RE Glossary

REAL ESTATE GLOSSARY

Acceptance:
the date when both parties, seller and buyer, have agreed to and
completed signing and/or initialing the contract.

Adjustable Rate Mortgage: a mortgage that permits the lender to adjust the mortgage’s
interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market
conditions change.

Amortized Loan:
a loan that is paid in equal installments during its term.

Appraisal:
an estimate of real estate value, usually issued to standards of FHA, VA
and FHMA. Recent comparable sales in the
neighborhood is the most important factor in determining value

Appreciation:
an increase in the value of a property due to changes in market
conditions or other causes. The opposite
of depreciation.

Assumable Mortgage:
purchaser takes ownership to real estate encumbered by an existing
mortgage and assumes responsibility as the guarantor for the unpaid balance of
the mortgage.

Bill of Sale:
document used to transfer title (ownership) of PERSONAL property.

Cloud of Title:
any condition that affects the clear title to real property.

Consideration: anything of value to induce another to enter into a contract,
i.e., money, services, a promise.

Deed:
a written instrument, which when properly executed and delivered,
conveys title to real property.

Discount Points: a loan fee charged by a lender of
FHA, VA or Conventional Loans to increase the yield on the investment. One point = 1% of the loan amount.

Easement:
the right to use the land of another.

Encumbrance:
anything that burdens (limits) the title to property, such as a lien,
easement, or restriction of any kind.

Equity: the value of real estate over and above the
liens against it. It is obtained by subtracting
the total liens from the value.

Escrow Payment:
that portion of a mortgagor’s monthly payment held in trust by the
lender to pay for taxes, hazard insurance and other items as they become due.

Fannie Mae:
nickname for
Federal National
Mortgage Corporation
(FNMA), a tax-paying corporation created by congress
to support the secondary mortgages insured by FHA or guaranteed by VA, as well
as Conventional Loans.

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.

FHA Insured Mortgage:
a mortgage under which the
Federal
Housing Administration
insures loans made, according to its regulations.

Fixed Rate Mortgage:
a loan that fixes the interest rate at a prescribed rate for the
duration of the loan.

Foreclosure:
procedure whereby property pledged as security for a debt is sold to pay
the debt in the event of default.

Freddie Mac:
nickname for
Federal Home Loan
Mortgage Corporation
(FHLMC), a federally controlled and operated
corporation to support the secondary mortgage market. It purchases and sells residential conventional
home mortgages.

Graduated Payment Mortgage:
any loan where the borrower pays a portion of the interest due each
month during the first years of the loan.
The payment increases gradually during the first few years to the amount
necessary to fully amortize the loan during its life.

Lease Purchase Agreement:
buyer makes a deposit for future purchase of a property with the right
to lease property in the interim.

Lease with Option:
a contract, which gives one the right to lease property at a certain sum
with the option to purchase at a future date.

Loan to Value Ratio (LTV): the ratio of the mortgage loan principal
(amount borrowed) to the property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage
loan principal of $80,000 the loan to value ratio is 80%.

Mortgage:
a legal document that pledges a property to the lender as security for
payment of a debt.

Mortgage Insurance Premium (MIP):
the amount paid by a mortgagor for mortgage insurance. This insurance protects the investor from
possible loss in the event of a borrower’s default on a loan.

Note:
a written
promise to pay a certain amount of money.

Origination Fee:
a fee paid to a lender for services provided when granting a loan,
usually a percentage of the face amount of the loan.

Private Mortgage Insurance (PMI):
see Mortgage Insurance Premium.

Second Mortgage/Second Deed of
Trust/Junior Mortgage/Junior Lien:
an additional loan
imposed on a property with a first mortgage.
Generally, a higher interest rate and shorter term than a “first” mortgage.

Settlement Statement (HUD-1):
a financial statement rendered to the buyer and seller at the time of
transfer of ownership, giving an account of all funds received or expended.

Severalty Ownership:
ownership by one person only.
Sole ownership.

Tenancy In Common:
ownership by two or more persons who hold an undivided interest without
right of survivorship. (In event of the
death of one owner, his/her share will pass to his/her heirs).

Title Insurance:
an insurance policy that protects the insured (buyer or lender) against
loss arising from defects in the title.