction industry under a contract with the owner of the property.

Conventional Loan - A mortgage loan that is not insured or guaranteed by the federal government or one of its agencies, such as the Federal Housing Administration (FHA), the U.S. Depart-ment of Veterans Affairs (VA), or the Rural Housing Service (RHS). Contrast with "Government Mortgage".

Conversion - a change in the use of a property, or in the way a property is owned

Convey - To transfer title to (or any other interest in) a property to someone else.

Cooperative (co-op) - a mode of land ownership where the occupiers of individual units in a building own an interest in the Cooperative Corporation that owns the whole property.

Counteroffer - A new offer made as a reply to an offer received from another; this has the effect of rejecting the original offer, which cannot thereafter be accepted unless revived by the offeror's repeating it.

Creative Financing - An arrangement for the financing of the purchase of a property which is outside the normal practice of residential financing.

Credit Line - The total of revolving credit that may be borrowed partially or in full against an account. Once the debt is repaid, the borrower make use that credit again, and may do so as many times as he or she wishes.

D
Dealer - a person who offers a collection of properties for sale to the public.

Debt Coverage Ratio (DCR) - A comparison of the net income of a property with the cost of payments (principal and interest) on the mortgage on the property, used to assess the ability of the property to generate enough income to pay for itself.

Debt Ratio (DR, D:I) -A comparison of the total monthly payments of all of the borrower's debts (including the mortgage) with the gross monthly income of the borrower, used to assess borrower's ability to pay mortgage. Also known as Debt-to-Income ratio

Decree - a court order or decision issued by one in authority.

Deed -The legal document conveying title to a property.

Deed in Lieu of Foreclosure - the transfer of title from a borrower to the lender to satisfy the mortgage debt and avoid foreclosure. Also called a "voluntary conveyance."

Deed of Trust (DOT) - A legal document in which the borrower transfers the title to a third party (trustee) to hold as security for the lender. When the loan is paid in full, the trustee transfers title back to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt.

Deed Restriction - rules written into the deeds or bylaws, that define how property may be used.(CCR's)

Default - The failure to fulfill a duty or promise or discharge an obligation, such as making monthly mortgage payments.

Defeasance -A clause in a deed, lease, will or other legal document that completely or partially negates the document if a certain condition occurs or fails to occur. Defeasance also means the act of rendering something null and void.

Deferred Maintenance - A way of telling that the property has not been kept up and is depreciating both physically and in value.

Deferred Payments - Payments that are to be made at some date in the future.

Deficiency Judgment - A judgment against a borrower, endorser, or guarantor for the balance of the debt issued when the security for a loan is insufficient to satisfy the debt.

Density - A measure of the number of a certain thing within a defined space.

Density Test - Analysis of soil, which determines if the surface can support the foundation of a house.

Depreciation Recapture - When real property is sold at a gain and accelerated depreciation has been claimed, the owner may be required to pay tax at ordinary income rates to the extent of the excess accelerated depreciation.

Discount Points - A fee paid by the borrower at closing to reduce the interest rate. A point equals one percent of the loan amount.

Document Preparation - A fee charged by the lender to prepare the closing documents. This charge can be seperate or included in the lender processing fee.

Down Payment - A portion of the price of a home, usually between 3-20%, not borrowed and paid up-front in cash.

Draw - A payment made to subcontractors or suppliers from a construction loan.

Due Diligence -The process of gathering information about the condition and legal status of assets to be sold.

Due-on-Sale - A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

E
Earnest Money - A sum of money paid by a potential purchaser as proof of her intention to complete the purchase transaction.

Easement - A right to the use of, or access to, land owned by another.

Easement by Necessity - A land owner's right to make use of the property of another (or a portion of it) for a specific purpose.

Easement by Prescription - The continuing, unchallenged use of all or part of a property by the owner of a neighboring or nearby property for a specific period of time such that, by law, the using owner gains a legal right to continue that use.

Egress - Means of exit from a room, building or property.

Eminent Domain - The right of a government to take private property for public use upon payment of its fair market value.

