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Mortgage Glossary |
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ABSTRACT
Back to Top...
The notes made by a title examiner based on his examination of the land records. These notes are a concise summary of the transactions affecting the property. The title agency produces a BINDER from the information in the abstract. ACCELERATION CLAUSE Back to Top... A condition in a real estate financing instrument giving the lender the power to declare all sums owing lender immediately due and payable upon the happening of an event, such as the sale of the property, or a delinquency in the repayment of the note. The buildup of land from natural forces such as wind or water. ACKNOWLEDGEMENT Back to Top... As a verb, 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 Back to Top... Under an FHA loan, the purchase price or appraised value of the property plus the estimated costing costs 43,560 square feet of land. ADDENDUM Back to Top... A form/document added to a contract or agreement also known as a Rider. ADJUSTABLE RATE MORTGAGE (ARM) Back to Top... An ARM is a variable interest rate loan. The lender may change the interest rate on this mortgage, within limitations, to follow a specified index to more readily reflect market rates. ADJUSTMENT DATE Back to Top... The date the interest rate changes on an ARM (adjustable rate mortgage). ADJUSTED BOOK BASIS Back to Top... The purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale ADJUSTMENT INTERVAL Back to Top... On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index. A person appointed by the Court to settle the estate of a person who dies without a will. The feminine form is Administratrix. Compare, EXECUTOR. ADVERSE POSSESSION Back to Top... A claim made against land titled to another person based on open, notorious and hostile possession and use of the land to the exclusion of the titled owner. AGENCY Back to Top... AIR RIGHTS Back to Top... The right to the air space above the real property. ALTA OWNER'S POLICY (American Land Title Association ) Back to Top... A typeof title insurance policy issued by title insurance companies whichexpands the risks normally insured against under the standard typepolicy to include unrecorded mechanic's liens; unrecorded physicaleasements; facts a physical survey would show ; water and mineralrights; and rights of parties in possession, such as tenants and buyers rights under unrecorded instruments. AMENDMENT Back to Top... A change to the correct or alteration to the original
document/agreement without The periodic principal pay down of a loan. AMORTIZATION SCHEDULE Back to Top... ANNUAL PERCENTAGE RATE (A.P.R.) Back to Top... ANNUITY Back to Top... A series of income payments of receipts over a period of years APPLICATION Back to Top... A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more. An estimate of the value of property, made by a qualified professional called an "appraiser." Most states require licenses. Various lenders have their own lists of approved appraisers. APPRECIATION Back to Top... Increases in property value due to fluctuations in the market, inflation, et al. APPROVED ATTORNEY Back to Top... An attorney authorized by a title insurance company to handle closings and render title opinions. Anything attached to the land or used with it passing to the new owner. ASSET Back to Top... Valuable items, encumbered or not, owned by a person, corporation, or entity. A local tax levied against a property for a specific purpose, such as a sewer or street lights. To transfer interest. One who receives an assignment or transfer of rights. An assignment of a contract transfers the right to buy property. The one who assigns to another person. ASSUMABLE MORTGAGE Back to Top... A mortgage that provides for a buyer to "assume" all outstanding payments when a home is sold. The buyer usually must meet qualification standards to assume a loan. The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, possibly higher, market-rate interest charges will apply. Seizure of property through Court process to repay a debt. ATTORNEY IN FACT Back to Top... A type of agency relationship where one person holds a POWER OF ATTORNEY allowing him to execute legal documents on behalf of another. Decisions made by the attorney in fact are binding on the principal. BALLOON (PAYMENT) MORTGAGE Back to Top... Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract. A provision of Federal Law whereby a debtor surrenders his assets to the Bankruptcy Court and is relieved of the future obligation to repay his unsecured debts. A Trustee in Bankruptcy administers the assets, selling them to pay as much of the debt as possible. If your seller is in bankruptcy, the Trustee in Bankruptcy owns the property and is the party to sign the contract and make decisions. After bankruptcy, the debtor is discharged and his unsecured creditors may not pursue further collection efforts against him. Secured creditors, those holding deeds of trust or judgment liens, continue to be secured by the property but they may not take other action to collect from the debtor. A permanent reference mark for surveyors. A person named to receive a benefit from a TRUST. A contingent beneficiary has conditions attached to his rights, usually someone else must die first. BEST FAITH ESTIMATEBack to Top... An estimate of the total costs for securing a real estate loan, that is given to borrowers prior to closing. BID Back to Top... An offer. BILL OF SALEBack to Top... A written document that transfers a title to personal property. A title insurance binder is the written commitment of a title insurance company to insure title to the property subject to the conditions and exclusions shown on the binder. BIWEEKLY MORTGAGE Back to Top... Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off. BLANKET MORTGAGE Back to Top... A mortgage covering at least two pieces of real estate as security for the same mortgage. This sort of loan is more common for commercial property or "special case" loans. An amount of money, often posted with the Court, to guarantee against loss as a result of a possible claim. For example, if there is a LIEN against the property, the owner may post a bond and the lien is removed from the property and the parties argue over the money rather than the property. BOOK VALUE Back to Top... Acquisition costs less any accrued depreciation. BREACH OF CONTRACT Back to Top... Failure to perform provisions of a contract. BRIDGE LOAN Back to Top... An equity loan secured to solve short-term financing problem. An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services. BUDGET MORTGAGE Back to Top... A mortgage that /includes a portion for taxes and insurance as well as principal and interest. BUILDING RESTRICTION LINE Back to Top... A required set-back a certain distance from the road within which no building may take place. This restriction may appear in the original plat of subdivision, restrictive covenants or by building codes and zoning ordinances. When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires. These are sometimes used to qualify borrowers for a loan amount that they would not otherwise qualify for but will be able to pay in subsequent years as their income increases. Rules and regulations governing an association or corporation. CALLABLE DEBT Back to Top... A debt security in where the issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity date. Profit earned from a sale of real estate. A method used to estimate value of a property based on the rate of return on investment. CAPS Back to Top... A set percentage amount by which an ARM may adjust each adjustment period. It is usually given in a format as such: 3/6. The first number indicates how much a loan may adjust at an adjustment period (3%), and the second number indicates how much a loan may adjust over its lifetime (6%). CARRYBACK LOAN Back to Top... A loan in which a seller agrees to finance a buyer in
order to complete a property sale. The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income-producing property (mortgage payment, maintenance, utilities, etc.). Buyer beware. The buyer must inspect the property and satisfy himself that it is adequate for his needs. The seller is under no obligation to disclose defects but may not actively conceal a known defect or lie if asked. CERTIFICATE OF ELIGIBILITY Back to Top... The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility). CERTIFICATE OF OCCUPANCY Back to Top... A certificate issued by a local governmental body stating that the building is in a condition to be occupied. CERTIFICATE OF REASONABLE VALUE (CRV)Back to Top... An appraisal that has been performed on a property that
is being paid for a VA loan. After the property has been
appraised, the Veterans Administration issues a CRV. CERTIFICATE OF SATISFACTION Back to Top... A document signed by the Noteholder and recorded in the land records evidencing release of a DEED OF TRUST, MORTGAGE or other lien on the property. CERTIFICATE OF TITLE Back to Top... A written opinion by an attorney setting forth the status of title to the property as shown on the public records. The certificate does not certify as to matters not of record and affords no protection unless the author was negligent. Compare, TITLE INSURANCE. The series of transactions from GRANTOR to GRANTEE as evidenced in the land records. Personal property. A claim brought up on behalf of a group of people. CLEAR TITLEBack to Top... A title that is free of liens or any legal question as to
the ownership of the property. The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report and notary fees. CLOSING COSTS Back to Top... Closing costs are fees paid by the borrower when a
property is purchased or refinanced. Costs incurred include
a loan origination fee, discount points, appraisal fee,
title search, title insurance, survey, taxes, deed recording
fee, and credit report charges. All closing costs are
separated into "non-recurring," and "pre-paid."
Non-recurring charges are any items that are paid only once
because a loan was obtained or a property bought, such as a
loan origination fee. Pre-paid charges are those that recur
over time, like insurance and property taxes. These are
summarized in the Good Faith Estimate. An evidence of encumbrances. A judicial proceeding through which a governmental body takes a private property for a public use. Covenants, conditions, and restrictions. The basic rules establishing the rights and obligations of owners of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners. When more than one insurance company shares the risk of a particular transaction or series of transactions. Lenders may require co-insurance on large commercial projects. Property pledged to secure a loan. Taking of private property for a public use through exercise of the power of EMINENT DOMAIN. The Constitution protects against taking without fair compensation. A system of individual FEE SIMPLE ownership of portions (units) in a multi-unit structure, combined with joint ownership of common areas. Each individual may sell or encumber his own unit. Compare, COOPERATIVE. Also called a Committee or Guardian, a person designated by the Court to protect and preserve the property of someone who is not able to manage their own affairs. Examples include the mentally incompetent, minors and incarcerated persons. CONSTRUCTION LOAN Back to Top... A short-term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses. These are generally done by lenders with offices local to the site of the construction. This enables the lender or their agent to monitor the progress of the construction. A legally enforceable agreement between two parties. CONTRACT FOR DEED Back to Top... Also known as a Land Contract or Land Installment Contract. A method of financing where title remains in the Seller's name until the Buyer has paid the full purchase price. A Contract for Deed will normally trigger the DUE ON SALE CLAUSE in a DEED OF TRUST or MORTGAGE but Veterans Administration regulations specifically allow Contracts for Deed without invoking the DUE ON SALE CLAUSE. CONVENTIONAL LOAN Back to Top... A mortgage not insured by FHA or guaranteed by the VA. A system of individual ownership of stock in a corporation that. in turn, owns the structure. Each owner has an exclusive right to use his individual unit and must pay his portion of the debt encumbering the entire building. Compare, CONDOMINIUM. A method used by an appraiser to estimate replacement costs of improvements less depreciation. Ownership in the same land by more than one person. See, TENANTS IN COMMON, JOINT TENANTS, TENANTS BY THE ENTIRETY. A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner's association. CREDIT LOANBack to Top... A credit loan is a mortgage that is issued on only the financial strength of a borrower, without great regard for collateral.
The ratio of credit-related losses to the dollar amount of MBS outstanding and total mortgages owned by the corporation. CREDIT RATING Back to Top... Used by lenders to assess borrowers' credit-worthiness or risk profile. A credit rating is expressed as letter grades, such as A, B+, or C-, etc. Ratings are based on factors such as payment history, bankruptcies, and charge-offs. CREDIT-RELATED EXPENSES Back to Top... The sum of foreclosed property expenses plus the provision for losses. CREDIT-RELATED LOSSES Back to Top... The sum of foreclosed property expenses plus charge-offs.
