Glossary of Real Estate Definitions

Glossary Of Real Estate Terms

401(K)/403(B)	An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.
401(K)/403(B) Loan	Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans.
Acceleration	The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the rights vested in the Due-on-Sale Clause.
Acceleration Clause	A clause in your mortgage note which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.
Additional Principal Payment	Monies added to the required monthly payment. Any lump sum payment that reduces the loan balance. This is referred to as loan acceleration.
Adjustable Rate Mortgage (ARM)	A variable interest rate loan that adjust payments based on remaining term of loan, current interest rate and current loan balance.
Adjusted Basis	The original cost of a property, plus the value of any capital expenditures for improvements, minus any depreciation.
Adjustment Date	Adjustable Rate Mortgage (ARM) 1st payment month and all subsequent periodic changes based on the mortgage note terms.
Adjustment Interval	Specific to the ARM loan and represents a time cycle. The interval can be 1, 3, 6, 12, 36, 60, 84 or 120 months.
Affordability Analysis	Also referred to as "Debt To Income" underwriting. It requires a review of borrower's income to establish the ability to repay the proposed debt.
Amenity	A nice feature of the house, such as a lovely view, ocean sunset , swimming pool, tennis court, patio, etc.
Amortization	Eliminating debt over time via monthly payments that include Principal (P) and Interest (I) components. With the last payment, the debt is paid in full.
Amortization Schedule	A monthly breakdown of P & I payment components for the life of the loan. In a table format, the schedule presents the effect of each payment towards reducing the loan balance. A 30 year loan has 360 monthly calculations that are referred to as iterations. The schedule also presents the interest paid at any given time during the life of the loan.
Annual Membership Or Participation Fee	An annual cost for the privilege of utilizing creditors financing options. Credit card providers are best known for this annual fee.
Annual Percentage Rate (APR)	The mortgage APR is presented to the borrower at time of loan application and loan closing. At time of loan application, the "RESPA" law requires lender to give the borrower a form known as "TRUTH-IN-LENDING DISCLOSURE STATEMENT". This form includes a box labeled APR. The APR calculation involves the interest rate, funding lender charges and third party charges. The APR is an attempt to equate cost plus interest rate in a format that will present a rate that is different from the mortgage note interest rate.
Application	A form with all the borrower's personal and financial information. A mortgage loan application is referred to as a 1003 as designated by Fannie Mae and Freddie Mac.
Appraisal	A majority of real estate lenders require a value estimate of a property prior to funding a mortgage loan. Value is primarily based on the most recent sales of similar property in the local neighborhood. Property condition, foot print, configuration and replacement cost are also factors of value.
Appraiser	An individual qualified by education, training, and experience to estimate the value of real property. Many states require the appraiser to pass a state mandated exam and issue an appraiser license.
Appreciation	A value increase from the date of acquisition to present day. Real estate equity is acquired by the increase value of the property.
Assessed Value	County tax assessor sets a tax rate for all county property and valuates all properties based on one or more valuation methods.
Assessment	A local tax levied against a property for a specific purpose, such as a sewer, parks, fire stations, etc.
Assessment Rolls	The public record of taxable property.
Assessor	Normally an elected public official who is responsible for collecting property taxes and establishing property values for tax purposes.
Asset	Anything of value, including bank accounts, stocks, bonds, mutual funds, etc. Other assets include real estate, personal property, and debts owed to an individual by others. Any assets that can be quickly converted into cash are considered "liquid assets".
Assignment	The transfer of property interest to another entity i.e. Assignment of rent in the mortgage note in the event of delinquency and foreclosure action.
Assumable Mortgage	A mortgage obligation that can be transfer from mortgagor to another entity with the lender's approval.
Assumption	An agreement between two parties to transfer lien obligations of the mortgage note to the new property owner. Any transfer of lien obligation must be approved by the lender of record.
Assumption Fee	Lender charge in connection with an assumption of lien obligation.
Back-End Ratio	Monthly housing expense plus other monthly debt (auto,credit cards, etc.) divided by the family's gross income.
Balloon Payment	Loan balance is all due and payable on a specific future date.
Bankruptcy	By filing in federal bankruptcy court, an individual(s) can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common type is either a "Chapter 7" or "Chapter 13".
Betterment	An improvement that increases property value, as distinct from repairs that simply maintain property value. It's an upgrade, not just upkeep.
Bill Of Sale	A written document that transfers title to the property.
Binder	A preliminary agreement, secured by an earnest money deposit, through which the buyer offers to purchase the home.
Bi-Weekly Mortgage	An amortized mortgage that requires a payment every 14 days (two weeks). This results in 26 payments per year instead of the normal 12 monthly payments. The bi-weekly acceleration of the loan result in early payoff. Important Note: There are independent companies that encourage you to set up a bi-weekly program that they manage. They charge a set-up fee for the service and charge a collection fee for each payment. Your funds are deposited into a trust account from which your monthly payment is forwarded to the lender of record between the 1st and 15th day of the payment month. These types of collections services can't set up a true bi-weekly program on your behalf. You are better served by adding 1/12th of the payment to the required monthly payment and eliminate the middle man.
