Real Estate Terms Glossary
Acceptance: Consent to an offer to
enter into contract.
Adjustable-rate
mortgage (ARM):
A mortgage that allows the interest rate to be changed periodically.
Agency:
A legal relationship in which an owner-principal engages a
broker-agent in the sale of property or a buyer-principal engages a broker-agent
in the purchase of property.
American
Society of Home Inspectors (ASHI):
A professional trade association that provides training and education
in home inspections. Members must
meet qualification requirements to join.
Amortization: The gradual repayment
of a mortgage by periodic installments.
Annual
percentage rate (APR):
The total finance charge (interest, loan fees, points) expressed as a
percentage of the mortgage amount.
Appraisal: An evaluation of a
piece of property to determine its value.
Assessed
value: The valuation placed
on property by a public tax assessor as the basis of property taxes.
Balloon
mortgage: A mortgage where the
amount financed is not fully amortized over the period of the loan.
When the loan becomes due, a large sum or “balloon” payment is
required to satisfy the mortgage.
Bridge
loan: A short-term mortgage
made until a longer-term loan can be made; it’s sometimes used when a person
needs money to build or purchase a home before the present one has been sold.
Broker:
A person licensed by a state real estate commission to act
independently in conducting a real estate brokerage business.
Although requirements vary from state to state, an individual must
usually have at least one year of experience in the industry and pass an
examination to earn a broker’s license.
Cap:
The maximum amount an interest rate or monthly payment can change,
either at adjustment time or over the life of the mortgage.
Closing: The final step in the
sale and transfer of ownership of a property.
The title is transferred from the Seller to the Buyer; the Buyer signs
the mortgage and pays costs of settlement; any money due the Seller and
Purchaser is paid.
Closing
costs: Fees and expenses, not
including the price of the home, payable by the Seller and the Buyer at the
closing (e.g., brokerage commissions, title insurance premiums, and inspection,
appraisal, recording, and attorney’s fees).
Closing
Statement: A financial statement
rendered to the Buyer and Seller at the time of transfer of ownership, giving an
account of all funds received or expended.
Cloud
on the title: Any condition which
affects the clear title to real property.
Commercial
bank: A financial
institution authorized to provide a variety of financial services, including
consumer and business loans (generally short-term), checking services, credit
cards, and savings accounts.
Comparables: Properties similar in
size and character to the one being bought or sold.
Consideration: Anything of value to
induce another to enter into a contract (i.e. money, services, a promise).
Contingency: A condition that must
be satisfied before a contract is valid.
Contract: An agreement to do or
not to do a certain thing.
Conventional
mortgage: A fixed rate,
fixed-term mortgage not insured by the federal government.
Deed:
A legal document conveying title to a property.
Deed
(quit claim): A deed that transfers only that title or right to a
property that the holder of that title has at the time of the transfer.
It does not warrant or guarantee a clear title.
Department
of Housing and Urban Development (HUD): A
U.S. Government agency established to implement certain federal housing and
community development programs.
Disclosure
laws: State and federal
regulations which require Sellers to disclose such conditions as whether a house
is located in a flood plain or whether there are known defects in or affecting
the property.
Earnest
money: A portion of a down
payment given to the Seller by a potential Buyer indicating the Buyer’s intent
to complete the purchase of the property.
Easement:
A right to use the land of another.
Encroachment: A condition that
limits the interest in a title to property such as a mortgage, deed
restrictions, easements, unpaid taxes, etc.
Equity:
The value of real estate over and above the liens against it.
It is obtained by subtracting the total liens from the value.
Equity
mortgage: A mortgage based on
the borrowers’ equity in their home rather than on their credit worthiness
Escrow:
The placement of money or documents with a third party for
safekeeping pending the fulfillment or performance of a specified act or
condition.
Federal
Housing Administration (FHA):
An agency within the Department of Housing and Urban Development
(HUD) that administers loan guarantee programs and loan insurance programs to
make more housing available.
FHA
Insured mortgage: A mortgage under which
the Federal Housing Administration insures loans made, according to its
regulation, by approved lenders.
Fixed
rate mortgage: A loan that fixes the
interest rate at a prescribed rate for the duration of the loan.