A report documenting the credit history and current status of a borrower's credit standing. DEBT-TO-INCOME RATIO Back to Top... The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio. The written document conveying real property. The Deed must be executed (signed), ACKNOWLEDGED, and DELIVERED to the Grantee. Once recorded at the Courthouse, the original piece of paper is not needed to convey title in the future. A voluntary lien to secure a debt deeding the property to Trustees who foreclose, sell the property at public auction, in the event of default on the Note the Deed of Trust secures. Compare, MORTGAGE. Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage. DEFERRED INTEREST Back to Top... When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization DEFICIENCY JUDGMENT Back to Top... If the foreclosure sale does not bring sufficient proceeds to pay the costs of sale and the note in full, the holder of the note may obtain a judgment against the maker for the difference. DELINQUENCY Back to Top...
The final, unconditional and absolute transfer of a DEED to the Grantee so that the Grantor may not revoke it. A Deed, signed but held by the Grantor, does not pass title. DEPOSIT Back to Top... A lump sum given in advance as security. A deposit is always paid of a larger amount to be paid in the future. In mortgage and real estate terms, this is called the "earnest money deposit." DEPRECIATION Back to Top... In real estate and mortgage terms, the decline in the
property value. DISCOUNT Back to Top... Difference between the face amount of a note or mortgage and the price at which the instrument is sold in the secondary market DISCOUNT POINTS Back to Top... A term used in government subsidized loans, such as FHA
and VA loans. Refers to any "points" (one percent of the
loan amount) paid in addition to the one percent loan
origination fee. A spouse's interest in the property of a deceased spouse. Money paid to make up the difference between the purchase price and the mortgage amount. Representation of opposing parties (buyer and seller) at
the same time in the same transaction. This situation most
often refers to cases where the Realtor is the agent for
both parties. DUE ON SALE CLAUSE Back to Top... A clause in the MORTGAGE that makes the loan non-assumable by providing the noteholder may call the loan immediately due and payable upon a sale or conveyance of an interest in the property. The FNMA/FHLMC form provides that a lease of more than three years or a lease with an option to buy also triggers this provision. A good faith deposit. The right to use the land of another for a specific limited purpose. Examples include utility lines, driveways, and INGRESS AND EGRESS. Easements can be temporary or permanent. The power of the state to take private property for public use upon payment of just compensation. The physical intrusion of a structure or improvement on the land of another. Examples include a fence or driveway over the property line. Any lien, liability or charge against a property. EQUAL CREDIT OPPORTUNITY ACT (ECOA) Back to Top... Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs. The difference between the fair market value and current indebtedness, also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property. A form of joint ownership between an owner/occupant and an owner/investor. The investor takes depreciation deductions for his share of the ownership. The occupant receives a portion of the tax write-offs for interest and taxes and a part of his monthly payment is treated as rent. The co-owners divide the profit upon sale of the property. Compare, JOINT OWNERSHIP AGREEMENT. ESCALATOR CLAUSE Back to Top... A clause in a loan providing for increases in payments or
interest based on pre-determined schedules or on a specific
economic index, such as the consumer price index. Property that reverts to the state when an individual dies without heirs and without a will. A disinterested third party holds funds or documents on behalf of others and subject to their instructions. ESCROW ACCOUNT (IMPOUND ACCOUNT) Back to Top... An account that a borrower can hold with a lender once a purchase transaction is closed. This requires borrowers to pay more than the principal and interest each month. The overage is put into escrow, which the lender uses to pay items like property taxes and homeowner's insurance when they are due. This eliminates the actual number of payments that a homeowner has to worry about, but not the amount that has to actually be paid. ESCROW ANALYSIS Back to Top... An analysis performed by a lender each year to escrow accountholders to ensure that the correct amount of money is being collected to cover anticipated payments. ESTATE Back to Top... The ownership interest an individual holds in real
property. This is also the sum total of all the real
property and personal property owned by an individual at
time of death. EVICTION Back to Top... The legal removal of real property occupants for unlawful
actions carried out by those occupants. A person named in a will to carry out its terms and administer the estate. The feminine form is Executrix. Compare, ADMINISTRATOR. FANNIE MAE'S COMMUNITY HOME BUYER'S PROGRAM Back to Top... A program that offers flexible underwriting guidelines to subsidize a low- to moderate-income family's purchase of a home. The program usually decreases the total amount of cash needed to purchase a home. FEDERAL HOUSING ADMINISTRATION (FHA) Back to Top... An agency under the U.S. Department of Housing and Urban
Development (HUD), it insures loans made by approved lenders
