Glossary

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A

Abstract of Title
Information on a parcel of real estate that a lender will obtain from public records, to be sure that there is sufficient evidence of title and that the title is clear of any liens or claims against the property,

Acceleration Clause
A provision in the mortgage document that allows the lender to declare the entire debt immediately due and payable, if the payments are missed or if any other provision in the document is violated.

Accrued Interest
The interest earned, which is calculated for the period of time between the borrower's payments.

Acknowledgment
Declaring formally before a public official that one has signed a document

Acre
43,560 square feet of land

Adjustable-Rate Mortgage (ARM)
A loan with an interest rate that changes periodically.

Adjusted Basis
To determine the cost of a property, any improvements to the property is added to the original cost of the property, and then any depreciation claimed is deducted from that amount.

Adjusted Sales Price
The amount of money that the seller of a property actually receives after commissions, legal fees and other costs of selling the property is deducted from the sales price.

Adjustment Period
The period of time that an interest rate change occurs, either monthly, semi annually, annually or a specified amount of time that is stated in the agreement.

Affordability Index
An index that indicates the percentage of families with adequate incomes to afford to purchase a home.

Agent
A person who is qualified to represent a buyer or seller, with their consent.

Agreement of Sale (Purchase & Sales Agreement)
A written agreement, involving a sale, which is a legally binding contract between the buyer and the seller, detailing the terms of the sale.

Alienation Clause (due-on-sale, nonassumption)
A paragraph in the mortgage document that stipulates that the ownership of the property cannot be transferred unless the loan is paid in full.

Alternate Documentation
When the lender obtains documents from the borrower pertaining to borrower's income, employment, funds and home loan payment history, rather than from the borrower's employer, bank or home loan provider,

Amortization
Installment payments on a loan that covers both principal and interest over a set period of time. At the end of that time, the loan will be paid in full.

Annual Percentage Rate (APR)
The rate of interest a borrower will be paying on a loan. All lenders must follow the same rules to calculate the APR, but interest rates will vary among lenders.

Applicant
A prospective borrower who has supplied information on a loan application.

Application Fee
A lender may charge a fee to cover the cost of processing a loan application.

Appraisal
An estimate of the value of a property, by a qualified person, to determine the market value.

Appraisal Fee
A fee that is charged for the appraisal

Appreciation
When the value or worth of a property increases.

Area Median Income
The average income of the residents in a certain community, determined by the midpoint between the high incomes and the low incomes.

As Is
The buyer accepts the property in its present condition, with no guaranty or warranty from the seller.

Assessed Value
A value placed on a property by the town or city for the purpose of calculating property taxes and is not the same as appraised value or market value.

Assessment ***
A value placed on a property for the purpose of taxation, or a levy placed against a property for a purpose such as a sewer assessment, whereby a town may impose a compulsory obligation of the property owner
to correct a problem.

Assign - Assignment
A transfer of a title or interest in a property from one party to another.

Assignee
The party to whom the title or interest in a property has been transferred.

Assignor
The party who transfers a title or interest in a property to another.

Assumable Mortgage
The seller may be able to transfer the seller's mortgage loan to the buyer. The lender will require a credit check of the buyer and may charge a fee for the transfer of the loan.

Assumption
A qualified buyer takes over a loan that is transferred from the seller.

Automatic Renewal Clause
A provision in the broker's contract listing the property for sale, that allows the listing to be renewed indefinitely unless the property owner cancels the listing.

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B

Balance Sheet
An accounting of the financial status of an individual or business, which provides a list of assets, liabilities and net worth, as of the date that the accounting was completed. This balance sheet is a part of the loan application form.

Balloon Loan - Balloon Payment
A type of mortgage loan which requires the remaining balance to be paid in full at a specified time. The amount may be substantial.

Bankruptcy
A court proceeding to relieve a person or business of the payment of all debt, due to a financial breakdown which has caused them to become financially insolvent. There are several types of bankruptcies:
Chapter 7: Liquidation of the assets of the debtor. for the protection of creditors
Chapter 11: Allows for a plan of reorganization and full or partial payment of debts
Chapter 12: Covers certain farm bankruptcies
Chapter 13: Covers restructuring of consumer debts

Basis points ***
The amount of change in (yield) (gain) in home loans - 1/4 of 1 percent (0.25percent) is 25 basis points (bps)

Bill of Sale
A document that provides proof of sale or transfer of personal property

Binder
An agreement prior to a final agreement of sale, usually with a deposit, to show a serious intention to follow through with the sale. A binder is also used for insurance, "insurance binder".