Blanket Mortgage	One mortgage secured by two or more of real estate properties.
Blended Rate	A method used to compute the average interest rate for two or more loans.

Blockbusting	The attempt to induce someone to sell their home because someone from a specific ethic group or persuasion is rumored to be moving into the area. The classic example would be an agent that informs local home owners of a minority family moving into the neighborhood. "Sale before your home is devalued." This is illegal.
Bona Fide (Latin)	In good faith, real, not fraudulent.
Bond Market	Usually refers to the debt, credit or fixed income market. Provides a venue to buy or sale securities. The government bond market is by far the largest exchange for trading U.S. treasury bills, notes and bonds.
Borrower (Mortgagor)	Loan applicant or Mortgagor (Trustor) in a real estate loan transaction. Any transfer of funds secured by a lien on property involves a loan balance and monthly payments. Debt incurred and a responsible party has a contract to repay the debt in full.
Breach	A violation of any legal obligation to perform a specific act i.e. repay a loan.
Bridge Loan	Money provided by a lender to a borrower for a short period of time. Loan repayment is based on a specific future event i.e. sale of home.
Broker	An individual, or other type of entity, acting as a third party that is responsible for negotiating contracts. Real estate agents, third party loan originators, attorneys, etc. are all considered brokers.
Building Code	Local government control of neighborhood disposition, zoning enforcement and property improvements. Every possible consideration of the effects of land use on the environment. Can't add a patio without a permit.
Buy-Down	Monetary requirement that reduces a fixed interest rate or ARM margin from the offered program. Money can buy down any interest rate program for a fixed period of time. This procedure can improve the MHE and reduce the impact of the house payment on net monthly income.
Call Option	Mortgage clause in the note that gives the beneficiary a right to demand full loan repayment of the debt. It covers a specific time frame and enforceable by law.
Caps	The Adjustable Rate Mortgage (ARM) interest rate is not static. ARM interest rates are recalculated throughout the life of the loan. To control the impact of a changing market on the borrower's monthly payment, ARM loans will always have a maximum cap (Life Cap) and many have a cap relating to each interest rate adjustment. Caps help control any upward interest rate movement and the impact of the new payment on the family's net household income. Caps also help the lender control profits due to lower interest rates and improving economic conditions.
Capital Expenditure	Monetary outlays for the improvement of real property. Money required for home remodeling, renovation, addition landscaping, etc.
Capital Improvement	Any improvement to real property.
Cash Flow	Normally relates to income producing property (rental). Cash flow can be either positive or negative against income. All expenses, including PITI and property depreciation, are subtracted from income to determine the property's impact on cash flow and family's income.
Cash-Out Refinance	Borrower refinances existing liens against property and extract equity in the form of money.
Certificate Of Deposit	A time deposit held in a bank which pays interest to the depositor.
Certificate Of Deposit Index (CODI)	An average of all outstanding saving instruments cost. Used by the supervised lender as the ARM "Index" when extending credit utilizing variable rate loans. The use of the CODI index is specific to each lender.
Certificate Of Eligibility	Qualified veterans can purchase a home using the Veteran Administration's home loan program. The VA issues the veteran a "Certificates of Eligibility" (Cert) based on the military discharge form DD-214.
Certificate Of Reasonable Value (CRV)	An appraisal issued by an approved Veterans Administration appraiser establishing the property's current fair market value.
Certificate Of Title	Confirms legal ownership of all real property.
Certificate Of Veteran Status	The document given to veterans or reservists who have served 90 days of continuous active duty (including training time). It may be obtained by sending DD-214 to the local VA office with form 26-8261a (request for certificate of veteran status). This document enables veterans to obtain lower down payments on certain FHA-insured loans.
Chain Of Title	Technically, a list of all owners of a piece of real property from the dawn of time to the present. Realistically, a list of the most recent property owners.
Chattel	Relates to movable personal property. Not fixed to any structure.
Clear Title	Property is free of all liens.
Closing	Settlement of all issues relating to a real estate transaction. This has different meanings in different states. In some states a real estate transaction is not consider closed until the legal documents are recorded and money and title is disperse to all interested parties. In many parts of the U.S., closing is a meeting of all interest parties, where all documents are signed and money changes hands.
Closing Costs	Non-recurring closing costs are one time charges related to financing and other third party cost. Charged once and only once. Other cost related to the financing of real estate are referred to as "Recurring Cost" or "Pre-paid items". Pre-paid items are cost to the borrower after closing, such as lender interest, property taxes, property insurance, association fees, etc.