to qualified borrowers, in accordance with its regulations The absolute total interest in real property. Compare, LIFE ESTATE, REVERSION. FEDERAL HOME LOAN MORTGAGE CORPORATION Back to Top... A affiliate of the Federal Home Loan Bank which creates a secondary money market in conventional residential loans and in FHA and VA loans by purchasing mortgage loans from members of the Federal Reserve System and the Federal Home Loan Bank Systems. FHA MORTGAGE Back to Top... A mortgage that is insured by the FHA, and will be
referred to as a government loan FIDUCIARY RELATIONSHIP Back to Top... A relationship of trust and confidence between principal and agent; lawyer and client; doctor and patient; etc. FIRM COMMITMENT Back to Top... A lender's agreement to provide a loan to a specific borrower on a specific property. FIRST MORTGAGE Back to Top... A mortgage that has priority over other mortgages. FIXED-RATE MORTGAGE Back to Top... A mortgage where the interest rate remains the same
during the entire term of the loan. An item of personal property attached to real property so that it can not be removed without damage to the real property. A FIXTURE becomes part of the real property. FORBEARANCE Back to Top... The postponement for a limited time of a portion or all the payments on a loan when a borrower is delinquent. 401(K)/403(B) Back to Top... An investment plan sponsored by employers that allows individuals to set aside tax-deferred income for retirement or emergency purposes. A 401(k) applies to private corporations, while a 403(b) applies to non-profit organizations. 401(K)/403(B) LOAN Back to Top... A loan that can be taken against the amount accumulated
in the 401(k)/403(b) plans, if so allowed by the plan
administrator. Loans against these plans are an acceptable
source of down payment for most types of other loans. The process by which a lender sells property securing a loan in order to repay the loan. Under a DEED OF TRUST, foreclosure is by public auction after appropriate advertisement. A MORTGAGE may require the lender to obtain Court approval prior to sale. FULLY INDEXED NOTE RATE Back to Top... As related to adjustable rate mortgages, the index value at the time of application plus the gross margin stated in the note. GENERAL WARRANTY DEED Back to Top... The Grantor warrants title against all claims. GOOD FAITH ESTIMATE Back to Top... An estimate of charges which a borrower is likely to incur in connection with a loan closing. GOVERNMENT LOAN Back to Top... A type of mortgage insured by the FHA (Federal Housing Authority), VA (Veteran's Administration), or RHS (Rural Housing Authority). GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GINNY MAE) Back to Top... Provides funds for government loans and takes over special assistance and liquidation functions of Fannie Mae. GRACE PERIOD Back to Top... A time allowed, usually 15 days, for making late payments
without a penalty. The person receiving an interest in property. Compare, GRANTOR The person granting, selling or giving up an interest in property. Compare, GRANTEE. GRADUATED PAYMENT MORTGAGE (GPM) Back to Top... A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. Income before expenses. GROSS MARGIN Back to Top... With regard to an adjustable rate mortgage, an amount expressed as percentage points, stated in the note which is added to the current index value on the rate adjustment date to establish a new note rate. The owner grants a long-term lease of the land (usually 99 years) and allows the lessee to build and use the land as agreed. At the end of the term, the land and all improvements revert to the owner. One appointed by the Court to administer the affairs of a minor. A guardian ad litem is appointed to protect one's interest in a particular legal action. See, CONSERVATOR. Income before expenses. HARD-MONEY MORTGAGE Back to Top... Cash loan to a borrower HAZARD INSURANCE Back to Top... A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like. A gap or space left between two parcels of land and not included in the legal description of either parcel. Similar terms are Gaps and Gores. HOME EQUITY CONVERSION MORTGAGE (HECM) Back to Top... Also known as the reverse annuity mortgage. This mortgage provides that instead of making payments to a lender, the lender makes payments to the individual. Older homeowners are able to convert home equity into cash this way, in the form of monthly payments. Borrowers don't qualify on the basis of income, but on the value of his or her home. Such a loan does not have to be repaid until the borrower no longer occupies the property. HOME EQUITY LINE OF CREDIT Back to Top... A mortgage loan in second position that allows a borrower to obtain cash drawn against home equity, up to a certain amount. HOME INSPECTION Back to Top... A thorough assessment by a professional regarding the structural and mechanical condition of a property. HOMEOWNER'S INSURANCE Back to Top... An insurance policy that combines personal liability insurance and hazard insurance for a home and its contents. HOMEOWNER'S WARRANTY Back to Top... An insurance policy that is purchased by a buyer that
covers certain repairs, should they be necessary over a
certain period. A declaration filed in the land records that an individual is asserting his homestead exemption. That exemption allows one to protect some assets (amount varies by state) against the claims of creditors. The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. See debt-to-income ratio. HUD Back to Top... Department of Housing and Urban Development; regulates Fannie Mae and Ginny Mae. HYBRID FINANCING Back to Top... The joining together of two forms of finance, such as
combining a convertible loan with a participation loan,
under which the lender has the right at loan maturity to
convert the debt to a 50 percent ownership in the property.