Employer-Assisted Housing - A program in which companies assist their employees in purchasing homes by providing assistance with the down payment, closing costs, or monthly payments.

Encroachment - The intrusion across the property line and into one property of an improvement to a neighboring property.

Encumbrance - Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

Equal Credit Opportunity Act (ECOA) - A federal law that prohibits a lender or other creditor from refusing to grant credit based on the applicant's sex, marital status, race, religion, national origin or age. The law also prohibits a creditor from refusing to grant credit because the applicant receives public assistance.

Equitable Conversion - A common law doctrine which treats a seller under an Agreement for the sale of property as holding the property in trust for the buyer even before the transaction has been completed such that the seller is liable to the buyer for any damage negligently caused to the property.

Equitable Title - The common law interest of the buyer in the property for which he has entered an agreement to buy prior to the completion of the transaction.

Equity - The difference, in dollars, between the market value of a property and the principal owing on debts secured against the property.

Escheat - The reversion of property to the state in the event the owner thereof dies without leaving a will and has no heirs to whom the property may pass by lawful descent.

Escrow - A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met.

Escrow Account - An account that a lender or mortgage servicer establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes.

Escrow Analysis - The accounting that a mortgage servicer performs to determine the appropriate balances for the escrow account, compute the borrower's monthly escrow payments, and determine whether any shortages, surpluses or deficiencies exist in the account.

Escrow Collections - Money taken in by the agent and set aside for future payments as required by the contract in a mortgage situation, for taxes, insurance, etc. on the property.

Escrow Disbursements - The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow Payment - Funds that a mortgage servicer withdraws from a borrower's escrow account to pay property taxes and insurance.

Estate - The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Estate at Sufferance - The continued occupation of a premises by a tenant after the lease has expired.

Estate for Life - an interest in property that terminates upon the death of a specified person. Also known as Life Estate.

Estate Tax - A tax based on the value of the property of a deceased person, and charged on the personal representatives of the deceased.

Estoppel - A legal restraint that stops or prevents a person from contradicting or reneging on his previous position or previous assertions.

Eviction - The legal act of removing someone from real property.

Exchange - under Section 1031 of the IRS Tax Code, like-kind property used in a trade or business or held as an investment can be exchanged tax-free, subject to certain conditions.

Exclusive Listing - A written agreement in which the seller appoints one agent to market the property for a specific period of time. If the owner sells the property himself, he is not required to pay a commission.

Exculpatory Clause - The term of a mortgage giving the borrower the right to simply surrender the property to the lender without personal liability to the borrower for any shortfall.

F
Facade - the face or front of a building.

Face Value - The amount or value listed on a bill, note, stamp, etc. shown by words or numbers.

Fair Credit Reporting Act - A federal law giving consumers the right to learn what information credit reporting agencies have on file about them and to dispute any inaccurate data in the file.

Fannie Mae (FNMA) - Federal National Mortgage Association, a public company that operates under a federal charter and is the nation's largest source of financing for home mortgages. Fannie Mae does not lend money directly to consumers, but instead works to en-sure that mortgage funds are available and affordable, by purchasing mortgage loans from institutions that lend directly to consumers.

Federal Fair Housing Law - Landmark federal law that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin.

Federal Housing Administration (FHA) - An agency within the U.S. Department of Housing and Urban Development (HUD) that insures mortgages and loans made by private lenders.

Fee Agreement - An agreement which specifies the relationship between a borrower and a broker and the amount of compensation to the broker.

Fee Simple - The best title to property available, representing the absolute ownership of a property.

Fiduciary Responsibility - The relationship of trust that buyers and sellers expect from a real estate agent.

First Mortgage - A mortgage that, when registered, is first in line on the property, giving the lender superior right to the proceeds of the sale of the property over other, later claimants.

Fixed Payment Mortgage - a loan secured by real property which features a periodic payment of interest and principal which is constant over the term of the loan.

Fixed Rate Mortgage - A mortgage with an interest rate that does not change during the entire term of the loan.

