It’s part of a realtor’s job to guide their clients through a confusing legal process during what’s likely the biggest purchase of their lives.
Abstract of Title
A condensed history or summary of all transactions affecting a particular tract of land.
Access
The legal right to enter and leave a tract of land from a public way. Can include the right to enter and leave over the land of another.
Accretion
The slow build up of land by natural forces such as wind or water.
Acknowledgement
A formal declaration made before a duly authorized officer (usually a notary public) by a person who has executed an instrument that such execution is his or her act and deed.
Acceleration clause
A clause in your mortgage 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.
Active contingent
When a seller accepts an offer from a buyer, that offer is contingent upon the buyer’s ability to meet certain conditions before finalization of the sale. Contingencies might include the buyer selling their home, receiving mortgage approval, or reaching an agreement with the seller on the home inspection.
Active Under Contract
A house is listed as “active under contract” when the seller has accepted an offer with contingencies, but still wants the house to be listed as active. In this situation, the seller is also likely accepting backup offers in case their current offer fails to meet its contingencies.
Addendum
If a buyer or seller want to change an existing contract, they might add an addendum outlining the specific part of the contract they’d like to adjust and the parameters of that change. The rest of the contract stays the same, regardless of the addendum.
Adjustable Rate Mortgage (ARM)
A residential mortgage that has an interest rate subject to change. The times of adjustment are agreed upon at the inception of the loan.You might start with lower monthly payments than you would with a fixed-rate mortgage, but fluctuating interest rates will likely make those monthly payments rise in the future.
Adjustment Date
This is the date your mortgage begins to accrue interest (though you might not have made a mortgage payment yet).
Administrator
A person appointed by a probate court to settle the affairs of an individual dying without a will. The term is “administratrix” if such person is a woman.
Adverse Possession
A claim made against the land of another by virtue of open and notorious possession of said land by the claimant.
Affidavit
A sworn statement in writing.
Agent
A person or company that has the power to act on behalf of another or to transact business for another.
Airbnb
A residential property that hosts rent on a short term basis to travelers. It can be anything from a house, a single room, a boat or even a tree house. Think of it as pop-up accommodation – a market place where people rent out their properties.
Air Rights
The right of ownership of everything above the physical surface of the land.
All-inclusive Trust Deed (wrap-around mortgage)
A financing technique that involves the creation of a new trust deed that includes the balance due on the existing note plus any new funds advanced.
ALTA: American Land Title Association
A national association of title insurance companies, abstractors and attorneys specializing in real property law. Its headquarters are in Washington, D.C.
Amortization
The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time. The monthly payment stays the same during the whole period.
Amortization Schedule
A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.
Annual Percentage Rate (APR)
This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual note rate on your loan. It is an expression of the percentage relationship of the total finance charges to the total amount to be financed as required under the federal Truth-in-Lending Act.
Application
The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more.
Appraisal
A written opinion of market value based upon a factual analysis of relevant local market information, given by a licensed appraiser.
Appraised Value
An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property.
Appraiser
An individual qualified by education, training, and experience to estimate the value of real property and personal property.
Appreciation
The increase in the value of a property due to changes in market conditions, inflation, or other causes.
Appurtenance
Anything so annexed to the land or used with the land that it will pass with the conveyance of the land.
Assessed Value
An assessment is used to determine how much in taxes the owner of a property will pay. An assessor calculates the assessment of a home’s value by looking at comparable homes in your area and reviewing an inspection of the home in question.
Assessment
The placing of value on a property for the purpose of taxation, charge or levy.
Assessor
A public official who establishes the value of a property for taxation purposes.
Asset
Items of value owned by an individual. Assets that can be quickly converted into cash are considered “liquid assets.” These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.
Assignment
When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment.
Assumable Mortgage
A mortgage which, by its terms, allows a new owner to takeover its obligations. Usually, the borrower must “qualify” in order to assume the loan.
Assumption
The term applied when a buyer assumes the seller’s mortgage.
Attachment
Legal seizure of property to force payment of a debt.
Attorney In Fact
One who holds a power of attorney from another, allowing him/her or her to execute legal documents such as deeds, mortgages, etc., on behalf or the grantor of the power.
Back-up Offer
A backup offer is simply a contract stating a buyer will purchase a home from a seller with agreed-upon terms if the primary contract is terminated. There can be more than one back-up offer on any property.
Balance Sheet
A financial statement that shows assets, liabilities and net worth as of specific date.
Balloon Mortgage
A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.
Balloon Payment
The final lump sum payment that is due at the termination of a balloon mortgage.
Bankrupt
A person, firm or corporation that, through a court proceeding is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
Bankruptcy
By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a “Chapter 7 No Asset” bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an “A” paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.
Beneficiary’s Statement
The statement of a lender which gives the remaining principal balance due on a note and other information concerning the loan. It is usually obtained in escrow when the owner wishes to sell or refinance.
Bill Of Sale
A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.
Bona Fide Purchaser (BFP)
One who buys property in good faith, for fair value, and without notice of any adverse claims or rights of third parties.
Bond Market
Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.
Bridge Loan
A bridge loan is a short-term loan a homeowner takes out against their property to finance the purchase of another property. It’s usually taken out for a period of a few weeks to up to three years.