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves. INCOME APPROACH Back to Top... A method used by an appraiser to estimate the value of a property by calculating its generated income. A protection against actual loss or damage as a result of the matter mentioned. An indemnity is not an absolute guarantee that something won't happen; it states the terms under which an actual loss will be compensated. A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one-, three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down. INGRESS AND EGRESS Back to Top... Applied to EASEMENTS, meaning the right to go in and out over a piece of property but not the right to park on it. INSURABLE TITLE Back to Top... Title subject to a defect or claim which a title insurance company is willing to insure against. Compare, MARKETABLE TITLE. INSURED CLOSING LETTER Back to Top... An indemnity given to a lender from a title insurance company, agreeing to be responsible if the closing agent does not follow the lender's instructions or misappropriates the loan proceeds. Lenders usually require an insured closing letter be on file for each settlement. INTEREST Back to Top... Money ("rent") paid for the use of money INTEREST ONLY Back to Top... A term loan arrangement calling for payments of interest
only, not to include any amount for principal INTEREST RATE SWAP Back to Top... A transaction between two parties, in which each agrees
to exchange payments tied to different interest rates or
indices for a specified period of time INTERIM FINANCING Back to Top... A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion. INITIAL NOTE RATE Back to Top... With regard to an adjustable rate mortgage, the note rate upon origination. This rate may differ from and is usually less than the fully indexed rate. INTERMEDIATE-TERM MORTGAGE Back to Top... A mortgage loan with a stated maturity at the time of purchase that it is equal to or less than 20 years. An estate without a Will. Compare, TESTATE JOINT OWNERSHIP AGREEMENT Back to Top... An agreement between owners defining their rights, ownership, monetary obligations and responsibilities. This could be between and investor and an occupant or the occupants. If an investor is involved, the investor does not take depreciation deductions and none of the occupant's payment is deemed rent for tax purposes. Compare, EQUITY SHARING. Two or more persons own a property. Joint tenants with the common law right of survivorship means the survivor inherits the property without reference to the decedent's will. Creditors may sue to have the property divided to settle claims against one of the owners. Compare, TENANTS IN COMMON, TENANTS BY THE ENTIRETY. A judgment is a lien against all real property owned by the judgment debtor in the county where the judgment is docketed (recorded). JUDICIAL FORECLOSURE Back to Top... A court procedure used by lenders to secure clear title
to a property under a defaulted real estate loan. A loan which is larger (more than $207,000 as of 1/1/96) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate. JUNIOR MORTGAGE Back to Top... Mortgage of lesser priority than the prior recorded mortgage. See, CONTRACT FOR DEED. LEASE Back to Top... A written agreement between a property owner and a tenant
that stipulates the payment and conditions under which the
tenant may possess the real estate for a specified period of
time. A rental agreement indicating a tenant's option to
purchase a property. Monthly payments consists not only of
rent, but an overage that can be applied towards a down
payment on an already established amount. LEASE HOLD ESTATE Back to Top... Tenant's right of possession for a specific period of time under a lease agreement. (Common in Hawaii.) LEVERAGE Back to Top... Using someone else's money for the purchase of property.
Insurance that protects property owners against claims
that alleges negligence or inappropriate action that
resulted in bodily injury or property damage to another
party. A claim or charge against property. Property is said to be encumbered by a lien and the lien must be removed to clear title. With regard to an adjustable rate mortgage, a ceiling the note rate cannot exceed over the life of the loan. The right to use, occupy and own for the life of an individual. Compare, FEE SIMPLE. Recorded document showing a pending litigation filed in the court. These show up on the preliminary title report and must be dealt with when transferring ownership or refinancing. LOAN Back to Top... The principal, or amount of total borrowed money, that is repaid with interest. LOAN APPLICATION Back to Top... The loan application is the source of information on which the lender bases a decision to make the loan; defines the term of the loan, gives the name(s) of the borrower(s), place of employment, salary, bank accounts and credit references, and describes the real estate that is to be mortgaged. It also stipulates the amount of the loan being applied for and the repayment terms. LOAN OFFICER Back to Top... An intermediary between lending institutions and borrowers, loan officers solicit loans, represent creditors to borrowers, and represent borrowers to creditors. LOAN ORIGINATION Back to Top... What the process of obtaining new loans is called. LOAN SERVICING Back to Top... A service performed by a lender to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies. LOAN-TO-VALUE RATIO (LTV) Back to Top... The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. LOCK-IN CLAUSE Back to Top... Clause in a loan agreement that states that the borrower cannot repay a loan prior to a specified date. The age at which a person may handle his own affairs. The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. MARKETABLE TITLE Back to Top... Title without defects or claims so as to be readily accepted without fair or reasonable doubt. Compare, INSURABLE TITLE. The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time. MATURITY Back to Top... Due date of a loan A credit report that reports data from two or more major
credit repositories. MECHANIC'S LIENS Back to Top... The right of an unpaid contractor, laborer or supplier to file a lien against property to recover the value of his work METES AND BOUNDS Back to Top... A means of describing land by directions and distances rather than reference to a lot number. Generally used when land has not been subdivided into lots. MODIFICATION Back to Top... any change to the original terms of a mortgage. A voluntary lien filed against property to secure a debt, usually a loan. To foreclose, the lender must often institute a court action and the borrower may have the right to reclaim the property after foreclosure. Compare, DEED OF TRUST. MORTGAGE BANKER Back to Top... A financial intermediary that originates or funds loans, collects payments, inspects the property, and forecloses if necessary. The main difference between a mortgage banker and a loan officer is a banker funds their own loans and sell them on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginny Mae. MORTGAGE BROKER Back to Top... A mortgage company that originates loans, joining the borrower and lender for a real estate loan, earning a placement fee. MORTGAGE CONSTANT Back to Top... The factor used for rapid computation of the annual
payment needed to amortize a loan MORTGAGE INSURANCE Back to Top... Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance. The lender The borrower or home owner. MULTIDWELLING UNITS Back to Top... Properties that provide separate housing units for more
than one family, although only a single mortgage is secured.
