A


ALTA
American Land Title Association


Abstract of Title
A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared (or cured) before a buyer can purchase clear, marketable, and insurable title. \r\n.


Acceleration Clause
Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage (i.e.,failure to pay taxes or insurance premiums).


Adjustable Rate Mortgage (ARM)
Mortgage loans under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates. The extent and number of these adjustments are agreed to at the inception of the loan.


Acknowledgment
A declaration or a vow of one\s act or of a fact to give it legal validity, especially before a duly qualified public officer. The term "notary acknowledgment" denotes the notary section of legal documents.


Adverse Possession
The possession, by one person, of land belonging to another in a manner deemed adverse to the interest of the owner. In most states, by operation of law, title to the land becomes vested in such person after a fixed number of years if the owner fails to assert his or her rights.


Affidavit
A written statement made under oath before a notary public or other judicial officer.


Agreement of Sale
Known by various names, such as "Contract", Contract of Purchase, Purchase and Sale Agreement or Deposit Receipt and Contract for Sale and Purchase, according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific conditions spelled out in writing and signed by both parties.


ALTA (American Land Title Association)
The trade association of the title insurance industry, which has adopted certain insurance policy forms to standardize coverage on a national basis.


Amenity
An aspect of a property that enhances its value. Off-street reserved parking within a condominium community is an amenity.


Amortization
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal. An Amortization Schedule is a detailed record of the principal and interest paid on each payment date, showing the remaining principal owed after each payment.


APR (Annual Percentage Rate)
The cost of credit expressed as a yearly rate to the customer, which includes the nonrecurring and other charges paid by the borrower. Interest and prepaid finance charges which are a part of the finance charge are computed as an annualized rate.


Appraisal
A report from an independent third party detailing the estimated value of real estate.


Appurtenance
A right or privilege that is a part of the ownership of property, such as a right of way to a highway across the land of another. Water rights are also an example.


Assessment
(1) The valuation of real estate for purposes of taxes or special improvement charges.\r\n(2) The amount of taxes or special improvement charges. Special improvement charges are usually for the costs of streets, sidewalks, sewers, etc. \r\n(3) Levy by Condominium Association for improvement/repair costs not included in monthly maintenance.


Assignment
(1) The act of transferring an interest, such as a loan secured by a mortgage, from one person to another. \r\n(2) The instrument or paper by which one person transfers such ownership to another.


Assumption of Mortgage
(Assumption Agreement) Contract by deed or other form, through which a buyer undertakes the obligation of an existing mortgage originally signed by another person. The seller remains secondarily liable unless released by the lender from this obligation. (Note: When the seller is released from liability, many governmental jurisdictions require payment of a tax or documentary stamps on the amount of the mortgage assumed by the buyer.)


Attorney-in-Fact
A person who, acting as agent, is given written authorization by another person to transact business for him or her out of court (not to be confused with attorney at law (lawyer).


Attos Opinion
A statement by an attorney as to the validity of a title, arrived at after investigation of the history of the title as recorded in the public records.

B


Back Title Letter
Also called "back title certificate" in some areas, and "starter" in others. When titles previously have been examined up to a certain date by reliable examiners, title companies sometimes give subsequent examiners of such titles a letter that sets forth the condition of the title at the time of the previous examination and authorizes them to begin their subsequent examination with the terminal date of the previous examination.


Balloon Mortgage
A form of mortgage with a promissory note that calls for the minimum payment of principal and the payment of interest at regular intervals, usually for 10 years or less. This type of note requires a substantial final payment, which represents all the remaining principal.

C


Capital Gains
Profit received from the sale of an asset that has been held for more than six months since purchase. The distinction is made between capital gain and ordinary income because the former are taxed at a lower federal income tax rate. Profit form property held less than six months is taxed as ordinary income.


Certificate of Title
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.


Certificate of Title
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

D


Dedication
The setting aside of certain land by the owner and declaring it to be for public use. Examples: streets, sidewalks and parks.


Deed of Trust
Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument; the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale,\r\nunder the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few states have begun in recent years to treat the deed of trust like a mortgage.


Deed
closing. There are two parties to a deed: the grantor (seller) and the grantee (buyer). (See also deed of trust, general warranty deed,\r\nquitclaim deed and special warranty deed.

E


Equity
The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value, the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.


Escrow
(1) A method of closing a real estate transaction in which all required documents and funds are placed with a third party for processing and disbursement; (2) The money collected from the owner in each monthly payment, adequate to cover yearly anticipated expenditures, and held in a trust fund by the lender, when the mortgage requires the lender to collect for real estate taxes and hazard and flood insurance(s)) and mortgage insurance provided for the buyer.