Broker
A broker has passed a broker’s license exam and received education beyond what the state requires of real estate agents. They understand real-estate law, construction, and property management. Real estate agents are required to work under the supervision of a broker.
In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but acts as intermediary between lenders and borrowers.
As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
Buydown
A mortgage-financing technique used to reduce (buy down) the buyer’s interest rate for anywhere from a few years to the lifetime of the loan. Usually, the property seller or contractor makes payments to the mortgage lender lowering the buyer’s monthly interest rates, which, in turn, lowers their monthly payments.
Call Option
A call option is a contract giving one party the right to buy and another party the right to sell a piece of property at a future time and specific price.
Cap
Cap is a limit. Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as “caps.” Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.
Cash-out Refinance
When a borrower refinances his mortgage at a higher amount than the current loan balance and withdraws the difference in cash. To be eligible for this kind financing, a borrower usually needs at least 20% in equity.
CC&R’s
Covenants, Conditions and Restrictions. | Also see “Conditions and Restrictions.”
Certificate Of Deposit
A time deposit held in a bank which pays a certain amount of interest to the depositor.
Certificate Of Deposit Index
One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.
Certificate of Eligibility
During the VA (Veterans Administration) loan process, lenders require veterans to show proof they’ve met the minimum service requirement to qualify for a VA loan.
Certificate of Reasonable Value (CRV)
Once the appraisal has been performed on a property being bought with a VA loan, the Department of Veterans Affairs issues a CRV, as it is required for veterans in order to receive the VA loan. It establishes the maximum value of the property and therefore the maximum size of the loan.
Chain Of Title
A documentation of all the transfers of title to a piece of property over the years. It runs from the present owner back to the very first owner of the property.
Changed Circumstance
In accordance with the TRID Rule, events which allow a creditor to revise a Loan Estimate or a Closing Disclosure include: (i) an extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction; (ii) information specific to the consumer or transaction that the creditor relied upon when providing the Loan Estimate and that was inaccurate or changed after the disclosures were provided; (iii) new information specific to the consumer or transaction that the creditor did not rely on when providing the Loan Estimate; (iv) revisions requested by the consumer; (v) when the Loan Estimate expires; or (vi) on the day of the rate lock.
Clear Title
A title that is free of liens or legal questions as to ownership of the property.
Closing
This has different meanings in different states. In some states a real estate transaction is not consider “closed” until the documents record at the local recorders office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.
Closing Costs
Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Loan Estimate and Closing Disclosure which they must issue to the borrower within three days of receiving a home loan application.
Closing
Also known as “escrow” or “settlement.” The process of executing legally binding documents, such as deeds and mortgages, most commonly associated with the purchase of real estate and the borrowing of money to assist in the purchase.
Closing Costs
Expenses for services incidental to a sale of real estate, such as sales commissions, loan fees, title fees, appraisal fees, etc.
Closing Disclosure
The five-page Closing Disclosure, also referred to as CD, must be provided to the consumer three business days before they close on the loan. The Closing Disclosure details all of the costs associated with the mortgage transaction.
Closing Statement
A summation, in the form of a balance sheet, made at a closing showing the amounts of debits and credits to which each party to a real estate transaction is entitled.
Cloud on Title
Any conditions (irregularity, possible claim or encumbrance ) revealed by a title search which, if valid, would affect the title of a real estate property. Usually clouds on title cannot be removed except by deed, release, or court action.
Clouded Title
An encumbered title.
Co-borrower
If a buyer is having trouble getting approved for a loan, they can elicit the help of a co-borrower. This person is usually a family member or friend who’s added to the mortgage and guarantees the loan. They’re listed on the title, have ownership interest, sign loan documents, and are obligated to pay monthly mortgage payments if the buyer is unable to.
Coinsurance
A form of insurance underwritten by two or more title insurers sharing a single risk under separate title insurance policies in proportional amounts.
Collateral
In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.
Collection
When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to “collection.” As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.
Commission
Most salespeople earn commissions for the work that they do. Real estate agents commissions are negotiable. The commission is negotiated at the time of sale between the sellers and their agent and at the time of representation between the buyers and their agent. It is most usual that sellers’ agent is negotiating their commission, at a rate that also covers buyer’s agent commission. to be paid by the seller.
Common Area Assessments
In some areas they are called Property/Homeowners Association Fees, depending of the type of property. They are charges paid to the Property/Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.
Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project’s homeowners’ association (or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Common Law
An unwritten body of law based on general custom in England and used to an extent in some states. Common law marriage, for example, also known as marriage without formalities or informal marriage, is a valid and legal way for a couple to marry in Texas. Texas law states that a common law marriage may be proved by certain evidence.
Community Property
Texas is one of nine states that is a community property jurisdiction. In general, this means that any property acquired by a couple during their marriage (with a few exceptions) is equally owned by both spouses.It is distinguished from separate property, which is property acquired before marriage, by separate gift or bequest, after legal separation, or which is agreed in writing to be owned by one spouse. This can have a profound effect on the dissolution of property during divorce proceedings.
Common Interest Community (CIC)
Ownership characterized by mutual ownership of common areas, either jointly or through membership in an association, e.g., condominiums, planned unit developments and townhomes.