NEGATIVE AMORTIZATION Back to Top... Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan. NET EFFECTIVE INCOME Back to Top... The borrower's gross income minus federal income tax. The difference between total assets and total liabilities. NON-ASSUMPTION CLAUSE Back to Top... A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Note: The signed obligation to pay a debt, as a mortgage note. NON-PERFORMING LOAN Back to Top... A loan in default. A loan of which no payments are being made and in danger of resulting in foreclosure. NO CASH-OUT REFINANCE Back to Top... A refinance transaction that is not intended to put cash in the hand of the borrower, but instead calculates a new balance to cover the balance due on a current loan and any costs with obtaining a new mortgage. NO-COST LOAN Back to Top... A no-cost loan can either be: 1) a loan that has no
"lender costs" associated with it or, 2) a loan that also
covers purchases or refinancing costs, which may be incurred
in buying a home, obtaining and/or refinancing a loan, but
are not directly charged by the lender. The interest rate on
this type of loan is higher. A written promise to pay a certain sum of money at a certain time. A negotiable note starts "Pay to the order of" and is transferable by endorsement similar to a check. NOTE RATE Back to Top... The stated interest rate on a mortgage note. One authorized by law to acknowledge and certify documents and signatures. A proposal; after acceptance it becomes a contract. A right given for a consideration to keep an offer to
purchase or lease open for specific time. ORIGINATION FEE Back to Top... On a conventional loan, it is the total number of points a borrower pays, a point equaling one percent of the loan amount. On a government loan, it is one percent of the loan amount. OWNER FINANCING Back to Top... A property purchase that is partly or wholly financed by the seller OWNER'S TITLE POLICY Back to Top... A policy protecting the buyer for the amount of the purchase price in the event of a future title dispute. PACKAGE MORTGAGE Back to Top... A mortgage that /includes equipment and appliances located on the premises in addition to the real property itself. PARTIAL ENTITLEMENT Back to Top... Under VA loans, the amount of guarantee still available to an eligible veteran who has used his previous entitlement PARTIAL PAYMENT Back to Top... A payment that is not sufficient enough to cover the month payment. During times of economic hardship, a borrower can make this request of the loan servicing collection department. PARTICIPATION FINANCING Back to Top... A loan in which more than one mortgagee or more than one
mortgagor harbors an interest. It can also be a loan in
which the mortgagee receives partial ownership of the
property being financed. The forced division of land among parties who were formerly co-owners. A partition suit may ask to divide the land, or if that is not practical, sell the land and divide the proceeds. PAYMENT CHANGE DATE Back to Top... The date when a new monthly payment amount takes effect
on an adjustable rate mortgage (ARM) or a graduated payment
mortgage (GPM). The payment change date occurs the month
immediately after the interest rate adjustment date. A total balance; amount of a full payment on existing loan or lien. PERIODIC PAYMENT CAP Back to Top... The limit on the amount that payments can increase or decrease during any one adjustment period for an adjustable-rate mortgage (ARM) where the interest rate and principal fluctuate independently of one another. PERIODIC RATE CAP Back to Top... The limit on the amount that payments can increase or decrease during any one adjustment period in an ARM (adjustable rate mortgage), regardless of how high or low the index fluctuates. PERSONAL PROPERTY Back to Top... Movable property that does not fit the definition of realty. PITI Back to Top... PITI stands for principal, interest, taxes, and insurance. An "impounded" loan means that the monthly payment covers all of these, and perhaps mortgage insurance, if your loan so calls for it. If one does not have an "impounded" account, then the lender still calculates these amounts separately and uses it as part of determining one's debt-to-income ratio. PITI RESERVES Back to Top... A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI (principal, interest, taxes, and insurance) must equal the amount that the borrower would have to pay for PITI for a determined number of months. PLANNED UNIT DEVELOPMENT (PUD) Back to Top... A type of ownership where individuals actually own the
building or unit they reside in, but shared areas are owned
jointly with the other members of the development or
established association. A map showing the division of a piece of land with lots, streets and, if applicable, common area. PLEDGE ACCOUNT MORTGAGE (PAM) Back to Top... Combines GPM (graduated payment mortgage) with a
subsidizing savings account to provide the borrower with a
low payment plan, the lender with amortizing payments and
the seller with cash. A lot connected to a public street by a narrow strip of land. Usually several adjacent pipestems are combined to form one driveway with each owner having a mutual-reciprocal easement to use and maintain the driveway to the street. Principal, Interest, Taxes and Insurance. Also called monthly housing expense. POINTS (loan discount points) Back to Top... Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000). POWER OF ATTORNEY Back to Top... A written document authorizing another to act on his behalf as an ATTORNEY IN FACT. One does not need to be a licensed attorney to act as an attorney in fact, but power of attorney forms are powerful legal documents that should be used only under advice of a licensed attorney at law. PRE-APPROVAL Back to Top... A term used to mean that a borrower has completed a loan application and provided debt, income, and savings information that has been reviewed and pre-approved by an underwriter. PRE-FORECLOSURE SALE Back to Top... A procedure in which the borrower is allowed to sell his or her property for an amount less that what is owed on it to avoid foreclosure, fully satisfying the borrower's debt. PRE-PAIDS Back to Top... Expenses such as taxes, insurance, and assessments, which are paid in advance of their due date, and on a prorated basis at closing. PRE-PAYMENT Back to Top... Any amount paid so as to reduce the principal before the
due date. PREPAYMENT PENALTY Back to Top... An additional charge imposed by the lender for paying off a loan before the due date. PRE-QUALIFICATION Back to Top... After a loan officer has made inquiries about a
borrower's debt, income, and savings, he or she can write a
written statement (pre-qualification) about the borrower's
chances for qualifying for a home loan. The most favorable interest rate charged by lenders on short-term loans to qualified customers. PRINCIPAL Back to Top... The amount borrowed less the interest rate incurred.