Cloud On Title	Any claim on property, recorded or not, the put suspicion on the ownership of real property i.e. a law suit involving claim of ownership.
Co-Borrower	A person(s) who uses personal income and assets to assist another person(s) to obtain a loan or qualify for extended credit.
Collateral	Real estate used as security for a mortgage loan.
Collection	Real estate lenders have collection divisions responsible for contacting borrowers who are late with their required payment or defaulted on their loan responsibilities as required by the mortgage note.
Commission	Earned fee for work accomplished by a non vested party to a any transaction. In real estate transactions, the most common paid commission relates to the buying and selling of residential real estate. Mortgage brokers receive a commission when the loan closes. Any fees paid for services rendered can be consider a commission payment.
Commitment	Seller agrees to sell the home via a purchase contract. The seller agrees to pay a commission to the realtors. Lender agrees to finance the sale at a specific rate and cost. Commitment are best agreed to in writing.
Common Areas	Buildings, land, and amenities owned by an association of a planned unit development (PUD), condominium project or cooperative that are available for used by all unit owners. Owners share in the common expenses of operating, maintaining and future cost to maintain the property in good order. Common areas include swimming pools, tennis courts, recreational facilities, as well as, common corridors of buildings, parking areas, means of ingress and egress, etc.
Common Area Assessments	Homeowners Association (HOA) fees are unique to any property connected with joint use properties. Fees are set by an elected board of directors to ensure proper upkeep of the common areas.
Community Property	A legal term used to described interest in real estate by two or more parties. The number one reason for this type of ownership are federal and state taxes.
Co-Mortgagor	More than one borrower to a real estate financing application. Married couples are co-applicants, not co-mortgagors. The co-mortgagor must take title with the primary loan applicant and is not considered a co-borrower.
Comparable Sales	Recent sales of similar properties in the surrounding area that are used to determine the market value of a property. Also referred to as "comps."
Comps	Short for "comparable properties". Recently sold properties that are used to determine the fair market value (FMV) of the subject property.
Condominium	Fee simple ownership to contiguous boundaries, such as walls, floors, etc. with a fractional interest in the condominium project.
Condominium Conversion	Legally converting an apartment building or any structure into a fractional interest project.
Condominium Hotel	A condominium project that is a combination of "Time Shares", individual ownership and corporate ownership. Units are available for short term occupancy, rent or lease. Equip with a registration desk, and all normal amenities associated with a Hotel.
Construction Loan	Lender provides funds necessary to construct improvements to real estate. Prior to funding a construction loan, local government must permit the project. Funds are disburse to the contract at certain stages of construction. Bank controls fund disbursement.
Contingency	A specified condition that must be met before a contract is legally binding. The two most common contingencies is a home inspection and approval of report and available financing for the purchase.
Contract	An written agreement between two parties.
Contract For Deed (Land Contract)	Seller of real estate retains legal title to property while transferring equitable title and possession to buyer. The seller remains responsible for making monthly payment to the lender, but receives monthly payment from the buyer. At some point in time the Land Contract is paid in full and legal title is transferred to buyer. This is a financing mechanism that eliminates lender approval of buyer.
Conventional Loan	A mortgage not insured by a government agency.
Convertibility Clause	A provision in the Adjustable Rate Mortgage note that allows the borrower to convert the terms of the note into an amortizing fixed rate for the remaining life of the loan. Many ARM conversion notes contain a time frame in which the conversion can occur.
Convertible ARM	Adjustable Rate Mortgage note that contains a right to convert to a fixed rate loan within a specific time frame.
Cooperative (Co-Op)	A condominium complex where owners retain shares in the cooperative corporation that owns the property. Each shareholder has the right to occupy a specific dwelling. Ownership of the property rest with the corporation.
Cost Of Funds Index (COFI)	The Federal Home Loan Bank of San Francisco (11th District) weighted-average, of deposit accounts, other borrowings, and any advances during the reporting month. The FHLB of San Francisco then reports this information and is known as the "11th District Cost Of Funds" or COFI. The COFI is used by many ARM lenders as the index of choice for their ARM loans.
Credit	An agreement in which a borrower receives something of value in exchange for a promise to repay the debt.
Credit History	A record of payments to creditors over a seven year period. Credit histories are reviewed my mortgage lenders as one criteria extending credit.
Credit Limit	The maximum amount that you can borrow.
Credit Report	A report documenting all public record information , including current and previous residences, employment history, bankruptcies, derogatory credit, etc. Credit report will also include credit scores. Report will show all outstanding loan balances and collection accounts.
Credit Repository	An organization that gathers, records, updates, and stores financial and public records information for all individuals and entities and provides this information to credit reporting agencies.
Creditor	An entity that extends credit.
Debt	An amount owed to another.