Biweekly Mortgage
A mortgage that allows payments to be made every other week instead of monthly, to lower the cost of interest paid and shorten the term of the loan.

Bond
A document that promises to repay a loan, which is similar to a promissory note, often with a mortgage that pledges real estate as security.

Bonus Income
Income that is additional to regular salary or hourly wage which might be used for qualifying under certain conditions.

Broker
There are several types of brokers who are licensed by the state to represent another for a fee. Two types of brokers are: A real estate broker who brings buyer and seller together. A mortgage broker who brings applicant and lender together.

Building Code
Regulations, requirements and standards of local government for building and construction.

Buy down
Payment to a mortgage lender in return for a lower interest rate on the loan, either for a portion of the term or for the whole term. This payment is referred to as "points", which is a percentage of the loan amount.

Buyer's Broker
An agent who represents the buyer and places the buyer's interests above all others.

Buyer's Market
A market where there are more homes for sale than there are buyers, supply of homes for sale exceeds the demand for homes.

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C

Call Provision
A mortgage with a clause that allows the lender to accelerate payment in full on the loan, on a certain date or on the occurrence of specified conditions.

Cap - Capped Interest Rate
Limitations on how much the interest rate can increase or decrease at one time on an adjustable mortgage rate, typically 2-3 percent.

Capital Gain
Taxable profit on the sale of real estate or other assets

Cash on Hand
A borrower's cash that is not in a bank and therefore is not verifiable and is difficult to use for closing because of underwriting guidelines.

Cash Reserves - Liquid Assets
Cash or marketable securities that the applicant retains after making the down payment and paying closing costs.

Caveat Emptor
Let the buyer beware.

Ceiling - Lifetime Cap
A limit on the interest rate which an adjustable mortgage rate may be raised.

Census Tract
The U.S. Bureau of Census designates a geographical area for the purpose of identifying the location of a dwelling. Lenders are required to use the census tract when reporting the loan application data.

Certificate of Eligibility
A veteran is required to have a certificate stating that they are eligible to participate in the loan guarantee program.

Certificate of Occupancy
A document issued by a local government agency verifying that a new home or building meets the standards of all building codes and is ready to be occupied.

Certificate of Reasonable Value
An appraisal by the VA

Chattel
Personal property

Clear Title
A title that has no liens, judgments or attachments on the property

Client
The person to whom a broker owes fiduciary duties

Closing - Passing Papers
Transactions to complete the sale. In real estate notes are signed, title is transferred, necessary funds are disbursed and there is a delivery of a deed.

Closing Costs
Fees paid by the buyer and the seller on the day of the sale of the property necessary to close the transactions.

Closing Statement
A statement listing all the details of the sale, including the disbursement of all funds. There is one for the buyer and one for the seller.

Cloud - on Title
The owner of the property does not have clear title, due to an outstanding claim or encumbrance against the property.

Combined Loan-to-Value Ratio (CLTV)
The sum total of all loans on the property as a percentage of the value of the property.

Commission - Commission Income
A fee paid to a broker, usually by a seller, for services including finding a buyer for a property. The fee is based on a percentage of the sale price.

Commitment
An agreement from a lender to loan money to a borrower at a future date. It may be subject to specified conditions or it may be firm.

Common Elements
Pertaining to condominium developments, the areas that are owned in part by all owners such as swimming pools.

Co-mortgagor - Borrower
The second person on the mortgage note who is also taking title to the property and whose income, assets and debts are combined with the mortgagor's for qualifying purposes.

Comparable
To estimate the market value of a property, a similar property in the area that has recently sold is used as a guide.

Comparative Market Analysis
A method of using the study of comparables to place a value on a property, including property that is currently on the market and property that did not sell.

Conditional Commitment
An agreement from a lender to loan money at a future date subject to specified conditions.

Conditional Offer
The buyer offers to purchase a property contingent on or depending on obtaining financing or some other circumstance such as selling another home.

Condominium
An ownership of a particular unit bounded by the interior walls, ceilings and floors, with proportionate ownership of shared areas and the right to use certain other areas.

