A B C D E F G H I J K L M N
O P Q R S T U V W X Y Z
Real Estate Glossary
1031 Exchange: IRS code that states that if a property is sold and the proceeds of the sale are invested in an asset of like kind, then no gain or loss is recognized. This is a way to defer taxes that would otherwise be due on the sale of a property.
401(k) or 403(b): Employer-sponsored investment plans allowing individuals to save tax-deferred income for retirement. 401(k) plans are provided by corporations. 403(b) plans are provided by nonprofits.
A
Acceleration Clause: A clause in a loan contract allowing the lender to call the loan due upon default of the borrower. If the borrower gets behind on payments, the lender may require the borrower to satisfy the entire loan amount in full.
Adjustable Rate Mortgage (ARM): A mortgage in which interest rates fluctuate with changes in the market after a typical 1-5 year time period. ARMs usually have a maximum rate to protect the borrower from dramatic increases.
Amortization: Loan payments that include monthly interest payments plus some principle payments. The payment remains the same each month, but over time, the amount paid towards interest decreases and the amount paid towards the principle increases.
Annual Percentage Rate (APR): Different than the rate on a loan. The APR reflects the true cost of borrowing as a percentage.
Appraisal: Written evaluation of the fair market value of a property typically based on a home inspection and comparable home sales in the same area.
Appreciation: The increase in the value of a home based on inflation, market conditions, improvements and other factors.
Appurtenance: Any improvement or easement to real property that "goes with the land.”
Assessed Value: The value given to a property by the public tax assessor that determines the amount of property taxes to be paid.
Assumed Loan: The ability for a buyer to take over the seller’s current mortgage in a
home sale; the buyer must also qualify for the loan.
B
Balloon Note Mortgage: An interest-only mortgage where interest payments are made monthly and the entire principle is due upon the end of the term.
Broker: The person responsible for managing local real estate businesses; the broker is responsible for all of his/her company’s listings and the acts of his/her real estate agents.
Buy Down: The ability for the borrower to have the interest rate reduced for a period of time (usually one to three years) by paying a portion of the principle up front.
C
Cap: The maximum interest rate that may be charged on an ARM.
Clear Title: A title has no liens or clouds.
Closing: The meeting between the buyer, seller and real estate agents to finalize a home sale. Documents are signed and money is exchanged to close the deal.
Closing Costs: Payments made at closing. Non-recurring costs are paid only at the time of closing and include transfer taxes, intangibles taxes and personal property sales associated with the home sale (e.g., selling furniture along with the property). Prepaid items include property tax and insurance adjustments.
Cloud on Title: Conditions that adversely affect the title to real property. Clouds can be removed by court action, releases, or by the deed. Clouds may include other's claims to property rights, another party’s name on the deed, etc.
Collateral: What is given to the lender in case of default on a loan. In a mortgage, the home is the collateral, as the bank will foreclose on the house in the event of default.
Commission: Money paid to realtors for their services in a real estate transaction, usually as a percentage of the sales price.
Community Property: Property acquired by husband and wife after marriage. Both parties have equal rights to the property; similar to Joint Tenancy.
Condemnation: The process used to enforce eminent domain.
Condominium: Property ownership in multi-tenant buildings in which all parties have ownership rights in common areas, and have freehold title to their individual units.
Contingency: Conditions that must be met in order for a contract to be binding. E.g., home sale contracts often have a mortgage approval contingency stating that if the buyer can’t qualify for a loan, the contract will be void.
Contract: Written or verbal agreement to perform or not perform a specific act. A home sale contract is an agreement that binds a buyer to buy and the seller to sell for a specified amount.
Conventional Mortgage: A home loan from traditional lender such as a bank.
Convertible Adjustable Rate Mortgage (ARM): An ARM that can be switched over to a fixed-rate mortgage within a specified period of time.
Cooperative (CO-OP): Co-ownership in which each party owns a share in the corporation that owns the property. Each co-op shareowner has the right to occupy a particular unit of the property.
Credit: The agreement that a borrower will receive something of value with the promise to repay the lender with in a certain period of time.
Credit History: A record of a person's ability to repay debts. Credit history is used by lenders to determine what interest rates to charge and to determine if a loan can be issued.