Debt-To-Income Ratio (DIR)	The DIR consist of two calculations that are referred to as front and back end ratios. The front end ratio is determined by dividing the proposed monthly housing expense (MHE) by the borrower's gross income. The back end ratio is determined by dividing the MHE and other monthly debt payments by the borrower's gross income i.e. 33/38.
Deed	The legal document conveying title to a property.
Deed Of Trust	In many states, this document is used in place of a mortgage and is evidence of a debt on the property. A third party holds title to the property for the benefit of the beneficiary. A trust deed is an easier way to foreclose on property, if borrower default on loan.
Deed-In-Lieu	Short for "deed in lieu of foreclosure," this conveys title to the beneficiary when the borrower is in default and wants to avoid foreclosure.
Default	Failure to meet the terms of the contract (note), specifically, failure to make the monthly mortgage payments on a mortgage.
Deferred Interest	Paid at a later date of the loan obligation. Possible negative adjustable rate mortgages (POARM) are associated with negative amortizing loan balances. The unpaid monthly interest of a POARM payment is added to loan balance. This is a method of collecting unpaid interest at a later date. Borrower pays interest on interest.
Delinquency	Failure to make required payments on time. Late fees are an added burden.
Department Of Veterans Affairs (VA)	The Veterans Administration provides qualified veterans with many different types of services. The VA guaranteed home loan is a widely used, 100% owner occupied, home loan commitment.
Deposit	In real estate transactions, the "earnest money deposit" demonstrates the good faith of the buyer to live up to the terms of the purchase contract.
Depreciation	A decline in value. An accounting term used devalue an asset and used to reduce taxable liability. It is not an out of pocket expense and can be recaptured by taxing authorities at a later date.
Discount Points	A "Point" is one percent (1.0%) of the loan amount. Depending on economic market conditions, 1 point can equal 0.25% in yield return. Discount points are used by mortgage lender to increase yield offered to potential investors. Discount points allow mortgage lender to stay competitive with other types of investments in the secondary financial market.
Discrimination In Advertising	Any printed or published material that uses words of a discriminatory nature. Some examples are "adult building, Jewish home, restricted, private, integrated, or traditional". Discrimination in any form will not be tolerated.
Down Payment	Difference between purchase price and mortgage loan amount. Lenders use a reverse term known as the Loan To Value (LTV) when considering a loan application i. e. 100%, 97%, 95%, 90%, 80%, etc.
Due-On-Sale-Clause	A provision in a mortgage or deed of trust, that requires the immediate payment of the outstanding loan balance, interest and penalties due, if the property is transferred to another entity without prior written authorization.
Earnest Money Deposit	Money deposited, in trust, with a third party. In a real estate transaction, the purchaser provides a good faith deposit with the offer to purchase, that is held in trust by the realtor.
Easement	Use of property authorize by owner or attached to land as a covenant, conditions or restrictions (CC&R) for another's use of said land. A majority of improved land will have a utility easement as exception to title.
Effective Age	Appraiser’s estimate of the remaining physical life of a structure. Takes into account the lack of any repairs and property maintenance.
Eminent Domain	Government's right to acquire private property for public use upon payment of its fair market value. How does government replace memories?
Encroachment	An improvement that intrudes on an adjacent property without permission.
Encumbrance	An exception to title, such as mortgages, leases, easements, etc., that prevents transfer of property prior to acceptance or elimination of the encumbrance.
Entitlement	VA home loan benefit i. e. "Certificate of Eligibility" (Cert).
Equal Credit Opportunity Act (ECOA)	Federal law that requires 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.
Equity	Value after debt accountability. Real estate has two different forms equity. The first is the difference between the purchase price and current loan balance. The second is the appreciated value over the original purchase price and any improvement cost.
Escrow	Acts as a third party in any type of transaction. Any money deposited in escrow is held in trust for all interested parties. Escrow draws instruction of all agreements between parties and is authorized to demand performance or be released from responsibilities by written instructions of all parties.
Escrow Account	If the loan servicer collects PITI each month, the monies are separated and deposited into two different account for the benefit of the borrower. The principal and interest is forwarded to the investor, minus servicing fee. The taxes and insurance portion is deposited into a trust account (escrowed). From this trust account, property and insurance payments are paid on demand.
Escrow Audit	Once each year your lender will perform an "escrow analysis". Because property taxes and insurance demands can change annually, lenders perform a review of the escrow account. If the account is deficient in the necessary amount needed to make the full payment, the monthly payment will increase to meet the demand.
Escrow Disbursements	Has two meanings for two different entities. At the close of the property transaction the escrow agent will disburse trust funds to all parties. Lenders will disburse funds for property and insurance payments from the borrower's trust account.
Estate	The ownership interest of an individual in chattel and real property. The sum total of all the real estate and personal property.
Eviction	The lawful expulsion of an occupant from real property.
Examination Of Title	A review of all public records and issuance of an abstract of the title or preliminary title report. Issued prior to the close of any property transaction.