Comparable Sales
Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.”
Condemnation
Taking private property for public use through court proceedings. | Also see “Eminent Domain.”
Condition or Conditions
A provision(s) in a deed, will or other instrument that, upon the happening or failure to happen of a certain event, limits, enlarges, changes or terminates the title of the purchaser or devisee.
Conditions and Restrictions
Limitations placed on the use and enjoyment of land. May include penalties for failure to comply. These are found most often on condominiums and planned unit developments.
Condominium
A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.
Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Condominium Hotel
A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.
Conservator
See “Guardian.”
Consideration
A required element in all contracts by which something of value, including a promise, is exchanged for the act or promise of another.
Consummation
Consummation occurs when the consumer becomes legally obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction. Consummation is not the same thing as closing or settlement.
Consumer Finance Protection Bureau (CFPB)
The regulatory agency created by the Dodd-Frank Act and charged with overseeing financial products and services that are offered to consumers.
Consumer’s Intent to Proceed
Unless a particular manner of communication is required by the creditor, a consumer indicates intent to proceed with the transaction when the consumer communicates, in any manner, that the consumer chooses to proceed after the Loan Estimate has been delivered. This may include (i) oral communication in person immediately upon delivery of the Loan Estimate; or (ii) oral communication over the phone, written communication via email, or signing a preprinted form after receipt of the Loan Estimate. A consumer’s silence is not indicative of intent to proceed.
Construction loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
Contingent vs. Pending
When a property is contingent, it means the owner has accepted an offer, but certain contractual expectations must be met or the offer will be void. If all contingencies are met, the property changes status to “pending.” While contingent offers are still considered active listings, pending offers are taken off the market and other offers will not be entertained. During the contingency status, the owner can chose to show the property or not, or accept other back-up offers.
Contingency
Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met.
Contract
An oral or written agreement to do or not to do a certain thing.
Contract for Deed
An agreement to sell and purchase, under which title is held as security by the seller until such time as the required payments to the seller have been completed.
Conventional Mortgage Loan
A conventional mortgage is a loan not guaranteed or insured by the federal government. It is a “conforming” loan, which simply means that it meets the requirements for Fannie Mae or Freddie Mac. Conventional loans have stricter credit requirements than government-backed loans like FHA or VA loans.
Convertible ARM
An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.
Convey
The act of deeding or transferring title to another.
Conveyance: An instrument by which title is transferred, e.g., a deed. Also the act of transferring title.
Covenant
An agreement written into deeds and other instruments promising performance or nonperformance of certain acts, or stipulating certain uses or non-uses of the property.
Cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Cost of Funds Index (COFI)
One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.
Credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
Credit History
A record of an individual’s repayment of debt. Credit histories are reviewed by mortgage lenders as one of the underwriting criteria in determining credit risk.
Creditor
A person to whom money is owed.
Credit Report
A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.
Credit Repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
Cul-de-Sac
The terminus of a street or alley. Usually laid out by modern engineers to provide a circular turnaround for vehicles.
Debt
An amount owed by someone to another.
Deed
The legal document conveying title to a property. A housing deed is the legal document transferring a title from the seller to the buyer. It must be a written document and is sometimes referred to as the vehicle of the property interest transfer.
Deed-in-Lieu
Short for “deed in lieu of foreclosure,” this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.
Deed Of Trust
Some states, like Texas, do not record mortgages. Instead, they record a deed of trust. It is an agreement between 3 parties, where the trustee holds the title of the home until the debt is repaid by the borrower to the lender.
Default
Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 90 days of the due date, the loan is considered to be in default. In most cases, at 120 days of nonpayment, the foreclosure action can begin.
Delinquency
Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a “late fee” for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.
Demand
The lender’s statement of the amount due to pay off a loan.
Deposit
A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an “earnest money deposit.”
Depreciation
A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.
Devise
The disposition of real property by will.
Discount Points
Discount points are also known as mortgage points. They are fees homebuyers pay directly to the lender at the time of closing in exchange for reduced interest rates which can lower monthly mortgage payments.
Documentary Transfer Tax
The tax, based on sales price, less loans which are being assumed, which is charged by the city and/or county on the transfer of real property.
Down Payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a loan.
Due-on-Sale Clause
A provision/clause in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
Earnest Money
Earnest money is a deposit (usually 1-2% of the home’s total purchase price) made by a homebuyer at the time they enter into a contract with a seller. Earnest money demonstrates the buyer’s interest in the property and is generally deducted from your total down payment and closing costs.
Easement
An interest in land owned by another that entitles its holder to a specific limited use, such as laying a sewer, putting up electric power lines or crossing the property. | Also see “Right of Way.”
Egress
The right to leave (exit) a tract of land.
Effective Age
An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Eminent Domain
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
Encroachment
An improvement that intrudes illegally on another’s property.
Encryption
The conversion of data into a form that cannot be easily understood by unauthorized people. The process of encoding a message so that it can be read only by the sender and the intended recipient. Encryption is the most effective way to achieve data security.
Encumber
To burden a parcel of land with a lien or charge.
Encumbrance
A real estate encumbrance is any claim against a property that restricts its use or transfer, including an easement or property tax lien.