Floodplain - The area around a body of water which may at times be under water and may at other times be dry land, depending on the level of the water in the lake, river, pond, etc.

Forbearance - a special agreement between the lender and the borrower in order to delay a foreclosure.

Foreclosure - A legal action that ends all ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.

Fractional Ownership - a generic term for a number of existing legal and commercial concepts whereby ownership and/or use of property is acquired jointly by a group of persons and whereby the use or income of such property is shared by them on an agreed basis.

FRBO - for rent by owner.

Freddie Mac (FHMLC) - Federal Home Loan Mortgage Corporation, A congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

FSBO - for sale by owner.

Fully Amortized Adjustable-Rate Mortgage - Type of home loan that carries with it a changeable rate of interest that must be fully paid off by the policyholder at the end of the term.

G
Gable Roof - A roof that has two, differently angled slopes on each side of the peak, the upper slope being flatter while the lower slope is steeper.

Gain - Any increase in value or monetary holdings.

Garden Apartments - A description of a kind of apartment unit which enjoys direct access to a lawn or other garden-like area.

General Contractor - the person hired by the owner to plan and oversee the construction of a building.

General Lien - A lien on all property, both real and personal, of a debtor, rather than a specific property.

General Warranty Deed - A deed which conveys all the grantor's interests in and title to the property of the grantee.

Gentrification - The process in which a neighborhood is transformed from low-value to high-value properties.

Graduated-Payment Mortgage(GPM) - A land loan in which the periodic payments increase at a stated rate over a stated period of time before levelling off for the remainder of the term of the loan.

Grantee - One who receives title.

Grantor - One who gives title to another.

Gross Debt Service - The amount of money needed to pay principal, interest and taxes, and sometimes energy costs. If the dwelling unit is a condominium, all or a portion of common fees are excluded, depending on what expenses are covered.

Gross Monthly Income - monthly earnings prior to any deductions for income taxes or any other employee deductions.

Gross Rent Multiplier -the ratio of the price of a real estate investment to its annual rental income before expenses such as property taxes, insurance etc

Ground Lease - a lease for the use and occupancy of land only

H
Habendum Clause - The "to have and to hold" clause that defines the quantity of the estate granted in the deed.

Hard Money Loan - Loan usually from a private lender. Actual money loaned and secured by a trust deed as opposed to a loan carried back by a seller, in which no money passes.

Hazard Insurance - Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other covered hazards or natural disasters.

Hereditaments - A descriptive term for any property that one is able to inherit.

Hiatus -a gap or an area of land that lies between two parcels of land but appears from legal descriptions and public records not to be a part of either.

Highest and Best Use - The particular use of a real property which will produce the greatest financial return.

Holdover Tenant - A tenant remaining on a rented property beyond the expiration of his/her lease term

Home Equity Loan - a loan secured by the available equity of an owner occupied residential property.

Homeowner Association (HOA) - An organization consisting of neighbors in a subdivision or condominium complex concerned with managing the common areas and enforcing deed restrictions

Homeowners' Warranty -Insurance offered by a seller that covers certain home repairs and fixtures for a specified period of time.

Homeowner's Insurance (Hazard Insurance) - This insurance includes hazard coverage for any damages that may affect the value of a house, in addition to personal liability and theft coverage.

Homesteading - A document that to protects some of a home's equity from lawsuits.

Homestead Exemption - the reduction in the taxable value of a homestead as authorized by law

Housing and Urban Development (HUD) - the United States federal department that administers federal programs dealing with better housing and urban renewal; created in 1965.

Housing Code - Local standards that ensure that maintenance and improvements of housing meet accepted standards and are adequate for occupancy.

Hypothecate - To pledge as security for a mortgage an asset of which the pledgor retains possession.

I
Implied Warranty of Habitability - In a residential lease, the implied warranty of habitability is a warranty from the landlord to the tenant that the leased property is fit to live in and that it will remain so during the term of the lease.

Impound Account - see Escrow Account.

Improvements -Things added to vacant land with the view to increasing its usefulness and value, such as buildings, parking areas, drainage works, etc.

