Listed in Alphabetical Order
| Term | Definition | ||
| 1031 Exchange | The exchange of certain types of business/investment property with the ability to defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due. | ||
| 401k/403b | An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations. | ||
| 401k/403b Loan | Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans. | ||
| A | |||
| Abandonment | The voluntary relinquishment of rights of ownership or another interest(such as easement) by faliure to use the property, coupled with an intent to abandon (give up the interest). | ||
| Abatement | A reduction of decrease. Usually applies to a decrease of assessed valuation of ad valorem taxes after the assessment, and levy | ||
| Abstract | A summary. | ||
| Abstract of Judgement | A summary of money judgement obtained in court. (When this summary or abstract is recorded in the county recorder’s office, in some states the judgement becomes a lien on the debtor’s property, both presently owned or after-acquired.) | ||
| Abstract of Title | A summary prepared by a licensed abstractor of all documents recorded in the public records of the political subdivision where the land is located. An abstract in some states or areas is reviewed by an attorney or other experienced title examiner to determine the status of title. Virtually every abstractor today provides actual copies of the records rather than an abstract of each document. | ||
| Acceleration Clause | Clause in a deed of trust or mortgage, which “accelerates,” or hastens, the time when the indebtedness becomes due. For example, some deeds of trust contain a provision(an acceleration clause) stating that the note shall become due immediately upon the sale of the land or upon faliure to pay interest or an installment of principal and interest. A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender. | ||
| Accomodation Recording | Recording of instruments with the county recorder by a title company merely as a convenience to a customer and without assumption of responsibility for correctness or validity-Policy. | ||
| Acknowledgement | A formal declaration before a duly authorized officer (such as a notary public) by a person who has executed an instrument that such execution is his own act and deed. An acknowledgment is necessary to entitle an instrument (with certain specific exceptions) to be recorded, to impart constructive notice of its contents and to entitle the instrument to be used as evidence without further proof. The certificate of acknowledgment is attached to the instrument or incorporated therein. | ||
| Adjustable Mortgage Loans | Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARM’S), Flexible Rate Loans, Variable Rate Loans. (See also: Indexing, Rate Index). | ||
| Adjustable Rate Mortgage (ARM) | A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes. | ||
| Adjustment Date | The date the interest rate changes on an adjustable-rate mortgage. | ||
| Administrator | A person appointed by the probate court to carry out the administration of a decedent’s estate when the decedent has left no will. If a woman is appointed, she is called an administratrix. | ||
| Adverse Possession | A process of acquiring title to real property by possession for a certain (statutory) period of time, in addition to fulfilling other conditions. | ||
| Affidavit | A written statement or declaration, sworn to before an officer who has authority to administer an oath. | ||
| Agent | One who has authorization, either expressed or implied, to act for or represent another party, usually in business matters, such as issuing title insurance policies on behalf of a title insurer for a portion of the premium. | ||
| Agreement of Sale | A written contract entered into between the seller (vendor) and buyer (vendee) for sale of real property (land) on an installment or deferred payment plan. It is also known as an agreement to convey, a long form Security Agreement or a real estate installment contract. | ||
| All-Inclusive Rate | Rate which includes charges for title insurance, searching or abstract fees and examination fees. | ||
| ALTA | (American Land Title Association) Organization composed of title insurance firms which sets standards for the industry, including title insurance policy forms used on a national basis. | ||
| Amendment | A change either to alter, add to, or correct part of an agreement without changing the principal idea or essence. | ||
| Amortization | The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time. | ||
| Amortization Schedule | A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero. | ||
| Amortized Loan | A loan that is paid off, both interest and principal, by regular payments that are equal or nearly equal. | ||
| Annual Percentage Rate (APR) | The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes. This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual note rate on your loan. | ||
| Application | The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more. | ||
| Appraisal | A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby. An estimate of value of property resulting from analysis of facts about the property; an opinion of value. | ||
| Appraised Value | An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price. | ||
| Appraiser | An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent. | ||
| Appreciation | The increase in the value of a property due to changes in market conditions, inflation, or other causes. | ||
| Approved Attorney | An attorney whose opinion is acceptable to a title company as the basis for issuance of a title insurance policy by the insurer. The insurer, rather than the attorney, executes the policy. | ||
| Assessed Value | The valuation placed on property by a public tax assessor for purposes of taxation. | ||
| Assessment | The placing of a value on property for the purpose of taxation. | ||
| Assessor | A public official who establishes the value of a property for taxation purposes. | ||