Estate
(1) The right, title or interest which a person has in any property; (2) the property that was owned by a deceased person, which becomes part the estate of the decedent and is possibly subject to probate proceedings.


Estoppel
1) A legal restraint that stops or prevents a person from contradicting or reneging on his previous position or previous asserts or commitments; (2) Payoff statement from lender and/or entity with authority to assess real property (i.e., condominium association, government utility department) as to any outstanding payments due at time of closing.


Examination
The study of the instruments and muniments incident to a chain of title to determine their effect and condition in order to reach a conclusion as to the status of the title.


Exception
A provision in a title insurance binder or policy that excludes a liability for a specific title defect or an outstanding lien or encumbrance


Execute
To sign a legal instrument. A deed is said to be executed when it is signed, witnessed, notarized and delivered to the buyer or buyer's agent.


Earnest Money
The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.


Easement
The right to use the land or a specified portion of the land of another for a specific limited use, such as laying a sewer, putting up electric power lines, or crossing the property.


Eminent Domain
The right of a government to take privately owned property for public purposes under condemnation proceedings subject to payment of its fair market value.


Encumbrance
Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burden or charge upon the property.


Encroachment
Any building, improvement or structure located on one property (such as a wall, fence, pool enclosure or driveway) that intrudes upon the property of


Endorsements to Title Insurance (Endorsement Fees)
Mortgagee Title Insurance issued to the lender is required by law to have certain exclusions from coverage, as do the underwriters of title insurance. These exclusions modify the master policy and attach specific provisions to the insurance coverage, i.e., variable interest rates (ARM) and balloon mortgages, condominium and PUD (such as townhomes, homeowner's associations).

F


FDIC (Federal Deposit Insurance Corporation)
A federal agency organized in 1933 to guarantee funds on deposit in member banks. The FDIC also performs functions such as making loans or buying assets from member banks to help effect mergers or helping to prevent bank failures.


FEMA
Federal Emergency Management Agency responsible for providing relief in national disasters. This agency designates flood areas and generates flood maps for use by hazard insurance agents and underwriters issuing flood insurance.


FHA (Federal Housing Administration)
A federal agency that is a division of the Department of Housing and Urban Development, it insures first mortgages, enabling lenders to lend a very high percentage of the sale price.


FNMA (Fannie Mae)
Federal National Mortgage Association. a taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.


Fair Credit Reporting Act
A 1971 federal law which guarantees an individual the right to examine all information on file about him or her with a credit reporting agency participating within the established guidelines. Procedures for rectifying errors are also specified in this act.


Federal Reserve System (The Fed)
The central banking system that regulates the supply of money, it includes 12 regional "banker's banks", their branches and all national and state banks that choose to be members. The Board of Directors of the system regulates the prime interest rate, which affects interest rates in all banks.


Fee Simple Deed
The absolute ownership of a parcel of land. The highest degree of ownership that a person can have in real estate, which gives the owner unqualified ownership and full power of disposition.


Fiduciary
One who hold a position of trust and confidence requiring scrupulous good faith and candor. In connection with real estate transactions, fiduciary responsibility belongs to the closing agent disbursing funds and the designated holder of escrowed monies in a closing, i.e., repair or tax payment escrows.


Fiscal Year
The period encompassing 365 days over which the company maintains financial records and at the end of which the financial books are closed and profit or loss are determined. This may or may not correspond with calendar year. In real estate transactions, this is more relevant for commercial closings.


Fixed Rate Mortgage
A mortgage having a rate of interest that remains the same for the life of the mortgage.


Fixtures
Personal property that is attached to real property and is legally treated as real property while it is so attached. Examples: medicine cabinets, window blinds and chandeliers.


Flood Hazard Area
A geographical area designated by the Department of Housing and Urban Development (HUD) as having an above average risk of flooding. Most lenders require a flood elevation certification from the surveyor


Foreclosure
A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property to satisfy the underlying debt, and depriving the mortgagor of possession.


Forgery
The fraudulent signing of another's name to an instrument such as a deed, mortgage or check.


Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A federal agency that purchases both conventional and federally insured first mortgages from members of the Federal Reserve System and the Federal Home Loan Bank System.


FDIC (Federal Deposit Insurance Corporation)
A federal agency organized in 1933 to guarantee funds on deposit in member banks. The FDIC also performs functions such as making loans or buying assets from member banks to help effect mergers or helping to prevent bank failures.

