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Sales contract
A contract signed by the buyer and seller detailing the terms of a
property sale.
Second mortgage
A second loan placed upon a piece of property.
Seller carry-back
An agreement where the seller provides financing for a home
purchase.
Seller financing
The seller allows the borrower to use a portion of the equity in the
property to finance the purchase.
Settlement or closing fees
Fees paid to the escrow agent (often a title insurance company) for
carrying out the written instructions of the agreement between buyer and
seller and/or borrower and lender.
Settlement statement
A closing statement or settlement sheet that outlines all closing
costs on a real estate transaction or refinancing for the buyer and
seller.
Shared-appreciation mortgage
A loan that allows a lender or other party to share in the
borrower's profits when the home is sold.
Shared-equity transaction
A transaction in which two buyers purchase a property, one as a
resident co-owner and the other as an investor co-owner.
Step-rate
mortgage
A loan that allows a gradual increase in the interest rate during
the first few years of the loan.
Subordinate
loan
A second or third mortgage.
Subsequent rate adjustments
The interest rate for adjustable rate loans (ARMs) adjusts at
regular intervals. This adjustment period could in some cases
differ from the initial interest rate duration period.
Subsequent rate cap
A specific limit defined by most adjustable rate loans (ARMs) for
the maximum amount the interest rate may increase at each regularly
scheduled interest rate adjstment date. This limit may differ from
the initial rate cap.
Super jumbo mortgage
A mortgage that is over $650,000 or $1,000,000, depending on the
lender.
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Survey
A precise measurement of a piece of property by a licensed surveyor.
Sweat
equity
The non-cash value added to a piece of property by the owner, such
as do-it-yourself home improvements.
Tax lien
A lien placed against a property for nonpayment of taxes (property
and/or personal)
Tax
service fee
A fee collected to set up third-party monitoring of the borrower's
property tax payments. This is done to ensure that the
payments are made on time and to prevent tax liens from occurring to
the detriment of the lender.
Teaser rate
A low, short-term interest rate offered on a mortgage to entice the
borrower.
Tenancy by the entirety
Ownership by a husband and wife in which they together hold title to
the whole property with right of survivorship.
Tenancy in common
A form of ownership in which two or more owners hold an undivided
(though not necessarily equal) interest in the property, with no
right of survivorship.
Timeshare
Ownership that involves the acquisition of a specific period of time
or percentage of interest in a vacation home or resort.
Title
The legal document conferring ownership of a piece of real estate.
Title company
A firm that ensures that the property title is clear and provides
title insurance.
Title Exam
An examination of the public record to determine that the seller is
the legal owner and there are no encumbrances (such as claims or liens)
affecting the property.
Title insurance
A policy issued to lenders and buyers to protect against loss due to
disputed property ownership at a later date.
Title insurance binder
A title insurance company's written commitment to insure title to
the property subject to the conditions and exclusions shown on the
binder.
Title risk
Possible impediments to the transfer of a title from one owner to
another.
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Title search
The process of reviewing all recorded transactions in the public
record to determine whether any title defects exist that could interfere
with the clear transfer of ownership of the property.
Total expense ratio
The percentage of monthly debt obligations relative to gross monthly
income.
Total lender
fees
Fees required by the lender to obtain the loan, apart from other
fees associated with transferring a property between buyer and seller.
Total loan amount
The base loan amount plus any financed closing costs.
Total monthly housing costs
The sum of principal, interest, property taxes and, if applicable,
private mortgage insurance (PMI) and either hazard insurance or
homeowners' association dues.
Total of all payments
The total cost of the loan including repayment of the principal
amount and the sum of monthly interest payments.
Townhouse
An attached home that is not a condominium.
Trading
down
Buying a home that is less expensive than the one's current house.
Trading up
Buying a home that is more expensive than one's current house.
Trans Union Corporation
One of the major credit reporting bureaus.
Transfer tax
An assessment by state or local authorities at the time a piece of
property changes hands.
Treasury
Index
An index used to determine interest rate changes for adjustable rate
mortgages.
Two-step mortgage
An adjustable mortgage with two interest rates: one for the first
five or seven years of the loan, and the other for the remainder of the
loan term.
U.S. Department of Housing and Urban Development
Also known as HUD. This federal agency oversees the
Federal Housing Administration and a variety of housing and community
development programs.
Underwriters' knot
A code-approved knot tied at the end of an electrical cord to
prevent the wires from being pulled away from their connection to
electrical terminals.
Underwriting
The process in which lenders evaluate the risks posed by a
particular borrower and set appropriate conditions for the loan.
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Underwriting fee
A fee charged by mortgage lenders to verify information on the loan
application and make a final decision about whether or not to approve
the loan.
Unrecorded deed
A deed that transfers ownership from one party to another without
being officially recorded.
VA (Veterans
Administration)
The Veterans Administration assists veterans with purchasing a home
without a down payment.
VA loan
A loan through the Veterans Administration program, which allows
most veterans to purchase a house without a down payment.
Variable rate
mortgage (VRM)
A mortgage with an interest rate that changes with fluctuations in
such indexes as the prime rate, libor rate, or treasury bill.
Verification of deposit (VOD)
As part of the loan process a lender may ask a borrower's bank to
sign a statement verifying the borrower's account balances and history.
Verification
of employment (VOE)
As part of the loan process a lender may ask the borrower's employer
for confirmation of the borrower's position and salary.
Warehouse fee
A closing cost fee representing the lender's cost of holding a
borrower's loan temporarily before it is sold on the secondary
mortgage market.
Wraparound mortgage
A loan given to a buyer for the remaining balance on a seller's
first mortgage and an additional amount requested by the seller.
Payments on both amounts are made to the lender who holds the
wraparound loan.
Yield spread
A form of compensation some brokers receive from a lender for
originating and processing a loan. The yield spread is based on
the interest rate of the loan and can usually vary anywhere from zero to
6%.
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