Conforming
The term used in real estate lending to describe a home loan that meets all guidelines.

Consideration
Something of worth given to another to persuade them to enter into a contract.

Contingency
A provision in a contract that states a condition that must be met upon which the sale is depending.

Contingent Liability
A debt, such as a cosigned loan, that has a possibility of becoming an obligation in the future. Lenders can consider these debts along with all other debts of the borrower.

Contract
A legally binding agreement or arrangement between parties.

Contract for Deed
The buyer receives possession but the seller retains title.

Contract of Sale
A contract between a buyer and a seller of property with all the details of the sale along with terms, conditions and sale price.

Contributions
When costs that are normally the responsibility of the buyer are absorbed by the seller or another interested party such as a developer, real estate agent or lender.

Conventional Mortgage
A home loan from a bank that is not insured or guaranteed by a federal agency such as the FHA or VA.

Conversion Interest Rate
When an adjustable interest rate loan is converted to a fixed interest rate loan based on a pre-determined amount as specified in the closing documents.

Conversion Period
The period during which a borrower may convert an adjustable rate loan to a fixed rate loan, if the loan has a convertible option.

Convertible Mortgage
A mortgage that has the option to convert an adjustable interest rate to a fixed interest rate at some future time.

Conveyance
A written document, such as a deed, that transfers the title to property from one person to another.

Co-signer
A person who signs a mortgage note along with the principal borrower and agrees to assume the debt obligation in the event that the principal borrower defaults on the payments of the home loan. A co-signer has no ownership in the property.

Cost Approach to Value
An appraisal method that determines the value of a property by taking the estimated cost of improvements and adding the value of the land, and then deducting the estimated depreciation.

Cost Basis
To calculate the profit or capital gains on the sale of a property, for tax purposes, the expenses incurred to purchase the property and the expenses for improvements is added to the purchase price and then the depreciation claimed on tax returns over the years is deducted from that to arrive at a cost basis.

Credit Report
A credit history of the borrower showing how much debt they presently carry, how timely they pay their debts as well as any delinquent payments, bankruptcies or foreclosures. There are three credit bureaus that report credit information.

Courtesy
A widower can obtain rights to a portion of his deceased wife's real estate, in some states.

Customer
The buyer

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D

Days on Market - DOM
The number of days that a property was on the market for sale until it was sold.

Deed
A formal written legal document transferring title or ownership of real estate from the seller to the buyer.

Deed in Lieu of Foreclosure - Voluntary Conveyance
To satisfy the mortgage debt and to avoid foreclosure, a borrower gives the deed to the property to the lender.

Deed of Trust - Trust Deed
A document used instead of a mortgage in some states as security for a lender. The title to a property is held by a neutral third party trustee instead of the borrower until the debt is paid to the lender, at which time the title is conveyed to the borrower. In the event of a default by the borrower, the trustee will sell the property and pay the debt.

Deed Restriction - Restrictive Covenant
A provision in a deed that limits or restricts the use and occupancy of the property by future owners.

Default
Failure to make mortgage payments

Defect of Record
A public record showing a title or deed that has a recorded defect such as an attachment, judgment, easement or some other liens.

Deferred Interest - Negative Amortization
The principal amount of a loan increases over time instead of decreasing because the monthly payments are less than the amount of interest due for that period. This condition can occur with adjustable rate mortgages and graduated payment mortgages.

Deferred Maintenance
Repairs that are needed have been put off

Deficiency Judgment
A judgment against a person for the amount remaining on a loan after a property has been foreclosed by the lender and the sale was not enough to pay the entire loan.

Delivery
When the title to a deed has been legally transferred to the new owner of the property.

Department of Housing and Urban Development - HUD
A federal agency responsible for community planning and development, producing government housing and loans (FHA), administration, research, technology and equal opportunity in housing, .

Department of Veterans Affairs - DVA (formerly Veterans Administration - VA)
An independent agency of the federal government that administers benefit programs to facilitate veterans adjustment to civilian life. One of the programs guarantees against loss to a lender offering a low interest rate and a long-term down payment financing to eligible veterans.

Depreciation
When a property loses value as a result of age, deterioration or obsolescence.

Direct Endorsement
An authorized local lender completes the processing of an FHA mortgage application.

