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| Abstract (of title) |
A written summary of the title history
of a particular piece of real estate. |
| Acceleration Clause |
A provision of a mortgage or note
which provides that the entire outstanding balance will become due
and payable in the event of default. |
| Adjustable Rate Mortgage
(ARM) |
A mortgage in which the interest rate
is adjusted periodically, based on the movement of a financial
index. |
| Amortization |
Repayment of loan by installment
payments. As the payments are made, the debt is reduced so that at
the end of fixed period or term, no money will be owed. |
| Annual Percentage Rate
(APR) |
The annual percentage rate refers to
the total cost of the loan, expressed as a yearly rate. |
| Application Fee |
That part of the closing costs
pre-paid to the lender at time of application to cover initial
expenses. |
| Appraisal |
A report made by a qualified person as
to the value of a property as of a given date. |
| Assessed Value |
The value placed on a piece of real
estate by the taxing authority for the purpose of taxation. Also
called an assessment. |
| Assumption of Mortgage |
The purchaser takes over mortgage
payments for the balance of the loan, assuming primary liability.
Unless specifically released by the lender, the seller remains
secondarily liable. |
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| Balloon Mortgage |
A mortgage with periodic payments that
do not fully amortize the loan. The outstanding balance of the
mortgage is due in a lump sum at the end of the term. |
| Bridge Loan |
A short-term loan secured by the
equity in an as-yet-unsold house, with the funds to be used for a
down payment and/or closing costs on a new house. There is no
payment of principal until the house is sold or the end of the loan
term, whichever comes first. Interest payments may or may not be
deferred until the house is sold. |
| Broker |
The person who, for a commission or a
fee, brings parties together and assists in negotiating contracts
between them. |
| Buydown |
Money advanced by an individual (e.g.
builder, seller, buyer, lender, developer) to lower monthly mortgage
payments for a few years or the whole term. |
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| Cap (interest rate) |
The maximum interest rate increase
allowable on an adjustable rate mortgage. Does not result in
negative amortization. See Negative amortization. |
| Cap (payment rate) |
The maximum payment amount increase
allowable on an adjustable rate mortgage. May result in negative
amortization. See Negative amortization. |
| Certificate Of Title |
A statement that shows ownership of
property, stating that the seller has clear legal title. |
| Closing |
The concluding day of the real estate
transaction, when title and deed pass from seller to buyer, the
buyer signs the mortgage and pays the purchase price and closing
costs. |
| Closing
Costs |
Expenses (over and above the price of
the property) incurred by buyers and sellers in transferring
ownership of a property. Also called "settlement costs." |
| Closing Statement |
A financial disclosure giving an
account of all funds received and expected at closing, including the
escrow deposit for taxes, hazard insurance and mortgage insurance
for the escrow account. |
| Commission |
An agent's or broker's fee for
bringing the pricipals together and helping to negotiate a real
estate transaction, often a percentage of the sales price or flat
fee. |
| Commitment |
An agreement, frequently in writing,
between a lender and a borrower to loan money at a future date,
subject to certain conditions. |
| Comparables |
Refers to similar properties used for
comparison purposes in the appraisal process. These properties will
be reasonably the same size and location, with similar amenities and
characteristics, so that the approximate fair market value of the
subject property can be determined. |
| Condominium |
Ownership of a single unit in a
multiunit building or complex of buildings. Along with this goes a
share of ownership of the common areas. |
| Contingency |
A condition that must be met for a
contract or a commitment to remain binding. |
| Conventional Mortgage |
Any mortgage loan that is not insured
by FHA, guaranteed by VA, of funded by a government authorized bond
sale or grant. |
| Convey |
To transfer real estate from one
person to another. |
| Credit Report |
The report to a prospective lender on
the credit standing of a prospective borrower. |
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| Deed |
A legal written document by which
title to property is transferred. |
| Default |
Failure to fulfill the terms as agreed
to in the mortgage of note. |
| Down Payment |
The difference between the sale price
of a property and the mortgage amount. |
| Due-On-Sale |
A clause in a mortgage which gives the
lender the right to require immediate repayment of a mortgage
balance if the property changes hands. |
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| Earnest Money |
The deposit money given to seller or
his agent by the potential buyer at the time of the purchase offer.
If the offer is accepted, the money will become part of the down
payment. |
| Easement |
A right to the limited use of land
owned by another. An electric company, for example, could have an
easement to put up electric power lines over someone's property. |
| Encumbrance |
Anything that affects or limits the
title to a property, such as outstanding mortgages, easement rights
or unpaid back taxes. |
| Equity |
The value in which the owner has in
real estate over and above the mortgages against it. When the
mortgage and all other debts against the property are paid in full,
the owner has 100% equity in his property. |
| Escrow |
Funds and/ or deed left in trust to a
third party. Generally, a portion of the monthly mortgage payment is
held in escrow by the lender to pay for taxes, hazard insurance and
yearly mortgage insurance premiums. |
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| First Mortgage |
A mortgage that has a primary lien
against a property. |
| Fixed-Rates Mortgage |
A mortgage with an interest rate and
monthly payments that remain constant over the life of the loan. |
| Fixture |
Property, such as a hot water heater
or plumbing fixture, that has become permanently attached to piece
of real estate and goes with the property when it is sold. |
| Flood Certification |
An independent agency report required
by the lender to determine whether a property is located in a flood
hazard zone, which would then require a federally mandated flood
insurance policy. |
| Foreclosure |
A legal procedure in which property
mortgaged as security for a loan is sold to pay the defaulting
borrower's debt. |
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Graduated Payment
Mortgage |
A fixed rate loan with monthly
payments that start low, increasing by a fixed amount for a specific
number of years. After that period, the payments typically remain
constant for the duration of the loan. |
| Gross Income |
Normal income, including overtime,
prior to any payroll deductions, that is regular and dependable.