| Asset | Items of value owned by an individual. Assets that can be quickly converted into cash are considered “liquid assets.” These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others. | ||
| Assignment | When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment. | ||
| Assumable Mortgage | A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must “qualify” in order to assume the loan. | ||
| Assumption | The act of conveying real property; taking title to a property with the Buyer assuming liability for paying an existing note secured by a deed of trust against the property. | ||
| B | |||
| Back Title Letter or Certificate | See Starter. | ||
| Balloon Mortgage | A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid. | ||
| Balloon Payment | The final lump sum payment that is due at the termination of a balloon mortgage. | ||
| Bankruptcy | By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a “Chapter 7 No Asset” bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an “A” paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt. | ||
| Beneficiary | See Deed of Trust. | ||
| Bill of Sale | A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds. | ||
| Bi-Weekly Mortgage | A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender. | ||
| Blanket or Trust Deed | A mortgage or trust deed that covers more than one lot or parcel of real property, and often an entire subdivision. As individual lots are sold, a partial reconveyance from the blanket mortgage is ordinarily obtained. | ||
| Bona Fide Purchaser | One who buys property in good faith, for fair value, and without notice of any adverse claim or right of third parties. | ||
| Bond Market | Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well. | ||
| Branch | A subordinate or division office of First American Title Insurance Company, as opposed to an affiliate, agent, subsidiary or underwritten firm associated with the Company. | ||
| Breach of Contract | Failure to perform a contract, in whole or part, without legal excuse. | ||
| Bridge Loan | Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property. | ||
| Broker | Broker has several meanings in different situations. Most Realtors are “agents” who work under a “broker.” Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. (See the Home Loan Library that discusses the different types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so. | ||
| Building Contract | An agreement between an owner or lessee and a building contractor, setting forth terms relative to the construction of a proposed structure. | ||
| Buydown | Usually refers to a fixed rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A “lender funded buydown” is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to “qualify” at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now. | ||
| C | |||
| Call Option | Similar to the acceleration clause. | ||
| Capitalization Rate | Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as “caps.” Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap. | ||
| Cash-Out Refinance | When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a “cash out refinance.” (top) | ||
| Certificate of Deposit | A time deposit held in a bank which pays a certain amount of interest to the depositor. (top) | ||
| Certificate of Deposit Index | One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit. (top) | ||
| Certificate of Eligibility | A document issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan.(top) | ||
| Certificate of Reasonable Value (CRV) | Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV. | ||
| Certificate of Title | In areas where attorneys examine abstracts or chains of title, a written opinion, executed by the examining attorney, stating that title is vested as stated in the abstract. | ||
| Chain of Title | An analysis of the transfers of title to a piece of property over the years. | ||
| Clear Title | A title that is free of liens or legal questions as to ownership of the property. | ||
| Close of Escrow | The date the documents are recorded and title passes from Seller to Buyer. On this date, the Buyer becomes the legal owner, and title insurance becomes effective. | ||
| Closing | This has different meanings in different states. In some states a real estate transaction is not consider “closed” until the documents record at the local recorders office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands. The final procedure in the real estate sales process, where the sale and pertinent loan are completed by the execution of documents for recording. In some areas, this procedure is known as the closing of escrow. | ||
| Closing Costs | Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application. | ||
| Closing Statement | See Settlement Statement. | ||
| Cloud on Title | Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action. An irregularity, possible claim, or encumbrance which, if valid, would adversely affect or impair the title. | ||
| Co-Borrower | An additional individual who is both obligated on the loan and is on title to the property. | ||
| Coinsurance | Ordinary coinsurance is defined as a transaction under which each of two or more insurers assumes a designated portion of the liability for the total risk and is liable for only such portion of any loss beginning at the first dollar of loss. (See Reinsurance.) | ||
| Collarteral | In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust. | ||
| Collateral | By or at the side, additional or auxiliary. Mistakenly used to mean collateral security. | ||
| Collateral Security | Most commonly used to mean some security in addition to the personal obligation of the borrower. | ||
| Collection | When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to “collection.” As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property. | ||
| Commission | Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others.(top) | ||
