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Sierra
Team Properties
(888) 766-5778
Charlene Gamet
(530) 386-0301 Cell
DRE License #01253885
Cindi Hoyt
(530) 412-3555 Cell
DRE License #0133170
Emily Heldman
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Glossary
of Real Estate Terms
A
Abstract
of Judgement
A summary of a court's judgment. When
recorded (in the county), a lien is created against
all real property owned by the judgement's debtor
as collateral for the judgment's creditor.
Abstract of Title
A historical summary of all of the recorded conveyances,
instruments, proceedings and facts that affect title
of the property with any other elements of the record.
Acceleration Clause
A clause in a loan or trust deed
that allows the lender or beneficiary
to demand immediate payment of the outstanding (entire unpaid) loan
balance. The most common reasons for accelerating a loan
are if the borrower defaults on the loan
or transfers title to another individual without
approval from the lender. This kind of
transfer is sometimes referred to as an alienation clause.
Acceptance
An offeree's consent and agreement to enter into a contract
and be bound by the terms of the offer.
Acknowledgement
A declaration by the person who has signed a document that such
signature is a voluntary act made before a duly authorized person.
Additional Principal Payment
A payment by a borrower of more than the principal
amount due in order to reduce the remaining balance on the loan.
Adjustable-Rate Mortgage (ARM)
A mortgage loan that allows the interest to change periodically,
according to fluctuations of an index and a fixed
offset in an index.
Adjustment Date
The date the interest rate changes on an adjustable-rate
mortgage (ARM).
Agency
The legal relationship between a principal and his agent
from a contract in which the principal engages the agent
to perform certain acts on the principal's behalf.
Agency Disclosure
A written explanation to be signed by the prospective buyer or seller
explaining the broker's role in the transaction.
Agent
A licensed real estate broker or salesperson that
undertakes to transact some business or manage an affair for an
individual. For example an owner engages a broker
to act as an agent in selling real property.
Alienation Clause
A clause in a loan or note that
causes immediate payment of the entire loan balance upon transfer of title
to another individual.
Amenity
A feature of real property that enhances its
attractiveness, desirability and increases the occupant's or user's
satisfaction. Natural amenities include a desirable location
near water and scenic views. Human-made amenities include
modern appliances, fixtures, swimming pools and tennis courts.
Amortization
The gradual payment of a debt by periodic
installments. 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 Term
The amount of time required to amortize (retire)
the loan. The amortization term is expressed as a number of
months. For example, a 30-year fixed-rate mortgage,
the amortization term is 360 months.
Amortize
Payment of a mortgage with regular payments that
cover both principal and interest.
Annual Cap
The limit on the amount of adjustment in the interest rate
on an Adjustable-rate Mortgage.
Annual Mortgage Statement
A report sent to the mortgagor each year.
The report shows how much was paid in principal and interest during the
year, as well as the remaining mortgage loan balance at the end of the
year.
Annual Percentage Rate (APR)
This is a value created according to a government formula (Truth-in-Lending
Law) intended to reflect the true annual cost of borrowing, expressed
as a percentage on an annual basis. The cost of a mortgage
stated as a yearly rate; includes interest, mortgage insurance,
and loan origination fee (points).
The APR is always higher than the actual interest rate
on your loan.
Annuity
An amount paid yearly or at other regular intervals, often on a
guaranteed dollar basis.
Application
A form used to apply for a mortgage loan, containing information about
a borrower's income, savings, assets, debts,
proposed security, etc.
Apportionment
The prorating of property taxes expenses such as property taxes and
insurance between buyer and seller.
Appraisal
A written analysis of the estimated or opinion of value for a real
property which is primarily based on an analysis of comparable
sales of similar homes nearby.
Appraised Value
An written justification (opinion) of a property's fair
market value, based on an appraiser's knowledge, experience,
and analysis of the property primarily based on an analysis of comparable
sales of similar homes nearby.
Appraiser
A person qualified by education, training, and experience to estimate
the value of real property and personal
property.
Appreciation
The increase in the value of a property due to changes in market
conditions (supply and demand) such as inflation as
well as property repairs and modernization.
Appurtenance
Something that is outside the property but is considered part of the
property and adds value, such as a right to cross another's land.
As Is
Without guarantees as to condition, as in a
sale. A buyer or tenant accepts premises as they are,
including physical defects except latent defects.
Asking Price
The list price that an owner would like to receive.
Assessed Value
The valuation placed on property by a public tax assessor for purposes
of taxation.
Assessment
Placing a value on property for the purpose of taxation. The
County Tax Collector usually places a value on property for the purpose
of computing real property taxes. Assessment also refers to a
levy against property for a special purpose, such as utility
assessments or association fees.