PRIVATE MORTGAGE INSURANCE (PMI) Back to Top... In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment— as low as 3 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on your loan's structure. Court process to prove a valid will. PROMISSORY NOTE Back to Top... A written unsecured note promising to pay a specified amount of money on demand, transferable to a third party. PRORATIONS Back to Top... The allocation of charges and credits to the appropriate parties at a real estate sale and/or loan closing at a real-estate sale and/or loan closing PROMISSORY NOTE Back to Top... A written promise to repay a specified amount over a
specified period of time Sale, auction open to the public. PURCHASE AGREEMENT Back to Top... A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. PURCHASE MONEY MORTGAGE (PMM) Back to Top... Seller financing as a part of the purchase price. PURCHASE-MONEY TRANSACTION Back to Top... The acquisition of property through the payment of money
or its equivalent. QUALIFYING RATIOSBack to Top... Calculations that are used in determining whether a
borrower can qualify for a mortgage. The front-end ratio is
the percentage of a borrower's gross monthly income before
taxes that would cover the cost of PITI (property, interest,
taxes, and insurance). The back-end ratio is the percentage
of a borrower's gross monthly income that would cover the
cost of PITI plus any other monthly debt payments, such as
car or student loans. A suit brought to remove a claim or objection on title. A deed releasing whatever interest you may hold in a property but making no warranty whatsoever. Compare, SPECIAL WARRANTY DEED and GENERAL WARRANTY DEED RATE LOCK Back to Top... A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost. REAL ESTATE Back to Top... A portion of the earth's surface extending downward to the center to the earth and upward into space, including all things permanently attached thereto by nature or man and all legal rights therein. REAL ESTATE AGENT Back to Top... A person licensed to negotiate and transact the sale of real estate. REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) Back to Top... An act requiring the revelation of all costs involved in a real estate closing to all participants. REAL PROPERTY Back to Top... See real estate. A member of the National Association of Realtors. RECAST Back to Top... To redesign an existing loan balance into a new loan for
the same period or longer, to reduce payments and help a
distressed borrower. The cancellation of a contract. With respect to mortgage refinancing, the law that gives the home owner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security. RECONCILIATION Back to Top... Determining the final estimate of value by weighing the results of the various approaches in an appraisal. RECONVEYANCE CLAUSE Back to Top... The clause in a trust deed that gives the title back to the borrower when the loan is paid in full. RECORDING Back to Top... The formal filing of documents affecting a property's
title. Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records. Obtaining a new mortgage loan on a property already owned, often to replace existing loans on the property. REGULATION Z Back to Top... A truth-in-lending provision that requires lenders to reveal the actual costs of borrowing. REFINANCING Back to Top... The process of paying off one loan with the proceeds from
a new loan, using the same property as security A discounted rate for title insurance when the title was previously insured with an owner's title insurance policy issued within the last ten years. An interest in land that is postponed until the termination of some other interest such as a LIFE ESTATE. Compare, FEE SIMPLE. RENT-LOSS INSURANCE Back to Top... Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty, resulting in the tenant being excused from paying rent. REPAYMENT PLAN Back to Top... An agreement between a lender and a delinquent borrower regarding mortgage payments, in which the borrower agrees to make additional payments to pay down past due amounts while still making scheduled payments. RESIDUAL QUALIFYING Back to Top... Under a VA loan, using specified housing expenses to
qualify for a loan payment. Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only. RESTRICTIONS Back to Top... Rules imposed on the use of real estate in an effort to preserve property values. REVERSE ANNUITY MORTGAGE (RAM) Back to Top... A system developed for an elderly property owner in which
regular monthly payments can be received from a lender. When
the total reaches a pre-determined amount, the owner begins
repaying the loan or sells the property. A provision in a conveyance that the land will return to the grantor upon the happening of an event or contingency. Compare, FEE SIMPLE. REVOLVING DEBT Back to Top... A credit arrangement that allows a customer to borrow against a pre-approved line of credit used to purchase goods and services. The borrower is responsible for the actual amount borrowed plus any interest due. RIGHT-OF-FIRST REFUSAL Back to Top... A provision that states that a property to be first offered to a specific person before it can be offered for sale or lease to other parties. RIPARIAN RIGHTS Back to Top... The rights of an owner of land adjacent to water. ROLLOVER LOAN Back to Top... A loan that /includes a call date earlier than its normal
amortization period. RULE OF 78 Back to Top... Calculates proportionate amount of interest due on a loan being paid in full before its maturity. SALE-BUYBACK Back to Top... A financing arrangement in which an investor buys property from a developer and immediately sells it back under a long-term sales agreement, wherein the investor retains legal title. SALE-LEASEBACK Back to Top... A financing arrangement whereby an investor purchases
real estate owned and used by a business corporation, then
leases the property back to the business. Small Business Administration. SECONDARY MARKET Back to Top... A market for the purpose of purchase and sale of existing
mortgages usually at discounted prices to provide greater
liquidity to the mortgagee/lender. SECOND MORTGAGE Back to Top... A mortgage recorded after a First mortgage, ranks second in priority. SECURED LOAN Back to Top... A loan that is backed by collateral. SECURITY Back to Top... Something given, deposited, or pledged to make secure the fulfillment of an obligation, usually the repayment of a debt. SELLER CARRY-BACK Back to Top... An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. SENIOR LOAN Back to Top... A real estate loan in first priority position. SERVICER Back to Top... An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market. SERVICING Back to Top... The collection of mortgage payments from borrowers and related responsibilities of a loan servicer. SINKING FUND Back to Top... Monies deposited in advance in anticipation of satisfying
a debt in the future. SPECIAL ASSESSMENT Back to Top... Additional tax imposed by the local government for public improvements such as new streets, etc. SPECIAL WARRANTY DEED Back to Top... The seller warrants he has done nothing to impair title but makes no warranty before his ownership. Compare, GENERAL WARRANTY DEED and QUITCLAIM DEED. SPECIFIC PERFORMANCE Back to Top... A legal action to complete the performance of a contract. STATUTE OF LIMITATIONS Back to Top... The time period to file a law suit to enforce a claim or it is barred by law. STOP DATE Back to Top... Date on a term loan when the balloon payment is due.