Discount Points
A lender charges the borrower a percentage of the loan to buy an interest rate that is lower than the market rate. A point is equal to one percent.

Documentary Tax Stamp
When real estate is transferred or mortgaged the state or local government charges an amount for tax.

Documentary Transfer Tax
A state tax based on the sales price of real estate or equity transfer of real estate.

Dower
The rights of a widow to a portion of her deceased husband's property, in some states.

Down Payment
The amount of cash that a buyer pays at closing which is the difference between the sales price of the property and the loan amount.

Due-on-Sale Clause - Acceleration Clause
Allows the lender to declare the entire unpaid balance immediately due and payable upon a sale or transfer of the mortgaged property.

Duplex
A single structure with two separate housing units - two houses built as one. The financing is the same as for a single house.

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E

Earnest Money
A small deposit on real estate accompanying an offer of purchase from the buyer to show that the offer is being made in good faith.

Easement
A permanent right to use another's property, for example a common driveway.

Eleventh District Cost of Funds Index
An index that indicates adjustments in interest rates

Encroachment
Intrusion of a building or driveway etc. onto another's land that is unauthorized.

Encumbrance
Anything that affects the title to real estate such as a mortgage, unpaid taxes, liens or attachments, easements or restrictions.

Engineer's Report
A report submitted by an engineer regarding the physical condition of property and includes recommendations for repair and maintenance.

Equal Credit Opportunity Act - ECOA
A federal law that requires lenders and other creditors to make credit available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity
The difference between the fair market value of a property and the amount owed on the present mortgage, which represents the amount of money that would go to the owner of the property if it were sold.

Escrow Account
Funds held by a third party pending a particular occurrence such as funds collected by a lender for the payment of property taxes or funds withheld at closing for the payment of uncompleted repairs

Escrow Agent
The escrow agent is a neutral third party who holds all required money and documents until the buyer, seller and lender have completed all the conditions of the agreement.

Exclusive Agency
When a seller lists their property for sale with a particular real estate office and signs a listing agreement under which only that office can sell the property and receive the commission, that real estate office becomes the exclusive agency. The only exception to this agreement is if the owner sells the property there is no commission paid.

Exclusive Right-to-Sell
When a seller lists their property for sale with a particular real estate office and signs a listing agreement under which the seller agrees to pay a commission if the property is sold during the listing period by anyone, even the owner.

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F

Fair Market Value
The most likely price that a property will bring if widely exposed on the market.

Fannie Mae
A name used that refers to the Federal National Mortgage Association - FNMA - a federally chartered corporation that purchases conventional and government-guaranteed real estate loans.

Farmers Home Administration - FMHA
A division of the U.S. Department of Agriculture that offers mortgage loans to farmers and nonfarmers in qualifying rural areas.

Fee Simple - Absolute
The highest possible degree of ownership of land.

Federal Home Loan Mortgage Corporation - FHLMC
Commonly referred to as Freddie Mac - a private corporation governed by federal law to provide secondary mortgage loans (second mortgages) in support of a conventional first mortgage real estate loan.

FHA - Federal Housing Administration
A federal agency that insures mortgages to protect the lending institution incase of default. A division of the Department of Housing and Urban Development - HUD

FHA Mortgage
A loan made by a local lending institution which is insured by the FHA.

Federal National Mortgage Association - FNMA
Commonly referred to as Fannie Mae - a federally chartered corporation that purchases conventional and government-guaranteed real estate loans.

Fiduciary
A person who acts in the best interest of the client and has a position of trust and responsibility.

Financial Institutions Reform Recovery and Enforcement Act of 1989 - FIRREA
The law enacted to restructure the thrift industry, and create regulatory agencies to oversee and established risk-based capital guidelines for qualified thrift lenders.

Firm Commitment
An agreement from a lender to give a loan to a borrower in a specified amount for a specified period of time on a specified property. Also may pertain to an insurance agreement from FHA or a private mortgager to insure a loan to a designated borrower on a specific property

First Lien
A lien refers to a mortgage loan or some other encumbrance or attachment on real-estate property. The first lien must be paid before any other lien is paid.

First Mortgage
The loan on a property that holds priority over all other loans on the same property. If the property is sold, the first mortgage must be paid before any other lenders are paid.