Assessor
A public official who establishes the value of a property for the
purpose of taxation.
Asset
Anything of monetary value. Assets include real
property, personal property, and
enforceable claims against others. Assets also include bank
accounts, stocks, bonds, mutual funds, etc.
Assignment
The transfer of a right or contract, such as a mortgage
from one person to another.
Assumable Loan
A mortgage loan that can be taken over ("assumed") by the buyer when a
home is purchased.
Assumption
The transfer of the seller's existing mortgage to
the buyer.
Assumption Clause
A provision in an assumable mortgage that allows a buyer to assume
responsibility for the mortgage from the seller.
Attachment
Seizure of property by court order.
B
Backup Contract
A contract to buy
real estate that becomes effective if a prior contract
fails to be completed.
Balloon Mortgage
A mortgage that has equal monthly payments that
will amortize over a stated term. This mortgage
requires that the entire remaining balance (ballon payment) must be
paid at a specified time.
Balloon Payment
The final lump sum payment that is due at the maturity date of a balloon
mortgage. This payment is greater than the
preceding installment payments and pays the loan in
full.
Bankruptcy
The financial inability to pay one's debts when
due. A person, firm, or corporation through a court
proceeding, can restructure debt payments or be
relieved from the payment of debts after the
surrender of assets to a court-appointed trustee
or can be allowed time to restructure the financial affairs to fully
pay the debts. A bankruptcy does not
discharge obligations when the loan is secured by a
deed of trust.
Before Tax Income
Income before taxes are deducted.
Beneficiary
The person or corporation that has the benefit of a trust.
Also, the security for the lender
of a note and deed of trust.
Bid
The amount someone offers to pay.
Bill of Sale
A written document that transfers title of personal
property from seller to buyer such as furniture or portable
appliances.
Binder
A preliminary agreement, secured by the payment of an earnest
money deposit, which a buyer offers to purchase real estate.
Biweekly Mortgage
A mortgage in which you make payments every two
weeks instead of one nominal monthly payment. The 26 (or
possibly 27) biweekly payments are each equal to one-half of the
monthly payment that would be required. The result for the
borrower is higher average payments over the same period of time with
substantial savings in interest.
Blanket
Covers two or more similar properties such as a blanket mortgage
covering more than one parcel of land.
Board of Realtors©
A local group of real estate licensees who are members of the state and
National Association of Realtors©.
Bona Fide
In good faith, without fraud.
Bond
An interest-bearing certificate of debt with a maturity
date. An obligation of a government or corporation.
A real estate bond is a written obligation usually secured by a mortgage
or a deed of trust.
Boot
Unlike property included to balance the value of like properties
exchanged.
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. It is a form of second trust that is collateralized
by the borrower's present home (which is usually for sale) in a manner
that allows the proceeds to be used for closing on
a new house before the present home is sold.
Broker
A person who, for a commission or a fee, brings parties together and
assists in negotiating contracts between them.
Building Code
Local regulations established by governments that control minimum
standards for design, construction, and materials used in construction.
Building Permit
Permission granted by a local government to build a specfic structure
or reconfigure an existing building at a particular site.
Buy Down
The additional payment of "discount points" to a
lender in exchange for a reduced interest rate.
C
Call Option
A provision in the mortgage that gives the mortgagee
the right to call (accelerate) the mortgage due and
payable at the end of a specified period for whatever reason.
Cap
A provision of an adjustable-rate mortgage (ARM)
that limits how much the interest rate or mortgage
payments may increase or decrease.
Cash-out Refinance
A refinance transaction in which the amount of money received from the
new loan exceeds the total of the money needed to
repay the existing first mortgage, closing
costs, points, and the amount required to
satisfy any outstanding subordinate mortgage liens.
In the refinance transaction the borrower receives additional cash that
can be used for any purpose.
Caveat Emptor
"Let the buyer beware." The buyer must examine the goods or
property and buy at his own risk, except for latent defects.
Certificate of Deposit Index
An index that is used to determine interest
rate changes for certain ARM
plans. It represents the weekly average of secondary
market interest rates on six-month
negotiable certificates of deposit.
Certificate of Eligibility
A document issued by the federal government certifying a veteran's
eligibility for a Department of Veterans Affairs (VA) mortgage.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA)
that establishes the maximum value and loan amount
for a VA mortgage.
Certificate of Sale
A document issued to a buyer at a judicial sale, such as a foreclosure
of a mortgage.
Certificate of Title
A statement provided by an abstract company, title company,
or attorney stating that the title to real estate
is legally held by the current owner.
