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Real Estate Glossary

Browse the list alphabetically for a specific term. The topical list groups terms by steps in the home buying process.

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"No glossary matches that begin with the letter Y."

Mortgage Glossary

Abstract (Of Title)

A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.
Acceleration ClauseCondition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
AcceptanceAn offeree’s consent to enter into a contract and be bound by the terms of the offer.
Additional principal payment A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
Adjustable Mortgage LoanAny mortgage that does not have a fixed interest rate and a fixed payment for the term of the loan, or does not amortize to zero at the end of the set term, when required payments are made on time.
Adjustable Rate MortgageA mortgage in which the interest rate is adjusted periodically according to the movement in a pre-selected index.
Adjusted basisThe original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken
Adjustment dateThe date on which the interest rate changes for an adjustable-rate mortgage (ARM).
Adjustment IntervalFor an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.
Adjustment periodThe period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
AdministratorA person appointed by a probate court to administer the estate of a person who died intestate.
Agreement of SaleKnown by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
AmenityA feature of real property that enhances its attractiveness and increases the occupant’s or user’s satisfaction although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.
AmortizationA payment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal.
Amortization scheduleA timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
Amortization termThe amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months.
AmortizeReduce a debt by regular payments of both principal and interest.
Amortization Schedule A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance.
Annual Percentage Rate (APR) The total yearly cost of a mortgage stated as a percentage of the loan amount: includes the base interest rate, primary mortgage insurance, and loan origination fee (points)
AnnuityAn amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.
ApplicationA form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.
Application FeeThe fee charged by the lender to the borrower for applying for a loan.
Appraised value An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
AppraiserA person qualified by education, training, and experience to estimate the value of real property and personal property.
Appraisal A professional opinion of the market value of a property.
Appreciation An increase in the value of a house due to changes in market conditions or other causes.
Assessed Value The valuation placed upon property by a public tax assessor for purposes of taxation.
AssessmentThe process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
Assessor A public official who establishes the value of a property for taxation purposes.
Asset Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
AssignmentThe transfer of a mortgage from one person to another.
Assumable LoanThese loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.
Assumption clauseA provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
Assumption feeThe fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Assumption of MortgageAn obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required.
Attorney-in-factOne who holds a power of attorney from another to execute documents on behalf of the grantor of the power. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage. Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

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Balance sheetA financial statement that shows assets, liabilities, and net worth as of a specific date.BankruptA 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.BankruptcyA proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.Before-tax incomeIncome before taxes are deducted.BeneficiaryThe person designated to receive the income from a trust, estate, or a deed of trust.Bill of saleA written document that transfers title to personal property.Binder or "Offer to Purchase"A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded. Broker (See Real Estate Broker)Blanket insurance policyA single policy that covers more than one piece of property (or more than one person).BondAn interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.Borrower One who receives funds with the expressed or implied intention of repaying the loan in full.Bridge loanA form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.Broker An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.Building codeLocal regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.Building Line or SetbackDistances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.Buy down Money advanced by an individual (seller, builder, etc.) to reduce monthly payments for a home mortgage either during the entire term or for an initial period of years.

