- Acceleration-The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by
using the right vested in the Due-on-Sale Clause.
- Adjustable rate mortgage (ARM) - A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.
- Agreement of
- Amortization - The gradual repayment of a mortgage loan by installments. including accrued interest on the outstanding balance.
- Amortization table - The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
- Annual percentage rate (APR) - The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
- Assumable mortgage - A mortgage loan which allows a new home buyer to take over the obligation of making loan payments with no change in the terms of the loan. Assumable loans do not have a due-on-sale clause. The lender has to be notified and agree to the assumption. The lender may require the buyer to qualify for the loan and may charge an assumption fee. The seller should obtain a written release from the lender stating clearly that he/she is no longer liable to make mortgage payments.
- Balloon mortgage - A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
- Buyers market - Market conditions that favor buyers i.e. there are more sellers than buyers in the market. As a result buyers have ample choice of properties and may negotiate lower prices. Buyers markets may be caused by an economic slump or overbuilding.
- Capital gains - Profit earned from the sale of real estate. A seller may defer taxes on the capital gain of his/her primary residence by buying a higher priced residence within 2 years.
- Capital improvement - Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
- Cash-out refinance - A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
- Closing - A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."
- Closing costs - Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors often provide estimates of closing costs to prospective homebuyers.
- Collateral - An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
- Co-maker (co-signer) - A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
- 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.
- Comparables - An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location , and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
- Compound interest - Interest paid on the original principal balance and on the accrued and unpaid interest.
- 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.
- Convertibility clause - A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.
- Net cash flow - The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.
- Owner financing - A property purchase transaction in which the property seller provides all or part of the financing influence changes in other rates, including mortgage interest rates.
- Prime rate - The interest rate that banks charge to their preferred customers. Changes in the prime rate
- Counter offer - An offer made by the lender to grant credit other than in the amount or terms requested by the application.
- Credit life insurance - A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.
- Debt-to-income ratio - The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.
- Deed - The legal document conveying title to a property.
- Deferred interest - When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization
- Deposit - A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan. See earnest money deposit.
- Due-on-sale provision - A provision 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.
- Easement - A right of way giving persons other than the owner access to or over a property.
- Effective gross income -
- Endorser - A person who signs ownership interest over to another party. Contrast with co-maker.
- Equal Credit
- 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.
- Equity sharing - Joint ownership of a property between the owner/occupant and the owner/investor, that results in tax advantages for both parties. Upon sale of the property the joint owners split profits based on the percentage they own.
- 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 deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
- Fair Credit Reporting Act - A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
- Fair market value - 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.
- 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 - Absolute ownership of real property; owner is entitled to the entire property with unconditional power of disposition during the owners life and upon his death the property descends to the owner's designated heirs.
- Finance charge - Interest charged by a lender.
- First mortgage - A mortgage that is the primary lien against a property.
- Fixed-rate mortgage (FRM) - A mortgage in which the interest rate does not change during the entire term of the loan.
- Foreclosure (Repossession) - The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt against any other claim to title of the property.
- General Warranty Deed - A deed in which the grantor (seller) agrees to protect the grantee (buyer)
- Graduated Payment Mortgage (GPM) - A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.
- Step-rate mortgage - A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.
- Subdivision - A housing development that is created by dividing a tract of land into individual lots for sale or lease.
- Subordinate financing - Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
- Grandfather clause - The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible.
- Home equity line of credit - A mortgage loan, which is usually in a subordinate position that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.
- Home inspection - A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
- Homeowner’s 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.
- Homeowner’s insurance - An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
- Housing expense ratio - The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front-end ratio.
- Housing and Urban Development (HUD) - A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet."
- Index - A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM.. This interest rate is subject to any caps that are associated with the mortgage.
- Insurance binder - A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.
- Interest rates buy down plan - An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specified period, the mortgagor's effective interest rate is "bought down" below the actual interest rate.
- Jumbo mortgage - Loans with balances higher than the Fannie Mae and Freddie Mac set limits. The current jumbo loan limit is $240,001 and above.
