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Abstract or title search
The process of reviewing all
publicly recorded transactions to determine whether any title defects exist that could interfere with
a clear transfer of property ownership.
Accelerated cost recovery system
A tax calculation that provides greater depreciation in the early years of ownership.
Accelerated depreciation
A bookkeeping method that provides faster property depreciation in the early
years of ownership.
Acceleration clause
A clause that provides the mortgagee (lender) the right to demand
immediate repayment of the loan balance upon default of the
mortgagor (borrower). "Acceleration" is also triggered by the
due on sale clause (demands immediate repayment if the home is
sold).
Acceptance
The seller's written approval of a buyer's offer.
Addendum
An addition or change to an existing contract between two (2) or
more parties.
Additional principal payment
Additional funds outside of the scheduled loan payment to reduce the
principal balance and shorten the term of the loan.
Adjustable rate
mortgage (ARM)
A home loan with an interest rate that periodically adjusts to
reflect changes in a specified financial index.
Adjustment period
The amount of time between interest rate adjustments in an
adjustable-rate mortgage.
Agency closing
When a lender uses a title company or other firm as
an agent to complete a loan.
Agency disclosure
Most states require agents who act for both buyers or sellers to
disclose who they are working for in the transaction.
Agreement of sale
A legal document the buyer and seller approve detailing
the price & terms of the transaction.
Alienation clause
A loan provision requiring the borrower to pay the balance of the
loan in a lump sum if the property is sold or transferred.
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Alternative mortgage
A home loan program that does not conform to standard fixed-rate
mortgage terms.
Amortization
The process of paying the principal and interest on a loan through
regularly scheduled payments.
Amortization tables
Mathematical tables used to calculate a borrower's
monthly payment.
Amortization term
The length of time required to amortize the mortgage loan expressed
as a number of months. For example, 360 months is the amortization
term for a 30-year fixed-rate mortgage.
Annual mortgagor statement
An annual statement to borrowers detailing the remaining principal
balance and amounts paid for taxes and interest throughout the year.
Annuity
The payment of a fixed sum at regular intervals.
Application fee
An application fee
is charged by some lenders and may include charges for items such as property appraisal and/or a credit report
unless
those fees are reported separately.
Appraisal
A professional opinion of the value of a property by a licensed
real estate appraiser.
Appraisal fee
The fee that a professional real estate appraiser charges to
appraise, or estimate the market value of, a property.
Appraisal report
A written report on the value of a property based on recent
sales of comparable property in the area.
Appraised value
A professional opinion of the current market value of a property.
Appreciation
An increase in the value of a home or other property.
APR (annual percentage rate)
A measure of interest that expresses the cost of a mortgage as a
yearly rate on the loan balance. The APR assumes the loan is held
for its full term. For adjustable-rate loans, the APR assumes the
loan's index doesn't change from its initial value.
ARM (adjustable rate mortgage)
A home loan with an interest rate that periodically adjusts to
reflect changes in a specified financial index.
ARM index
A publicly published number used as the basis for adjusting the interest rates
of
adjustable rate loans (ARM).
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Assessed value
A tax assessor's determination of the value of a home in order to
calculate a tax base.
Assessment
The estimated value of a piece of real estate or a special levy placed in addition to taxes.
Assets
Items of value which include cash, real estate, securities, and
investments.
Assignment
The transfer of rights to pay a debt from one party to another, with
the original party remaining liable for the debt if the second party
defaults.Assignor
A person who transfers rights and interests of a property.
Assumable mortgage
A mortgage that can be transferred to another borrower.
Assumption
clause
A provision that allows a buyer to take responsibility for the
mortgage from a seller.
Assumption fee
A fee the lender charges to process new records for a buyer who
assumes an existing loan.Back title letter
A letter that a title insurance company gives to an attorney who
then examines the title for insurance purposes.
Back-end ratio
A calculation used by lenders to compare a borrower's total debt to
their gross monthly income.
Balance sheet
A statement providing the assets, liabilities and net worth of an
individual.
Balloon loan
A mortgage loan where the monthly payments are not large enough to
repay the loan by the end of the term resulting in a lump sum due on
the final payment date.
Balloon
payment
The final lump sum payment due at the end of a balloon mortgage.
Bankruptcy
A proceeding where an insolvent debtor (person or corporation) can obtain relief from
payment of certain obligations.
Base loan amount
The loan amount upon which payments are based. If the borrower
chooses to finance closing costs or other fees these costs will be added to the
base loan amount and payments adjusted to reflect the larger loan
balance.
Basis point
A basis point is one one-hundredth of one percentage point. For
example, the difference between a home loan at 5.25 percent and one at
5.37 percent is 12 basis points.
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Before-tax income
Total income before any taxes are deducted.
Bill of sale
A legal document transferring ownership of personal property.
Binder
A report detailing the condition of a property's title.
Usually issued by a title insurance company to provide guidelines for
issuing a title
insurance policy.Binder
A preliminary agreement between buyer and seller.
Biweekly mortgage
A mortgage that requires payments every two weeks and helps repay
the loan over a shorter term.
Blanket mortgage
A mortgage that covers more than one property owned by the same
borrower. (very rare)
Book value
The value of a property based on its cost plus
any additions, minus depreciation.
Break-even
point
The point in which the owner's rental income matches expenses and
debt.
Bridge loan
A short-term loan for borrowers who need more time to find permanent
financing.
Broker
Anyone who acts as a go-between between a buyer and seller.
For example, a real estate broker is licensed to
handle property transactions and negotiate between a buyer and
seller. A
mortgage broker acts as a go-between with the lender and the
borrower.