| Commitment | A binding contract with a title company to issue a specific title policy, showing only those exceptions contained in the commitment and any intervening matters after the date of the commitment and prior to the effective date of the policy. The commitment contains all information included in the preliminary title report, plus a list of the title company’s requirements to insure the transaction. It also includes the standard exceptions from coverage that will appear in the policy. | ||
| Common Area Assessments | In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas. (top) | ||
| 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. | ||
| Common Law | An unwritten body of law based on general custom in England and used to an extent in some states. | ||
| Community Driveway | A driveway which is jointly owned, used and maintained by two or more persons. Usually, a portion of each owner’s property is burdened by the driveway. | ||
| Community Property | In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area. Property acquired by husband, wife or both during marriage which gives each spouse an interest in the property whether each appears in title or not. | ||
| Comparable Sales | Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.” | ||
| Comparable Sales | Sales that have similar characteristics as the subject property, used for analysis in the appraisal. Commonly called “comps.” | ||
| Condemnation | The taking of private property by the government for public use – as for a street or a storm drain – upon making just compensation to the owner. This right or power of government to take property for a necessary public use is called “eminent domain.” | ||
| Condominium | A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership. | ||
| Condominium Conversion | Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership. | ||
| Condominium Hotel | A 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. These are often found in resort areas like Hawaii. | ||
| Conservator | A person appointed by the court to care for the person and/or property of an incompetent adult or an adult unable to care for their person or property because of health. | ||
| Construcive Notice | Notice imparted by the public records of the county when documents entitled to recording are recorded. | ||
| Construction Loan | A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses. | ||
| 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. | ||
| Contract | An oral or written agreement to do or not to do a certain thing. | ||
| Conventional Mortgage | Refers to home loans other than government loans (VA and FHA). | ||
| Convertible ARM | An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time. | ||
| Conveyance | An instrument in writing, such as a deed or trust deed, used to transfer (convey) title to property from one person to another. | ||
| Cooperative (co-op) | Corporation | An entity authorized by law and established by a group of people, the stockholders, which is endowed with certain rights, privileges and duties similar to an individual. | |
| Cost of Funds Index (COFI) | One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank. | ||
| Covenant | (1) A formal agreement or contract between two parties in which one party gives the other certain promises and assurances, such as the covenant of warranty in a warranty deed. (2) Agreements or promises contained in deeds and other instruments for performance or nonperformance of certain acts, or use or nonuse of property in a certain manner. | ||
| Covenants, Conditions, and Restrictions (CC&R’s) | Commonly called “CC & R’s” the term usually refers to a written recorded declaration which sets forth certain covenants, conditions, restrictions, rules or regulations established by a subdivider or other landowner to create uniformity of buildings and use within tracts of land or groups of lots. The restrictions also can be established by deed. CC & R’s are sometimes referred to as private zoning. | ||
| Credit History | A record of an individual’s repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk. | ||
| Credit Report | A 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 Repository | An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit. | ||
| Credit | An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date. (top) | ||
| Creditor | A person to whom money is owed. | ||
| D | |||
| Debt | Money owing from one person to another. An amount owed to another. | ||
| Debtor | One who owes a debt. | ||
| Decree of Distribution | A probate court decree which determines how the estate of a decedent shall be distributed. | ||
| Deed | Written document by which an estate or interest in real property is transferred from one person to another. The person who transfers the interest is called the “grantor.” The one who acquires the interest is called the “grantee.” Examples of deeds are grant deeds, administrators’ deeds, executors’ deeds, quitclaim deeds, etc. The deed to use depends on the language of the deed, the legal capacity of the grantor and other circumstances. | ||
| Deed of Trust or Trust Deed | A written document by which the title to land is conveyed as security for the repayment of a loan or other obligation. It is a form of mortgage. The landowner or debtor is called the “trustor.” The party to whom the legal title is conveyed (and who may be called on to conduct a sale thereof if the loan is not paid) is the “trustee.” The lender is the “beneficiary.” When the loan is paid off, the trustee is asked by the beneficiary to issue a “recon” or reconveyance. This reconveyance corresponds to the release that the holder of a mortgage executes when the mortgage is paid off. | ||
| Deed Restrictions | Limitations in the deed to a property that dictate certain uses that may or not be made of the property. | ||
| Deed-In-Lieu | Short for “deed in lieu of foreclosure,” this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record. | ||
| Default | Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default. | ||
| Defect | A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty. | ||
| Defective Title | (1) Title to a negotiable instrument obtained by fraud. (2) Title to real property which lacks some of the elements necessary to transfer good title. | ||