Chain of Title
The history of all of the documents that transfer title
to a parcel of real property, starting with the
earliest existing document and ending with the most recent.
Clear Title
A title that is free of liens
or legal questions as to ownership of the property.
Closing
The final accounting of a sale normally given by escrow
to the buyer and seller. In some areas, a meeting at which a
sale of a property is finalized by the buyer signing the mortgage
documents and paying closing costs. This
event is also called "settlement".
Closing Costs
Expenses (over and above the price of the property) incurred by buyers
and sellers in transferring ownership of a property. Closing
costs normally include an origination fee, an
attorney's fee, taxes, an amount placed in escrow,
and charges for obtaining title insurance and a survey.
Closing costs percentage will vary according to the area of the
country; lenders or Realtors®.
Closing 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
statement define the seller's net proceeds and the buyer's net payment
at closing.
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 a
quitclaim deed, release, or court
action.
Co-borrower
An additional individual who is both obligated on the loan
and is on title to the property.
Collateral
An asset (such as a car or a home) that guarantees
the repayment of a loan. The borrower
risks losing the asset if the loan
is not repaid according to the terms of the loan contract.
Collection
The efforts used to bring a delinquent mortgage
current and to file the necessary notices to proceed with foreclosure
when necessary.
Commission
The fee charged by a broker or agent
for negotiating a real estate or loan transaction. A
commission is generally a percentage of the price of the property or loan.
Commitment Letter
A formal offer by a lender stating the terms under
which it agrees to lend money to a home buyer. Also known as
a "loan commitment".
Common Area Assessments
Levies against individual unit owners in a condominium
or planned unit development (PUD) project for
additional capital to defray homeowners' association
costs and expenses and to repair, replace, maintain, improve, or
operate the common areas of the project.
Common 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 the United States.
Community Property
In some western and southwestern states, a form of ownership under
which property acquired during a marriage is presumed to be owned
jointly unless acquired as separate property of
either spouse.
Comparable Sales
Comparables are properties that are similar to the property under
consideration. They have approximately the same size,
location, and amenities and have recently been
sold. Comparables help the appraiser
determine the approximate fair market value of the
subject property.
Compound Interest
Interest paid on the original principal balance and on the accrued and
unpaid interest.
Condition(s)
Provisions(s) in a contract that some or all terms
of the contract will be altered or cease to exist
upon a certain event.
Condition Precedent
A condition that must be met or fulfilled before title
can be transferred.
Conditional Offer
Purchase contract tendered to the seller that stipulates one or more
requirements to be satisfied before the buyer is obligated to buy.
Conditional Sale Contract
A contract for the sale of property where title
remains vested in the seller and delivery is to be
made to the buyer when conditions of the contract
have been met or fulfilled.
Conditions, Covenants, and Restrictions
(CCRs)
Rules written into the deed or bylaws that define
how the property may be used. For example, they prevent
property owners from making changes to their individual properties that
could result in an unattractive setting that could adversely affect the
other owners.
Condominium
A real estate project in which each unit owner has title
to a unit in a building, an undivided interest in the common
areas of the project, and sometimes the exclusive use of
certain limited common areas.
Condominium Conversion
Changing the ownership of an existing building (usually a rental
project) to the condominium form of ownership.
Conforming Loan
A mortgage loan that is eligible for purchase by FNMA or FHLMC.
Consideration
Something of value. Most often money but can be other objects
or thing of value.
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 certain things.
Conventional Mortgage
A mortgage that is not insured or guaranteed by the
federal government. Savings and loan associations and banks
offer conventional loans. Conventional loans also feature a
fixed interest rate and a fixed amorization
term.
Convertibility Clause
A provision in some adjustable-rate mortgages (ARMs)
that allows the borrower to change the ARM to a fixed-rate
mortgage at specified timeframes after loan
origination.
Convertible ARM
An adjustable-rate mortgage (ARM) that can be
converted to a fixed-rate mortgage under specified
conditions.
Conveyance
A written document that transfers title from one
person to another person. A deed, bill
of sale and an assignment are all conveyances.
Cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit
housing complex own shares in the cooperative corporation that owns the
property, giving each resident the right to occupy a specific apartment
or unit.
Corporate Relocation
Arrangements under which an employer moves an employee to another area
as part of the employer's normal course of business.
Cost Of Funds Index (COFI)
An index that is used to determine interest
rate changes for certain adjustable-rate mortgage
(ARM) plans. It represents the weighted-average
cost of savings, borrowings, and advances of the 11th District members
of the Federal Home Loan Bank of San Francisco.