G


GNMA(Ginnie Mae)
A federally owned corporation formed to invest in mortgages not suitable for Fannie Mae. Administered by the U.S. HUD, Ginnie Mae invests in relatively high-risk mortgages.


GNMA Mortgaged Backed Securities
Securities guaranteed by GNMA and issued primarily by mortgage bankers. The GNMA security is pass-through in nature, and the banker is protected by the "full faith and credit of the U.S. Government." It is collateralized by FHA and VA mortgages. Good Faith Estimate - Add this


Grant
To bestow or confer, with or without compensation, real or personal property, such as land or money by one having control or authority over the property.


Grantee (Buyer)
(1) A person to whom interest in property is transferred by deed or who is granted property rights by trust instrument or some other document (referred to as the buyer in a Contract for Sale and Purchase); (2) the recipient of a grant or property.


Grantor (Seller)
A person who transfers property by deed or who grants property rights by deed or trust instrument or some other document (referred to as the seller in a Contract for Sale and Purchase).


Gross Income
Total dollar amount of all income resources before deductions for taxes, insurance, etc.

H


HUD
The Department of Housing and Urban Development, established by the Housing and Urban Development Act of 1965. It is responsible for the administration and implementation of government housing and urban development programs. The broad range of programs includes community planning and development, housing production and mortgage credit, equal opportunity in housing, research, and technology. It also generates forms used in the real estate industry


Hazard Insurance/Flood Insurance
This premium is for insurance protection for the owner and lender against loss due to fire, windstorm and other natural hazards. This coverage may be included in a Homeowner's Policy, which insures against additional risks which may include personal liability and theft. If a property is located within a special Flood Hazard Area (identified by FEMA )a borrower may be required by Federal law and/or by the lender to carry flood insurance. Lenders require proof of payment of the first year's premium for fire insurance and flood insurance at the time of settlement and requires that the lender be designated as a loss payee.


Hereditaments
Any and all kinds of estates, interest and rights in real estate that can be inherited.


Homeowner's Association
An organization of homeowners living in a particular development, whose major purpose is to maintain and provide community services for the enjoyment of the residents. In real estate it is a PUD and often charges a maintenance fee for providing lawn and yard care, and maintenance of common areas in the development, such as a recreational area.


Homestead Rights (Estate)
The rights of the head of a family or the household residents in real estate that is owned and occupied as a residence. Some states grant statutory exemptions, protecting homestead property against the rights of creditors. Property tax exemptions for all or part of the tax) are also available in some states. Statutory requirements to establish a homestead may include a formal declaration to be recorded, or at the least to file a declaration with a government property appraiser, assessor or collector.

I


Improvements
Man-made additions to the land, including structures, building, or facilities placed on or in land, e.g., buildings, streets, sewers, water lines


Indemnification Letter
A document given to the lender by a title insurance company that insures a lender against the failure of the title company's agent to perform his or her duties according to the lender's instructions


Index
(1) An alphabetical listing in the public records of the names of parties to recorded real estate instruments together with the book and page number of the record. (2) The listing in abstract and title plans of recorded real estate instruments in groups according to land descriptions, known as a geographic index; (3) Specifically designated indexes are used by lenders to calculate the interest adjustment of variable (adjustable) rate loans. Some indexes are more volatile than others, which can affect adjustments in your interest rate and subsequently, your monthly payments, making it wise for the potential borrower to investigate the index used by their proposed lender prior to making application for the loan.


Inspection Reports/Fees
Fees payable to the providers of such reports as roof and/or structural, termite or pest control, household appliances, property, geological or core soil samples.


Installment Note
A note usually given in consumer and personal credit transactions in which the principal is payable in specified installments, together with interest on the unpaid balance until the note is paid in full. This note is usually of shorter duration than a promissory note or mortgage note. An installment note may be but is not necessarily secured by real property.


Institutional Lender
A financial institution that invests in mortgages and carries them in its own portfolio. Mutual savings banks, life insurance companies, commercial banks, pension and trust funds, and savings and loan associations are examples of institutional lenders.


Insurance Binder
See Binder (above)


Insured Bank
A bank that belongs to the FDIC (Federal Deposit Insurance Corporation).


Interest Rate
The percentage rate charged for the use of money, usually quoted on an annual basis.


