A summary; an abridgment. Before the use of photo static copying public records were kept by abstracts of recorded documents.

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 before a buyer can purchase clear, marketable, and insurance title.

Formal declaration before a public official that one has signed a document. Prior to recording real estate legal documents, such as grant deeds and deeds of trust, a Notary Public acknowledges the person's signature on the document.

A measure of land equal to 43,560 square feet.

A court action to establish ownership of real property. Although technically not an action to remove a cloud on title, the two actions are usually referred to as "Quiet Title" actions.

Adjustable-Rate Mortgage (ARM)

A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

Adjustment Date

The date the interest rate changes on an adjustable-rate mortgage (ARM).

Designates an assessment of taxes against property. Literally, according to value; based on the "ability to pay" theory.

The actual, exclusive, open notorious, hostile and continuous possession and occupation of real property under an evident claim of right or title. The time required legally to obtain title by adverse possession varies from state to state.

A contract by which the agent undertakes to represent the principal in business transactions, using some degree of discretion.

Person authorized to act on behalf of another in dealings with third parties.

An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract. In Texas it is known as an Earnest Money Contract.

Provision in a mortgage document stating that the loan must be paid in full if ownership is transferred.

The qualities and state of being pleasant and agreeable. In appraising, those qualities that attach to property in the benefits derived from other than monetary. Satisfactions of possession and use arising from architectural excellence, scenic beauty and social environment.

Title policy that assures a lender that it has the proper rights as the beneficiary on a mortgage loan.

Amortization

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 Schedule

A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.

Annual Percentage Rate (APR)

This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual not rate on your loan.

Application

The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more.

Appraisal

A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

These fees are generally collected by the lender and paid to outside companies performing the services.

Estimate of real estate value, presumably by an expert. An appraisal evaluates the property at a given time based on facts regarding the location, improvements, neighborhood and comparable sales. Generally, the value is based on three approaches: cost, market and income.

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

Appraiser

An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

Appreciation

The increase in the value of a property due to changes in market conditions, inflation, or other causes.

Payment made after it is due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.

A clause that is sometimes used in the transfer of property. It means that the present property is being transferred with no guarantee or warranty provided by the seller.

Assessed Value

The valuation placed on property by a public tax assessor for purposes of taxation.

Assessment

The placing of a value on property for the purpose of taxation.

The total assessed value of all property in a given assessment district.

Assessor

A public official who establishes the value of a property for taxation purposes.

Asset

Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

Assignment

When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment.

Assumable Mortgage

A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan.

A home that has one or more common walls adjoining another home. Condominiums and row houses are attached homes.

B

Balloon Mortgage

A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

Balloon Payment

The final lump sum payment that is due at the termination of a balloon mortgage.

Original cost of property plus value of any improvements put on by the seller minus the depreciation taken by the seller.

The lender named on the mortgage note. One entitled to the proceeds of property held in trust; also proceeds of wills, insurance policies, or trusts.

Bill of Sale

A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

Preliminary agreement of sale, usually accompanied by earnest money (term also used with property insurance).

Bi-weekly Mortgage

A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

A mortgage covering more than one property of the mortgage.

A form of an interim loan, generally made between a short term loan and a long term loan when the borrower needs additional time before obtaining permanent financing.

Broker

Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. (See the Home Loan Library that discusses the different types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

Government regulations specifying minimum construction standards.

Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leased, by building codes, or by zoning ordinances.

Buydown

Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

Agent who takes the buyer as a client, and is obligated to represent their interest above all others, and owes specific fiduciary duties to the buyer.

C

Call Option

Similar to the acceleration clause.

Cap

Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap. 

Accumulated wealth. A portion of wealth which is set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of their remaining permanently in the business.

Taxable profit on the sale of an appreciated asset.

A legal term meaning "let buyer beware".

Certificate of Eligibility

A document issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan.

Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

Certificate of Reasonable Value (CRV)

Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

A certification 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 public 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.