Credit
An agreement in which a borrower receives something of value in
exchange for a promise to repay the lender at a
later date.
Credit History
A record of an individual's open and fully repaid debts.
A credit history helps a lender, to determine
whether a potential borrower has a history of repaying debts
in a timely manner.
Credit 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 credit worthiness.
Credit Repository
An organization that gathers, records, updates, and stores financial
and public records and information about the payment records of
individuals who are being considered for credit.
D
Debit
In a closing statement an item that is charged to a
party.
Debt
An amount owed to another.
Deed
A written document properly signed and delivered that conveys title
to real property.
Deed In Lieu of Foreclosure
A deed given by a mortgagor to the mortgagee
to satisfy a debt and avoid foreclosure.
Also called a "voluntary conveyance."
Deed of Trust
The document used in many states instead of a mortgage;
title is conveyed to a trustee to
secure the repayment of the loan.
Deed Restriction
A clause in a deed that limits the use of the land.
Default
Failure to make mortgage payments on a timely basis
or to comply with other requirements of a mortgage.
Deficiency Judgement
A judgement given when the security
pledge for a loan does not satisfy the debt
upon default.
Delinquency
Failure to make mortgage payments when mortgage
payments are due.
Deposit
A sum of money given to bind the sale of real estate, or a sum of money
given to ensure payment or an advance of funds in the processing of a loan.
Depreciation
A decline in the value of property; the opposite of appreciation.
Description
A formal depiction of the diminisions and location of a property.
Disclosure Statement
A statement required by law, in which sellers of particular kinds of
property, or under certain circumstances, must reveal specified
information to potential buyers.
Discount
To sell a promissary note for less than its face
value. This occurs most frequently with second and third
trust deed notes.
Discount Points
Amount paid to a lender at the time of loan
origination to account for the difference in the market interest
rate and the lower face rate of the note. A "point"
is one percent of the loan amount.
Documentary Transfer Tax
A tax on the transfer of real property.
Counties and cities impose this tax to collect revenue from the sale of
real property. The
seller usually pays this tax.
Down Payment
The part of the purchase price of a property that the buyer pays in
cash and does not finance with a mortgage.
Dual Agency
The situation in which an agent represents more
than one party to a transaction. An example is a real estate agent
representing both the buyer and seller.
Due-On-Sale Clause
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
A deposit made by the potential home buyer to show
that he or she is serious about buying the house.
Easement
A right of way giving persons other than the owner access to or pass
through a property.
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.
Eminent Domain
The right of a government or public utility to acquire private property
for public use upon payment of its fair market value.
Eminent domain is the basis for condemnation proceedings.
Encroachment
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, unpaid taxes, or deed
restrictions.
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.
Escape Clause
A provision in a contract that allows one or more
of the parties to cancel all or part of the contract
if certain events or situations do or do not happen.
Escrow
An item of value, money, or documents deposited with a third party to
be delivered upon the fulfillment of a condition.
Escrow Account
The account in which a mortgage servicer holds the borrower's escrow
payments prior to paying property expenses.
Escrow Analysis
The periodic examination of escrow accounts to
determine if current monthly deposits will provide sufficient funds to
pay taxes, insurance, and other bills when due.
Escrow Collections
Funds collected by the servicer and set aside in an escrow
account to pay the borrower's property taxes, mortgage
insurance, and hazard insurance.
Escrow Disbursements
The use of escrow funds to pay real estate taxes, hazard
insurance, mortgage insurance, and other
property expenses as they become due.
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 title.
Exclusive Listing
A written contract that gives a licensed real
estate agent the exclusive right to sell a property for a
specified time, but reserving the owner's right to sell the property
alone without the payment of a commission.
Executor
A person named in a will to administer an estate. The court
will appoint an administrator if no executor isnamed.
"Executrix" is the feminine form.
Extension
An agreement between two parties to extend the time period specified in
a contract.
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
Fannie Mae is a New York Stock Exchange company and the largest
non-bank financial services company in the world. It operates
pursuant to a federal charter and is the nation's largest source of
financing for home mortgages. Over the
past 30 years, Fannie Mae has provided nearly $2.5 trillion of mortgage
financing for over 30 million families.
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.
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). Also known as a government mortgage.
Fiduciary
One who acts, in a legal role, in the best interest of others.
Firm Commitment
A lender's agreement to make a loan to a specific
borrower on a specific property.
First Mortgage
A mortgage that is the primary lien
against a property.
Fixed-Rate Mortgage (FRM)
A mortgage in which the interest rate
does not change during the entire term of the loan.
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
The loss of money, property, rights, or privileges due to a breach of
legal obligation.
G
Gain
An increase in money or property value.