- Land contract - A real estate installment selling arrangement whereby the buyer may use and occupy land, but no deed is given by seller until the sales price has been paid.
- Lease with the option to purchase - A lease under which the lessee has the right to purchase the property. The option may run for a portion or for the full length of the lease.
- Lien - A legal claim against a property that must be paid off when the property is sold.
- Junior mortgage - A mortgage subordinate to another mortgage. In the case of a foreclosure a senior
- 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.
- Loan-to-value (LTV) percentage - The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage of 80 percent.
- Margin - For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.
- Mortgage - A legal document that pledges a property to the lender as security for payment of a debt.
- Warranty Deed- A deed conveying the title to a property with a warranty of a clear marketable title.
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- Wraparound mortgage - A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.
- Zoning - Areas may be zoned to specify use of a property i.e. residential, commercial, agricultural. These zoning ordinances are normally enforced by the city or the county.
- Private mortgage insurance (MI) or (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 MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
- Qualifying ratios - Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
- Quit claim deed - A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.
- Real estate agent - A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
- Real estate broker - An individual who often owns a real estate company or is in a management position, and who is licensed to represent a buyer or a seller in a real estate transaction.
- Real Estate Investment Trust (REIT) - A trust that uses investors’ money to purchase and manage real estate. Investors realize some of the tax advantages in owning real estate.
- Real Estate Settlement Procedures Act (RESPA) - consumer protection law that requires lenders to give borrowers advance notice of closing costs.
- Realtor - A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
- Refinancing - The process of paying off one loan with the proceeds from a new loan using the same property as security.
- Reverse Mortgage - A mortgage used by the elderly that provides income as long as they live in exchange. Payments made cause the loan principal to increase.
- Reverse Annuity Mortgage (RAM) - A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as collateral for and repayment of the loan.
- Rollover loan - A loan that is amortized over a long period of time (e.g. 30 yrs) but the interest rate is fixed for a short period (e.g. 5 yrs). The loan may be extended or rolled over, at the end of the shorter term, based on the terms of the loan.
- 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.
- Satisfaction of Mortgage - The document issued by the mortgagee when the mortgage loan is paid in full. Also called a "release of mortgage."
- Secondary Mortgage Market - The buying and selling of existing mortgages.
- Secured loan - A loan that is backed by collateral.
- Sweat equity - Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
- Tax escrows - Most lenders require the impounding of taxes, especially when the amount you are borrowing represents a large percentage of the value of the property. Lenders will typically require that you prepay a two month reserve of these amounts along with the amount the lender will need to pay the property tax installment when it comes due. A monthly tax payment will be collected with your regular mortgage payment. Your tax bills will be paid from this separate account.
- Tenancy at will - A license to use or occupy land and buildings at the will of the owner. The tenant may decide to leave the property at any time or must leave at the landlords will.
- Title - A legal document evidencing a person's right to or ownership of a property.
- Title company - A company that specializes in examining and insuring titles to real estate.
- 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 report - A document indicating the current state of title. The report includes information on the current ownership, outstanding deeds of trust or mortgages, liens, easements, covenants, restrictions, and any defects.
- Total debt ratio - Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.
- Triple-net lease - One in which the tenant pays all operating expense of the property. The landlord receives the net rent.
- Trust account - A separate bank account maintained by a broker or escrow company to handle all money collected for clients. A broker may not commingle these funds with his/her own funds.
- Trustee - A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.
- Underwriting - The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
- Unencumbered Property - Real estate with free and clear title.
- Unsecured loan - A loan that is not backed by collateral.
- Usury - Charging a rate of interest greater than that permitted by law.
- Variable Rate Mortgage (VRM) - see adjustable rate mortgage.
Check out these helpful links if you are needing some more information:
- Government Records
- Creative Real Estate Solutions
- The Ultimate Real Estate Solutions
- Smart Real Estate Investments
- Foreclosure Profits
Alright gang, hope this was helpful! We'll see you soon.
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