Dividing land into lots and streets. The owner signs a PLAT and Deed of Resubdivision which is recorded among the land records. The state and county have strict requirements for subdivision of land. Taking title to property with a lien but not agreeing to be personally responsible for the lien, if the holder who forecloses the lien can take the property but may not collect any money from the owner who took "subject to." Compare, ASSUMPTION. SUBORDINATE FINANCING Back to Top... Any mortgage or other lien that has a priority lower than that of the first mortgage, or senior loan. See second mortgage. SURVEY Back to Top... A drawing or map the shows the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features. SWEAT EQUITY Back to Top... Increase in property value due to improvement by owners. TAKEOUT MORTGAGE Back to Top... A permanent mortgage, obtained by pre-arrangement between
a builder and a financial institution, to repay the interim
mortgagee at the completion of construction. TENANTS BY THE ENTIRETY Back to Top... A husband and wife own the property with the common law right of survivorship so, if one dies, the other automatically inherits. One may not sue the other to PARTITION the property. A creditor of one may not claim the property or the proceeds of sale. Compare, TENANT IN COMMON, JOINT TENANTS. TENANTS IN COMMON Back to Top... Two or more persons own the property with no right of survivorship. If one dies, his interest passes to his heirs, not necessarily the co-owner. Either party, or a creditor of one, may sue to PARTITION the property. Compare, TENANTS BY THE ENTIRETY, JOINT TENANTS. To die with a Will. Compare, INTESTATE. One who makes out a last will and testament. The feminine form is Testatrix. THIRD-PARTY ORIGINATION Back to Top... A process by which a lender uses another party to
completely or partially originate, process, underwrite,
close, fund, or package the mortgages it plans to deliver to
the secondary mortgage market. A document that gives evidence of an individual's ownership of property. TITLE INSURANCE Back to Top... Insurance that provides an INDEMNITY against loss or damage as a result of defect in title ownership to a particular piece of property. Title insurance covers mistakes made during a TITLE SEARCH as well as matters which could not be found or discovered in the public records such as missing heirs, mistakes, fraud and forgery. Compare, CERTIFICATE OF TITLE. An examination of the public records, including court decisions, to disclose facts concerning the ownership of real estate. The title examiner prepares an ABSTRACT and the title agent prepares a BINDER but decisions regarding the legal sufficiency of title or questions requiring legal interpretation must be resolved by a licensed attorney at law. TRANSFER OF OWNERSHIP Back to Top... The means by which the ownership of a property changes hands. Examples of such include the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchases, and any exchange of possession of the property under a land sales contract or any other land trust device. TRANSFER TAX Back to Top... State or local tax payable when the title passes from one
owner to another. A right to or in property held for the benefit of another. A trust may be written or implied. An implied trust is called a Constructive Trust. One who holds property in Trust for another. TRUTH-IN-LENDING Back to Top... A federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan. Also known as Regulation Z. TWO-STEP MORTGAGE Back to Top... A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often five or seven), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. the lender sometimes has the option to call the loan due with 30 days' notice at the end of five or seven years. The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount. Charging more than the maximum legally permitted rate of interest. A long-term, low- or no-down-payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements. VARIABLE RATE MORTGAGE (VRM) Back to Top... See adjustable rate mortgage VERIFICATION OF DEPOSIT (VOD) Back to Top... A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts. VERIFICATION OF EMPLOYMENT (VOE) Back to Top... A document signed by the borrower's employer verifying his/her position and salary. VESTED Back to Top... Means that one has a right to use a portion of a fund,
such as an individual's retirement fund. Relinquishment of a right. A deed conveying the title to a property with a warranty of clean, clear marketable title. The debt secured includes an existing debt already on the property. The payments made to the holder of the wraparound include payments due on the existing loan and the holder must forward the appropriate portion of each payment to the existing noteholder. Often used to avoid a PREPAYMENT PENALTY or a DUE ON SALE CLAUSE. Can refer to a wraparound DEED OF TRUST or CONTRACT FOR DEED. ZERO PERCENT FINANCING Back to Top... A loan with no interest in the contract. The IRS imputes
10 percent for both borrower and lender. Regulation of private land use and development by local government.
To report errors or to request submission of additional Mortgage or Real Estate terms, please contact us.
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