Government Insured 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).
Government National Mortgage
Association (GNMA)
A government-owned corporation within the U.S. Department of Housing
and Urban Development (HUD). Created by Congress on September
1, 1968, GNMA assumed responsibility for the special assistance loan
program formerly administered by Fannie Mae. Nicknamed Ginnie
Mae.
Grandfather Clause
When a law is changed or a new law is passed, those whose specific
activity was legal under the previous law are allowed to continue, by
virtue of this provision.
Grantee
The person to whom an interest in real property is
conveyed.
Grantor
The person conveying an interest in real property.
H
Half
Bath
A room in a residence that contains a toilet and wash basin but no
bathing facilities, such as a shower or bathtub.
Hazard Insurance
Insurance coverage that
compensates for physical damage to a property from fire, wind,
vandalism, or other hazards.
Home Equity Conversion Mortgage (HECM)
A special type of mortgage that enables older home
owners to convert the equity they have in their homes into cash, using
a variety of payment options to address their specific financial
needs. 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. Sometimes
called a reverse mortgage.
Home Equity Line of Credit
A mortgage loan, which is usually in a subordinate
position, that allows the borrower to obtain multiple advances of the
loan proceeds at his or her own discretion, up to an amount that
represents a specified percentage of the borrower's equity in a
property.
Home Inspection
A thorough inspection that evaluates the structural
and mechanical condition of a property. A satisfactory home
inspection is often included as a contingency by
the purchaser.
Homeowners' 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 that covers repairs to
specified parts of a house for a specific period of time. It
may be provided by the builder or property seller as a condition
of the sale.
Homestead
A home that the owner has recorded a declaration of
homestead. The home is protected against judgements
up to a specified amount.
Housing Expense Ratio
The percentage of gross monthly income that goes toward paying housing
expenses.
HUD-1 Statement
A document that provides an itemized listing of the funds that are
payable at closing. Items that appear on
the statement include real estate commissions, loan
fees, points, and initial escrow amounts.
Each item on the statement is represented by a separate number within a
standardized numbering system. The totals at the bottom of
the HUD-1 statement define the seller's net proceeds and the buyer's
net payment at closing. The blank form
for the statement is published by the Department of Housing and Urban
Development (HUD). The HUD-1 statement is also known as the closing
statement or "settlement sheet."
I
Impound
Account
An account that collects and hold funds for the payment of taxes and insurance
on the property. An impound account is usually required by
the lender when the borrower's down
payment is less than 20%. Funds are usually
collected at the same time as loan payments.
Improved Land
Land that has been partially or fully developed for use.
Income Property
Real estate developed or improved so that it generates rental income.
Index
A number used to compute the interest rate for an adjustable-rate
mortgage (ARM). The index is generally a published
number or percentage, such as the average interest rate
or yield on Treasury bills. A margin is added to the index to
determine the interest rate that will be charged on
the ARM.
Inflation
An increase in the amount of money or credit
available in relation to the amount of goods or services available,
which causes an increase in the general price level of goods and
services. Over time, inflation reduces the purchasing power
of a dollar, making it worth less.
Initial Interest Rate
The original interest rate of the mortgage
at the time of closing. This rate changes
for an adjustable-rate mortgage (ARM).
Sometimes known as "start rate" or "teaser."
Inspection
A physical scrutinizing review of property or of documents.
Insurable Title
A property title that a title insurance
company agrees to insure against defects and disputes.
Insurance
A contract that provides compensation for specific
losses in exchange for a periodic payment. An individual contract
is known as an insurance policy, and the periodic payment is known as
an insurance premium.
Insurance Binder
A document that states that insurance is
temporarily in effect. Because the coverage will expire by a
specified date, a permanent policy must be obtained before the
expiration date.
Insured Mortgage
A mortgage that is protected by the Federal Housing
Administration (FHA) or by private mortgage insurance.
If the borrower defaults on the loan,
the insurer must pay the lender the lesser of the
loss incurred or the insured amount.
Interest Rate
The percentage of a sum of money charged for its use. The
rate of interest for a mortgage is usually paid
monthly.
Interest Rate Ceiling
For an adjustable-rate mortgage (ARM), the maximum interest
rate, as specified in the mortgage note.
Interest Rate Floor
For an adjustable-rate mortgage (ARM), the minimum interest
rate, as specified in the mortgage note.
Investment Property
A property that is not occupied by the owner.
IRA (Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred
contributions to a personal retirement fund. Individuals can place IRA
funds in bank accounts or in other forms of investment such as stocks,
bonds, or mutual funds.