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Call optionA provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.Capital expenditureThe cost of an improvement made to extend the useful life of a property or to add to its value.Capital improvementAny structure or component erected as a permanent improvement to real property that adds to its value and useful life.CapA provision of an ARM limiting how much the interest rate or mortgage payments may increase.Cash OutA loan transaction in which the borrower receives funds at the time of closing.Cash-out refinanceA 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.Certificate of depositA document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period. Certificate of Eligibility A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage. Certificate of Reasonable Value (CRV) A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.Certificate of TitleA certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property, which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title, which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.Chain of titleThe history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.Change frequencyThe frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).ChattelAnother name for personal property.ClaimAn amount requested of an insurer, by a policyholder or a claimant, for an insured loss.Clear titleA title that is free of liens or legal questions as to ownership of the propertyClosingThe occasion where a sale is finalized; the buyer signs the mortgage, and closing costs are paid. Also called "settlement."Closing CostsExpenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."Closing cost itemA fee or amount that a homebuyer must pay at closing for a single service, tax, or product.Closing Day  The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.Cloud (On Title)An outstanding claim or encumbrance, which adversely affects the marketability of title.Co-BorrowerAn additional borrower on a loan. A co-borrower's obligation on a loan are the same as all other borrowers.CoinsuranceA sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.Coinsurance clauseA provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.CollateralAn 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.CollectionThe efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.Co-makerA 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.CommissionMoney paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale.Commitment LetterA formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.Common area assessmentsLevies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.Common areasThose 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 lawAn unwritten body of law based on general custom in England and used to an extent in the United States.Community propertyIn some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.ComparablesA abbreviation for comparable properties used for comparative purposes in the appraisal process; facilities of reasonably the same size and location with similar amenities; properties which have been recently sold, which have characteristics similar to property under consideration, thereby indicating the approximate fair market value of the subject property.Compound interestInterest paid on the original principal balance and on the accrued and unpaid interest.CondemnationThe taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.CondominiumIndividual ownership of a dwelling unit and an individual interest in the common areas and facilities, which serve the multi-unit project.Condominium conversionChanging the ownership of an existing building (usually a rental project) to the condominium form of ownership.Condominium hotelA 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.Construction LoanA short-term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.Consumer reporting agency (or bureau)An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.ContingencyA condition that must be met before a contract is legally binding.ContractAn oral or written agreement to do or not to do a certain thing.ContractorIn the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.Conventional MortgageAny mortgage that is not insured or guaranteed by the federal government.Convertibility clauseA provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified time.Convertible ArmAn adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.CoverageThe amount of protection, usually expressed in a percentage of the total claim amount, an insured receives under a certificate.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.Cooperative CorporationA business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.Cooperative HousingAn apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation, which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.Cooperative mortgagesMortgages related to a cooperative project.Cooperative projectA residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.Corporate relocationArrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.Cost of funds index (COFI)An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.CovenantA clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.CommitmentA written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.Credit historyA record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.Credit life insuranceA 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.CreditorA person to whom money is owed.Credit ReportA 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 repositoryAn organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.CureA loan that is removed from a delinquency status with no loss to the insurer.

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Deed-in-lieu

A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."Deed of TrustLike a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.DefaultFailure to make mortgage payments on a timely basis or to comply with other conditions of a mortgage.Deficiency JudgmentA court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan. Deficiency judgments are not allowed in all states.Delinquency A loan in which a payment is overdue but not yet in default.DepositA 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.DepreciationA decline in the value of property; the opposite of "appreciation."Discount PointsSee Points.Documentary StampsA State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.Dower  The rights of a widow in the property of her husband at his death.Down PaymentThe part of the purchase price, which the buyer pays in cash and does not finance with a mortgageDue-on-sale provisionA 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.Due-on-transfer provisionThis terminology is usually used for second mortgages.

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Earnest MoneyThe deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.Easement RightsA right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.Effective ageAn 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. Effective gross incomeNormal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.Eminent domainThe 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.Employer-assisted housingA special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.EncroachmentAn obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.EncumbranceA legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.EndorserA person who signs ownership interest over to another party. Contrast with co-maker.Equal Credit Opportunity Act (ECOA)A federal law 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.EquityThe difference between the market value of a property and the homeowner's outstanding mortgage balance.Equity LoanA loan based on the borrower's equity in his or her home. Prior to closing; also, an account held by the lender into which a homeowner pays money for taxes and insurance.Escrow account

The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.Escrow analysis. The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow collections

Funds collected by the servicer and set aside in an escrow account to pay the borrower’s property taxes, mortgage insurance, and hazard insurance. Escrow disbursements. The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow payment

The portion of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items 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.