| Delinquency | Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a “late fee” for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus. | ||
| Demand Note | A note having no date for repayment, but due on demand of the lender. | ||
| Deposit | A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an “earnest money deposit.” | ||
| Depreciation | A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income. | ||
| Discount Points | In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any “points” paid in addition to the one percent loan origination fee. A “point” is one percent of the loan amount. | ||
| Down Payment | The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. | ||
| 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. | ||
| E | |||
| Earnest Money Deposit | Down payment made by a purchaser of real estate as evidence of good faith; a deposit or partial payment. | ||
| Easement | A right or interest in the use of the land of another which entitles the holder to some use, privilege or benefit, such as to place pole lines, pipe lines or roads thereon. | ||
| Effective Age | An 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 Demand | A qualifying term meaning the ability to pay as well as desire to buy. | ||
| Eminent Domain | The right of a government to take privately owned property for public purposes under condemnation proceedings upon payment of its reasonable value. See Condemnation. The 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. | ||
| Encroachment | The presence of an improvement such as a building, a wall, a fence or other fixture which overlaps onto the property of an adjoining owner. An improvement that intrudes illegally on another’s property. | ||
| Encumbrance | Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions. | ||
| Endorsement | Addition to or modification of a title insurance policy which expands or changes coverage of the policy, fulfilling specific requirements of the insured. | ||
| 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. | ||
| 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 and other liens. | ||
| Escheat | The reversion of property to the state when an owner dies leaving no legal heirs, devisees or claimants. | ||
| Escrow | An independent third party, such as First American Title, who acts as the agent for buyer and seller, or for borrower and lender, carrying out instructions of both and disbursing documents and funds. Escrow closes and the transfer of property or document is completed upon fulfillment of certain conditions specified in the written instructions, whereupon the necessary deeds and other instruments are recorded. | ||
| 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 earnest money deposit is put into escrow until delivered to the seller when the transaction is closed. | ||
| Escrow Account | Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself. | ||
| Escrow Analysis | Once each year your lender will perform an “escrow analysis” to make sure they are collecting the correct amount of money for the anticipated expenditures. | ||
| Escrow Disbursements | The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses 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. | ||
| Eviction | The lawful expulsion of an occupant from real property. | ||
| Examination of Title | The report on the title of a property from the public records or an abstract of the title. | ||
| Exclusive Listing | A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time. | ||
| Execution | An order directing a sheriff, constable, marshal or court-appointed commissioner to enforce a money judgment against the property of a debtor. This officer, if necessary, may sell the property to satisfy the judgment. | ||
| Executor | A person appointed in a will and affirmed by the probate court to cause a distribution of the decedent’s estate in accordance with the will. (The one who makes the will is called a “testator.”) If a woman is appointed, she is referred to as the “executrix.” | ||
| F | |||
| 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. | ||
| Fannie Mae (FNMA) | The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library. | ||
| Fannie Mae’s Community Home Buyer’s Program | An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family’s buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions. | ||
| 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. (top) | ||
| Fee Simple | The greatest possible interest a person can have in real estate. | ||
| Fee Simple Estate | An 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 Mortgage | A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan. | ||
| File and Use | In most states, title insurers file rate schedules, title insurance policies and endorsement forms with the State Insurance Department or other state agency and then may use such items or rates starting within a specified period of time after filing. Rates so filed usually are mandatory. | ||
| Firm Commitment | A lender’s agreement to make a loan to a specific borrower on a specific property. | ||
| First Mortgage | The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions. | ||
| Fixed Rate Mortgage | A mortgage having a rate of interest which remains the same for the life of the mortgage. | ||
| Fixture | Personal property that becomes real property when attached in a permanent manner to real estate. | ||
| Flood Insurance | Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas. | ||
| Foreclosure | 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. | ||
| Forfeiture of Title | A common penalty for the violation of conditions or restrictions imposed by the seller upon the buyer in a deed or other proper document. For example, a deed may be granted upon the condition that if liquor is sold on the land, the title to the land will be forfeited (that is, lost) by the buyer (or some later owner) and will revert to the seller. | ||
| Full Disclosure | In real estate, revealing all the known facts which may affect the decision of a buyer or tenant. A broker must disclose known defects in the property for sale or lease. | ||