Fixed-Rate Mortgage
A mortgage loan with an interest rate that will not change for the entire term of the loan.

Fixture
A thing fixed permanently in position that has become part of the real estate, such as bathroom fixtures or light fixtures.

Forbearance Agreement
An agreement, either verbal or written, that the lender will delay foreclosing on a loan if the borrower performs certain terms and conditions.

Foreclosure
A legal proceeding brought by the lender to enforce payment of a debt by seizing and selling the mortgaged property in order to satisfy the defaulted debt.

Front Foot - Frontage
A measurement of land along the street. A lot that has 150 feet of frontage means that the lot is 150 feet wide along the street which is the front of the lot.

Fully Indexed Rate
The base index interest rate plus the margin on an adjustable interest rate loan.

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G

Gift Letter
Certification that the funds in an applicant's account are truly a gift and need not be repaid.

Good-Faith Estimate
A breakdown of estimated closing costs.

Graduated-Payment Mortgage - GPM
A loan with monthly payments that are lower in the beginning and are increased by a specified percentage each year for a specified period of time. During this period, most of the payments and sometimes all of the payments go to interest and none to principal which means that the loan is not being paid down. At the end of the specified period the payments are set at an amount that will gradually pay off the loan over the remaining term.

Grant Deed
A deed with implied warranties that is used to convey title to property.

Grantee
The buyer, who receives a deed to property from the seller.

Grantor
The seller, who gives the deed to a property to the buyer.

Gross Income
Income earned before deductions.

Gross Rent Multiplier
A method used to compare rental properties, based on the ratio of the selling price to the rent received.

Growing Equity Mortgage
A mortgage with a fixed-rate of interest that allows the borrower to pay off the loan in less time and to build equity more rapidly with a repayment schedule that increases by a specified percentage each year and the increase amount applied to the principal balance.

Guaranteed Sale
The listing broker agrees to buy the property if it cannot be sold by a specific date, usually at a distinctly reduced price.

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H

Hazard Insurance
An insurance coverage for real estate property that provides protection against loss from fire, vandalism, malicious mischief and certain natural causes.

Homeowner's Association
A group of homeowners within a particular development who form an organization for the purpose of maintaining community facilities and providing services for the common enjoyment of the residents.

Homeowner's Policy
An insurance coverage for private homes and its contents that protects against loss from fire, theft, wind damage, property damage and personal injury.

HUD
Department of Housing and Urban Development - A federal agency responsible for community planning and development, producing government housing and loans (FHA), administration, research, technology and equal opportunity in housing,

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I

Improvements
Permanent additions to real estate property that increase the value of the property.

Income Approach to Value
An appraisal technique used to estimate property value based on the income of rent that the property can earn.

Index
A measure of current interest rates used to calculate the periodic rate change on adjustable rate mortgages.

Initial Interest Rate
The interest rate paid until the date of the first rate adjustment on an adjustable rate mortgage.

Inspection Report
A report such as a home inspection report by a licensed inspector indicating the condition of a property.

Installment Debt
Debts such as automobile loans or furniture debts repaid on a monthly basis for a specific amount and term

Insured Loan
A loan that is insured by the FHA - Federal Housing Administration - or by a private mortgage insurance company.

Interest
A charge or expense for the use of borrowed money.

Interest Rate
A percentage of borrowed money that is paid to the lender.

Investment Property
Property that is not occupied by the owner, referred to as non-owner-occupied property of one to four unit property. An owner-occupied property of two to four units is viewed as both primary residence and investment property by lenders and is given special treatment

Investor
The holder of a mortgage, the lender.

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J

Joint Tenancy
Ownership by more than one person. Each person has equal rights in the property.

Judgment
A decision in the court system. Judgments can sometimes take the form of a lien on a defendant's property.

Judicial Foreclosure
A type of foreclosure that is treated as a civil lawsuit that is handled in court. See Foreclosure.

Junior Lien
A loan that is guaranteed by a mortgage that is not a first lien. See First Lien.

Junior Mortgage
See Junior lien.

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K

Nothing Listed Under "K"

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L

Land Contract
Installment Plan for purchasing a home. A buyer would look for this when he/she does not have enough money to qualify for a mortgage.

Late Charge
Penalty charged to a borrower when a regular mortgage installment is not received by the financial institution.