Interest Rate Cap
A safeguard built into variable rate loans to protect the consumer by limiting the movement in the rate of interest when adjusted


Investor
(1) An individual who purchases securities with the intention of obtaining income from the investment without losing the principal; (2) a private lender who normally is obtained through a mortgage broker.

J


Joint Ownership
The common ownership of real or personal property by two or more persons. The persons involved are either joint tenants or tenants in common.


Joint Tenants
Two or more entities owning an undivided interest in property. The interests must be equal, accruing under the same conveyance (deed) and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased. Also see Tenants in Common and Tenants by the Entireties.


Judgment
The determination of a court regarding the rights of parties in an action. A judgment of debt on a property owner can create a lien on all of that owner's land within a certain jurisdiction.


Junior Mortgage
A mortgage lower in lien priority than another, i.e., Second Mortgage or Equity Line secured by real property already secured by a mortgage

K

L


Leasehold Interest
A form of property interest in which the holder of the interest has the right to use or occupy, but not to sell or transfer the property. The holder of a Leasehold Estate has the right to build on and to occupy land for a specified lease term, but the holder of Fee Simple Estate to the land retains the right to sell the land at any time (subject to the lease) and to take the buildings as well at the end of the lease. Some condominium PUD projects lease land and/or recreational; facilities from the developer or a third party.


Legal Description
A method of geographically describing a parcel of land, which is recognized in a court of law, and which is sufficient to locate and identify a property without oral testimony.


Legal Rate of Interest
The maximum rate of interest that may be charged on a loan. The interest established by the laws of the state having jurisdiction over the transaction. Interest rates charged in excess of this ceiling are considered usurious and are subject to the usury laws of the state having jurisdiction.


Lessee
Person who pays for the privilege of using a specific piece of property, as stipulated in a lease; a tenant.


Lessor
The person, corporation, or other legal entity that leases property to a lessee; a landlord.


Liability
The claims of creditors and owners against the assets of a business.


License
Permission to go upon or use the land of another, the permission being a personal privilege and not constituting an interest in the land.


Lien
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. (See also special lien.)


Lieb Waiver
Also "waiver of liens." A waiver of mechanics' lien rights, signed by contractors or subcontractors.


Link
In surveying, a length of 7.92 inches.


Loan Discount Fee
A one-time charge based on a percentage of the loan amount to adjust the yield on a loan to the market conditions demand. It is used to offset constraints placed on the yield by State or Federal regulations.


Loan Maturity
Date when a note becomes due and payable, the date when the amortization schedule indicates the last payment will have been made.


Loan Origination Fee
A one-time fee which covers the lender's administrative cost in processing a home loan. This is usually expressed in terms of "points". One point is equal to one (1%) percent of the loan amount.


Loan Policy
Also called "mortgagee policy." A title insurance policy insuring a mortgagee (lender), or beneficiary under a deed of trust, against loss caused by invalidity or unenforcability of a lien, or loss of priority of the mortgage or deed of trust.


Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and the appraised value of the security, expressed as a percentage of the appraised value.


Lis Pendens
A legal notice intending to bind third parties of litigation claiming an interest in real estate, and preventing sale of same until judicial disposition of the litigation.


Long Term Capital Gains
Profits earned on assets held for more than six months. It is important for taxation purposes and sellers should consult their accountant or financial advisor regarding the profit from the sale of real property.


Loss Payable Clause
An endorsement to an insurance (hazard) policy specifying parties (lenders) entitlement to participate in proceeds in the event of loss.


Lot
Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision.

M


Market Rates
Rates of interest resulting from the demand for a supply of funds in the money market.


Market Value
The average of the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing but not compelled to sell, would accept.


Marketability
Refers to how easily a property will sell, if a borrower defaulted on the loan.


Marketable Title
A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.


Maturity
The date on which a note, draft, acceptance or bond becomes due and payable.


Mechanic's Lien
A lien on real estate, created by operation of law, that secures the payment of debts due to persons who perform labor or services or furnish materials incident to the construction of buildings and improvements on the real estate.


Metes and Bounds
A land description in which boundaries are described by courses, directions, distances and monuments.


Monthly Assessment
A monthly fee paid to the Homeowner's Association or a Condominium Association (or a firm that handles collection of the fees for the association), which covers the costs of maintaining common areas and often includes money escrowed for future maintenance costs such as roofs, so as to avoid future special assessments.


Mortgage Broker
A firm or individual who brings the borrower and lender together, receiving a commission. A mortgage broker does not retain servicing of the loan.