Endorsement
A rider attached to an insurance policy to expand or limit coverage. Also spelled indorsement.
Equal Credit Opportunity Act (ECOA)
A federal law enacted on October 28, 1974 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.
Equity
A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
Escheat
A reversion of property to the state in those cases where an individual dies without heirs or devisees, and, in some states, without a will.
Escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.
Escrow Account
Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.
Escrow Analysis
Once each year your lender will perform an “escrow analysis” to make sure they are collecting the correct amount of money for the anticipated expenditures.
Escrow Disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
Estate
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
Eviction
The lawful expulsion of an occupant from real property.
Examination Of Title
The report on the title of a property from the public records. It generally reviews all previous deeds, wills, and trusts to ensure the title has passed cleanly and legally to every new owner.
Exclusive Listing
A written contract that gives a licensed real estate broker the exclusive right to sell a property for a specified time.
Exception
In legal descriptions, that portion of land to be deleted or excluded. The term often is used in a different sense to mean an encumbrance on title, excluded from coverage in a title insurance policy.
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. | Also see “Personal Representative.”
Fair Credit Reporting Act (FCRA)
A consumer protection law that was enacted in 1970 and 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
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Fannie Mae (FNMA)
The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds.
Fannie Mae Homeready Program
Affordable mortgage loan program expands eligibility and removes barriers to homeownership for qualified homebuyers. HomeReady lets homebuyers: Finance up to 97 percent of the purchase price. Use non-traditional income sources to help qualify for a mortgage loan. Borrowers that decide to use HomeReady are required to attend pre-purchase home-buyer education sessions.
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
Fee simple refers to the greatest possible type of property ownership. It means the owner’s rights to the property are indefinite and can be freely transferred or inherited when the owner chooses. It is most often associated with single-family homes, as condominiums and townhomes are purchased with covenants, conditions, and restrictions.
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. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
FHA Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.
Finance Charge
A total of all costs imposed directly or indirectly by the creditor and payable either directly or indirectly by the customer, as defined by the federal Truth-in-Lending laws.
Financing Statement
A document filed with the Register of Deeds or Secretary of State to give notice that a creditor (lender) has or may have a security interest in the personal property of the debtor (borrower).
Firm Commitment
A lender’s agreement to make a loan to a specific borrower on a specific property.
First Mortgage
The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions.
Fixed-Rate Mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
Fixture
Personal property that becomes real property when attached in a permanent manner to real estate.
Flood Certification
A common term for a Federal Emergency Management Agency (FEMA) Standard Flood Hazard Determination Form (SFHDF). This determines whether land or a building is located within a Special Flood Hazard Area for purposes of flood insurance requirements under the National Flood Insurance Program.
Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. If they are unable to pay off outstanding debt on the property or sell it via short sale, the property enters a public auction. If no sale is made there, the lender takes control of the property.
Forfeiture of Title
Provision in a deed creating a condition which will cause title to be passed to another, should certain circumstances occur.
Freddie Mac
Federal Home Loan Mortgage Corporation (also FHLMC) is a stockholder-owned corporation chartered by Congress that purchases mortgage loans.
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.
Government Loan/Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.
Government National Mortgage Association (Ginnie Mae)
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans insured by FHA (Federal Housing Administration), FMHA (Farmers Home Administration) or VA (Veterans Administration).
Graduated Payment Mortgage
A loan in which monthly payments are relatively small in the beginning and gradually increase in dollar amount over the life of the mortgage.
Grantee
A person who acquires an interest in land by deed, grant or other written instrument.
Grantor
A person, who, by a written instrument, transfers to another an interest in land.
Guardian
One appointed by the court to administer the affairs of an individual not capable of administering his or her own affairs.
Harbor Line
An arbitrary line set by authorities on navigable rivers, beyond which wharves and other structures may not be built. Also designated as line of navigation.
HARP
The Home Affordable Refinance Program (HARP) was a U.S. Treasury loan refinance program designed for homeowners who were struggling to make their payments, were not behind with their payments, and were unable to refinance their mortgage because their property value had declined. This refinance program required a full underwriting and loan process. This program is now obsolete.
Hazard Insurance
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
Heir
One who might inherit or succeed to an interest in land of an individual who dies without leaving a will. | See intestate.
Hidden Defect
An encumbrance on a title that is not apparent in the public records; for example, unknown heirs, secret marriages and forged instruments.
Home Equity Conversion Mortgage (HECM)
The Home Equity Conversion Mortgage (HECM) is an FHA reverse mortgage program enabling homeowners to withdraw equity on their home through either a fixed monthly payment, a line of credit, or a combination of the two. Instead of making payments to a lender, the lender makes payments to you. It enables home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.
Home Equity Line of Credit
A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.
Home Inspection
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
Homeowners’ Association
A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements. Where HOA’s are mandatory, when you purchase the home, you must also join the HOA and pay it’s monthly or yearly fee.
Homeowner’s Insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
Homeowner’s Warranty
A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.