Incidents of Ownership - any control over property. If you give away property but keep an incident of ownership then legally, no gift has been made. This distinction can be important if you're making large gifts to reduce your eventual estate tax.

Indemnify - To take responsibility for the losses and damages suffered by another person.

Index - Any rate published by an independent third party (the government, the federal bank, etc.) which serves as the base for calculating a variable item in a contract. (A Variable or Adjustable Rate Mortgage may use the Federal Bank's monthly prime interest rate as the index for the interest charged under that mortgage).

Initial Note Rate - With regard to an adjustable rate mortgage, the note rate upon origination. This rate may differ from the fully indexed note rate.

Installment Contract - see Contract for Deed

Installment Sale - The sale of a property with the seller taking back a mortgage from the purchaser and paying the taxes on the sale proceeds as they are collected.

Insurance Binder - A temporary insurance arrangement usually put in force until a permanent policy can be obtained.

Insured Mortgage - A loan secured against land for which an insurance policy exists promising to compensate the lender for all losses and costs resulting from the borrower's failure to meet his obligations under the loan agreement.

Inter Vivos - Term used in law to describe agreements made while living

Interest Accrual Rate - The rate, stated as a percentage, at which interest accumulates on a mortgage.

Interest Rate - The sum, expressed as a percentage, charged for a loan. Interest payments on most home loans are tax deductible. deductible.

Interest Rate Buydown Plan - For cash-short buyers, some sellers are willing to advance funds from the sale of the home to buy down the interest rate and reduce the buyer's monthly obligation.

Interim Financing - A short-term loan usually made during the construction phase of a building project; often referred to as the "construction loan."

Intestate - To die without a valid will.

J
Joint and Several Liability - A situation in which more than one party is liable to repay a debt or obligation and a creditor can obtain compensation from one or more parties, either individually or jointly, whichever he chooses.

Joint Tenancy - A way for two or more people to share ownership of real estate or other property.

Joint Venture - A project which two or more persons undertake together, sharing the cost, the risk and the reward.

Judgment - The official and authentic decision of a court of justice concerning the respective rights and claims of the parties to an action or suit.

Judgment Creditor - A party who, by virtue of a court decision, is entitled to a monetary payment from another party.

Judgment Lien - A lien on the property of a debtor resulting from the decree of a court.

Judicial Foreclosure - Property of a defaulted borrower is sold under court order and the amount received is ratified by the Court.

Jumbo Loan - A loan that exceeds the mortgage amount eligible for purchase by Fannie Mae or Freddie Mac. Also called "non-conforming loan."

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.

K
Kicker - Additional compensation for a lender or investor, the right to share in the income from the property in addition to payments of principal and interest. Also known as "equity kicker" or "lender participation".

L
Lien - The right to hold the property of a debtor as security or payment for a debt

Land Contract - see Contract for Deed.

Land Lease - see Ground Lease.

Land Trust - An association organized by common owners of real property, which holds title to the real property in the name of one or more trustees for the benefit of the owners, whose beneficial interests may be represented by trust certificates.

Landlocked -Real property having no access to a public road or way.

Lease -A contract conveying from one entity to another the use of real or personal property for a designated period of time in return for payment or other consideration.

Lease Option - A written agreement between a property owner and a tenant that allows the tenant to use a property in exchange for rent, but it also gives the tenant the option to buy the property for a certain price within a specified time period.

Lease Purchase - A contract in which an owner leases his house (usually for one to five years) to a tenant for an increased monthly rent, and which gives the tenant the right to buy the house at the end of the lease period for a price established in advance, with the incremental rent increase being used to form a down payment.

Leasehold - A less than freehold estate, which a tenant possesses in real property.

Leasehold Estate - an ownership interest in land in which a lessee or a tenant holds real property by some form of title from a lessor or landlord.

Legal Blemish - Blemishes on a piece of property, such as a zoning violation or fraudulent title claim.

Legal Description - A description of a parcel of land recognized by law, based on surveys identifying the exact boundaries of the property.