Lease
A legal contract between a leaser and lessee outlining the conditions of the use of the leaser's property to the lessee. This contract usually is for a stated time and includes a stated price.

Leasehold
The legal right of holding title to property as specified in a lease. The lessee has a long-term lease on the property and does not own it.

Lease with Option to Purchase
A lease in which the lessee can purchase the property. The purchase terms must be contained in the contract.

Legal Description
A legally acknowledged representation of property.

Liabilities
Things owed by one individual to another individual. Debts are examples of liabilities.

Lien
A lien refers to a mortgage loan or some other encumbrance or attachment on real estate property.

Lifetime Cap
In an adjustable rate mortgage, this is the highest percentage rate that can be applied to the loan.

Liquid Assets
Assets that can be transformed into cash at any given moment.

Lis Pen dens
A legal notice that property is pending litigation.

Listing Agreement (listing)
Agreement between a property owner and a real estate broker that allows the broker to sell the property.

Listing Presentation
Real Estate broker's proposal to put a property on the market.

Loan Approval (final)
A decision by the lender to agree to supply money to the borrower.

Loan Origination
The full process of producing a loan.

Loan Servicing
Maintaining all the records and payments of a loan.

Loan Servicing Department
The department of the financial institution that maintains all the records and payments of a loan.

Loan Submission
All the applicable paperwork needed for a loan review that is given by the borrower to the lender.

Loan-to-Value Ratio (LTV)
A ratio that is used by financial institutions representing the percentage of the amount of the loan to the lesser of the sales price or appraised value.

Locked Loan
A loan with a guaranteed rate that one will get at the time of the loan. If this is not requested, the rate at the time of application will be different from the rate at the time of approval.

Lock-in
The actual guaranteed rate referred to in Locked Loan.

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M

Maintenance and Utilities
When applying for a government loan, this is calculated as an expense which will affect whether someone qualifies or not. It refers to the money that needs to be paid for upkeep of property including the the money paid to utility companies.

Maintenance Fees
In a condominium complex, this is a payment that is paid to the association to maintain the common grounds.

Manufactured Housing
A house that is not built on site. The house is made in sections at a factory and then transported to the final location.

Margin
On an adjustable rate mortgage, the difference between the final rate that is given and the index rate that is used as a base rate.

Market Approach to Value
A method of appraisal that analyzes the sale price of comparative houses and uses that as a basis for coming up with a figure.

Marketable Title
A title with no problems associated with it such as clouds, defects, or liens.

Market Value
The value a house would have if brought to sale.

Maturity
The term used for the period it takes for a loan to close out.

Maximum Interest Rate Ceiling
In an adjustable rate loan, the most highest rate of interest that the lender can charge.

Mechanic's Lien
An action against a business brought forth by unpaid venders or workers.

Meeting of the Minds
An acceptance of the terms of a contract by the buyer and the seller.

Minimum Property Standards
In terms of FHA financing, these are conditions that properties must meet to ensure eligibility.

Modification Agreement
Any type of alteration to an original loan that is agreed upon by the borrower and lender.

Monthly Operating Income
In terms rental property, this is income received from renting the property minus the amount to maintain the property and then dividing by twelve.

Mortgage
The conditional transference of property as security for a loan.

Mortgage Banker
A company that uses its own funds to conduct real estate lending transactions.

Mortgage Broker
A person or company that brings the lender and the borrower together.

Mortgager
The lender.

Mortgage Guarantee
In the situation when a borrower defaults on a loan, this is a commitment by another party (DVA) to pay the remainder of the loan.

Mortgage Insurance
Insurance that protects a lender from damages of a lender defaulting on a loan.

Mortgage Life Insurance
A life insurance policy that pays off the remainder of a mortgage in the event that the borrower dies.

Mortgagor
The borrower.

Multiple-Listing Service (MLS)
A system that allows real estate brokers to collaborate on the sale of houses for shared commissions.

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N

Negative Amortization
A situation where the principal of a loan raises due to payments being less than interest owed.

Net Listing
A situation where the seller of a home receives a set amount of money from the sale and the real estate broker takes the rest as commission.

Net Worth
A basis of financial stability which equals total assets minus total liabilities.

