Real Estate Glossary

A
1. Acre: A measurement of land equal to 4,840square yards or 43,560 square feet.

2. Adjustable rate mortgage (ARM): Mortgage loans in which the interest rate is adjusted periodically based on predetermined factors such as an assigned index or designated market factor.

3. adjustments: Any money that the buyer and seller "credit each other at closing, such as taxes, down payments, etc.

4.affordability analysis: A detailed analysis of the borrower's ability to buy a home, made up of factors such as: income, holdings, debts, the type of mortgage that will be used, the location of the home and closing costs.

5. amenity: A feature of a home (like a pool or a garage) which isn't crucial to the home's existence.

6. appraisal, appraised value: An appraiser's estimate of the value of the property.  Banks require appraisals to determine how much money it will lend you.

7. assessment: A local tax levied against a property for a specific purpose such as a sewer or streetlights. An assessor is a public official who establishes the value of a property for taxation.

8. assignment: The transfer of a mortgage from one person to another.

9. assumable mortgage: A mortgage that can be taken over by the next buyer of the home.

B

1. back-end ratio or debt ratio: The amount you pay in monthly debt ( car payments, credit cards, student loans, etc.) divided by your gross monthly income.

2. betterment: improvement (such as renovations and additions) that increases a property's value, different from routine home maintenance and repairs.

3. breach: To break of violate an agreement.

4. broker: Mortgage Broker is and individual whose business is to help arrange funds or negotiate contracts for a client but who doesn't loan money himself.  Real Estate Broker
(real estate agent) helps you find a house.

5. buy down: A fixed-rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years.  In order to temporarily buy down the initial rate, a lump sum is paid to the lender and held in an account used to supplement the borrower's ,monthly payment.

C

1. capital improvement:  Any item, structure or addition which is a permanent improvement to the property.

2. cash flow:  The amount of cash gained over a period of time from an income-producing property.

3. certificate of eligibility:  A document given to qualified veterans entitling them to VA loans for homes or businesses.

4. certificate of reasonable value (CRV): An appraisal issued by the VA showing a property's current market value.

5. certificate of veterans status: The document given to veterans or reservists who have served 90 days of continuous active duty. This document enables veterans to obtain lower down payments on certain FHA-insured loans.

6. change frequency: The frequency of payment and/or interest rate changes in an ARM, usually expressed in months.

7. closing costs: Expenses incurred by buyers and sellers in transferring ownership of a property, such as an origination fee, taxes, title insurance, transfer fees, points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance.

8. closing statement: A detailed written summary of the financial settlement of a real estate transaction, showing all charges and credits made, all cash received and paid.

9. cloud on title: Anything found by the title search which indicates that a property is not owned free and clear by the purported owner.

10. commission: The compensation paid to a real estate broker (or by a broker to a salesman) for services rendered. It is usually a predetermined percentage of the selling price.

11. commitment: A promise by a lender to make a loan to a borrower or builder.

12. comparables, comps: Properties in close proximity which have sold recently that are about the same size with similar amenities, used to determine value of a property by comparison.

13. compound interest: Interest computed on the principal and unpaid accumulated interest of a loan.

14. contingency: A specific condition that must be met before a contract is legally binding.

15. contract of sale: Agreement between the buyer and seller which conveys title after certain conditions are met, outlining purchase price, terms, etc.

16. conventional loan: A mortgage loan not insured by the FHA or guaranteed by the VA.

17. conveyance:  A written document (such as a deed or lease) that transfers ownership interest in a property from on person to another.

D

1. debt-to-income ratio: The ratio (expressed as a percentage) which describes a borrower's monthly payments on long-term debts divided by their "net effective income"(for FHA and VA loans) or gross monthly income (for conventional loans).

2. deferred interest: Unpaid interest added to the loan balance.

3. Department of Veterans Affairs (VA): An independent governmental agency which guarantees long-term, low- or no-money-down mortgages to eligible veterans.

4. depreciation: A decline in a property's value.

5. down payment: A percentage of sales price paid by the buyer at the time of purchase. Comprises the difference between the purchase price and the mortgaged amount.

6. due-on-interest: A mortgage clause that allows a lender to call a loan due and payable upon the transfer of the property.

7. due-on-sale clause: A provision that allows a lender to demand the immediate repayment of the mortgage balance if the borrower sells the home.

E

1. earnest money: Money given by a buyer to a seller as a form of deposit (part of the purchase price) in order to bind a transaction or to ensure payment.

2. easement: A right of way which gives people other than the owner access to a property.

3. encroachment: An illegal intrusion on someone else's property.

4. encumbrance: A lien or claim on a property.

5. 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.

6. equity: The value an owner has in real estate over and above the debt of the property.

7. escrow: Funds that are set aside and held in trust.

F

1. first mortgage: The mortgage which is the primary lien against a property.

2. foreclosure: A legal process through which the lender forces the sale (or repossession) of a mortgaged property because the borrower has not met the terms of the mortgage.