Lessee - The person to whom property is rented or leased.

Lessor - The person who rents or leases property to another.

Let - To lease or rent part or all of a property to a third party.

Letter of Intent - written expression of desire to enter into a contract without actually doing so.

Liabilities - A person's debts and other financial obligations.

Liability Insurance - insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. See also homeowners insurance.

Lien Theory State - Texas is a Lien Theory State, where legal title of mortgaged property resides with the mortgagor (borrower), with the mortgage as a lien against the property. Contrast with title theory state.

Life Estate - Interest in land that lasts for the life of the grantee.

Life Tenant - A tenant whose legal right to retain possession of buildings or lands lasts as long as they (or some other person) live.

Lifetime Cap - For an adjustable rate mortgage (ARM), a limit on the amount that the interest rate or monthly payment can increase or decrease over the life of the loan.

Like-Kind Property - properties similar in nature.

Limited Partnership - one in which there is at least one partner who is passive and limits liability to the amount invested and at least one partner whose liability extends beyond monetary investment.

Line Of Credit - A financial agreement under which lender agrees to provide a client with loans of money up to an approved limit during a predefined period without the need for the borrower to file another application.

Liquidated Damages - an amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach

Liquidity - The ease and certainty with which an asset can be converted into cash.

Lis Pendens - Latin for "suit pending." This may refer to any pending lawsuit or to a specific situation with a public notice of litigation that has been recorded in the same location where the title of real property has been recorded.

Listing - An agreement between an owner of real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for specific property at a certain price and terms in return for a fee or commission.

Loan Application (1003) - The form potential customers must complete to apply for a home loan.

Loan Origination Fee - A charge imposed by the lender, payable at closing, for processing the loan. A point is 1 percent of the total loan amount.

Loan Package - The file of all items necessary for the lender to decide to give or not give a loan. These items would include the information on the prospective borrower and information on the property.

Loan-to-Value (LTV)- A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased. If the loan is $80,000 and the value of the property is $100,000 the LTV is 80% ($80,000 / $100,000).

Lot and Block - A method of describing real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, see Legal Description.

Lot Line - A line marking the legal limits of the property of a person.

Low-Documentation Loan - A loan that requires very little documentation in order to qualify.

Low-Down-Payment loan -A mortgage in which the borrower can put down a very small down payment in order to be approved for a mortgage.

M
Management Agreement - is a written agreement that sets out the terms and conditions upon which a property owner appoints a real estate agent to manage the owner's investment property.

Margin - A percentage added to the index for an adjustable rate mortgage (ARM) to establish the interest rate on each adjustment date.

Marketable Title - A title to real property that is unencumbered and not subject to any reasonable challenges.

Master Lease -The dominant lease in a property, under which one or more sub-leases may exist.

Maturity - The date on which a loan or bond comes due and is to be paid off.

Maximum Financing - A loan given for a property where the buyer puts down the lowest allowable down payment possible.

Mechanic's Lien - A legal claim placed on real estate by someone who is owed money for labor, services or supplies contributed to the property for the purpose of improving it.

Merged Credit Report -A credit report which reports the raw data pulled from two or more of the major credit repositories.

Minimum Payment -The smallest amount a borrower must pay each month on a loan.

Monthly Mortgage Insurance (MI) Payment - portion of monthly payment that covers the cost of Private Mortgage Insurance.

Monthly Payment (P&I) - This includes Principle Payment plus the Interest Payment added together, but excludes any amounts that are applied to taxes and insurance.

Monthly Principal & Interest (P&I) Payment - portion of monthly payment that covers the principal and interest due on the loan.

Monthly Taxes & Insurance (T&I) Payment - portion of monthly payment that funds the escrow or impound account for taxes and insurance.

Mortgage -A legal document that pledges a property to the lender as security for payment of a debt.

Mortgage (Open-End) - A mortgage that allows additional money to be borrowed (up to the original loan amount) without refinancing the loan or paying additional financing charges .

Mortgage Balance - see Principal Balance.

Mortgage Insurance Premium (MIP) - The amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company.