J
Joint Tenancy
A form of co-ownership that gives each of two or more tenants equal
interest and equal rights in the property, including right of
survivorship.
Judgment
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.
Judgment Lien
A lien on the property of a debtor resulting from
the decree of a court.
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.
Jumbo Loan
A loan that exceeds Fannie Mae's legislated
mortgage amount limits. Also called a nonconforming loan.
L
Late
Charge
The penalty a borrower must pay when a payment is made after the due
date (usually 15 days).
Latent Defects
Flaws that are hidden but are apt to surface later.
Lease
A written agreement between the property owner and a tenant that
stipulates the conditions under which the tenant may possess the real
estate for a specified period of time and amount of rent.
Lease Option
An alternative financing option that allows home buyers to lease
a home with an option to purchase. 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 property description, recognized by law, that is sufficient to locate
and identify the property without oral testimony.
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".
Letter of Commitment
Officical notification to a borrower of the lender's
intent to grant a loan. Norminally, the
terms of the loan are specified and a date for closing
is established.
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.
Lien
A legal claim against a property that must be paid off when the
property is sold.
Lifetime Cap
For an adjustable-rate mortgage (ARM), the limit
that the interest rate can increase or decrease
over the life of the loan.
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.
Listing
A written contract between a principal and an agent,
authorizing the agent to perform certain services
for the principal involving the principal's proprerty.
Loan
A sum of borrowed money (principal) that is
generally repaid with interest.
Loan Application
A document required by the lender prior to making
the loan commitment. The loan application includes
information such as loan amount, term of the loan, and the borrower's
financial and employment data.
Loan Approval
The decision by a lender to extend credit
in a specified amount and under specified terms.
Loan Origination
The process by which a mortgage lender brings into existence a mortgage
secured by real property.
Loan-To-Value (LTV)
The relationship between the principal balance of
the mortgage and the appraised value
(or sales price if it is lower) of the property. For example,
a $300,000 home with an $240,000 mortgage has a LTV percentage of 80
percent.
Lock-In
A written agreement in which the lender guarantees
a specified interest rate if a mortgage
closes within a set period of time. The lock-in usually
specifies the number of points to be paid at closing.
Lock-In Period
The time period during which the lender has
guaranteed an interest rate to a borrower.
M
Margin
For an adjustable-rate mortgage (ARM), the amount
that is added to the index to establish the interest
rate on each adjustment date, subject to any limitations on
the interest rate change.
Market Price
The actual price paid in an actual transaction.
Market Value
The theoretical highest price a buyer would pay, and the lowest price a
seller would accept.
Maturity
The date on which the principal balance of a loan, bond,
or other financial instrument becomes due and payable.
Mechanic's Lien
A lien given by law upon improvements and land, as security
for the payment of labor performed and materials furnished for
improvements.
Megan's Law
A federal law requiring states to develop programs to notify
communities when convicted sex offenders are released into their
neighborhood.
Merged Credit Report
A credit report that contains information from
three credit repositories. When the report is created, the
information is compared for duplicate entries. Any duplicates
are combined to provide a summary of a your credit.
Modification
The act of changing any of the terms of a document such as a mortgage.
Mortgage
A legal document that pledges a property to the lender
as security for payment of a debt.
Mortgage Banker
A company that originates mortgages exclusively for resale in the secondary
market.
Mortgage Broker
An individual or company that brings borrowers and lenders
together for the purpose of loan origination.
Mortgage brokers typically require a fee or a commission
for their services.
Mortgagee
The lender in a mortgage agreement.
Mortgage Insurance
A contract that insures the lender
against loss caused by a mortgagor's default on a
government mortgage or conventional mortgage. Mortgage
insurance can be issued by a private company or by a government agency
such as the Federal Housing Administration (FHA).
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 company.
Mortgage Life Insurance
A type of term life insurance often bought by mortgagors.
The amount of coverage decreases as the principal balance
declines. In the event that the borrower dies while the
policy is in force, the debt is automatically
satisfied by insurance proceeds.
Mortgagor
The borrower in a mortgage agreement.
Motivated Seller
One who urgently needs to dispose of property.
Multidwelling Units
Properties that provide separate housing units for more than one
family, although they secure only a single mortgage.
Multiple Listing
An arrangement among a group of real estate brokers
that agree in advance to provide information about their listings
to others and also agree that commissions on sales
from these listings will be shared.
Multiple Listing Service (MLS)
An association of real estate brokers that agree to
share listings with one another. The
listing broker and selling broker share in the commission.
N
Negative Amortization
A gradual increase in mortgage debt
that occurs when the monthly payment is not large enough to cover the
entire principal and interest due. The
amount of the shortfall is added to the remaining balance to create
"negative" amortization.