This income may come from more than one source. |
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| Hazard Insurance |
Insurance protection against damage to
a property from fire, windstorms, and other common hazards. |
| Homeowner's Insurance |
An insurance policy that covers the
dwelling and its contents in case of fire or wind damage, theft,
liability for property damage and personal liability. |
| HUD-1 Form |
See Real Estate Settlement Statement. |
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| Income Property |
Real estate that is owned for
investment purposes and not used as the owner's residence. |
| Interest |
A charge paid for the use of money. |
| Interim Financing |
See Bridge Loan. |
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| Land Contract |
When the buyer agrees to make payments
directly to the seller at pre-negotiated terms. The seller agrees to
deed the property to the buyer upon completion of the agreement. The
buyer becomes the owner of equity in this type of sale. (Also see
Owner Financing) |
| Lien |
A legal claim on a property used as
security for a debt. |
| Loan-To-Value Ratio |
The relationship between the amount of
the mortgage and property value, usually shown as a percentage. |
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| Market Value |
The price at which a property will
sell, assuming a knowledgeable buyer and seller, both operating
without undue pressure. |
| Mortgage |
A contract in which a borrower's
property is pledged as security for a loan which is to be repaid on
an installment basis. |
| Mortgage Note |
A written promise to pay a debt at a
stated interest rate during a specified term. The agreement is
secured by a mortgage. |
| Mortgagee |
The lender in a mortgage contract. |
| Mortgagor |
The borrower in a mortgage contract. |
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| Negative Amortization |
A loan in which the outstanding
principal balance goes up instead of down because the monthly
payments are not large enough to cover the full amount of interest
due. Also called deferred interest. |
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| Offer to Purchase |
A written proposal to buy a piece of
real estate that becomes binding when accepted by the seller. Also
called a sales contract. |
| Origination Fee |
A fee charged for the work involved in
the evaluation preparation and submission of a proposed mortgage
loan. |
| Owner Financing |
A purchase in which the seller
provides all or part of the financing. |
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| PITI |
An acronym for payments to lender that
cover principal, interest, taxes and insurance on a property. |
| Plat |
A map of a piece of land showing
boundary lines, streets, actual measurements and easements. |
| Point |
A fee paid to the lender on closing
day to increase the effective yield of the mortgage. A point is one
percent of the amount of the mortgage loan. Also called a discount
point. |
| Prepayment Penalty |
A charge paid to the lender by the
borrower if a mortgage loan is repaid before its term is over. |
| Pre-Approval |
A commitment by a lender to extend
credit provided that specific conditions are met. |
| Pre-Qualification |
A preliminary assessment of a buyer's
ability to secure a loan, based on a specific set of lending
guidelines and buyer representations made. This is not a guarantee
or commitment by a lender to extend credit. |
| Prime Rate |
The interest rate charged by banks to
their preferred corporate customers, it tends to be an estimator for
general trends in short term interest rates. |
| Principal |
The amount borrowed or remaining
unpaid; also, that part of the monthly payment that reduces the
outstanding balance of a mortgage. |
| PMI (Private Mortgage
Insurance) |
Insurance written by a private company
to protect the lender against loss caused by mortgage default. |
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| Qualifying Ratios |
Guidelines applied by lenders to
determine how large a loan to grant a home buyer. |
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| Real Estate Settlement
Statement |
Final settlement statement often
referred to as the HUD-1 form, used to itemize buyer, seller,
broker, and lender charges and credits at closing. |
| Realtor |
A real estate broker or sales
associate affiliated with the National Association of Realtors. |
| Recording Fee |
The charges made by the register of
deeds to record the legal documents. |
| Refinancing |
Repaying a debt with the proceeds of a
new loan, using the same property as collateral or security. |
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| Second Mortgage |
A loan on property which already has
an existing mortgage(the first mortgage). The second mortgage is
subordinate to the first. |
| Secondary Mortgage Market |
The buying and selling of existing
mortgages through agencies (i.e. Fannie Mae, Freddie Mac). |
| Survey |
A map prepared by an engineer or
surveyor charting a particular piece of real estate. |
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| Title |
Ownership of a property. A clear title
is one without any outstanding liens or encumbrances. A cloud on
title refers to any outstanding liens or encumbrances which could
impair the title. |
| Title Insurance Policy |
Protection against financial loss
arising from defects in the title occurring before purchase. |
| Title Search |
A check of public record to disclose
the past and current facts regarding ownership of a particular piece
of property. |
| Transfer Tax |
In some areas city, county or state
taxes imposed when property passes from one person to another. |
| Truth-In-Lending |
A federal law that requires lenders to
fully disclose, in writing, the terms and conditions of a mortgage,
including the APR and other charges. |
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| Underwriting |
The process of evaluating a loan
application to determine the risk involved for the lender. |
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