Mortgage Loan - a loan on real estate that is usually secured by a mortgage

Mortgage-Interest Deduction - Interest expense on a home loan that governments allow homeowners to subtract from their income before computing their income tax.

Mortgagee - The institution or individual to whom a mortgage is given.

Mortgagor - The owner of real estate who pledges property as security for the re-payment of a debt; the borrower.

Multi-Dwelling Property - Properties that provide separate housing units, although they secure only a single mortgage.

N
Needs-Based Pricing - A seller's asking price based on factors such as the required funds to pay off the mortgage, the cost of remodeling or the purchase of another house.

Negative Amortization - An increase in the balance of a loan caused by adding unpaid interest to the loan balance; this occurs when the payment does not cover the interest due.

Negotiation -The process of achieving agreement through discussion or bargaining.

Net Cash Flow - The amount of money leftover from the income of a property after all costs and expenses of the property have been paid.

Net Operating Income (NOI) - The income from a property or business left over after the costs of operating the property or business have been paid.

No Cash-Out Refinance - A transaction for refinancing a mortgage in which the new mortgage amount is limited to the sum total of the remaining balance of the first mortgage, points, closing costs, whatever is required to satisfy any liens that are more than one year old.

No Income Verification Loan (NIV) - A loan that does not require income verification.

Non-Assumption Clause - A term of a mortgage contract that forbids the transfer of the mortgage to a new owner without prior consent of the lender.

Non-conforming Loan - A non-conforming loan is a loan that fails to meet bank criteria for funding.

Non-Qualifying - The buyer of the property is not required to qualify through traditional bank financing requirements.

Non-Recurring Closing Costs - Fees that are paid once, usually at a real-estate closing. Closing costs can include origination fees, appraisal costs, points, and title insurance.

Note - A written instrument of indebtedness, promising to pay a certain person a particular sum of money upon stated terms.

Note Broker - An individual who acts as an intermediary between a holder of an existing note and a prospective purchaser of the note.

Notice of Default - A notice filed to show that the borrower under a mortgage is in default.

O
Obligee - The party owed an obligation by another party, the obligor

Obligor - The party bearing a legal obligation to another party, the obligee

Option - A situation in which a buyer puts down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy.

Ordinances - A rule or by-law enacted by a local government.

Origination Fee - Fee charged to a borrower (especially for a mortgage loan) to cover the costs of initiating the loan.

Originator - An individual who works with a borrower to start a loan.

Owner Financing (Seller Financing) - Instead of paying a mortgage company, payments are made to the owner, who finances the purchase of the home.

P
Penalty - Fine for breaching a rule, term of a contract or law.

PITI - The components of a monthly mortgage payment principal, interest, taxes, and insurance.

Planned Unit Development (PUD) - A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Points - One percent of the amount of the mortgage loan.

Portfolio Loan - A loan that is kept as an investment by the bank issuing the loan and is not sold in the secondary market.

Prepayment Penalty - A charge to a borrower for paying off the loan before the end of the term.

Principal Balance - The portion of a loan not yet repaid, exclusive of interest or other charges.

Principal, Interest, Taxes, Insurance (PITI) - monthly payments required by an amortizing loan that includes escrow deposits for taxes and insurance in addition to the principal and interest

Private Mortgage Insurance (PMI) - Paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-To-Value Ratio is greater than 80%

Pro Forma - Presentation of financial information that gives effect to an assumed event

Probate - Establishment of the validity of a will through a court process.

Promissory Note -A document saying that someone owes a specific amount of money to someone else, often with the deadline and interest fees

Purchase Money Mortgage - a mortgage which secures a note written on a loan used in the purchase of real estate

Purchase Subject to Mortgage - a purchase in which a buyer agrees to make the monthly mortgage payments on an existing mortgage and the original borrower remains liable if the purchaser fails to make the payments as agreed.

Purchase-Money Mortgage (PMM) - A loan from the vendor to the purchaser to help finance the purchase of the property.

Q
Qualifying Ratio - Ratio used, by a lender, to determine how much a potential buyer can afford to borrow.