Negotiation
The process of bargaining that precedes an agreement.
Successful negotiation generally results in a contract
between the parties.
Net Worth
The value of all of a person's assets, including
cash, minus all liabilities.
No Cash-Out Refinance
A refinance transaction in which the new mortgage
amount is limited to the sum of the remaining balance
of the existing first mortgage, closing
costs (including prepaid items), points,
the amount required to satisfy any mortgage liens
that are more than one year old (if the borrower chooses to satisfy
them), and other funds for the borrower's use (as long as the amount
does not exceed 1 percent of the principal amount
of the new mortgage).
Nonconforming Use
A land use that violates zoning regulations or codes but is allowed to
continue because it began before the zoning restriction was enacted.
Notary Public
An officer who is authorized to take acknowledgements to certain types
of documents, such as deeds, contracts
and mortgages, and before whom affidavits may be
sworn.
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
Offer
An expression of willingness to purchase a property at a specified
price and terms. In real estate an offer is made by either
party to the other party.
Open House
A method of showing a home for sale whereby the home is open for
inspection for interested buyer's.
Option to Purchase
A contract that gives one the right, but not the
obligation, to buy a property, within a certain time, for a specified
price, and subject to specified conditions.
Ordinances
Municipal (local) rules governing the use of land.
Original Principal Balance
The total amount of principal owed on a mortgage
before any payments are made.
Origination Fee
A fee paid to a lender for processing a loan
application. The origination fee is stated in the
form of points. One point
is 1 percent of the mortgage amount.
Owner Financing
A property purchase transaction in which the property seller provides
all or part of the financing.
P
Partial
Payment
A payment that is not sufficient to cover the scheduled monthly payment
on a mortgage loan.
Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate
mortgage (ARM) or a graduated-payment adjustable-rate
mortgage (GPARM). Generally, the payment change date occurs
in the month immediately after the adjustment date.
Periodic Payment Cap
For an adjustable-rate mortgage (ARM), a limit on
the amount that payments can increase or decrease during any one
adjustment period.
Periodic Rate Cap
For an adjustable-rate mortgage (ARM), 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.
Permit
A document issued by a government authority that allows specific action
to be taken such as construction or modification of a building or the
right to occupy a building.
Personal Property
Property that is not permanently fixed to land.
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 project or subdivision that includes common areas
which is owned and maintained by a homeowners' association
for the benefit and use of the individual PUD unit owners.
Point
A one-time charge by the lender for originating a loan.
A point is 1 percent of the amount of the mortgage
or loan.
Power of Attorney
A legal document that authorizes another person to act on one's
behalf. A power of attorney can grant complete authority or
can be limited to certain acts and/or certain periods of time.
Preforeclosure Sale
A procedure in which the investor allows a mortgagor
to avoid foreclosure by selling the property for
less than the amount that is owed to the investor.
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 in
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
The process of determining how much money a prospective home buyer will
be eligible to borrow before he or she applies for a loan.
Prime Rate
The interest rate that banks charge to their
preferred customers. Changes in the prime rate influence
changes in other rates, including mortgage interest
rates.
Principal
The amount borrowed or remaining unpaid. The part of the
monthly payment that reduces the remaining balance
of a mortgage.
Principal Balance
The outstanding balance of principal on a mortgage.
The principal balance does not include interest or any other charges.
Principal, Interest, Taxes, and
Insurance (PITI)
The four components of a monthly mortgage payment. 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 mortgageinsurance
and hazard insurance.
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 PMI 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.
Prorate
To allocate between seller and buyer their proportionate share of the
obligation paid or due.
Public Auction
A meeting in an announced public location to sell property to repay a mortgage
that is in default.
Purchase 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. They consist of
two separate calculations: a housing expense as a percent of income
ratio and total debt obligations as a percent of income ratio.
Quitclaim Deed
A deed that transfers without warranty whatever
interest or title a grantor may
have at the time the conveyance is made.
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.
Real Estate Agent
A person licensed to negotiate and transact the sale of real estate on
behalf of the property owner.
Real Estate Owned (REO)
Property acquired by a lender through foreclosure
and held in inventory.
Real Estate Settlement Procedures Act
(RESPA)
A consumer protection law that requires lenders to
give borrowers advance notice of closing costs.
Real Property
Land and appurtenances, including anything of a
permanent nature such as structures, trees, minerals, and the interest,
benefits, and inherent rights thereof.
Realtor®
A real estate broker or sales agent who holds
active membership in a local real estate board that is affiliated with
the NATIONAL ASSOCIATION OF REALTORS®.