| G | |||
| Good Faith or Mortgage Savings Clause | A clause in CC & R’s which provides that ” a violation thereof shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value.” | ||
| Good Faith Purchaser or Mortgagee | A person who buys or lends in good faith, that is, without notice of any existing problem, where value is paid or lent. | ||
| Government Loan (mortgage) | A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans. | ||
| Government National Mortgage Association (Ginnie Mae) | A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA) | ||
| Grant | A transfer of real estate, between individuals, by deed. A transfer of real estate from a sovereign is accomplished by patent or royal decree. | ||
| Grant Deed | One of the many types of deeds used to transfer real property. Contains warranties against prior conveyances or encumbrances. When title insurance is purchased, warranties in a deed are of little practical significance. | ||
| Grantee | The person to whom an interest in real property is conveyed. | ||
| Grantor | The person conveying an interest in real property. | ||
| Guardian | A person appointed by a court to manage the person and/or property of one who is legally incompetent to handle his/her own affairs. | ||
| H | |||
| Hazard Insurance | Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. Buyer often adds liability insurance and extended coverage for personal property. | ||
| Home Equity Conversion Mortgage (HECM) | Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. | ||
| Home Equity Line of Credit | A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount. | ||
| Home Inspection | A thorough inspection by a professional 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. | ||
| Homeowner’s Warranty | A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay. | ||
| Homestead | A statutory protection from execution or the establishment of title by occupation of real property in accordance with the laws of various states or the Federal Government. | ||
| HUD Median Income | Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD). | ||
| HUD-1 Settlement Statement | A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the “closing statement” or “settlement sheet.” | ||
| I | |||
| Impounds | A trust type of account established by lenders for the accumulation of borrower’s funds to meet periodic payments of taxes, mortgage insurance premiums, and/or future insurance policy premiums, required to protect their security. | ||
| Indemnity | Insurance against possible loss or damage. A title insurance policy is a contract of indemnity. | ||
| J | |||
| Joint Tenancy | A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety. | ||
| Judgement | A 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. Alternative spelling is “judgement.” | ||
| Judgment Lien | A lien against the property of a judgment debtor. An involuntary lien. | ||
| Judicial Foreclosure | A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure. | ||
| Jumbo Loan | A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently at $227,150. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans. | ||
| K | |||
| L | |||
| Land Contract | An installment contract for the sale of land whereby the seller (vendor) holds legal title and the buyer (vendee) has equitable title until the sales price is paid in full. | ||
| Lease | A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time. | ||
| Lease Option | An alternative financing option that allows home buyers to lease a home with an option to buy. Each month’s rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price. | ||
| Leasehold Estate | A 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 Description | A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire piece of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other. | ||
| Lender | A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as “lenders.” | ||
| Liabilities | A person’s financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others. | ||
| Liability Insurance | Insurance 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. It is usually part of a homeowner’s insurance policy. | ||
| Lien | An encumbrance against property for money, either voluntary or involuntary. All liens are encumbrances but all encumbrances are not liens. | ||
| Life Cap | For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage. | ||
| 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. | ||
| Liquid Asset | A cash asset or an asset that is easily converted into cash. | ||
| Loan | A sum of borrowed money (principal) that is generally repaid with interest. | ||
| Loan Officer | Also referred to by a variety of other terms, such as lender, loan representative, loan “rep,” account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution. | ||
| Loan Origination | How a lender refers to the process of obtaining new loans. | ||
| Loan Servicing | After you obtain a loan, the company you make the payments to is “servicing” your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services. | ||
| Loan to Value (LTV) | The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower). | ||
| Lock-In | An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost. | ||
| Lock-In Period | The time period during which the lender has guaranteed an interest rate to a borrower. | ||
| M | |||
| Margin | The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down. | ||
| Maturity | The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable. | ||
| Mechanic Lien | A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements. | ||
| Merged Credit Report | A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report. | ||
| Modification | Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification. | ||
| Mortgage | A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds. | ||
| Mortgage Banker | For a more complete discussion of mortgage banker, see “Types of Lenders.” A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents. | ||