G

1. graduated payment mortgage: A type of flexible-payment mortgage where the payments increase for a period of time and then level off.

2. guaranty: An agreement by which one person assumes responsibility of assuring payment or fulfillment of another's debts or obligations, or something given as security for the execution, completion or existence of something else.

H

1. hazard insurance: A form of insurance that protects the insured from specified losses due to hazards such as fire, flood, wind damage, etc.

2. home equity line of credit: a loan against the amount of equity you have in a property. The equity serves as security for the new loan.

3. home inspection: A complete and thorough inspection of the physical condition of a property, including all major systems and structural elements, conducted by someone who knows what to look for.

4. homeowner's insurance: An insurance policy required by many lenders when you take ownership that combines personal liability insurance and hazard insurance for the home as well as its contents.

5. homeowner's warranty:  A warranty provided by the seller, (or buyer), that covers repairs to specified parts of a house for a specific period of time.

6. HUD-1: also known as closing statement or settlement sheet - An itemized list of whatever costs must be paid at closing, such as real estate commissions, loan fees, points, and initial escrow amounts.

I

1. interest: The amount of money charged for the use of the money borrowed.

2. interim financing: A construction loan made during completion of a building or a building or a project which is replaced by a permanent loan once the building is completed.

J

1. jumbo loan: A loan which is larger than the limits set by the FNMA and the FHLMC.

L

1. lien: A claim upon real or personal property for the satisfaction of some debt or obligation.

2. listing price: The price at which a house is listed for sale: the asking price.

3. loan-to-value ratio: The relationship between the amount of the mortgage loan and the appraised value of the property.

4. lock-in: A written agreement from the lender to offer a specified interest rate in the mortgage closes in a certain time period.

M

1. market value: The amount that a seller may expect to obtain in the open market.

2. mortgage: A conveyance of or lien against property until it is paid or until other stipulated terms are met.

3. mortgage banker: An individual who originates mortgages for resale in the secondary market.

4. mortgage broker: An individual or company that offers loans to borrowers from numerous sources and is paid a commission for their services.

5. mortgage insurance: Money paid to insure the mortgage when the down payment is less than 20 percent.

N

1. negative amortization: When your monthly payments are not large enough to pay all the interest due on the loan, the unpaid interest is added to the unpaid balance of the loan. The homebuyer ends up owing more than the original amount of the loan.

2. non-assumption clause: A statement in a mortgage contract forbidding the assumption of the mortgage without the lender's approval.

3. note: A signed obligation to pay a debt.

O

1. origination fee: The fee (usually a percentage of the loan) a lender charges to prepare loan document, make credit checks, inspect and sometimes appraise a property, etc.

P

1. PITI: Principal, Interest, Taxes, and Insurance.

2. points: Prepaid interest assessed at closing by the lender. Each point equals 1 percent of the loan amount.

3. power of attorney: A legal document authorizing one person to act on behalf of another.

4. prepaid expenses: Money necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

5. prepayment: A privilege in a mortgage which allow the borrower to make payments before they are due.

6. principal: The amount of debt, not counting interest, left on loan.

7. private mortgage insurance(PMI): Default insurance for conventional loans, normally required with smaller down-payment loans.

Q

1. qualification requirements: guidelines used by lenders to decide whether to loan money to an applicant.

2. qualified buyer: A person who has been pre-approved for a mortgage loan.

3. quit claim deed: A document that transfers a title, right or claim to another person, giving up all claims to a possession.

R

1. REALTOR®: A real estate broker or and associate holding an active membership in a local real estate board affiliated with the NATIONAL ASSOCIATION OF REALTORS®.

2. recording fees: Money paid to the lender for recording a home sale with local authorities, making it public record.

3. Real Estate Settlement Procedures Act(RESPA): A federal law that allows consumers to review information on know or estimated settlement costs once after application and once prior to (or at) closing.

4. right of first refusal: A portion of an agreement that requires a property owner to give one party the opportunity to buy or lease the property before the property is made available to other potential buyers.

S

1. sale price: The price at which the house actually sold.

2. second mortgage: A mortgage made subsequent to the primary mortgage.

3. simple interest: Interest which is computed on the principal balance.

4. survey: A detailed measurement of a property, including the location of the land in reference to known points, its dimensions, and the location and dimensions of any structures on the land.

T


1. term: The lifespan of the contract to repay a loan.

2. title: A document that gives evidence of an individual's ownership of property.

3. title insurance: Insurance, usually issued by a title insurance company, which insures a hombur against errors in the title search.

4. title search: The examination of municipal records by a title company to
determine the legal ownership of property.

U

1. underwriting: The decision whether to make a loan to a potential hombur based on credit, employment, assets, and other factors, and the matching of this risk to an appropriate rate and term or loan amount.

W

1. walk-through inspection: A final walk-through immediately prior to closing to verify that no changes have taken place and no new damage has occurred.

Z

1. zoning: City regulations determining the character or use of property.

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