Quiet Enjoyment - The right of an owner to use his or her property without interference.

Quiet Title Action - A suit brought for the purpose of establishing clear title to real property or to remove a cloud (problem with) on the title.

Quitclaim Deed - A deed relinquishing all interest, title or claim an owner has in a property. A quitclaim deed implies no warranty or covenants for title.

R
Rate Cap - The limit on the amount an interest rate on an adjustable-rate mort-gage (ARM) can increase or decrease during an adjustment period.

Rate-Improvement Mortgage - A loan permitting a borrower to reduce his or her interest rate once without paying refinance charges.

Real Estate Owned (REO) - Real estate owned by the lender; the final result of the foreclosure process when the property does not sell at the trustee auction.

Real Property - Rights to land and to the improvements to the land.

Realtor - a real estate agent who is a member of the National Association of Realtor.

Recission Period -The right to cancel a home loan contract without any penalty within three business days after closing on non-purchase money mortgages or loans.

Recourse - The right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment.

Redemption Period - The specified period in which a mortgagor can reclaim foreclosed property by making full payment of the mortgage debt under right of redemption.

Refinance - Obtaining a new loan to pay off an existing loan.

Regression - The principle that the value of a better-quality property is adversely affected by the proximity of a lesser-quality property.

Regulation Z - Implements the Truth-in-Lending Act requiring credit institutions to inform borrowers of the true cost of obtaining credit.

Residential Service Contract - A warranty or insurance contract which covers services such as electrical, plumbing etc. in a resale home.

Residual - The remaining value or income after deducting an amount necessary to meet fixed obligations.

Reverse Mortgage - A special type of loan available to equity-rich, older owners. Repayment is not necessary until the borrower sells the property or moves into a retirement community.

Right of First Refusal - A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

S
Sale Leaseback - A financial transaction, where one sells an asset and leases it back for a long-term

Sandwich Lease - a tenant has a current lease with the owner of a property and then "sublets" the property to a third party.

Seasoned Mortgage- An old loan under which the borrower has proven herself capable of meeting loan obligations.

Second Mortgage - A mortgage that has a lien position subordinate to the first mortgage.

Section 1031 - Section of the IRS code that allows the deferral of capital gains tax on the exchange of "like kind" real estate properties.

Section 8 - A federal program that allows for leasing a property to lower-income families.

Security Deposit - A payment required by a landlord to ensure that a tenant pays rent on time and keeps the rental unit in good condition. If the tenant damages the property or leaves owing rent, the landlord can use the security deposit to cover what the tenant owes.

Seller Financing - also known as Owner Financing.

Settlement Statement - also known as Closing Statement or HUD-1.

Short Sale - a sale of real estate which proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the mortgagor.

Special Warranty Deed - A deed containing a covenant whereby the seller agrees to protect the grantee (purchaser) against any claims created by the grantor (seller).

Specific Performance - A legal action brought in a court of equity to compel a party to carry out the terms of a contract.

Subject To - a way of purchasing property when there is an existing lien

Subordination - Placing the right of one person behind those of another.

Survey - Confirmation of the property boundaries and improvements

T
Tax and Insurance Escrow - account required by a mortgage lender to fund annual property tax assessments and hazard insurance premiums, funded through monthly contributions by the mortgagor

Tax Lien - A claim registered against a property by a government authority for non-payment of assessed taxes.

Teaser Rate - A lower interest rate charged on an adjustable or variable rate mortgage for a brief, introductory period as an inducement to the borrower to accept the loan from the lender.

Terms - The various clauses that make up a contract. Sometimes used to described the financial portions of the contract only.

Time is of the Essence - A condition in a contract requiring the completion of a certain act within a designated period of time.

Title - The right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of land.

Title Defect - An outstanding claim on a property that prevents the legal sale of that property. Also known as a Cloud on the title. A title with defects is not a "clear" title.

Title Insurance - Insurance that protects lenders and homeowners against legal problems with the title.