Exclusive Listing	Written contract between owner of real estate (seller) and a real estate broker that gives the broker an exclusive right to sell a property for a specified time period.
Executor	A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.
Fair Credit Reporting Act	A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Fair Market Value	Established by an appraisal of real property or the agreement to purchase property in an arm's length transaction. Lenders will establish the value for lending purposes. FMV is normally dependent on the ability to borrow money to finance the property.
Fannie Mae (FNMA)	The Federal National Mortgage Association was established in the 1930s by congress to create a secondary mortgage market. FNMA is the nation's largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), or Ginnie Mae (GNMA) visit their web sites.
Fannie Mae's Community Home Buyer's Program	Program set up especially for low and moderate income family's. Specific income qualification must be met to utilize the program.
Farmers Home Administration (FmHA)	Organization which provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
Federal Home Loan Bank Board (FHLBB)	Federally chartered savings institutions regulated by the banking laws of the United States.
Federal Home Loan Mortgage Corporation (Freddie Mac)	Created by congress in 1972, provides a secondary mortgage market for all approved seller/servicers of real estate loans.
Federal Housing Administration (FHA)	An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
Fee Simple	The greatest possible interest a person can have in real estate.
Fee Simple Estate	An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration.
FHA Loan	A real estate loan insured by the Federal Housing Administration. FHA approves all lenders who originate and close FHA loans. FHA sets all underwriting, loan amounts and property requirements for FHA loans. FHA loans are available to all U.S. citizens and legal immigrants that meet FHA guidelines.
FHA Mortgage Insurance	FHA requires insurance coverage for all FHA insured loans. A 1.5% up front fee at the time of closing and a monthly Mortgage Insurance Premium (MIP) for the 1st 5 years of the loan. The monthly MIP is determined by the term of the loan i.e. 30 year FHA MIP is .5% annually; 15 year is .25% annually. At the end of 5 years, if the loan to value (LTV) is 78% or less, the MIP can be removed from the monthly payment obligation.
First Mortgage	Mortgage lien with the earliest recording date.
Fixed Rate Mortgage	Interest rate is set for the life of the loan (Term), regardless of future interest rate fluctuations i.e. ARM loan. Fixed rate P&I payments are constant over the life of the loan, regardless of economic conditions.
Fixture	Personal property that becomes real property when attached in a permanent manner to real estate.
Flood Insurance	Compensates for structural flood damage. Lenders require this insurance for properties located in federally designated flood areas.
Foreclosure	A legal process by which lien holders force the ownership transfer from borrower to lender. Foreclosures are the result of the failure of the borrower to meet the terms of the mortgage note.
Freddie Mac	See Federal Home Loan Mortgage Corporation (FHLMC).
Front-End Ratio	Proposed monthly housing expense (MHE) divided by gross income.
Ginnie Mae	Created by Congress on September 1, 1968, the Government National Mortgage Association (GNMA) approve Mortgage Back Securities (MBS) secured by VA & FHA loans. The GNMA market provides liquidity for lenders offering FHA & VA loans to qualified borrowers.
Government National Mortgage Association (GNMA),	A See Ginnie Mae.
Graduated Payment Mortgage (GPM)	A fixed rate loan that accrues interest for a specific time period (5 yrs). Starts with a low 1st year payment (less than the required payment) and each successive year increases the monthly payment based on a designated percentage increase. With the last GPM payment, the existing loan balance is re-amortized over the remaining life of the loan, based on the interest rate. This is a negatively amortizing loan during the GPM period.
Grantee	The person to whom an interest in real property is conveyed.
Grantor	The person conveying an interest in real property.
Guaranteed Loan	Generally refers to a VA loan.
Hazard Insurance	Required by lenders to protect their financial interest. Minimum requirement is the replacement cost of the improved real estate (home). The maximum requirement covers the loan amount. Lenders won't lend without property insurance coverage.
Home Equity Line Of Credit (HELOC)	Acts like credit card with the exception that it is secured by real estate. The borrower is approved for a maximum credit line that can be drawn against and repaid over the HELOC term. Lender issues checks as a means of accessing HELOC funds. The HELOC can be in any approved lien position.
Home Inspection	Can be completed by the potential home buyer or an inspection service. The idea behind the property inspection is to identify any flaws in the home and require the seller to make repairs prior to closing or make financial concessions prior to settlement closing.
Homeowners' Association	A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project.
Homeowner's Warranty	A warranty company's agreement to repair covered issues after the transfer of ownership from seller to buyer. The seller (builder) uses this type of service to offset any problems that might occur within one year of closing.
Hud Median Income	Median family income for a metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development.
Hud-1 Settlement Statement	Required by the RESPA law. The settlement agent must provide all parties to a property transaction a detailed list of all third party charges and rebates.
Impounds	Refers to property taxes, insurance, and PMI portions of the monthly payment that are held in trust for the borrower. Also known as reserves. Impounds are used to make demand payments to third parties.