| Mortgage Broker | A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships. | ||
| Mortgage Insurance (MI) | Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves “No MI” are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value. | ||
| Mortgage Insurance Premium (MIP) | The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company. | ||
| Mortgage Life and Disability Insurance | A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days. | ||
| Mortgagee | The party lending the money and receiving the mortgage. | ||
| Mortgagor | The borrower in a mortgage agreement. | ||
| Multi-Dwelling Units | Properties that provide separate housing units for more than one family, although they secure only a single mortgage. | ||
| N | |||
| Negative Amortization | Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called “deferred interest.” The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization. | ||
| No Cash-Out Refinance | A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a “rate and term refinance.” | ||
| No-Cost Loan | Many lenders offer loans that you can obtain at “no cost.” You should inquire whether this means there are no “lender” costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a “no-point” loan, the interest rate will be higher than if you obtain a loan that has costs associated with it. | ||
| No-Points Loan | Almost all lenders offer loans at “no points.” You will find the interest rate on a “no points” loan is approximately a quarter percent higher than on a loan where you pay one point. | ||
| Note | A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. | ||
| Note Rate | The interest rate stated on a mortgage note. | ||
| Notice of Default | A formal written notice to a borrower that a default has occurred and that legal action may be taken. | ||
| O | |||
| Obligee | One to whom an obligation (promise) is owned. | ||
| Obligor | One who legally binds (obligates) oneself, such as the maker of a promissory note. | ||
| Original Cost | The purchase price of property, paid by the present owner. The present owner may or may not be the first owner. | ||
| Original Principal Balance | The total amount of principal owed on a mortgage before any payments are made. | ||
| Origination Fee | On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called “discount points.” One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays. | ||
| Owner Financing | A property purchase transaction in which the property seller provides all or part of the financing. | ||
| Owner’s Policy | A policy of title insurance usually insuring an owner of real estate against loss occasioned by defects in, liens against or unmarketability of the owner’s title. | ||
| P | |||
| Parcel | Any area of land contained within a single description. | ||
| Partial Payment | A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department. | ||
| Partnership | An association of two or more persons who have contracted to join in business and share the profits. | ||
| Party Wall | A wall generally erected on a property boundary or between two lots for the common benefit and use of the property owners on either side. | ||
| Patent | A conveyance of title to land by the Federal or State Government. | ||
| Payment Change Date | The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date. | ||
| Periodic Payment Cap | For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period. | ||
| Periodic Rate Cap | For an adjustable-rate mortgage, a 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 Property | Any property that is not real property. | ||
| Personal Property (Moveable) | Any property that is not designated by law as real property (i.e., money, goods, evidences of debt, rights of action, furniture, automobiles). | ||
| PIQ | A title term referring to Property In Question. | ||
| PITI | This stands for principal, interest, taxes and insurance. If you have an “impounded” loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio. | ||
| PITI Reserves | A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months. | ||
| Planned Unit Development (PUD) | A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association. | ||
| PLAT | A plan, map or chart of a tract or town site dividing a parcel of land into lots. | ||
| Point | A point is 1 percent of the amount of the mortgage. | ||
| Power of Attorney | A document by which one person (called the “principal”) authorizes another person (called the “attorney-in-fact”) to act for him/her in a specific manner in designated transactions. | ||
| Pre-Approval | A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification. | ||
| Preliminary Report | A written report issued by a title company, preliminary to issuing title insurance, which shows the recorded condition of title of the property in question. See Commitment. | ||
| Prepayment | Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner’s decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized. | ||
| Prepayment Penalty | A fee that may be charged to a borrower who pays off a loan before it is due. | ||
| Pre-Qualification (Pre-Approval) | This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower. | ||
| Prime Rate | The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans. | ||
| Principal Balance | The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance. | ||
| Principal, Interest, Taxes, and Insurance (PITI) | The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance. | ||
| Priority | The order of preference, rank or position of the various liens and encumbrances affecting the title to a particular parcel of land. Usually, the date and time of recording determine the relative priority between documents. | ||
| Priority Inspection | A title term referring to the type of inspection made in connection with insuring a new construction loan. In making the inspection of the property, the title company must be assured that the work of improvement had not yet begun when the lender’s deed of trust was recorded. | ||