EvictionThe lawful expulsion of an occupant from real property.Examination of titleThe report on the title of a property from the public records or an abstract of the title.Exclusive listingA written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner’s right to sell the property alone without the payment of a commission. ExecutorA person named in a will to administer an estate

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Fair Credit Reporting ActA 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.FDIC(Federal Deposit Insurance Corporation). Provides insurance of accounts for institutions whose deposits were formerly covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).Fee simpleThe greatest possible interest a person can have in real estate.Fee simple estateAn 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(Federal Housing Administration). A division of the Department of Housing and Urban Development. The FHA's main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA neither lends money, nor plans, nor constructs housing.FHA LoanGovernment loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).FHFB(Federal Housing Finance Board). It oversees the credit functions of the twelve regional Federal Home Loan Banks.FHLBB(Federal Home Loan Bank Board). A regulatory and supervisory agency for federally charted savings institutions, which oversees the operations of the FSLIC and FHLMC. This agency was abolished by the Financial Institutions Reform, Recovery and Enforcement Act of 1989. (See FIRREA.)FHLMC(Federal Home Loan Mortgage Corporation, Freddie Mac). A private corporation authorized by Congress, which became an independent, stockholder-owned government corporation with the passage of FIRREA. FHLMC promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secondary market and selling securities backed by those mortgages in the capital market.Finance ChargeThe total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.Finder's feeA fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.FIRE(Financial Institutions Reform, Recovery and Enforcement Act of 1989). An act signed into law in August 1989, by President Bush that restructured the thrift regulatory an insurance system.Firm commitmentA lender’s agreement to make a loan to a specific borrower on a specific property. First MortgageThe mortgage that has first claim in the event of default.Fixed installmentThe monthly payment due on a mortgage loan.Fixed-Rate Mortgage(FRM) A mortgage in which the interest rate does not change during the entire term of the loan.FNMA(Federal National Mortgage Association, Fannie Mae). A government-sponsored corporation, owned solely by private investors, created to provide support to the secondary market for FHA and VA mortgages and conventional mortgages.FixturePersonal property that becomes real property when attached in a permanent manner to real estate.Flood insuranceInsurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.ForfeitureThe loss of money, property, rights, or privileges due to a breach of legal obligation.ForeclosureThe process by which a mortgage property may be sold when a mortgage is in default.Fully amortized ARMAn adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.Full RecastingSetting the P&I payments to the level that will fully amortize the loan's outstanding balance over the remaining term using the fully indexed accrual rate at the recasting point.Fully Indexed Accrual RateThe interest (accrual) rate resulting from the index at closing (or at another point in the loan) plus the lender's full spread, rounded as prescribed in the loan documents (often to the nearest 1/8th of 1%).

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General Warranty DeedA deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.Good Faith EstimateAn estimate of charges, which a borrower is likely to incur in connection with a loan closing.Graduated Payment Mortgage(GPM) A mortgage where the payments are scheduled to increase, usually annually, for a set number of years, and then level off. GPM can be used with either a fixed or adjustable interest rate, and usually has a 30-year term.GranteeThat party in the deed who is the buyer or recipient.GrantorThat party in the deed who is the seller or giver.Gross Monthly IncomeThe total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.Growing Equity Mortgage(GEM) A fixed rate, graduated payment mortgage with small initial payments that increase each year so that the loan pays off in a shortened term, usually 15 years.

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Hazard InsuranceInsurance to protect the homeowner and the lender against physical damage to a property from fire, wind, vandalism, or other hazards.Homeowner's InsuranceAn insurance policy that combines liability coverage and hazard insurance.Homeowner's WarrantyA type of insurance that covers repairs to specified parts of a house for a specific period of time.Housing RatioThe ratio of the monthly housing payment to total gross monthly income. Also called Payment-to-Income Ratio or Front-End Ratio.HUD(Department of Housing and Urban Development). A cabinet department responsible for the implementation and administration of government housing and urban development programs.