Mortgage (Conventional)
A conveyance of an interest in real property given as security for the payment of a debt. (See Deed of Trust)


Mortgage (Open End)
A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure. An Equity Loan secured by real property operates similarly to an Open End Mortgage, and has a specified maximum loan amount.


Mortgage Commitment
A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount, for a specified interest rate, to enable a buyer to purchase real property.


Mortgage Note
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which is shall be paid. The note states the actual amount of the debt that the mortgage secures, at a specific interest rate within a specified term, and renders the mortgagor personally responsible for repayment.


Mortgagee
The holder of a mortgage. The party who lends money, secured by real property; generally the lender.


Mortgage Insurance Premium (MIP)
Mortgage insurance protects the lender from loss due to payment default by the borrower. With this insurance protection, the lender is willing to make a larger loan, thus reducing the down payment requirements. This type of insurance should not be confused with mortgage life, credit life or disability insurance designed to pay off a mortgage in the event of physical disability or death of the borrower. The consideration is paid by a mortgagor for the mortgage insurance either to FHA or to a private mortgage insurer (PMI). Mortgagee Policy (see Loan Policy, above)


Mortgage Portfolio
The aggregate of mortgage loans held by an investor, or serviced by a mortgage banker.


Mortgagor
A person who mortgages property. A person who executes a mortgage, generally the property owner.


Multiple Listing Service (MLS)
The pooling in a central bureau of listings of properties for sale. These listings are held individually by members of a group of real estate brokers, with the agreement that any member of the group may sell the properties and, in the case of a sale, the commission will be divided between the broker making the sale and the broker who filed the listing.


Muniments of Title
Written evidence (documents) that an owner possesses to prove his or her title to property.

N


National Flood Insurance Act
A federal law establishing a program to provide flood insurance to homeowners whose houses are located in specially designated flood hazard areas. This program is administered by the Federal Insurance Administration.


Negative Amortization
A situation which may occur on variable rate loans which have a payment cap feature. If the adjusted payment amount is insufficient to pay the actual amount of interest due, the unpaid deferred interest will then be added to the loan principal balance. This increase in principal balance is known as negative amortization.


Net Worth
The difference between total assets and liabilities of an entity (individual , corporation, etc.)


Notary Public
A public officer who takes acknowledgment of or otherwise attests or certifies deeds and other writings or copies of them, usually under his official seal to make them authentic, and takes affidavits, depositions and protests of negotiable instruments.


Note
A written evidence of a debt. A note is a promise to pay a specified amount to a certain entity on a specified date. Also called "promissory note."

O


Orgination Fee
A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.


Owner's Policy
A policy of title insurance insuring an owner of real estate against loss occasioned by defects in, liens against, or unmarketability of the owner's title.

P


PITI
Refers to a mortgage payment which includes Principle, Interest, Taxes and Insurance.


PUD (Planned Unit Development)
A comprehensive development plan for a large land area, usually including residences, roads, schools,, recreational facilities, and service area plus commercial, office and industrial areas.


Payee
The individual named in an instrument as the recipient of the sum shown. The payee, thus, is the part who benefits by the payment of an instrument.


Per Diem
A term meaning "by day," used to compute an allowance or charge that has been established on a daily basis, or which is calculated on a daily basis.


Personal Property
All property subject to ownership which is not fixed or immovable. Personal property may be tangible or intangible. Tangible personal property consists of physical objects, whereas intangible personal property consists of property which cannot be physically touched, such as a patent, goodwill of a business, mutual funds and stocks, etc.


Plat
A map representing a piece of land dived into lots, as in a subdivision, with streets, boundaries, easements, and dimensions shown thereon. It is usually recorded and made a part of the public record. P.O.C. (Paid Outside of Closing)


Points
Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. It is a one-time charge by a lender to raise the yield on his loan, and is often charged to induce the lender to offer the mortgagor a lower interest rate on the life of the loan. It is also charged when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited from paying points on VA loans (however, sellers can pay points on VA loans), On a conventional mortgage, or an FHA insured mortgage, points may be paid by either buyer or seller or split between them. (Example: if a mortgage loan is for $50,000, one point would cost $500.00; two points would cost $1,000, etc.)


Power of Attorney
A document witnessed and acknowledged authorizing the person named therein to act as his agent, called attorney-in-fact, for the person signing the document. If the attorney-in-fact is authorized to act for his principal in all matters he or she has a general power of attorney, if he or she has authority to do only certain specified things he has a special power of attorney.


Prepaid Closing Costs
These are the fees which are for those expenses which are paid in advance and will usually be prorated upon sale, such as taxes, interest and insurance.