Credit Report: A report on credit history that’s complied by a credit bureau. A credit report is used by lenders to determine credit worthiness when issuing a loan.
D
Deed: A legal document used to show title to property.
Deed of Trust or Trust Deed: Similar to mortgage, but used in states that do not recognize "mortgages”. The loan is managed by third party trustee.
Deed in Lieu of Foreclosure: The opportunity for a person who is facing foreclosure to give the title for the property to the lender to avoid foreclosure. This may be done to save a person's credit and to keep the situation from becoming a matter of public record.
Default: Failure to make payments on a loan with a specified period of time.
Delinquency: The conditions that arise when loan payments are not paid on time. If the payment is late, the loan becomes delinquent.
Deposit or Earnest Money: Good faith payment of a portion of the total sales price in advance. A buyer pays earnest money to show the seller sincerity and to secure the offer.
Depreciation: A decrease in the value of a property over time. The opposite of appreciation.
Discount Points: Usually for FHA and VA loans. The buyer can receive discount points to lower the interest rate by paying an additional down payment with the loan origination fee.
Down Payment: The money paid on a home that comes out of the buyer's pocket and is not covered by the loan. For example in a conventional 80% LTV loan, the loan would be for 80% of the sale price and the down payment would be the other 20% paid directly by the buyer.
Due on Sale Clause: Provision in a mortgage that allows the lender to call the mortgage due upon sale of the home.
E
Earnest Money: Good faith payment of a portion of the total sales price in advance. A buyer pays earnest money to show the seller sincerity and to secure the offer.
Eminent Domain: The government’s right to seize one's land for the "good of the public.” The government can take the front ten feet of a person's yard to widen a road, or can take an entire property to build a shopping center. Must be done through the process of condemnation.
Encroachment: An improvement to real property that illegally extends onto or above another person's property.
Encumbrance: Anything that burdens a person's title to real property. Includes liens, restrictions and easements.
Equity: Equity is the difference between the Fair Market Value of the home and the amount of money that is still owed on the mortgage.
Escrow Account: A separate account where additional payments paid with the monthly mortgage payments are held to cover property tax and homeowner's insurance payments.
Estate: The total value of all real property and personal property owned at time of death.
Eviction: The lawful removal of tenant from a property.
Executor: The person named in a will to execute the wishes of the will.
F
Fair Credit Reporting Act: Protects consumers and ensures the disclosure of credit reports by credit reporting agencies and sets procedures for correcting mistakes on one's credit history.
Fair Market Value (FMV): The estimated highest price a buyer would be willing and able to pay and the lowest price the seller would be willing to accept.
Federal National Mortgage Association (FNMA) or ‘Fannie Mae’: FNMA is the largest supplier of home mortgage funds. They are a middleman between institutional banks and the Federal Reserve.
FHA Loan: A lone that is insured by the Federal Housing Administration. Often referred to as a government loan.
Firm Commitment: A lender's promise to issue a mortgage to a particular buyer for a particular property.
First Mortgage: The mortgage that is number one in priority of all other recorded loans against a property.
Fixed Rate Mortgage: A mortgage in which the interest rate remains fixed, or the same, over the entire term of the loan.
Flood Insurance: Insures against property damage caused by flooding. Flood insurance is required in designated flood plains.
Foreclosure: A legal process in which a property is taken from a defaulting borrower (owner) and later sold at auction to satisfy the mortgage debt.
G/H
Grantee: The person who receives the rights to real property in a transaction.
Grantor: The person who relinquishes their rights to real property in a transaction.
Hazard Insurance: Insures damage to property caused by natural hazards like fire, wind, earthquakes, etc.
Home Equity Loan / Line of Credit: A loan allowing a person to borrow against the equity in their the home. Home equity loans are generally in a second position to the first mortgage.
Home Inspection: An inspection of a property by a professional who evaluates its structural and mechanical condition. Inspections are generally a requirement in the closing contract.
Homeowners' Association (HOA): An organization that oversees neighborhoods and condos. The HOA manages the common areas and ensures that covenants are not broken.
Homeowners' Insurance: Insures items within the home such as heating and air systems and items damaged from theft.
HUD Median Income: The median income of a city or county as figured by the Department of Housing and Urban Development (HUD).