HUD median income
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
HUD-1
The HUD-1 is a type of settlement statement which, prior to the TILA-RESPA Integrated Disclosure (TRID) Rule, was required for use with all federally related mortgage loans. It has been supplanted by the “Closing Disclosure” as a required form, but the HUD-1 will continue to be used for reverse mortgage and HELOC transactions. In addition, it may remain in use for some transactions that do not involve federally related mortgage loans since it functions well as a balance sheet of the settlement.
Impound Account
An account held by a lender for the payment of taxes, insurance or other periodic debts against real property.
Improvements
Those additions to raw land tending to increase value, such as buildings, streets, sewer, etc.
Indemnify
To make payment for a loss or to hold another harmless from loss.
Ingress
The right to enter a tract of land.
Insurance
A contract of indemnity against specified perils.
Interim Financing
Temporary or short-term loans. Often used with new construction. Usually replaced with permanent long-term financing.
Intestate
Designates the estate or condition of failing to leave a will at death. “To die intestate.”
Joint Tenancy
A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
Judgment
A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor’s real property as collateral for the judgment’s creditor. Alternative spelling is “judgement.”
Judgment Docket
The record book of a County Clerk, where a judgment is entered in order that it may become a lien upon the property of the debtor.
Judgment Lien
The charge upon the land of a debtor resulting from the decree of a court properly entered into the judgment docket.
Judicial Foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Texas uses non-judicial foreclosure.
Jumbo Loan
A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans. A jumbo mortgage exceeds these conforming loan limits, which are tied to local median home values. Qualifications for these loans are more stringent and the loans themselves are manually underwritten to mitigate risk to the lender.
Land Contract
See “Contract for Deed.”
Lease
A written agreement between the 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. Leases under one year don’t have to be in writing.
Leasehold Estate
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
Lease Option
An alternative financing option that allows home buyers to lease a home with an option to buy. Each month’s rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
Legal Description
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
Lender
A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as “lenders.”
Lender’s Policy
A form of title insurance policy which insures the validity, enforceability and priority of a lender’s lien. This policy does not provide protection for the owner.
Lessee
One who takes land under a lease.
Lessor
One who grants land under a lease.
Liabilities
A person’s financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Liability Insurance
Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.
Lien
A legal hold, claim or charge against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien. Other examples are other mortgage liens, judgment liens and mechanics’ liens.
Life Cap
A life cap refers to the maximum amount an interest rate on an adjustable rate loan can increase over the lifetime of the loan. A life cap is also known as an absolute interest rate or interest rate ceiling and keeps interest rates from ballooning too high over the term of the loan.
Life Estate
A grant or reservation of the right of use, occupancy and ownership for the life of an individual.
Line of Credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
Liquid Asset
A cash asset or an asset that is easily converted into cash.
Lis Pendens
A notice recorded in the official records of a county to indicate that a suit is pending affecting title to the land in the jurisdiction where the notice is recorded.
Loan
A sum of borrowed money (principal) that is generally repaid with interest.
Loan Estimate
A three-page Loan Estimate (also called LE) must be provided to the consumer no later than three business days after they submit a loan application for most mortgages. The Loan Estimate provides information about key features, costs and risks of the mortgage loan for which the consumer is applying.
Loan Officer
Also referred to by a variety of other terms, such as lender, loan representative, loan “rep,” account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, they represent the borrower to the lending institution and communicate with appraisers.
Loan Origination
Loan origination is the process during which a borrower submits a loan application and a financial institution or lender processes that application. There is usually an origination fee associated with this process.
Loan Policy
See “Lender’s Policy.”
Loan Servicing
After you obtain a loan, the company you make the payments to is “servicing” your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.
Loan-To-Value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower). The higher your LTV, the riskier you’ll appear during the loan underwriting process because a low down payment denotes less equity or ownership in your property making you more likely to default on your loan.
Lock-In
An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.
Lock-In Period
The time period during which the lender has guaranteed an interest rate to a borrower.
Loss Payable Clause
A clause in a contract of insurance which says any loss will be paid to two or more parties as their interest may appear. Usually the owner and the mortgage lender.
Lot
A part of a subdivision or block having fixed boundaries ascertainable by reference to a plat or survey.
Margin
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.
Market Value
An appraisal term denoting the highest price that a buyer, willing but not compelled to buy, would pay and the lowest a seller, willing but not compelled to sell, would accept.
Marketable Title
A good title about which there is not fair or reasonable doubt.
Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Merged Credit Report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.
Modification
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.
Mechanic’s Lien
A lien allowed by statute to contractors, laborers and material suppliers on buildings or other structures upon which work has been performed or materials supplied.
Metes and Bounds
A description of land by courses and distances.
Mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
Mortgage Banker
For a more complete discussion of mortgage banker, see “Types of Lenders.” A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.
Mortgage Broker
A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
Mortgage Insurance (MI)
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves “No MI” are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.
Mortgage Insurance Premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
Mortgage Life and Disability Insurance
A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.
Mortgagee
The lender in a mortgage agreement.
Mortgagee’s Policy
See “Lender’s Policy.”
Mortgagor
The borrower in a mortgage agreement.
MUD
A Municipal Utility District (MUD) is one of several types of special districts that function as independent, limited governments. The purpose of a MUD is to provide a developer an alternate way to finance infrastructure, such as water, sewer, drainage, and road facilities. In return, the developer sets a MUD fee for future homeowners in the development. As the tax burden decreases the MUD rate will decline over a period of time.