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Income propertyReal estate developed or improved to produce income.Index(Also called "Rate Index"). A regularly published rate, independent of the lending institution, that measures the prevailing cost of funds, and is used periodically with the margin to set AML accrual rates.Initial Borrower Interest RateThe rate on which the borrower's first payment is calculated.Initial Borrower Payment RateThe annual interest rate used to calculate the borrower's initial cash payment.InflationAn increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.Initial interest rateThe original interest rate of the mortgage at the time of closing.InstallmentThe regular periodic payment that a borrower agrees to make to a lender.Installment loanBorrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.Insurable titleA property title that a title insurance company agrees to insure against defects and disputes.InsuranceA contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.Insurance binderA 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.Insured mortgageA mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amountInterestThe fee charged for borrowing money.Interest accrual rateThe percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.Interest RateThe percentage of an amount of money, which is paid for its use for a specified time.Interest Rate CapA provision of an ARM limiting how much interest rates may increase per adjustment period.Interest rate ceilingFor an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.Interest rate floorFor an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.Investment propertyA property that is not occupied by the owner.IRA (Individual Retirement Account)A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.

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Joint tenancyA form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.JudgmentA 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.Judgment lienA lien on the property of a debtor resulting from the decree of a court.Judicial foreclosureA type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.Jumbo LoansJumbo, or non-conforming, is a term used to describe a loan that does not conform to Fannie Mae or Freddie Mac guidelines. The typical Jumbo loan exceeds the maximum loan amounts described above.

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Late chargeThe penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.LeaseA written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.Leasehold estateA 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.Legal descriptionA property description, recognized by law that is sufficient to locate and identify the property without oral testimony.LenderAn institution that makes loans to borrowers on real estate.LiabilitiesA person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.Liability insuranceInsurance 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.LienA legal claim against a property that must be paid when the property is sold.Lifetime CapA provision of an ARM that limits the total increase in interest rates over the life of the loan.Lifetime payment capFor an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.Line of creditAn 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 assetA cash asset or an asset that is easily converted into cash.LoanA sum of borrowed money (principal) that is generally repaid with interest.Loan CommitmentFormal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.Loan originationThe process by which a mortgage lender brings into existence a mortgage secured by real property.Loan ServicingThe collection of mortgage payments from borrowers and related responsibilities of a loan servicer.Loan -To-Value(LTV). The loan-to-value ratio (LTV) is the original loan amount divided by the lower of the sales price or the appraised value.LockThe period, expressed in days, during which a lender will guarantee a rate.Lock-in periodThe time period during which the lender has guaranteed an interest rate to a borrower.

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Marketable TitleA title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.Master associationA homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.MaturityThe date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.Merged credit reportA credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your credit.ModificationMargin(Also called "Spread"). The amount the lender adds to the index to determine the Fully Indexed Accrual Rate.Money market accountA savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.Money market fundA mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.Monthly Housing ExpenseTotal principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.Monthly payment mortgageA mortgage that requires payments to reduce the debt once a month.MortgageA legal document that pledges a property to the lender as security for a payment of a debt.Mortgage BankerA company that originates mortgages exclusively for resale in the secondary market.Mortgage BrokerA company that for a fee matches borrowers with lenders.Mortgage Insurance Premium(MIP). The fee paid to FHA or a private insurer for mortgage insurance.MortgageeThe lender in a mortgage agreement.Mortgage CommitmentA written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.Mortgage Insurance PremiumThe payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.Mortgage life insuranceA type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.Mortgage NoteA written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.MortgagorThe borrower in a mortgage agreement.Multidwelling unitsProperties that provide separate housing units for more than one family, although they secure only a single mortgage.Multifamily mortgageA residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.