| Private Mortgage Insurance (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. | ||
| Promissory Note | A written promise to repay a specified amount over a specified period of time. | ||
| Public Auction | A meeting in an announced public location to sell property to repay a mortgage that is in default. | ||
| Public Domain | Land owned by the government and belonging to the community at large. | ||
| Public Records | The transcriptions in a recorder’s office of instruments which have been recorded, including the indexes pertaining to them. | ||
| Puchase Agreement | A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. | ||
| Purchase Money Transaction | The acquisition of property through the payment of money or its equivalent. | ||
| Q | |||
| Qualifying Ratios | Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The “top” or “front” ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The “back” or “bottom” ratio includes housing costs as will as all other monthly debt. | ||
| Quiet Title | To free the title to a piece of land from the claims of other persons by means of a court action called a “quiet title” action. The court decree obtained is a “quiet title” decree. | ||
| Quitcliam Deed | A deed operating as a release; intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor. | ||
| R | |||
| Rate Lock | A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost. | ||
| Real Estate Agent | A person licensed to negotiate and transact the sale of real estate. | ||
| Real Estate Settlement Procedure Act (RESPA) | A consumer protection law that requires lenders to give borrowers advance notice of closing costs. | ||
| Real Property (Immovable) | Land, from the center of the earth and extending above the surface indefinitely, including all inherent natural attributes and any man-made improvements of a permanent nature place thereon. For example: minerals, trees, buildings, appurtenant rights. | ||
| Realtor | A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors. | ||
| Reconveyance | An instrument used to transfer title from a trustee to the equitable owner of real estate, when title is held as collateral security for a debt. Most commonly used upon payment in full of a trust deed. Also called a deed of reconveyance or release. | ||
| Recording | Filing documents affecting real property as a matter of public record, giving notice to future purchasers, creditors, or other interested parties. Recording is controlled by statute and usually requires the witnessing and notarizing of an instrument to be recorded. | ||
| Refinance Transactioin | The process of paying off one loan with the proceeds from a new loan using the same property as security. | ||
| Reinsurance | A contract which one insurer makes with another to protect the first insurer, wholly or partially, against loss or liability by reason of a risk under a separate and distinct contract as insurer of a third party. Reinsurance differs from coinsurance in that, in the case of reinsurance, only one insurer has a direct contractual relationship with the insured, and that insurer (commonly referred to as the “lead insurer”) purchases reinsurance in order to lessen or spread the risk. The “lead insurer” will assume a risk up to a limit (the amount of which is referred to as the “retention”) and any loss which exceeds this limit would be borne by the reinsurers. In the case of coinsurance, each coinsurer has a direct contractual relationship with the insured, and the risk is shared in agreed-upon proportions from the first dollar of loss. | ||
| Remaining Term | The original amortization term minus the number of payments that have been applied. | ||
| Rent Loss Insurance | Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent. | ||
| Repayment Plan | An arrangement made to repay delinquent installments or advances. | ||
| Replacement Reserve Fund | A 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. | ||
| Restrictions | Often called restrictive covenants. Provisions in a deed or other instrument whereby an owner of land prohibits or restricts certain use, occupation or improvement of the land. | ||
| Revolving Debt | A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved 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 Refusal | A 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 Ergress | The right to enter or leave designated premises. | ||
| Right of Survivorship | In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant. | ||
| Right of Way | (1) The right to pass over property owned by another, usually based upon an easement. (2) A path or thoroughfare over which passage is made. (3) A strip of land over which facilities such as highways, railroads or power lines are built. | ||
| S | |||
| 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. | ||
| Search | In title industry parlance, a careful exploration and examination of the public records in an effort to find all recorded instruments relating to a particular chain of title. | ||
| Second Mortgage | A mortgage that has a lien position subordinate to the first mortgage. | ||
| Secondary Market | The buying and selling of existing mortgages, usually as part of a “pool” of mortgages. | ||
| Secured Loan | A loan that is backed by collateral. | ||
| Security | The property that will be pledged as collateral for a loan. | ||
| Seller Carry-Back | An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. | ||
| Separate Property | Real property owned by one spouse exclusive of any interest of the other spouse. | ||
| Servicer | An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market. | ||
| Servicing | The collection of mortgage payments from borrowers and related responsibilities of a loan servicer. | ||
| Settlement Statement | See HUD1 Settlement Statement | ||
| Squatter | One who settles upon unoccupied land without legal claim or authority. (See Adverse Possession.) | ||
| Starter | A copy of the last policy or report issued by a title insurer which described the title to land upon which a new search is to be made. In some states, this is called a back title letter or back title certificate. | ||