A true copy, attested to be true by the officer holding the original.

One having an equitable interest in property with the legal title being vested to the trustee.

Chain of Title

An analysis of the transfers of title to a piece of property over the years.

Personal property.

Person who employs the agent. Typically the seller is a client. The buyer can be a client (buyer's broker) or customer (seller's broker).

Clear Title

A title that is free of liens or legal questions as to ownership of the property.

A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company or attorney.

The day on which the formalities of a real estate sale are concluded. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Closing Statement

See Settlement Statement. 

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 deed, release, or court action.

Standards subscribed to by members of the National Association of Realtors.

Collateral

In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.

Collection

When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

Equally responsible for repayment as the borrower.

Commission

Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others.

A written promise to make or insure a loan for a specified amount and on specified items.

Common Area Assessments

In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.

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 some states.

Community Property

In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.

Comparable Sales

Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."

The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

A lenders promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.

Purchase offer in which the buyer proposes to purchase property only after certain events (sale of another home, finding a loan commitment, etc.) occur.

Condominium

A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.

Condominium Conversion

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel

A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.

Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.

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 a certain thing.

An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract. In Texas it is known as an Earnest Money Contract.

A purchase transaction in which the buyer receives possession of the property, but the seller retains title.

The full purchase price as stated in the contract.

Conventional Mortgage

Refers to home loans other than government loans (VA and FHA).

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.

Cost of Funds Index (COFI)

One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

A building contract setting the builder's profit at a set percentage of actual cost of labor and materials.

Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any depreciation claimed on tax returns over the years.

A new offer made as a result of another offer, which cancels the original offer.

A division within a state, usually encompassing one or more cities or towns.

An agreement written into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or non users of the property.

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 repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.

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 creditworthiness.

Credit Repository

An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Creditor

A person to whom money is owed.

Typically, the buyer (before buyer agency laws), as opposed to the principal (seller).

D

Debt

An amount owed to another.

A set of restrictions filed by a sub divider to cover an entire tract or subdivision.

The voluntary giving of private property to some public use by the owner, as the dedication of land for streets, schools, etc., in a development.

Deed

The legal document conveying title to a property.

Deed-in-lieu

Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.

Deed of Trust

Some states, like California, do not record mortgages. Instead, they record a deed of trust which is essentially the same thing.

The document required by the lender to be recorded along with the security instrument for an ARM.

Restrictions placed on use of real property by writing in a deed to control use and occupancy of the property by future owners.

Default

Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.

Title to real property which lacks some of the elements necessary to transfer good title. Title to a negotiable instrument obtained by fraud.

Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the loan (s) and accrued interest.

Delinquency

Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

Deposit

A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an "earnest money deposit."

Depreciation

A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

Real Estate left by will.

One to whom real estate is given by will.

A testator who leaves real estate.

A lender that can complete the processing and closing of an FHA loan without prior approval from FHA.

An amortized mortgage in which principal and interest are computed on the remaining balance.

Payments made during the course of an escrow or at closing.

A loan funded below par (100%). Lenders or investors will fund loans at a discount in order to increase the overall yield on the note.

Stamps affixed to a deed showing the amount of transfer tax. In Nebraska the documentary tax is $1.75 for each thousand dollars of the selling price.

The rights of a widow to a portion of her deceased husband's property.

A clause in a mortgage or deed of trust which places the real estate as security for existing debts between the parties.

E

Easement

A right of way giving persons other than the owner access to or over a property.

Impairment of desirability or useful life arising from economic forces, such as changes in optimum land use, legislative enactments which restrict or impair property rights and changes in supply-demand relationships. Loss in the use and value of property arising from the factors of economic obsolescence is to be distinguished from loss in value from physical deterioration and functional obsolescence.

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 to take 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, or 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 and other liens.

Reversion of property to the State by reason of failure to find persons legally entitled to hold or lack of heirs. The State must try to find heirs.

Escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.

Escrow Account
Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.

Escrow Analysis

Once each year your lender will perform an "escrow analysis" to make sure they are collecting the correct amount of money for the anticipated expenditures.

Escrow Disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, mortgage insurance, hazard insurance, lease payments and other items as they become due. Also known as "impounds" in some states.

The buyer reimburses the seller for the current balance of his escrow (or impounded) funds.

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.

Possession of property at the discretion of the owner.

Tenant has rights in real property for a designated number of years.

The statement which lists the financial settlement between buyer and seller and the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

An impediment to a law of action, whereby one is forbidden to contradict or deny one's own previous statement or act.

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 the title.

Listing agreement in which only the listing office may sell the property and earn the commission. If the owner sells the house, the listing office would not receive any commission.

Exclusive Listing

A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.

Listing agreement under which the owner promises to pay a commission if the property is sold during the listing period by anyone, even the owner.

Executor

A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.

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 (FNMA)

The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.

Fannie Mae's Community Home Buyer's Program

An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

The board which oversees the Federal Home Loan Bank systems.

Provides liquidity to supervised financial service companies, such as savings and loans and credit unions. The bank system has several districts.

The board which charters and forbids discrimination in the sale.

A government sponsored agency that is also a publicly traded company on the New York Stock Exchange that purchases mortgage loans from mortgage bankers and financial depository institutions. FHLMC is a major secondary market investor.

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.

See Fannie Mae.

The regulatory agency for certain commercial banks and bank holding companies. Sets monetary policy for the country and provides liquidity for supervised financial institutions.

A lien attached to property for nonpayment of a federal tax.

The U.S. government's method to identify individual and company's annual tax responsibility. The tax returns identify the income and taxes.

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). Along with VA loans, an FHA loan will often be referred to as a government loan.

A person in a position of trust or responsibility with specific duties to act in the best interest of a client. Real estate brokers and mortgage brokers are fiduciaries.

Banks, savings and loans or credit unions.

Firm Commitment

A lender’s agreement to make a loan to a specific borrower on a specific property.

Fixed-Rate Mortgage

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.

See Federal Home Loan Mortgage Corporation.

Revealing all known facts which may affect the decision of a buyer or tenant.

Impairment of functional capacity or efficiency. For example, homes without indoor plumbing (while they may contain working outdoor plumbing facilities) are considered functionally obsolete.

401(k)/403(b)

An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.

401(k)/403(b) loan

Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans

A lien such as a tax lien or judgment lien, which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property.

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" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Government National Mortgage Association (Ginnie Mae

A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA).

The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible.

Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only.

Grantee

The person to whom an interest in real property is conveyed.

H

One who might inherit or succeed to an interest in a property under the rules of law applicable when a property owner dies.

Will written in the testator's handwriting and not witnessed.

Home Equity Conversion Mortgage (HECM)

Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. 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.

Home Equity Line of Credit (HELOC)

A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.

Home Inspection

A thorough inspection by a professional 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.

Policy which expands the insurance for a homeowner. It may include theft, liability, earthquake, etc.

Payments made by property owner (s) of a condominium or a unit in PUD to the homeowners' association for expenses incurred in upkeep of the common areas.

Homeowner’s Warranty

A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.

Tract of land occupied as a family home.

HUD Median Income

Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

HUD-1 Settlement 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 HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the "closing statement" or "settlement sheet."

I

Account held by a lender for payment of taxes, insurance or other related expenses. Also known as an escrow account.

Valuable additions to property which raise the value of the property.

Other costs that are incurred when a real estate loan is closed.

A published rate or benchmark measure of current interest rate levels used to calculate periodic changes in rates charged on adjustable rate mortgages.

A tax term used to describe a sale which is usually accomplished by use of a land contract.

A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the mortgaged property to satisfy the balance owing plus cost of foreclosure.

A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year.