Multidwelling units
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
Negative amortization
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called “deferred interest.” The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
No cash-Out Refinance
A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a “rate and term refinance.”
No-Cost Loan
Many lenders offer loans that you can obtain at “no cost.” You should inquire whether this means there are no “lender” costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a “no-point” loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
Non-Public Personal Information (NPPI or NPI)
Means ‘‘personally identifiable financial information’’ that is (i) provided by a consumer to a financial institution, (ii) about a consumer resulting from a transaction or service performed for the consumer, or (iii) otherwise obtained by the financial institution. Personally identifiable financial information includes any information obtained by a financial institution in connection with its provision of a ‘‘financial product or service,’’ even if the information is not typically considered financial in nature.
Notarization
The certification by a notary public that a person signing a document has been properly identified. Notarization does not certify the content of a document, only validity of signature.
Notary
One authorized to take acknowledgments.
Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
Note Rate
The interest rate stated on a mortgage note.
No-Points Loan
Almost all lenders offer loans at “no points.” You will find the interest rate on a “no points” loan is approximately a quarter percent higher than on a loan where you pay one point.
Notice of Default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
Option
It is a voluntary action that allows the buyer time to discover any property defects before committing to the purchase, and it lowers the seller’s chances of losing litigation if a defect is discovered after closing. A fee is paid for a limited period of time in which the option not to continue the contract can exercised.
Option Period
Means the period during which an Option may be exercised.
Original Principal Valance
The total amount of principal owed on a mortgage before any payments are made.
Origination Fee
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called “discount points.” One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
Owner Financing
A property purchase transaction in which the property seller provides all or part of the financing.
Owner’s Policy
A policy of title insurance, which insures a named owner against loss by reason of defects, liens and encumbrances not excepted to in the policy or unmarketability of the title. The company also agrees to defend covered claims made against the title.
Ownership
The right to possess and use property to the exclusion of others.
Partial payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.
Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.
Patent
A document or grant by which the federal or state government originally transferred title to public land to an individual. The first in the series of transfers by which title comes down to present owners.
Perfecting Title
Process involving the elimination of any adverse claims against title.
Periodic Payment Cap
For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.
Periodic Rate Cap
For an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
Personal Property
Any property that is not real property.
Personal Representative
A person appointed by the probate court to administer a decedent’s estate. | Also see “Executor” or “Administrator.”
PID
A Public Improvement District is a special district created by a City or County under the authority of Chapter 372 of the Texas Local Code. The statute allows for a city or county to levy a special assessment against properties within the District to pay for improvements to the properties within the District. The statute allows for a city or county to levy a special assessment against properties within the District to pay for improvements to the properties within the District.
PITI
This stands for principal, interest, taxes and insurance. | See “Principal, Interest, Taxes, and Insurance.”
PITI Ratio
The principal, interest, tax and insurance payment-to-income ratio. Used in mortgage lending decisions.
PITI Reserves
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 principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
Planned Unit Development (PUD)
A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.
Plat or Plot
A map representing a piece of land subdivided into lots with streets shown thereon.
P.M.I.
Private Mortgage Insurance. An insurance contract which insures that the named lender will recover a specific percentage of the loan amount from the insurer in the event the loan goes bad.
Point
A point is 1 percent of the amount of the mortgage.
Points
A one-time special fee or extra charge paid to a lender in order to secure a loan. Expressed as a percentage of face amount of mortgage.
Policy
See “Title Insurance Policy”.
Policy Owner
The insured on a title insurance policy.
Power Of Attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Pre-Approval
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification.
Prepayment
Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner’s decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
Prepayment Penalty
A fee that may be charged to a borrower who pays off a loan before it is due.
Pre-Qualification
This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.
Premium Tax
A tax imposed on all premiums from the business of title insurance. Only applies in some states.
Prime Rate
The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
Principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
Principal Balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.
Principal, Interest, Taxes, and Insurance (PITI)
The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
Privacy Rule
The GRAMM-LEACH-BLILEY ACT requires financial institutions (which includes title insurance companies) to give notice to all of their “customers” about their privacy practices. The Privacy Policy is a “clear and conspicuous” written notice describing their privacy policies and practices.
Private Mortgage Insurance (PMI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
Property Owners Association
It means an association or organization, whether or not incorporated, which operates under and pursuant to recorded covenants or deed restrictions, through which each owner of a portion of a subdivision-be it a lot, parcel site, unit plot, condominium, or any other interest-is automatically a member as a condition of ownership and each such member is subject to a charge or assessment for a pro-rated share of expense of the association which may become a lien against the lot, parcel, unit, condominium, or other interest of the member.
Probate
It is the administration of an estate in which the decedent either had or did not have a will. Jurisdiction over the administration of such estates, among other matters, is by the district court sitting in probate.
Promissory Note
A written promise to repay a specified amount over a specified period of time.
Prorate
To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a proration of real property taxes or fire insurance premiums.
Public Auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.
Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.
Pre-Settlement Inspections
See “Walk Through.”
