Glossary of Terms |
| Acknowledgement - a formal declaration made before an authorized official (usually a notary public) by the person who has executed (signed) a document that such execution is his/her own act and deed. In most instances documents must be acknowledged (notarized) before it can be accepted for recording. |
| Adjustable Rate Mortgage (ARM) - a mortgage with an interest rate that changes over time in line with movements in the index. |
| Adjustable Period - the length of time between interest rate changes on an ARM. For example, a loan with adjustment period of one year is called a one year ARM, which means that the interest rate changes once per year. |
| Affidavit - a sworn statement in writing made before an authorized official |
| ALTA - acronym for the American Land Title Association |
| Amortization - repayment of a loan in equial installments of principal and interst rather than interest only payments |
| Annual Percentage Rate (APR) - the total finance charges (interest, loan fees, points) expressed as a percentage of the loan amount |
| Assessments - specific and special taxes (in addition to normal taxes) imposed on real property to pay for public improvements within a specific geographic area |
| Assumption of mortgage - a buyer's agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability. |
| Attorney-in-fact - An agent authorized to act for another under a power of attorney |
| Balloon Payment - a lump sum principal payment due at the end of some mortgages or other long-term loans |
| Beneficiary - as used in a trust deed, the lender is designated as the beneficiary i.e., obtains the benefit of the security. One of three parties to promissary note financing of real property. Also know as the lender. |
| Binder - sometimes known as an offer to purchase or an earnest money request. A binder is the acknowledgement of a deposit along with a brief written agreement to enter into a contract for the sale of real estate. |
| Cap - the limit on how much an interest rate or monthly payment can change either at each adjustment or over the life of the mortgage. |
| CC&Rs - Covenants, Conditions and Restrictions. A document that controls the use, requirements and restrictions of a property. |
| Certificate of Reasonable Value (CRV) - a document that establishes the maximum value and loan amount for a VA guaranteed mortgage. |
| Conventional Loan - a mortgage loan which is not insured or guaranted by a governmental agency. |
| Closing Statement - the financial disclosure statement that accounts for all of the funds received and accepted at the closing including deposits for taxes, hazard insurance and mortgage insurance. |
| Condominium - a form of real estate ownership; the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, doors and ceilings) serve as its boundaries. |
| Contingency - condition(s) that must be satisfied before a contract is binding. For instance a sales agreement may be contingent upon the buyer obtaining financing. |
| Conversion Clause - a provision in some ARMs that enables you to change an ARM to a fixed rate loan usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra. |
| Cooperative - a form of multiple ownership, in which a corporation or business trust entity holds title to property and grants occupancy rights to shareholders by means of proprietary leases or similar agreements. |
| CRB - Certified Residential Broker - To be certified, a broker must be a member of the Natrional Association of Realtors and have five years experience as a licensed broker and have completed five required Residential Division courses. |
| Deed - a written instrument by which the ownership of land is transferred from one person to another. |
| Deed of Trust - written instrument by which title to land is transferred to a trustee as security for a debt or other obligation. Also called a trust deed. Used in place of mortgages in many states. |
| Deposit Receipt - used when accepting earnest money to bind an offer for property by a prospective purchaser, also includes terms of contract. |
| Due-On-Sale Clause - an acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership. |
| Earnest Money - the portion of the down payment delivered to the seller or escrow agent by the purchaser with written offer as evidence of good faith. |
| Easement - gives one party the right to go onto another party's property. Utilities often get easements that allow them to run pipes or phone lines beneath private property. |
| Escrow - a procedure in which a third party acts as a stakeholder for both the buyer and the seller carrying out other parties' instructions and assuming responsibility for handling all of the paperwork and distribution of funds. |
| FHA Loan - Federal Housing Administration - a federal agency, created by the National Housing Act of 1934 for the purpose of expanding and strengthening home ownership by making private mortgage financing possible on a long-term low-down payment basis. The vehicle is a mortgage insurance program with premiums paid by the homeowner to protect lenders against loss on these higher risk loans. Since 1965 FHA has been a part of the Department of Hosing and Urban Development (HUD). |
| Federal National Mortgage Association (FNMA) - aka Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA as well as conventional home mortgages. |
| Fee Simple - an estate in which the owner has unrestricted power to dispose of the property as he wishes including leaving by will or inheritance. It is the greatest interest a person can have in real estate. |
| Finance Charge - the total cost a borrower must pay directly or indirectly to obtain credit according to regulation Z. |