Recission
The cancellation or annulment of a transaction or contract
by the operation of a law or by mutual consent. Borrowers
usually have the option to cancel a refinance transaction within three
business days after it has closed.
Recorder
The public official who keeps records of transactions that affect real
property in the area. Sometimes known as a "Registrar of
Deeds" or "County Clerk."
Recording
The noting in the registrar's office of the details of a properly
executed legal document, such as a deed, a mortgage
note, a satisfaction of mortgage, or an extension
of mortgage, thereby making it a part of the public
record. Recording gives constructive notice. The
fee for recording is paid by the person benefiting by the recording.
Refinance Transaction
The process of paying off one loan with the
proceeds from a new loan using the same property as
security.
Rehabilitation
The restoration of a property to satisfactory condition without
drastically changing floor plan or architectural style.
Remaining Balance
The amount of principal that has not yet been
repaid.
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. Lenders' formal repayment plans are called "relief
provisions."
Replacement Reserve Fund
A fund set aside for replacement of common property in a condominium,
PUD, or cooperative project --
particularly which has a short life expectancy, such as carpeting,
furniture, etc.
REO
"Real
Estate Owned" is a property that is owned by a lender (usualy a bank)
after an unsuccessful sale at foreclosure public auction. View
current listings for REO properties by clicking here.
Repo
Slang for reposition. A property that a lender
owns after a foreclosure sale.
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 Egress
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.
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.
Sale Pending
A real estate transaction for which a contract has
been signed and accepted but the sale has not closed.
Second Mortgage
A mortgage that has a lien
position subordinate to the first mortgage.
Secondary Market
The buying and selling of existing mortgages.
Secured Loan
A loan that is backed by collateral.
Security
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
Property that is not community property.
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
market.
Servicing
The collection of mortgage payments from borrowers and related
responsibilities of a loan servicer.
Short Sale
A sale of property in which the sale price is less then the amount
owned on the mortgage. View
current listings for short sale properties by clicking here.
Subdivision
A housing development that is created by dividing a tract of land into
individual lots for sale or lease.
Subordinate Financing
Any mortgage or other lien that
has a priority that is lower than that of the first mortgage.
Survey
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
Tenancy in Common
A type of joint tenancy in a property without right
of survivorship.
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
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
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 Search
A check of the title records to ensure that the seller is the legal
owner of the property and that there are no liens
or other claims outstanding.
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 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.
Trust Deed
A deed that the trustor conveys
title to a trustee
to be held in trust as security for a loan.
Trustee
A fiduciary who holds or controls property for the
benefit of another.
Trustor
One who deeds property to a trustee to be held as security
until the loan to the lender
has been fulfilled under the terms of the deed of trust.
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 Family 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.
U
Underwriting
The process of evaluating a loan application to
determine the risk involved for the lender.
Underwriting involves an analysis of the borrower's creditworthiness
and the quality of the property itself.
Unlawful Detainer Action
A lawsuit to evict a tenant or former owner who unlawfully remains in
possession of real property.
Usury
An illegally high interest rate.
Unsecured Loan
A loan that is not backed by collateral.
V
VA Mortgage
A mortgage that is guaranteed by the Department of
Veterans Affairs (VA). Also known as a government
mortgage.
Vendee
A purchaser; the buyer.
Vendor
A seller.
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.
Veterans Affairs (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.
Voluntary Lien
Any lien placed on property with the consent of, or
result of, a voluntary act of the owner.
W
Warranty Deed
A deed used to convey real property
that contains warranties of title and quiet
possession. The grantor agrees to defend
the property against lawful claims of third parties.
What-If Analysis
An affordability analysis that is based on a what-if
scenario. A what-if analysis is useful if you do not have
complete data or if you want to explore the effect of various changes
to your income, liabilities, or available funds or
to the qualifying ratios or down payment expenses that are used in the
analysis.
What-If Scenario
A change in the amounts that is used as the basis of an affordability
analysis. A what-if scenario can include changes to monthly
income, debts, or down payment
funds or to the qualifying ratios or down payment
expenses that are used in the analysis. You can use a what-if
scenario to explore different ways to improve your ability to afford a
house.
Wraparound Mortgage
A mortgage that includes the remaining
balance on an existing first mortgage
plus an additional amount requested by the mortgagor.
Full payments on both mortgages are made to the
wraparound mortgagee, who then forwards the payments on the first mortgage
to the first mortgagee.
Z
Zoning
A local government's authority designating specific uses for real
property. An example is "R1" for single family
dwellings.
Zoning Ordinance
A local government's act setting forth regulations designating specific
regulations for land useage.
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