Prepayment
Payment of mortgage loan in advance of final due date, or payment of an amount to reduce the principal of the mortgage loan, or an amount in excess of the stipulated amortized payment amount. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.


Prepayment Penalty
A charge paid for the privilege of repaying an obligation prior to the agreed upon maturity date. Prepayment penalties are often charged on a loan extended at an interest rate considered unfavorable to the lender in the short run but favorable in the long run.


Prescriptive Easement
A right to use another's property that is not inconsistent with the owner's rights and that is acquired by an open, notorious, adverse and continuous use for the statutory period, for example 20 years.


Prime Rate
The most favorable interest rate charged by the bank to their most creditworthy customers for short term loans, not mortgages.


Principal
(1) A sum of money owed or outstanding balance of a mortgage; (2) Outstanding balance of a mortgage; (3) A person who empowers another to act as his representative or agent; (4) The person having prime responsibility for an obligation as distinguished from one who acts as a surety or endorser.


Private Mortgage Insurance (Also See MIP)
Insurance written by a private mortgage company protecting the mortgage lender against loss occasioned by a mortgage default. Companies in this industry are referred to as MIC's (Mortgage Insurance Companies).


Promulgated Rate
Promulgated Rate


Promissory Note
An unconditional written promise, signed by Maker (borrower), to pay absolutely a sum in money, either to the bearer or to a person herein designated or his agent (lender).


Prorate
To divide in proportion, proportionately, according to share interest or liability of each party. Payments such as property taxes, monthly condominium maintenance fees, assessments, and appliance contracts are prorated on a settlement statement (HUD).


Purchase Money Mortgage
A mortgage given by a purchaser to a seller on the subject property to secure payment of a part of the purchase price.

Q


Quit Claim Deed
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See Deed)

R


REDI (Real Estate Data Inc.)
A source of data on comparable sales in a market area. This information is collected from deeds, assessor files, and other public records by Real Estate Date Incorporated, a firm active in many major U.S. housing markets.


Real Estate
Also called "real property." (1) Land and anything permanently affixed to the land, such as building, fences and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items that would be personal property if not attached; (2) May refer to rights in real property as well as the property itself.


Realtor
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.


Recision
Cancellation of a contract without penalty. When a borrower is refinancing a mortgage, the lender must by law give the borrower 3 days after the closing documents are executed to reconsider the transaction, which is called the recision period. If after 3 days the borrower has not cancelled the contract, the funding is approved and all disbursements are made.


Reconveyance
A document extinguishing the lien of a Deed of Trust after payment in full of the note. A Satisfaction of Mortgage is issued by a lender upon final payment of the note, and a Deed is issued by the holder of a Deed of Trust, upon final payment for the property


Recording
The noting in a public (government) office of the details of a legal document, such as a deed or mortgage, affecting the title to real estate. When such an instrument is properly recorded, it is considered to be a matter of public record. Legally, that means that all subsequent purchasers are deemed to have constructive knowledge of that information.


Redlining
Systematic exclusion of certain geographic areas usually high-risk, low income neighborhoods, from mortgage investment.


Refinancing
The payment of a mortgage or debt from the proceeds of a new loan, using the same property as security. Ordinarily an entity applies for a refinancing loan in order to obtain a better interest rate on their mortgage.


Regulation B
Prohibits discrimination by lenders on the basis of age, race, color, religion, national origin, sec, marital status, or receipt of income from public assistance programs. It establishes guidelines for gathering and evaluating credit information and requires written notification to the applicant in cases where credit is denied.


Regulation Z
Requires that uniform methods be used to compute the cost of credit extended to individuals for personal, family, household, or agricultural credit.


Reinsurance
A contractual relationship between two insurance companies under which one insurer assumes a portion of the risk of the insurance policy written by the other.


Release
(1) To relieve from debt or security or abandon a right, such as the release of a mortgage lien from a part or all of the land mortgaged; (2) The instrument effecting a release.


Rent
Consideration paid for use or occupancy of land, buildings or dwelling units.


Resale
A sale of a home which is not the original sale from the builder or developer. When a development is still in construction, the developer may control resales by original owners.


Reserves
Funds set aside for a particular purpose, usually to protect the security of outstanding mortgage loans. Reserves are also held by condominium and homeowner associations for future maintenance needs, as a portion of the funds collected monthly, to reduce the need for future assessments for roof repairs, etc.