Prepayment Penalty
A clause in a mortgage or loan contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed. The penalty can be based on percentage of the remaining mortgage balance or some other calculation as described in the clause.
Principal
The sum of money outstanding upon which interest is payable. Also refers to one who is served by an agent.
Purchase Agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Purchase Money Transaction
The acquisition of a property through the payment of money or its equivalent.
Qualifying Ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The “top” or “front” ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The “back” or “bottom” ratio includes housing costs as will as all other monthly debt.
Qualification
The process of reviewing a prospective borrower’s credit and payment capacity prior to approving a loan.
Quiet Title
An action in a proper court to remove record defects or possible claims of other parties named in the action.
Quitclaim Deed
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
Range
A part of the government survey, being a strip of land six miles in width, and numbered east or west of the principal meridian.
Rate lock
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
Property consisting of land and any permanent structures or improvements on the land, whether natural or man-made.
Real Estate Agent
A person licensed to negotiate and transact the sale of real estate.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
Real Property
Land and appurtenances, including anything of a permanent nature such as structures, fixtures, trees, minerals, and the interest, benefits, and inherent rights thereof.
Realtor®
A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors. All Realtors® are real estate licensed agents, but not all real estate licensed agents are Realtors®.
Realty
A brief term for real property.
Reconveyance
The conveyance to the landowner of the title, held by a trustee under a deed of trust, when the performance of the debt is satisfied.
Recordation
Involves filing for record in the office of the county recorder for the purpose of giving constructive notice of title, claim or interest in real property.
Record Owner
The owner of property as shown by an examination of the public record.
Redeem
Literally “to buy back.” The act of buying back land after a mortgage foreclosure, tax foreclosure, or other execution sale.
Recorder
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk.”
Recording
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
Redisclosure
For covered transaction under the TILA-RESPA Integrated Disclosure (TRID) Rule and under very specific circumstances, the Loan Estimate and/or the Closing Disclosure may be revised and delivered to the consumer.
Refinance Transaction
The process of paying off one loan with the proceeds from a new loan using the same property as security.
Registered Land
See “Torrens Title.”
Reinsurance
To insure again by transferring to another insurance company all or part of an assumed liability, thus spreading the loss risk any one company has to carry.
Remaining Balance
The amount of principal that has not yet been repaid. See principal balance.
Remaining Term
The original amortization term minus the number of payments that have been applied.
Rent Loss Insurance
Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
REO
Real Estate Owned, or REO for short, describes property that the bank comes to own because the borrower defaulted or could not financially afford to remain in the property and efforts to sell the property, either at the short-sale stage or at the foreclosure sale, were unsuccessful.
Repayment Plan
An arrangement made to repay delinquent installments or advances.
Replacement Reserve Fund
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project, particularly that which has a short life expectancy, such as carpeting, furniture, etc.
Reverse or Reverse Annuity Mortgage
A mortgage for which the borrower pledges home equity in return for regular (monthly) payments, rather than a lump sum distribution of loan proceeds. Repayment is usually not required until the home is sold or the borrower’s estate is settled, provided the borrower continues to live in the home and keeps current all taxes and insurance. | Also see “Home Equity Conversion Mortgage.”
Revolving Debt
A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
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 exit designated premises.
Right of Survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
Right of Way
The right which one has to pass across the land of another. An easement.
Riparian
Rights to use of waterways in adjoining lakes or rivers.
Sale Leaseback
A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
Second Mortgage
A mortgage that has a lien position subordinate to the first mortgage.
Secondary Market
The buying and selling of existing mortgages, usually as part of a “pool” of mortgages.
Secured Loan
A loan that is backed by collateral.
Security
The property that will be pledged as collateral for a loan.
Section or Section of Land
A parcel of land comprising approximately one square mile or 640 acres.
Seller Carry-Back
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
Servicer
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
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
Set Back Line
Those lines which delineate the required distances for the location of structures in relation to the perimeter of the property.
Settlement Statement
See HUD1 Settlement Statement and Closing Disclosure.
Short sale
Short-sale properties are those that are available for sale because of financial hardship on the part of the current or previous owner. When a financially distressed homeowner sells their property for less than they owe on the mortgage. A successful short-sale transaction includes ALL lienholders accepting less than what is owed to them.
Statement of Information (SI)
A confidential information statement completed by the buyer, seller and borrower in every transaction where a policy or policies of title insurance are requested. Allows the title company to competently search documents affecting the property to be insured, documents which may not refer to said property. Allows title companies to differentiate between parties with similar names when searching matters such as liens and court decrees.
Subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
“Subject To” Clause
A clause in a contract of sale setting forth any contingencies or special conditions of purchase and sale, such as an offer made and accepted subject to financing, securing certain zoning or similar requirements.
Subordinate Financing
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
Subordination Agreement
An agreement under which a prior or superior lien is made inferior or subject to an otherwise junior lien.
Sub-Surface Right
The right of ownership to things lying beneath the physical surface of the property.
Survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Sweat Equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
Tax Lien
A lien for real property taxes. Attaches only to the property upon which the taxes are due in most jurisdictions. It may be foreclosed for nonpayment.
Tenancy by the Entirety
Ownership by married persons. Each owns the entire estate, with the survivor taking the whole upon the other’s death.