Nonconforming Loan
A home loan that is more than the limitations set forth by the FNMA/FHLMC

Nonoccupant Co mortgagor
A second person on the mortgage note who is also taking title to the property and whose income, assets and debts are combined with the mortgagor's for qualifying purposes but will not occupy the property.

Non-owner-Occupied
A property that is not occupied by the owner but by tenants.

Nonresident Alien
People that work and live for a temporary period of time in the United States but are not citizens.

Note
A written document that states that one party will promise to pay a second party a specified amount of money under agreed upon terms.

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O

Operating Expenses
The cost to maintain a piece of property that is not occupied by the owner but by tenants.

Option
The right of buying or selling something at a certain rate and in a certain time.

Origination Fee
A fee charge charged by a lender when the lender receives a loan submission.

Overtime Income
Income that higher than one's standard income. Received when an individual works an excess of the standard working hours.

Owner-Occupied
A property that is occupied by the owner either as the primary or secondary residence.

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P

Payment Adjustment
This term is used with adjustable rate mortgages. It refers to any change in principal and interest payments set forth in the note.

Payment Adjustment Date
The date that the above-mentioned Payment Adjustment takes place.

Payment Cap
This term is used with adjustable rate mortgages. It refers to a limitation that is set on the amount that monthly payment can change on a payment date.

Payment Change Interval
The time between two payment adjustment dates.

Payment Shock
A term that refers to the difficulty that might arise from a large difference in monthly payments.

Pipeline
The collection of loan applications that are awaiting approval.

PITI
An abbreviation for what makes up a monthly loan payment: Principal, Interest, Taxes, and Insurance.

Plat
A detailed plan or map that includes such things as boundaries, buildings, and easements.

PMI
Private Mortgage Insurance.

Point (discount point)
A one-time fee paid by the borrower to the lender that equals one percent of the principal of the loan.

Portfolio Loan
A loan that is made by an institutions that keeps a collection of loans as assets, with no intent to sell thus allowing uncommon loan terms.

Power of Attorney
A written and signed authorization allowing someone to act as an agent of the person granting it.

Prepaid Interest
Payment of interest at the time of a closing before it is due.

Prepayment
Payment of a mortgage payment before the due date.

Prepayment Penalty
Penalty by the financial institution imposed for paying off a loan before the loan's maturity.

Prequalification
Estimate of how much someone might be able to borrow.

Primary Residence
The property that a person occupies on a primary basis.

Principal
1) The amount of debt, minus interest, left on a loan.
2) The individual that hires an agent.

Private Mortgage Insurance
Insurance that protects a lender from damages of a lender defaulting on a loan.

Processing
Getting the required information so that the lender can assess a borrower.

Procuring Cause
The things that a real estate agent does to bring about a desirable effect.

Promissory Note
A written document that states that one party will pay a specified amount to another party.

Perorations
Divided expenses between the buyer and the seller at the time of the closing.

Purchase Agreement
A written agreement, involving a sale, which is a legally binding contract between the buyer and the seller, detailing the terms of the sale.

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Q

Qualifying
The method of evaluating the risk of lending money to a borrower.

Quitclaim Deed
A document by which the signer renounces ownership rights to another party.

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R

Rate Commitment
This term is used in reference to the lock-in rate as well as the agreements on any caps and margins for adjustable rate loans.

Rate Reduction Rollover
Refinancing term that requires little documentation.

Real Estate Settlement Procedures Act (RESPA)
Requires that lenders provide borrowers with an estimate for settlement costs within three days of application. The HUD booklet on settlement costs must also be given. This act also limits the amount of money that can be held in escrow.

Real Property
Land and immovable property, as opposed to temporary personal property.

Realtist
Member of the National Association of Real Estate Brokers

Realtor @
Registered name for a member of the National Association of Realtors@.

Realtor-Associate @
Salesperson that is associated with a Realtor@.

Recasting
A modification of a loan that amortizes the balance over the remaining years of the loan.

Recording Fees
Fees that are charged when documents are recorded with public agencies.

Redlining
Denying to supply insurance or loans to certain communities.

Regulation Z
Regulation used to carry out the Truth-in-Lending Act.

Resident Alien
A person that is registered to live and work permanently in the U.S. but who is not a U.S. citizen.

Residential Mortgage Credit Report
A credit report that contains information about one's employment, residential, and income history. This report satisfies all the requirements of the associations that provide mortgages.