Index	Identified with Adjustable Rate Mortgage (ARM). The index represents an average cost to borrower money in a specific market place. Lenders can create their own in house index or use one of many other available indices, such as, U. S. treasury bills, note or bonds, Libor, COFI, etc.
Initial Interest Rate	Also known as the "Start Rate" or "Teaser Rate". It is an integral part of an Adjustable Rate Mortgage (ARM) loan program. The initial ARM payment is based on the initial interest rate.
Interest	Compensation for lending money.
Interest Rate Adjustment	Refers to recalculation of the Fully Indexed Rate (FIR) as required by the terms of ARM note.
Interest Rate Ceiling	Adjustable Rate Mortgage (ARM) maximum interest rate that can be charge the borrower during the life of the loan. Also referred to as the "Life Cap".
Interest Rate Floor	The minimum interest rate of an Adjustable Rate Mortgage (ARM). The usual minimum rate is equal to the ARM "Margin".
Interim Financing	A short term loan required for satisfying monetary demands of creditors, contractor, suppliers, etc. An example would be the financing required to purchase land, prior to the execution of a construction loan.
Investor	A risk taker that provides funds for investment by others or for investments for personal portfolio.
Joint Tenancy	A legal method for holding title of an investment. In the event of the death of one party, the title to the investment is automatically transferred to the remaining joint tenant(s).
Judgment	Decision made by a court of law. Judgments can require repayment of debt or the performance of certain acts.
Judicial Foreclosure	Foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure such as "Trustee Sales".
Jumbo Loan	Loan amount that exceeds the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) maximum loan limit.
Late Charge	Penalty paid when borrower's payment is received after grace period. Mortgage loan late charge conditions are spelled out in the note.
Lease	A written agreement between the property owner and tenant stipulating the conditions of leasing property and its duration.
Lease Option	An alternative purchase program that allows a seller of real estate to offer a home buyer the right to purchase property at a later date. The option to purchase will include a sale's price and other specific terms.
Leasehold Estate	Holding property by lease for a prolonged period of time. Leaseholds can be transferred during the life of the lease, if the terms of the lease does not include a termination provision for any such transfer.
Legal Description	A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
Lender	Any entity that loans money.
Liabilities	Outstanding debt obligations.
Liability Insurance	Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate actions resulted in bodily injury or property damage to another party.
Lien	Evidence of a debt(s) against real or chattel property. A mortgage note is a lien against real estate as evidence by mortgage or deed of trust.
Life Cap	The maximum interest rate allowed by the Adjustable Rate Mortgage note. Not to be confused with "Adjustment Cap" or "Payment Cap".

Liquid Asset	Any asset that is easily converted into cash.
Listing Price	The price of property that is listed with a realtor.
Loan	Borrowed money.
Loan Officer	A representative of a loan originating entity that is responsible for new lending business. Lending institution loan officers can have greater responsibilities than a loan officer of a mortgage brokerage firm.
Loan Origination	Marketing for new business. Meeting with consumers and convincing them to use the services of the lending entity. An application process.
Loan Servicing	Entity that collects monthly payments, maintains borrower records and disburses beneficiary funds. Loan servicer is responsible sending out monthly statements, managing escrow (impound) accounts, maintaining a collection department for delinquent loans, loan default department and insure that insurance and property taxes are current. Additional services include loan pay off and assumption departments plus a variety of other services.
Loan To Value Ratio (LTV)	Loan request divided lender's appraised value.
Locking The Loan	A funding lender's written agreement offering a specified interest rate and cost for a specific period of time. The reason for locking any loan program is a fear of rising rates and cost.
Lock In Period	Time frame for which a funding lender will honor offered loan program.
Margin	Mortgage term associated with the Adjustable Rate Mortgage (ARM) that represents the cost of servicing any loan and includes a profit.
Market Value	Highest price a willing buyer will pay for any product or service.
Maturity	Date that loan is due and payable.
Merged Credit Report	Residential Mortgage Credit Report (RMCR), also referred to as a standard factual credit report, that presents a total picture of the borrower's personal and financial condition. Can include married spouse.
Minimum Payment	Associated with ARM and Interest only loans. A minimum monthly payment that will be accepted by a lender.
Mortgage	Conveyance of land given as security for the payment of debt.
Mortgage Banker	An entity that originates and services mortgage loans.
Mortgage Broker	A third party entity that originates, processes, submits and coordinates mortgage loans for real estate funding lenders.
Mortgage Insurance	Covers lender losses due to foreclosure up to a specific percentage of the loan amount. Available for both government and conventional loans programs.
Mortgage Insurance Premium (MIP)	Mortgage insurance payment related to a FHA loan. The Federal Housing Administration (FHA) premium has two components. An initial 1.5% payment at time of loan closing and a monthly fee based on the term of loan. A 30 year loan monthly fee is based on 0.5% of loan amount divided by 12 months.