| Foreclosure - the processs a lender uses to complete a sale, at public acution, of real property secured by a loan the borrower fails to repay as agreeded. |
| Graduated Mortgage Payment -(GPM) a residential mortgage with monthly payments that start at a low level and increase at a predetermined rate. |
| Grant - a transfer of real property. |
| Grantee - the person to whom the grant is made |
| Grantor - the person who makes a grant |
| GRI - Graduate Realtors Institute - a professional designation granted to a member of the National Association of Realtors who has successfully completed three courses covering law, finance and principles of real estate. |
| Home Inspection Report - a qualified inspector's report on a property's overall condition. The report usually includes an evaluation of both the structure and mechanical systems. |
| Home Warranty Plan - protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances. |
| Impound Account - funds retained by a lender to cover such items as taxes and hazard insurance premiums. |
| Index - a measure of interest rate changes used to determine changes in an ARM's interest rate over the term of the loan. |
| Joint Tenancy - an equal undivided ownership of property by two or more persons. Upon the death of any owner the survivors take the deceased's interest in the property. |
| Lien - a legal hold or claim on property as security for a debt or charge. |
| Loan Committment - a written promise to make a loan for a specified amount on specified terms. |
| Loan-to-Value Ratio - the relationship between the amount of the mortgage and the appraised value of the property expressed as a percentage of the appraised value. |
| Margin - the number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment |
| Mortgage Banker - a company or individual engaged in the business of originating mortgage loans with its own funds. Selling those loans to long-term investors and servicing the loans for the investor until they are paid in full. |
| Mortgage Life Insurance - a type of term life insurance often bought by mortgagors. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force the debt is automatically covered by insured proceeds. |
| Negative Amortization - occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid balance, which means that after several payments you could owe more than you did at the beginning of the loan. Can also occur when an ARM has a payment cap that results in monthly payments that are not high enough to cover the interest. |
| Notice of Default - a document filed in the county of where a property is located that ofically starts the foreclosure process. |
| Notice of Trustee Sale - a document filed that sets the date for a public auction of real property. |
| Origination Fee - a fee or charge for work involved in evaluating, preparing and submitting a proposed mortgage loan. The fee is limited to 1 percent for FHA and VA loans. |
| Personal Property - moveable property; all property which is not real property. Property consisting of chattels as contracted to real estate i.e., furniture, car, clothing. |
| PITI - principal, interest, taxes and insurance |
| Planned Unit Development (PUD) - a zoning designation for property developed at the same or slightly greater overall density than conventional development sometimes with improvements clustered between open common areas. Uses may be residential, commercial or industrial. |
| Point - an amount equal to 1 percent of the principal amount of the investment or note (loan amount). The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments. |
| Prepayment Penalty - a fee charged to a mortgagor who pays a loan before it is due. Not allowed on FHA or VA loans. |
| Private Mortgage Insurance (PMI) - insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage. |
| Purchase Agreement - a written document in which the purchaser agrees to buy certain real estate and seller agrees to sell certain real estate under stated terms and conditions. Also called a sales contract, earnest money contract or agreement for sale. |
| Real Property - land and buildings as opposed to personal property or chattels |
| Realtor - a real estate broker or associate acting in a local real estate board affiliated with the National Association of Realtors. |
| Recordation - filing for record in the office of the county recorder |
| Regulation Z - a set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act. |
| Tenancy in Common - a type of joint ownership of property by two or more persons with no right of survivorship. |
| Trustee - netural third party to a to promissary note financing for real property. The other two parties are the Trustor and Beneficiary. |
| Trustor - one of three parties to promissary note financing of real property. Also know as the borrower and/or owner of the property. |
| Title - evidence of a person's right or the extent of his interest in property. |
| Title Insurance Policy - a policy that protects the purchaser, mortgagee or other party against losses. |
| VA Loan - a loan that is partially guaranteed by the Veteran's Administration and made by a private lender. |
| Veterans Administration - an independent agency of the federal government created by the Service men's readjustment Act of 1944 to administer a variety of benefit programs designated to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the Home Loan Guaranty Program designated to encourage mortgage lenders to offer long-term low down payment financing to eligible veterans by guaranteeing the lender against loss on these higher risk loans. |