J
Joint Tenancy: Multiple-party ownership in which each party has an equal interest in the property. The surviving member takes sole ownership upon the death of the other tenants (Right Of Survivorship).
Judgment: A court ruling on a case. In the event the judgment requires payment, a lien may be placed against a property.
Judgment Lien: A lien placed against one's property to satisfy a judgment.
Judicial Foreclosure: Foreclosure process that must be carried out in the courts.
L
Lease: Written contract between a property owner and a tenant specifying the terms and conditions for which the tenant may rent and occupy the property.
Lender: The party who is loaning out the money. Referred to as the Mortgagee.
Liabilities: Financial obligations including short and long-term debt.
Lien: A legal claim against a property that must be satisfied when the property is sold.
Loan: Lending money that is repaid over a set period of time and usually carries interest.
Loan Origination: The process of creating a new loan.
Loan to Value (LTV): The percentage relationship between the amount of the loan and the sales price or appraised value (whichever is less).
Lock In: An agreement that the lender will agree to a fixed interest rate on loan for a particular period of time and cost.
M/N/O
Maturity: The date in which a loan is called due.
Mortgage: A legal document that offers real property as collateral for a loan allowing foreclosure in case of default.
Mortgagee: The lender
Mortgagor: The borrower (home buyer)
Note: A legal document stating that a loan has been issued and requires repayment with interest within a set period of time.
Notice of Default: Written notice that a loan is in default and that legal action will be taken to satisfy the loan.
Origination Fee: The total number of points a borrower pays on a new loan. One point is equal to one percent of the principle.
Owner Financing: A closing transaction in which the seller (instead of a lender) provides financing to the buyer.
P
P.I.T.I.: Principle, Interest, Taxes, and Insurance. These comprise everything covered on monthly mortgage payments when the loan requires an escrow.
Point: One percent of the loan principle paid in advance at closing.
Prepayment: Money paid on a loan to reduce the principle prior to the due date.
Prepayment Penalty: A fee charged to a borrower who pays off a loan prior to the date of maturity; usually a percentage of the loan amount.
Principle: The amount of money borrowed or the amount of money remaining on a loan.
Private Mortgage Insurance (P.M.I.): Insurance taken out by the lender to protect itself from loss in the event of default by the borrower. P.M.I. is required on conventional loans greater than 80% L.T.V.
Promissory Note: Written promise to repay a debt over a specific period of time.
Public Auction: Public meeting to sell a home that has been foreclosed on to satisfy the loan in default.
Q/R
Quitclaim Deed: Deed that makes no promises of actual ownership. Often used to clear a cloud on the title.
Real Estate Agent: Licensed individual who represents buyers or sellers in real estate transactions for a commission on the cost of the property.
Real Property: Land plus appurtenances. Includes all structures, trees, fences, etc.
Realtor: Agent, broker, or associate broker who is a member of a local real estate board that is associated with the National Board of Realtors.
Refinancing: Satisfying one loan with the proceeds of a new loan using the same property as collateral to secure the debt.
Right of Survivorship: In joint tenancy, the right of the surviving parties to inherit the property rights of the deceased party. E.g.: when a husband dies, the wife inherits the husband's interest.
S/T/V
Second Mortgage: A property lien placed in a secondary position to the original mortgage.
Secondary Market: Buying and selling of existing mortgages.
Secured Loan: A loan backed by collateral.
Security: The collateral for a secured loan.
Survey: A map of a property outlining the boundaries of a property, location of improvements, easements and encroachments.
Tenancy in Common: Co-ownership in real property where individual interests may not be equal and the property is inheritable.
Title: A legal document that transfers rights in real property.
Title Insurance: Protects lenders and buyers from loss caused by disputes on the title.
Title Search: Checking public records to ensure the seller is the legal owner of the property.
Transfer Tax: A state tax on the transfer of real property; 1/1000th of the sale price minus any loan assumption.
Trustee: A third party who holds or controls property for the benefit of another.
Truth in Lending: A federal law requiring lenders to disclose all terms and conditions of a loan.
V.A. Loan: A mortgage guaranteed by the Department of Veteran's Affairs.
Veteran's Administration: The department of the federal government that guarantees mortgages for eligible veterans and protects lenders from loss due to default.
(c) 2007 Good Neighbor Home Buyers LLC