Title Search - A check of the public records to ensure that the seller is the legal owner of the property and to identify any liens or claims against the property.

Title Theory State - The system in which the lender has legal title to the mortgaged property and the borrower has equitable title. Also see Lien Theory State.

Triple Net Lease -A lease that requires the tenant to pay all costs of property ownership so that the landlord receives his rent clear of all expenses and outgoings, or at least, the three major expenses, namely taxes, insurance and maintenance.

Trust - an arrangement whereby something (as property) held by one party (the trustee) for the benefit of another (the beneficiary)

Trust Deed - transfers the title to the property to a trustee--often a title company--who holds it as security for a loan. When the loan is paid off, the title is transferred to the borrower, same as Deed of Trust

Trustee - A person or entity who holds, for the benefit of the beneficiary, title to property

U
U.S. Department. of Housing and Urban Development (HUD) - the United States federal department that administers federal programs dealing with better housing and urban renewal; created in 1965.

Underwriting - The process used to determine loan approval. It involves evaluating the property and the borrower’s credit and ability to pay the mortgage.

Undivided Interest - A right to possess and use real property in conjunction with other co-owner(s), in which each owner is entitled to undivided possession and use of the whole property.

Unencumbered Property - Land that has no claims, liens or mortgages registered against it.

Unilateral Contract - a one-sided agreement whereby you promise to do (or refrain from doing) something in return for a performance.

Unimproved Property - Real property that has not been subjected to man's labour to make it more valuable of profitable. Raw land.

Unrealized Gain - Increase in the value of property while it is being held. Gain is only realized upon sale.

Unrecorded Deed - A deed that transfers ownership from one party to another without being officially recorded.

Urban Renewal - The process of acquiring and redeveloping property for the purposes of increasing its profitability or utility. May be conducted by government, private interests or a combination of the two.

Usufruct - a legal right to use and derive profit from property belonging to someone else provided that the property itself is not injured in any way

Usury - Interest charged in excess of the legal rate established by law.

Utility Easement - The area near the home structure that houses the electric, gas, or telephone lines. These areas may be owned by the homeowner, but the utility company has the legal right to enter the area as necessary to repair or service the lines.

V
V.A. Loan - A loan on below market terms guaranteed by the Department of Veterans Affairs, given to former members of the armed forces.

Valuation - Assessment of the value of a property given in a written report by a registered valuer

Variable Interest Rate- An interest rate that may change according to change in the index rate.

Variable Rate Mortgage - A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating market interest rates. If mortgage rates go up, a larger portion of the payment goes to interest. If rates go down, a larger portion of the payment is applied to the principal.

Vendee- A buyer of real property.

Vendee's Lien - A buyer's lien on the purchased land as security for repayment of purchase money paid in, enforceable if the seller cannot or does not convey good title.

Vendor - A seller of real property.

Veneer - Brick or thin sheets of wood applied to the surface of furniture for decorative effect.

W
Waiver - The intentional or voluntary yielding or relinquishment of a known legal claim, right or privilege.

Warehouse Fee -Charge to a borrower to cover the costs of the lender taking short term loans from other lenders to cover the borrower's mortgage.

Warranty Deed- A deed guaranteeing that the grantor has good title, free and clear of all liens and encumbrances, and will defend the grantee against any and all claims.

Wholesale - To contract a property with the intention of reselling it quickly at a higher price.

Wild Deed - An improperly recorded deed

Without Recourse - A mortgage or deed of trust securing a note without recourse allows the lender to look only to the security (property) for repayment in the event of default, and not personally to the borrower.

Wraparound Mortgage - A loan to a buyer for the remaining balance on a seller's first mortgage and an additional amount requested by the seller. Payments on both loans are made to the lender who holds the wraparound loan.

Writ of Execution - A claim or lien which is registered with the local enforcement officer to enforce a judgement of a court.

X

Y
Yield - measurement of the rate of earnings of an investment.

Z
Zero Lot Line- The practice of placing the building on one of the side lot lines in order to increase the usable side yard space.

Zoning - Laws that govern specifically how a zoned area can be used.

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