Tenancy in Common
As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
Tenant
Any person occupying real property with the owner’s permission.
Testament
Another term for a will. Commonly referred to as “last will and testament.”
Testate
The state or condition of leaving a will at death. “To die testate.”
Testator
A man who makes or has made a testament or will.
Testatrix
A woman who makes or has made a testament or will.
The Dodd-Frank Act
Fully known as the Dodd-Frank Wall Street Reform and Consumer Protection Act is a United States federal law that places regulation of the financial industry in the hands of the government.
Three-Day Review Period
For covered transactions under the TILA-RESPA Integrated Disclosure (TRID) Rule: the creditor is generally required to ensure that the consumer (borrower) receives the Closing Disclosure no later than three business days prior to the consummation of the loan.
Third-Party Origination
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.
Title
A legal document evidencing a person’s right to or ownership of a property.
Title Agent
See “Agent.”
Title Commitment
A report issued by a title insurance company or its agent, committing the title insurance company to issue the form of policy designated in the commitment upon compliance with and satisfaction of requirements set forth in the commitment.
Title Company
A company that specializes in examining and insuring titles to real estate.
Title Defect
Any legal right held by others to claim property or to make demands upon the owner.
Title Examination
To peruse and study the instruments in a chain of title and to determine their effect and condition in order to reach a conclusion as to the status of the title.
Title Insurance
Insurance that protects the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.
Title Insurance Underwriter
An insurance company that issues insurance policies either to the public or to another insurer.
Title Insurance Policy
A written contract of title insurance.
Title Plant
The total facilities records, equipment, fixtures, and personnel required to function as a title insurance operation in some parts of the country. Technically, the organization of official records affecting real property into a system, which allows quick and efficient recovery of title information.
Title Search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
Tolerances
See “Variances.”
Torrens Title
A system whereby, after court proceedings, a certificate is issued setting forth the extent of the applicant’s estate in land, subject to the exceptions shown.
Total Interest Percentage (TIP)
The total amount of interest that the consumer will pay over the life of the loan as a percentage of the principal of the loan, assuming the consumer makes each monthly payment in full and on time, and does not make any overpayments.
Total Loan Costs
Fees the lender charges to make the loan, as well as fees paid to providers selected by the lender and fees paid to providers chosen by the borrower. Total Loan Costs are found under Section D of the Loan Estimate.
Township
A division of territory approximately six miles square, containing approximately 36 sections or 36 square miles.
Tract
A particular parcel of land.
Transfer Of Ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property “subject to” the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
Transfer Tax
State or local tax payable when title passes from one owner to another.
Treasury Index
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury’s daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
TRID
The TILA RESPA Integrated Disclosure Rule, also known as the “Know Before You Owe” initiative, was created by the Consumer Financial Protection Bureau (CFPB) to help consumers shop for and understand mortgages. It replaced four disclosure forms with two new ones, the Loan Estimate and the Closing Disclosure. It also gives consumers three business days to review their Closing Disclosure and ask questions before closing.
Truth-In-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
Trust
A property right held by one as a fiduciary for the benefit of another.
Trustee
A person holding property in trust as a fiduciary for the benefit of another.
Trustor
The borrower under a deed of trust. One who deeds their property to a trustee as security for repayment of a loan.
Two-Step Mortgage
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
Two To Four Family Property
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.
Uniform Settlement Statement
The standard HUD Form 1 required to be given to the borrower, lender and seller at, or prior to, settlement. | Also see HUD-1.
Unmarketable Title
Title which contains defects that would allow a purchaser to be released from his obligation to purchase.
VA
Department of Veterans Affairs. An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans. VA has power and authority to guarantee or insure payment of loans made to veterans by private lending institutions. This function is similar to that of FHA. VA also makes direct loans to veterans in non-urban areas where private loan funds are not available.
VA mortgage
A mortgage that is guaranteed by the (VA).
Variable Rate Mortgage
A loan in which the interest rate fluctuates with the cost of funds or some other index.
Variances
The comparison made between fees and/or charges listed on the Loan Estimate (or Good Faith Estimate) and those listed on the final Closing Disclosure (or HUD-1). Not all fees are exposed to such scrutiny but for those that are the creditor/lender is held accountable for the excessive charges. There are two levels of tolerance based on the type of fee. Variance may also be referred to as Tolerance.
Vendee
A purchaser of real property under land contract.
Vendor
A seller of real property under land contract.
Vest
To pass to a person an immediate right or interest. Title may be said to vest in John Smith.
Vested
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
Walk Through
Depending on the terms of the contract of sale or based on local custom, a walk-through or pre-settlement inspection may be scheduled prior to settlement or closing of the transaction. The primary purpose of this type of inspection is to make certain the property is in the agreed-upon condition, repairs (if any) from the home inspection are complete, and to confirm that nothing has gone wrong with the property since the buyer’s last viewing.
Warranty
A limited promise by the grantor of real property that he or she is the owner and will be responsible to the buyer if title is other than as represented.
Will
A written document providing for the distribution of property owned by a person after his or her death.
Zoning
The right of a municipality to regulate and determine the compatible character and use of property.
blog.hubspot.com
realestateabc.com
OneRepublicTitle.com