Residual Income
The remaining money after you subtract monthly housing expenses and monthly fixed expenses.

RESPA
See Real Estate Settlement Procedures Act

Restrictive Covenant
See Deed Restriction

Reverse Annuity Mortgage
A provision that allows an elderly homeowner to draw against the equity of a home without having to repay the loan for a specified number of years.

Reverse Mortgage
See Reverse Annuity Mortgage

Revolving Debt
A debt that allows the borrower to reuse the principal of the loan again once the principal balance has been repaid.

Rural Area
The country, as opposed to the city and surrounding areas.

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S

Salary and Wages
Term used for qualifying for a loan referring to compensation for working.

Salesperson
A person that has a license to assist a real estate broker.

Seasonal Income
Income that is received at a job that is not year-round.

Secondary Mortgage Market
A market where investors buy and sell existing mortgages which allows for a larger amount of funds for future loans.

Second Home
A non-rental property that a borrower occupies in addition to the primary residence.

Second Mortgage
This loan is secured by a mortgage and is of less precedence than a first mortgage.

Seller's Broker
An agent legally obligated to the seller.

Seller's Market
When the demand for homes is greater than the homes on the market.

Servicing
The administrative work that needs to be done including bookkeeping, accounting, tax records, etc.

Settlement
See closing

Settlement Statement (HUD-1)
A summary given to both parties at the time of closing that outlines all the costs that have been paid and that still need paying.

Shared Equity
A situation where an individual that is not occupying the property provides a portion of the down payment in return for a future portion of the appreciated property.

Shipping
Sending the loan documents to the investor.

Single-Family Residence
A house that was designed with the intent to hold one family.

Specific Performance
A legal suit that asks that a contract be carried out to the letter.

Sub agency
A situation where a seller contracts with a listing broker, thus inheriting the broker's agents and collaborating companies as agents as well.

Subordinate Financing
A loan on property that is not the primary source of funding.

Substitution of Liability
A third party's assumption of responsibility on a note secured by a mortgage.

Suburban Area
Residential area that adjoins the city.

Survey
An inspection by a surveyor that measures the land and proximity to surrounding properties.

Sweat Equity
Equity of a property that is created by the owner's own work.

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T

Tax Lien
A claim against property for taxes that are owed.

Tenancy by the Entirety
A type of ownership between a husband and wife that includes the right of survivorship.

Tenants in Common
A type of ownership not by undivided interests that does not include the right of survivorship.

Term
The time frame between when a note/mortgage starts and terminates.

Time is of the Essence
Legal phrase that refers to the timely fulfillment of duties.

Title
Property ownership rights.

Title Insurance
Protects against damages arising out of defects in the title.

Title Search
A public record search to ensure that there are no claims that will affect the title value.

Town House
A residential unit that is characterized by a common wall with at least one other unit.

Trade Equity
Equity that arises from using one's existing property as a down payment for the new property.

Trustee
A person legally invested with property rights in the interest of another.

Trustor
The person that deeds property to a trustee until the he/she fulfills all necessary duties to a lender.

Truth-in-Lending
Provides specific information about the costs associated with obtaining credit.

Two- to Four-Family Property
A residential property under one deed that is designed with units for anywhere from two families to four families.

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U

Underwriting
Analyzing whether or not a loan should be given to a borrower.

Urban Area
The city, as opposed to rural areas.

Usury
Using an interest rate higher than the law allows.

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V

Vacancy Factor
A percentage that takes under consideration loss of income due to the vacancy of rental property.

Variable Rate Mortgage
See adjustable rate mortgage.

Verification of Deposit
A form seeking confirmation of a loan applicant's money held on deposit at banking institutions.

Verification of Employment
A form seeking confirmation of a loan applicant's employment history.

Verified Funds
Funds that are confirmed by a lending institution to be available to a loan applicant.

Vested Interest
A personal interest in property.

Veterans Administration
See Department of Veterans Affairs.

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W

Warranty Deed
A deed that guarantees the conveyance of good title.

Wire Transfer
Electronically moving cash from one bank to another without physically doing so.

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X

Nothing Listed Under "X"

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Y

Yield
The income that is generated yearly on an investment.

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Z

Nothing Listed Under "Z"