Residential Mortgage
A loan extended for which real estate is given as collateral. The collateral is usually a single owner occupied home, or a unit in a condominium or townhome.


Restrictions (also Restrictive Covenant)
Limitations on the use of property imposed or created by deeds or other documents in the chain of title. A restriction, for example, may prohibit the placement of a trailer or the construction of a commercial structure on the property.


Riparian Rights
The rights of owners of lands bordering watercourses which relate to the water and its use.

S


Sale Agreement
A contract entered into between a buyer and seller, setting forth the terms, provisions and conditions of a sale of real estate. Also referred to as a "Contract", Purchase and Sale Agreement or Deposit Receipt and Contract for Sale and Purchase.


Sales Comparison Approach
A method of estimating market value by comparing similar properties which have recently sold. It's based on the supposition that an informed purchaser would pay no more for a property than the cost of acquiring a similar existing property in the same neighborhood. Realtors commonly provide "comps" to prospective sellers contemplating listing their property with a realtor.


Satisfaction of Mortgage
A Release issued by the Mortgagee (lender) indicating that the debtor has repaid all principal, interest and outstanding charges due for a loan, specifying the recording data of the original mortgage. This document is provided subsequent to the lender's receipt of the payoff check issued by the closing agent. The Satisfaction must be recorded in the public records.


Saving Bank
An institution whose main functions are accepting interest bearing time deposits for investment in mortgages and high grade securities. Savings banks operate under slightly different federal regulations than national associations.


Search
A careful exploration and perusal of the public records in an effort to find all recorded instruments relating to a particular chain of title for real property.


Second Mortgage
A mortgage ranking in priority immediately below a first mortgage.


Secured Loan
A loan for which the creditor's interest is protected by requiring the borrower to pledge collateral of some kind. The collateral can be any marketable asset.


Servicing
The duties of the mortgage banker as loan correspondent as specified in the servicing agreement for which a fee is received. The collection for an investor of payments, interest, principle, and trust items, such as hazard and flood insurance, real estate taxes, on a note by the borrower in accordance with the terms of the note. Servicing also consists of operational procedures covering accounting, bookkeeping, insurance records, loan payment follow-up, and loan analysis.


Simple Interest
A method of interest calculation that takes a flat percentage of the principal sum on an annual basis.


Site Improvements
Improvements made to the land, such as landscaping, water, sewer and other utilities.


Small Business Administration (SBA)
An independent agency, created by the U.S. Government in 1953, for the purpose of helping small businesses compete with larger corporations. The SBA makes loans directly or guarantees those loans made to small businesses.


Subordination
(1) The act or process by which a person's rights are ranked below the rights of others. For example, a second mortgagee's (lender's) rights are subordinate to those of the first mortgagee (lender); (2) an agreement between two creditors of a particular borrower whereby one party grants to the other a priority of its lien.


Surety
(1) A person who agrees to be responsible for a debt or obligation of another; (2) The pledge or agreement by which one undertakes responsibility for the debt or obligation of another.


Survey
A measurement of boundaries of a parcel of land, it's area and sometimes it's topography, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements, rights-of-way, easements. Particularly important to homeowners, a survey enables them to install fencing or other improvements to their property while adhering to any restrictions of record with governmental authorities.

T


Tax Lien
A claim against property or a person in the amount that is due on unpaid real estate or federal income taxes.


Tax Service Fee
A fee payable for an independent agency utilized by lenders to insure property taxes are paid each year.


Tenants by the Entireties
A form of ownership by husband and wife whereby each owns the entire property. in the event of the death of one, the survivor owns the property, without probate.


Tenant in Common
Two or more entities owning an undivided interest in real estate. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship accrues to the remaining owners, but the property passes to the decedent's heirs.


Term
The period of time between the commencement date and termination date of a note, mortgage, legal document, or other contract.


Title
(1) A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy and dispose of real estate or an inheritable right or interest therein. The documentary evidence of ownership is the title deed, which specifies in whom the legal estate is vested and the history of ownership is the title deed (often referred to as the Chain of Title), which specifies in whom the legal estate is vested and the history of ownership and transfers. It can be acquired through purchase, inheritance, devise, gift, or through foreclosure of a mortgage; (2) The rights of ownership recognized and protected by the law.


Title Covenants
Covenants ordinarily inserted in conveyances and in transfers of title to real estate for the purpose of giving protection to the purchaser against possible insufficiency of the title received. A group of such covenants known as "common law covenants" includes: covenants against encumbrances; covenants for further assurance (in other words, to do whatever is necessary to rectify title deficiencies); covenants of good right and authority to convey; covenants of quiet enjoyment; covenants of seisin (possession); covenants of warranty. (See Warranty or Covenant.)