Brokerage
The act of bringing together two or more parties in exchange for a
fee or commission. Common brokerage companies include real
estate brokerage and mortgage brokers.
Buydown mortgage
A home loan program where the lender receives a premium as an
enticement
to reduce the interest rate during the early years of the mortgage.
Buyer's remorse
An emotion felt by first-time homebuyers after signing a sales
contract or closing the purchase of a house.
Call option
A loan clause allowing a lender to ask for repayment of the entire
balance at any time.
Cap
A limit on the amount the interest rate or monthly payment can
increase in an adjustable rate mortgage.
Capitalization
A mathematical formula investors use to calculate property value based on net income.
Capitalization rate
The rate of return estimated from the net income of a
piece of property, expressed as a percentage.
Caps (Interest Rate
Caps)
Consumer safeguards which
limit the amount the interest rate on an adjustable rate mortgage
which may change per year and/or the life of the loan.
Carryback financing
Financing in which a seller agrees to hold back a note for a set
amount of the sales price.
Cash flow
The amount of cash a rental property investor receives after
deducting operating expenses and loan payments from gross income.
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Cash-out refinance
The refinancing of a mortgage in which the money received from the
new loan is greater than the amount due on the old loan.
Cashier's check
A check the bank draws on itself rather than on a depositor's
account.
Certificate of deposit index (CODI)
An index based on interest rates of six-month CDs.
Commonly used to
determine interest rates for some adjustable rate mortgages.
Certificate of eligibility
A document issued by the Veterans Administration that verifies the
eligibility of a veteran for a loan program.
Certificate of occupancy (CO)
A document stating that a home or other building has met all
building codes and is suitable for habitation.
Certificate of
Reasonable Value (CRV)
An appraisal issued by the
Veterans Administration showing a property's current market value
Certificate of
veteran status
The document given to veterans
or reservists who have served 90 days of continuous active duty
(including training time).
Chain of title
The official record that details the ownership history of a piece of
property.
Clear title
A title to property that does not have liens, defects or other
legal encumbrances.
Closing
The final procedure in which loan and title documents are signed
between the buyer and seller and their respective representation.
Closing costs
Expenses related to the sale of real estate including loan,
title, and appraisal fees. These costs are above and beyond the
price of the property and are paid at closing. Most closing
costs are one-time
expenses however a few are recurring.
Closing statement
A document which details the final financial details of a property
sale between a
buyer and seller and the costs paid by each party.
Cloud on title
An invalid encumbrance on real property.
Co-signer
A second party who also signs a promissory note and takes responsibility
for the debt.
COFI Index
(Cost of Funds Index)
This index reflects the weighted-average interest rate paid by 11th
Federal Home Loan Bank District savings institutions for savings and
checking accounts, advances from the FHLB, and other sources of
funds. The 11th District represents the savings institutions
(savings & loan associations and savings banks) headquartered in
Arizona, California and Nevada. The COFI index is a popular
index used for determining interest rates on adjustable rate
mortgages.
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Commercial Mortgage
A mortgage used to buy a commercial piece of property or commercial
building.
Commercial Mortgage Broker
A mortgage broker who specializes in commercial mortgage
applications.
Commercial Mortgage Lender
A mortgage lender who specializes in the funding of commercial
mortgage loans.
Commitment
A promise by a lender to make a loan with specific terms for a
specified period.
Commitment fee
A fee charged by the lender to guarantee a specific set of loan
terms to be honored at some future date.
Comparables
Properties used as comparisons to determine the value of a certain
property.
Compound interest
The interest paid on the principal balance of a mortgage plus
accrued interest.
Conditional commitment
A promise by a lender to make a loan if the borrower meets certain
conditions.
Conditional sale
A contract for property sale stating that the title will
remain invested in the seller until all the conditions of the contract
have been fulfilled.Conforming loan
A home loan that meets qualifications to be purchased by Fannie Mae
or Freddie Mac.
Construction documents
Drawings and specifications from an architect and/or engineer providing detailed
requirements for the construction of a project.
Construction loan
A short term loan for construction. Lenders usually disburse
funds from construction loans in draws according to completion of
defined stages throughout the construction process.
Construction-to-permanent loan
A construction loan that is converted to a longer term traditional
mortgage after construction has been completed.
Conventional loan
A long term loan a lender makes for the purchase of a home.
Convertible adjustable-rate mortgage
A mortgage which starts as an adjustable rate loan, but contains a
provision that allows the
borrower to convert the loan to a fixed-rate mortgage during a
specified period of time.
Cooperative mortgage
Any loan related to a cooperative residential project.
Courier fee
Fee charged at closing to cover the delivery of documents between
lenders, escrow companies, and other third parties during a real estate
transaction.
Credit history
A file detailing an individual's current and past debt payments and
financial obligations.
Credit life insurance
Insurance that pays off a mortgage in the event of the borrower's
death.Credit rating
The degree of creditworthiness assigned to a person based on their credit
history and financial status.
Credit report
A detailed account of an individual's credit, employment, and
residence history. A lender uses this report to determine a loan
applicant's creditworthiness. The three largest credit bureaus are
Trans Union, Equifax and Experian.
Credit repository
Large companies that gather financial and credit information from
various sources about individuals who have applied for credit.
Credit Risk
Score
A credit risk score is a
statistical summary of the information contained in a consumer's
credit report. The most well known type of credit risk score
is the Fair Isaac or FICO score. This score represents the
answer from a mathematical formula that assigns numerical values to
various pieces of information in a credit report.
Credit
Score
A credit score is a
statistical summary of the information contained in a consumer's
credit report. The most well known type of credit score
is the Fair Isaac or FICO score. This score represents the
answer from a mathematical formula that assigns numerical values to
various pieces of information in a credit report.
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