Mortgage Life And Disability Insurance	Pays off the loan in the event of death or makes the monthly payment due to incapacitation.
Mortgagee	The lender or beneficiary of a mortgage loan.
Mortgagor	Borrower that has power to lien and encumber land.
Multi dwelling Units	Properties that consist of more than a single unit.
Negative Amortization	Adding unpaid interest to current loan balance. The opposite of an amortizing loan that is paid in full with the last monthly payment.
Net Income	Gross income minus federal and state income tax, along with other deductions leaving the consumer with money to pay monthly expenses.
No Cash Out Refinance	A rate and term refinance that pays off existing liens and the cost relating to the refinance. No cash in hand.
No Cost Loan	A refinance that results in no increase in current loan balance.
No Doc Loan	A loan application that does not include any financial documentation.
Note	Security for the debt such as a mortgage note.
Note Rate	Interest rate stated on a mortgage note.
Notice Of Default	Formal written notice to borrower that note is in default due to lack of monthly payment or transfer of title without lender permission.
Original Principal Balance	Loan balance as stated in the mortgage note prior to 1st payment or any addition of interest to loan balance.
Origination Fee	A lender charge that covers the cost of processing and funding the loan. Many lenders represents this fee as a point. 1 point equals 1%.
Owner Financing	Also known as "Seller Financing". Seller agrees to finance a percentage of sales price to make the deal. Happens more in a tough sales environment.
Partial Payment	Payment not sufficient to cover the scheduled monthly payment.
Payment Change Date	Adjustable Rate Mortgage (ARM) or Graduated Payment Mortgage (GPM) associated with negative interest added to the loan balance. The actual payment period is normally set for 12 months.
Periodic Payment Cap	Adjustable Rate Mortgage (ARM) program that limits interest rate maximum or minimum adjustment. Also referred to as "Adjustment Cap". An example is a semi-annual adjustable with a +/- 1% cap.
Permanent Loan	An amortizing loan that pays off over time. Also called an "end loan."
Personal Property	Property not attached to land or structure or "Chattel" property.
PITI	Principal (I), Interest (I), Taxes (T) and Insurance (I).
Planned Unit Development (PUD)	A type of unit ownership that conveys fee simple title to structure and land. Ownership of the PUD's common areas is held by a corporation. Each unit owner has a percentage share in the corporation. Each owner is charged a monthly fee for maintenance, repair and reserves. The difference between a PUD and a condominium unit owner is land ownership. The Condo owner does not own the land beneath the unit, but the units airspace.
Point	A point equals 1%.
Power Of Attorney	A legal document authorizing one person to act on behalf of another.
Pre-Approval	Not to be confused with a telephone interview. Only a funding lender's agreement to make a mortgage loan is valid. A third party's interview can help the consumer determine loan qualification, but the third party must secure a loan commitment from the funding lender to be valid. A funding lender must review the borrowers income, expense, assets and credit before issuing an approval prior to the purchase of any real estate.
Prepaids (Recurring Cost)	Includes all those cost charged at settlement that continue after closing. Interest and property taxes are examples along with impounds.
Prepayment	Monthly over payment or loan pay off.
Prepayment Penalty	A clause in the mortgage note that allows the loan servicer to charge a fee to the borrower for early pay off of the loan. This penalty can be significant dollar amount and should not be taken lightly. Read the note for penalty terms.
Pre-Qualification	An opinion of the ability of a borrower to qualify for a home loan. Not to be confused with a lender's pre-approval of the borrower.
Primary Mortgage Market	Lenders making mortgage loans directly to the borrower, such as a savings and loan association, commercial banks, and mortgage companies. These lenders originate, process and fund the loans. No 3rd party involve in the loan process.
Prime Rate	Unique to banks controlled by the FEDs. This is also the rate charged by banks to their AAA customers. Changes in the prime rate are widely publicized in the news media and are used as an index by many different types of lenders. The FOMC meets a minimum of 8 times a year to discuss the "Discount Rate" and is the primary reason for any movement in the prime rate.
Principal	Can be the current loan balance or part of a monthly payment.
Principal Balance	The outstanding principal on a mortgage loan.
Private Mortgage Insurance (PMI)	Provided by an insurance company, the PMI protect the lender from foreclosure losses. PMI does not insure the entire loan amount, but only a percentage of the lender's exposure i.e. 20%. Borrower pays either a lump sum at closing or a monthly fee that protects the lender in the event of any losses due to foreclosure. Consumer pay the bill.
Promissory Note	A written promise to repay a specified amount over a specified period of time.
Public Auction	A meeting in an announced public location to sell property.