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Negative Amortization(Also called "Deferred Interest"). If the payments are too small to cover the interest due on a loan, the remaining interest owed is added to the outstanding loan balance, causing negative amortization.Net cash flowThe 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.Net Effective IncomeGross income less federal income tax.Negative amortizationA gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortizationNet WorthThe value of all assets, including cash, less total liabilities.No cash-out refinanceA refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).Non-liquid assetAn asset that cannot easily be converted into cash.NoteA legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.Note rateThe interest rate stated on a mortgage note.Notice of DefaultA formal written notice to a borrower that a default has occurred and that legal action may be taken.

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Original principal balanceThe total amount of principal owed on a mortgage before any payments are made.Origination FeeA fee paid to a lender for processing a loan Application.OTC(The Office of Thrift Supervision). Charters federal thrifts, serves as the primary federal examiner and regulator of federal and state-chartered savings associations, and administers laws governing savings and loan holding companies.Owner financingA property purchase transaction in which the property seller provides all or part of the financing.Owner Occupied"Owner Occupied" means the property is the owner's primary residence.

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Payment Adjustment PeriodThe length of time (typically a year) between changes to the AML borrower's P&I payment.Payment Buy downPayment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.Payment CapA limit on the amount the payment can be changed at the end of each Payment Adjustment Period.Payment DiscountIn a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers.Periodic payment capA limit on the amount that payments can increase or decrease during any one-adjustment period.Periodic rate capA 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 propertyAny property that is not real property.PITIPrincipal, Interest, Taxes and Insurance are components of a mortgage payment.PlatA map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.PointsA one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.Power of attorneyA 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. PrepaymentPayment of mortgage loan, or part of it, before due date.Pre-qualificationThe process of determining how much money a prospective homebuyer will be eligible to borrow before application.Prime rateThe interest rates that banks charge to their preferred customers.PrincipalThe amount borrowed or remaining unpaid, also, that part of the monthly payment that reduces the outstanding balance of a mortgage.Private Mortgage InsuranceInsurance provided by nongovernmental insurers that protect lenders against loss if a borrower defaults.Promissory noteA written promise to repay a specified amount over a specified period of time.Public auctionA 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.Purchase AgreementSee Agreement of Sale.Purchase money transactionThe acquisition of property through the payment of money or its equivalent.

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Qualifying RatiosGuidelines applied by lenders to determine how large a loan to grant a homebuyer.Quitclaim DeedA 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. (See Deed.)

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RadonA radioactive gas found in some homes that in sufficient concentrations could cause health problems.Rate Caps(Also called "Interest Rate Caps"). A limit on the amount of which the interest rate charged to the borrower can be changed.Rate lockA commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.Real Estate BrokerA middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.Real Estate Owned(REO). A term frequently used by lending institution as applied to ownership of real property acquired for investment or as a result of foreclosure.RESPA(Real Estate Settlement Procedures Act). A Federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.Real property  Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.REALTORA 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.RecissionThe cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent.RecorderThe public official who keeps records of transactions that affects real property in the area.RecordingThe 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. RefinancingThe process of the same mortgagor paying off one loan with the proceeds from another loan.Rehabilitation mortgageA mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.Remaining balanceThe amount of principal that has not yet been repaid.Remaining termThe original amortization term minus the number of payments that have been applied.Repayment planAn arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."Replacement reserve fundA 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.Restrictive CovenantsPrivate restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)Revolving liabilityA 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 refusalA 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 egressThe right to enter or leave designated premises.Right of survivorshipIn joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.RTC(Resolution Trust Corporation). Formed to resolve thrift failures over the next three years and dispose of their assets and liabilities.

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Sales AgreementSee Agreement of sale.Second MortgageA mortgage that has rights that are subordinate to the rights of the first mortgage holders.Secondary Mortgage MarketThe buying and selling of existing mortgages.Seller-Provided Funds(Also called "Seller Contributions"). Seller-provided funds include all transaction cost paid by the seller except the real estate agent's (or brokers) fee.ServicerThe party who has entered into an agreement with the insured to service a loan.Settlement CostsSee Closing Costs.Single PremiumA premium, which provides coverage for more than a year. empty)Special Assessments  A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, streetlights, etc.Special LienA lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a