Foreclosure: Procedure whereby
property pledged as security for a debt is sold to pay the debt in the event of
default.
Growing-equity
mortgage:
A mortgage loan in which the monthly payments increase by a specific
amount each year, with the “Overpayments” applied to the principal.
Installment
debts: Long-term debts that usually extend for more than one
month.
Investor:
The holder of a mortgage or the permanent lender for whom the
mortgage maker services the loan. Any person or institution that invests in
mortgages.
Joint
& Survivorship Deed: (Also known as “Warranty deed creating tenants in
common with right of survivorship”) Upon death of one of the owners, title to
the interest transfers “by contract” to survivors.
Lease
purchase agreement: Buyer
makes a deposit for the future purchase of a property with the right to lease
the property in the interim.
Lien:
A legal claim against a property that must be paid when the
property is sold.
Loan-to-value
ratio: The relationship between the amount of a home mortgage
and the total value of the property. Lenders
may limit their maximum mortgage to 80-95 percent of value.
Lock-in-rate:
A commitment made by lenders on a mortgage loan to “lock in” a
civilian rate pending mortgage approval. Lock-in
periods vary.
Market
value: The highest price a
buyer will pay for a property and the lowest price the seller will accept
Mortgage:
One type of document used to make property the security for the
payment of a loan
Mortgage
broker: An individual or
company that obtains mortgages for others by finding lending institutions,
insurance companies, or private sources to lend the money; may also make
collections and handle disbursements
Mortgagee: The lender of money or
the receiver of the mortgage.
Mortgagor:
The borrower of money of the giver of the mortgage document.
Note:
A written promise to pay a certain amount of money.
Origination
fee: A fee or charge for
work involved in the evaluation, preparation and submission of a proposed
mortgage loan.
Prepayment
penalty: A fee paid to the mortgagee for paying the mortgage
before it becomes due. Also known
as prepayment fee or reinvestment fee.
Private
mortgage insurance (PMI): Insurance
issued to a lender by a private company to protect the lender against loss on a
defaulted mortgage loan. Its use is
usually limited to loans with high loan-to-value ratios.
The borrower pays the premiums.
Promissory
note: A written contract
containing a promise to pay a definite amount of money at a definite future
time.
Radon:
A colorless, odorless gas formed by the breakdown of uranium in
subsoil. It can enter a house
through cracks in the foundation or in water and is considered to be a health
hazard.
Realtor®:
Registered collective membership marks that identify real estate
professionals who are members of the National Association of Realtors®
and who subscribe to its strict Code of Ethics.
Rent
with option: A contract
which gives one the right to lease property at a certain sum with the option to
purchase at a future date.
Savings
and loan association (S&Ls): Depository
institutions that specialize in originating, servicing, and holding mortgage
loans, primarily on owner-occupied residential property.
Savings
bank: A financial
institution organized to hold individual depositors’ funds in interest-bearing
accounts and to make long-term investments, such as home mortgage loans.
Second
mortgage/Second deed of trust/Junior mortgage or Junior lien:
An additional loan imposed on a property with a first mortgage.
Generally a higher interest rate and shorter term than a “first”
mortgage.
Severalty
ownership: Ownership by one person only.
Sole ownership.
Shared
equity mortgage: A home loan in which
an investor is granted a share of the equity, thereby allowing the investor to
participate in the proceeds from resale.
Survey:
The process by which a parcel of land is measured and its area
ascertained.
Tenancy
in common: Ownership by two or
more persons who hold an undivided interest without right of survivorship.
(In the event of the death of one owner, his/her share will pass to
his/her heirs.)
Title:
A document that’s evidence of ownership.
Title
defect: An outstanding claim
or encumbrance on property that affects marketability.
Title
insurance: Protection for lenders
and homeowners against financial loss resulting from legal defects in the title.
Veterans
Administration (VA):
A government agency that provides services for eligible veterans of
the armed forces. Among other
programs, it guarantees mortgage loans made by private lenders to veterans.
Variance: A special suspension
of zoning laws to allow the use of property in a manner not in accord with
existing laws.
Zoning restrictions:
Local municipal ordinances that classify property according to
specific uses such a single family, residential, commercial, industrial,
multi-family, etc.