Purchase Agreement	A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Qualifying Ratios	Lender calculations using borrower(s) gross income to determine an ability to repay the debt. There are two ratios known as the "Front" and "Back" end ratios. The front end ratio is determined by dividing the proposed monthly housing expense (principle, interest, taxes, insurance, mortgage insurance, HOA fees, etc.) by the borrower(s) gross monthly income. The back end adds monthly credit payment to the PITI and is divided by the gross income i.e. 28/33.
Quitclaim Deed	A deed that transfers, without warranty, title to property.
Rate Lock	An interest rate commitment issued to a mortgage borrower by a funding lender for a specified period of time.
Real Estate Agent	A person licensed to negotiate real estate deals under the supervision of a licensed real estate broker.
Real Estate Settlement Procedures Act of 1974 (RESPA)	A disclosure law that requires lenders to give borrowers a "Good Faith Estimate" at time of loan application and final figures at time of closing.
Real Property	Land and appurtenances, including anything of a permanent nature such as structures, trees, and mineral rights.
Realtor	A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.
Rescission	The cancellation of a contract. With respect to mortgage refinancing, a "Right of Rescission" law that gives the homeowner three days to review loan documents and cancel the loan if not satisfied with the cost.
Recorder	The public official who keeps records of transactions that affect real property in the county. Sometimes known as a "Registrar of Deeds" or "County Clerk."
Recording	An act of filing executed legal document, such as, deeds, mortgages, mortgage reconveyance, judicial liens with the county recorder (clerk).
Recording Fees	Cost related to filing documents with the county recorder.
Redlining	The illegal practice of refusing to rent, mortgage or issue insurance policies in specific areas for reasons other than qualifications of the applicant.
Refinance	The act of trading one lien for another.
Remaining Balance	The amount of principal that has not yet been repaid.
Remaining Term	Number of months remaining prior to expiration of the term of the note.
Replacement Reserve Fund	Fund set aside for replacement of common property in a condominium, PUD, or cooperative project. Reserves are used for replacement of a roof, driveway, pool, etc.
Reverse Annuity Mortgage (RAM)	A mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as collateral.
Revolving Debt	Line of credit provided by a lender that allows for the purchase of goods and services. A credit card is a good example.
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.
Right Of Ingress Or Egress	The right to enter or leave designated premises.
Right Of Survivorship	Effects joint tenancy and community property title holders.
Sale Price	The price agreed to by the buyer and seller.
Sale Leaseback	An agreement between buyer and seller, that property will be leased to the seller after closing for a specific time and rental fee.
Satisfaction Of Mortgage	The document issued by the mortgagee when the mortgage loan is paid in full. Also called a reconveyance deed.
Second Mortgage	A mortgage made subsequent to another mortgage and is determined by time and date of recording of the lien.
Secondary Market	Financial markets that purchase interest in funded loans.
Secondary Mortgage Market	The market in which primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.
Secured Loan	A loan that is backed by collateral.
Security	Property that is pledged as collateral for a loan.
Seller Carry Back	An agreement by a seller to finance a portion of the purchase price.
Servicer	Entity that collects monthly mortgage payments, maintains records, disburses beneficiary payment, monitors property taxes and insurance, etc.
Servicing	The act of performing those functions necessary to meet the conditions of the servicing contract with the beneficiary.
Shared Appreciation Mortgage (SAM)	A financing mechanism that allows a borrower payment concession for a percentage of any value increase during the term of the contract.
Simple Interest	Interest which is computed only on the principal balance.
Subdivision	A housing development that is created by dividing a tract of land into individual lots for sale or lease.
Subordinate Financing	Lien that submits or agrees to a recording position behind a new lien.
Survey	A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to a base line.
Sweat Equity	Owner that improves property without the help of a professional.
Term	Represents life of loan in years or months.
Third-Party Origination	An entity that originates, processes, an submits package to funding lender for approval and funding i.e. Mortgage Broker.
Title Company	A company that specializes in examining and insuring titles to real estate.
Title Insurance	Insures home buyer from financial demands of a defective title.
Title Search	An examination of county records to determine the legal ownership, recorded liens against the property and plotting all easements.
Transfer Of Ownership	Property owners transfer interest in property via a grant deed.
Transfer Tax	State or local tax payable when title passes from one owner to another.
Treasury Index	An ARM index utilizing U.S. treasury bills, notes or bonds.
Trustee	A fiduciary who holds or controls property for the benefit of another.
Truth-In-Lending	Lenders are required by RESPA to disclose the APR and other loan details to a borrower at time of loan application.
Two To Four Family	A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
Underwriting	The process of reviewing a borrower's personal and financial information to determine credit worthiness and ability to repay the debt.
Usury	Interest charged in excess of the legal rate established by law.
VA Loan	A no down payment loan offered to qualified veterans that is guaranteed by the Department of Veterans Affairs.
VA Funding Fee	Va requires this fee to offset operational expenses and cover foreclosure losses.
Vested	An interest in an investment.