Title Exception
A specified item appearing in a title policy against which the title company does not insure.


Title Commitment
Also called "binder." A document issued by a title insurance company that contains the conditions under which a policy of title insurance will be issued.


Title Defect
(1) Any possible or patent claim or right outstanding in a chain of title that is adverse to the claim of ownership; (2) Any material irregularity in the execution or effect of an instrument in the chain of title.


Title Insurance Fees
Fees charged to provide insurance which protects the insured from claims which may arise by reason of defects in the title of the property. There are two types of title insurance: (1) Owner's Title Insurance, which protects the owner(s) against title defects and is usually written for the total purchase price (value) of the property; (2) Mortgagee Title Insurance, which protects the lender from title defects and is usually written for the amount of the loan.


Title Plant
Also called "abstract plant" in some areas. A geographically filed assemblage of title information that helps in expediting title examinations, such as copies of previous attorneys' opinions, abstracts, tax searches and copies or take-offs of the public records.


Title Search
An examination of public records to disclose the past and current facts regarding the ownership of a given piece of real estate. Most title examiners also attempt to obtain written proof from local government authorities, condominium and homeowner associations that there are no unrecorded assessments or amounts due that would cloud title.


Trust
A fiduciary relationship in which one person (the trustee) is the holder of the legal title to property (the trust property) subject to an equitable obligation (an obligation enforceable in a court of equity) to keep or use the property for the benefit of another person (the beneficiary).


Trust Deed (Trustee's Deed)
(1) An instrument used in many states, taking the place and serving the uses of a common-law mortgage, by which the legal title to reap property is placed on one or more trustees, to secure the repayment of money or the performance of other conditions. (2) an instrument executed by a Trustee on behalf of the Trust to convey ownership of property from the Trust to another entity, which differs from a Warranty Deed in that no warranty of title is included.


Trustee
An individual or a trust institution which holds the legal title to property for the benefit of someone else.


Truth in Lending Statement
A federal law requires a disclosure of credit terms using a standard format

U


Underwriter
(1) An insurance company that issues insurance policies to the public or to another insurer; (2) underwriting department of a lending institution which analyzes the risk and the settling of an appropriate rate and term for a mortgage on a property for borrowers.


Underwriting Fee
A one-time fee charged by the lender to analyze the loan application and supporting documentation to determine whether the loan will meet the lender's standards.


Unencumbered Property
Property that is free and clear of assessments, liens, easements, and exceptions of all kinds.


Unsecured Loan
Funds that have been extended with no pledge of collateral, or for which the value of the collateral is less than the loaned amount, or for which the security is not physically controlled by the lender for the full term of the loan.

V


Variable Interest Rate
Also called "flexible interest rate." An interest rate that fluctuates as the prevailing rate moves up or down. In mortgages, there are usually maximums as to the frequency and amount of fluctuation.


Vesting
Name(s) in which title to a property is held.


Veterans Administration (VA) Loans
An independent agency of the federal government created by the Servicemen's Readjustment Act to administer a variety of benefit programs designed to facilitate the readjustment of returning veterans to civilian life. Among the benefit programs is the home loan guaranty program designed to encourage lenders to offer long-term, low down payment financing to eligible veterans by guaranteeing the lender against loss, enabling veterans to buy a residence with little or no down payment.

W


Waiver
The voluntary and intentional relinquishment of a known right, claim or privilege.


Warranty
In a broad sense, an agreement or undertaking by a seller to be responsible for present or future losses of the purchaser occasioned by deficiency or defect in the quality, condition or quantity of the thing sold. In a stricter sense, the provision or provisions in a deed, lease or other instrument conveying or transferring an estate or interest in real estate under which the seller becomes liable to the purchaser for defects in or encumbrances on the title. (See Title Covenants.)


Warranty Deed
A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" (such as mortgage claims, tax liens, title claims, judgments or mechanic's liens) against it at the time of the conveyance of ownership, the grantee may hold the grantor liable.


Will
A testamentary disposition of property, usually in a form prescribed by law, naming beneficiaries who inherit property, that takes effect upon death. Also called a Last Will and Testament

X

Y


Yield
The total money earned on a loan or the term of the loan computed on an annual percentage basis.

Z


Zoning
Laws passed by local governments regulating the size, type, structure, nature and use of land or buildings.