| Street Improvement Bonds | Interest-bearing bonds issued, usually by a city or county, to secure the payment of assessments levied against land to pay for street improvements. The property owner may pay off the particular assessment against the property, or may allow the assessment to “go to bond” and pay installments of principal and interest over a period of years, usually at the city or county treasurer’s office. The holder of a bond received payments from these offices. | ||
| Subdivision | An area of land laid out and divided into lots, blocks, and building sites, and in which public facilities are laid out, such as streets, alleys, parks, and easements for public utilities. | ||
| Subordinate Financing | Any mortgage or other lien that has a priority that is lower than that of the first mortgage. | ||
| Subordination Agreement | An agreement by which one encumbrance (for example, a mortgage) is made subject to another encumbrance (for example, a mortgage) is made subject to another encumbrance (perhaps a lease). To “subordinate” is to “make subject to,” or to make of lower priority. | ||
| Surface Rights | Rights to enter upon and use the surface of a parcel of land, usually in connection with an oil and gas lease or other mineral lease. They may be “implied” by the language of the lease (no explicit reservation or exception of the surface rights) or “explicitly” set forth. | ||
| Survery | The measurement by a surveyor of real property which delineates the boundaries of a parcel of land. An ALTA survey additionally delineates the exact location of all improvements, encroachments, easements and other matters affecting the title to the property in question. A survey may be required by a title insurance company whenever the company is requested to issue an ALTA Extended Coverage Policy. | ||
| Survery | A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features. | ||
| Sweat Equity | Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash. | ||
| T | |||
| Tax Deed | A deed executed by the tax collector to the state, county or city when no redemption is made from a tax sale. | ||
| Tax Sale | Property on which current county taxes have not been paid is “sold to the state.” No actual sale takes place – the title is transferred to the state and the owner may redeem it by paying taxes, penalties and costs. If it has not been redeemed within five years, the property (referred to as “tax sold property”) is actually deeded to the state. (Similar “sales” to cities take place for unpaid city taxes.) | ||
| Tenancy in Common | As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death. | ||
| Testate | Leaving a legally valid will at death. See Intestate. | ||
| Third Party Origination | A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market. | ||
| 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 | Insured statement of the condition of title or ownership of real property. For a one-time-only premium, the named insured and their heirs are protected against title defects, liens and encumbrances existing as of the date of the policy and not specifically excluded from it. In the event of a claim, the title company provides legal defense from the policyholder and pays any covered losses incurred as a result of such claim. | ||
| 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 | See Preliminary Report. | ||
| Title Search | A review of all recorded documents affecting a specific parcel of land to determine the present condition of title. An experienced title officer or attorney reviews and analyzes all material relating to the search, then determines the sufficiency and status of title for insurance of a title insurance policy. | ||
| Transfer of Ownership | Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property “subject to” the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. | ||
| Transfer Tax | State or local tax payable when title passes from one owner to another. | ||
| Treasury of Index | An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury’s daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. | ||
| Trustee | A fiduciary who holds or controls property for the benefit of another. | ||
| Truth in Lending | A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges. | ||
| Two Step Mortgage | An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term. | ||
| Two to Four Famiy Property | A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed. | ||
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| Underwritten Company | A title firm which conducts title searches but is not qualified to insure, and therefore issues policies of a qualified title insurer (underwriter) in return for a portion of the premium. | ||
| V | |||
| VA Mortgage | A mortgage that is guaranteed by the Department of Veterans Affairs (VA). | ||
| Variable Interest Rate | An interest rate that fluctuates with the current cost of money; subject to adjustment if the prevailing rate moves up or down. | ||
| Vendee | See Agreement of Sale. | ||
| Vendor | See Agreement of Sale. | ||
| Vendor’s Lien | An implied lien given by law to a vendor for the remaining unpaid and unsecured part of a purchase price. | ||
| Venue | Neighborhood; often used to refer to the county or place in which an acknowledgment is made before a notary; also refers to the county in which a lawsuit may be filed or tried. | ||
| Vested | Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn. | ||
| Vesting | The names, status and manner in which title of ownership is held with a fixed or determinable interest in a particular parcel of real property; also that portion of a title report or policy setting forth the above. | ||
| Veterans Administration (VA) | An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans. | ||
| W | |||
| Waive | To voluntarily and intentionally relinquish a known right, claim or privilege. | ||
| Warranty Deed | A deed used in many states to convey fee title to real property. | ||
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