The percentage of an amount of money which is paid for its use for a specified time.

Someone who has died without leaving a valid will.

A property that is not occupied by the owner and in most cases produces income or is held for gains from appreciation.

J

A liability which allows the creditor to sue any one of the debtors or sue all together.

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. Alternative spelling is "judgement."

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. Other states use non-judicial foreclosure.

A mortgage subordinate to another mortgage.

L

In a legal sense, the solid part of the surface of the earth, as distinguished from water; any ground, soil or earth whatsoever regarded as the subject of ownership and everything annexed to it, whether by nature, e.g., trees and everything in or on it, such as minerals and running water, or annexed to it by man; e.g., buildings, fences, etc. In an economic sense, land consists of all those elements in the wealth of a nation which is supposed to be furnished by nature as distinguished from those improvements which owe their value to the labor and organizing power of man.

Installment plan for buying a house. It is used as an alternative to obtaining a loan from a traditional, source such as a mortgage banker or savings and loan.

A penalty for failure to pay an installment on time.

Hidden structural defect.

Lease

A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of the lease period.

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.

Lease Option

An alternative financing option that allows home buyers to lease a home with an option to buy. 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.

Legal Description

A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

A document that lenders prepare for the closing agent that outlines the requirements for loan closing.

One who possesses the right to use or occupy a property under lease agreement.

One who holds title to and conveys the right to use and occupy a property under lease agreement.

A formal method of stating that a prospective developer, buyer or lessee is interested in property.

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. It is usually part of a homeowner’s insurance policy.

Life Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage.

An estate in real property for the life of a living person. The estate then reverts back to the grantor or to a third party.

A partnership consisting of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, who contributes capital and are liable only to the amount contributed.

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.

A public notice that litigation is pending on a property.

A record of property for sale by a broker who has been authorized by the owner to sell. Also used to denote the property so listed.

Agreement between a property owner and a real estate broker, authorizing the broker to find a buyer for the property. If the sale is consummated, the listing broker will be paid a fee.

Loan

A sum of borrowed money (principal) that is generally repaid with interest.

Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to the yield requirement of the investor. Loan discount denotes an investor yield requirement higher than the note rate. Loan premium denotes an investor yield requirement lower than the note rate.

Guarantee from a lender that a borrower will receive the interest rate in effect at the time of loan application.

Loan Origination

How a lender refers to the process of obtaining new loans.

The information regarding a borrower and property necessary which is the basis for a lender's credit decision to extend or deny credit.

The amount of a loan to the value or selling price of real property.

Loan-To-Value (LTV)

The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).

Lock-In

An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

Lock-In Period

The time period during which the lender has guaranteed an interest rate to a borrower

Margin

The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.

The most likely price a given property will bring if widely exposed on the market, assuming fully informed buyer and seller.

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.

The management process through which efforts to conceive, develop and deliver goods and services are integrated to satisfy the needs and wants of selected customers as a means of achieving company objectives.

The price paid for a property; the amount of money that must be given or which can be obtained at the market in exchange under the immediate conditions existing at a certain date. To be distinguished from market value.

Maturity

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land.

Merged Credit Report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.

False statement made to or concealment of knowledge from another party with the intent to provoke action from that party.

Modification
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.

Mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.

Mortgage Banker

For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.

Mortgage Broker

A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.

A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgagee

The lender in a mortgage agreement.

Mortgage Insurance (MI)

Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

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 (MI) company.

Mortgage Life and Disability Insurance

A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.

The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps for ARMs, the name of the lender and the borrower, and any other material item required by the lender.

A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans which are sold to an investor shortly thereafter. The mortgage notes are used as collateral for this interim financing.

Mortgagor

The borrower in a mortgage agreement.

Multi-Dwelling Units

Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

A means of making possible the orderly dissemination and correlations of listing information to its members so that REALTORS may better serve the buying and selling public.

N

The association of REALTORS dedicated to the protection and the preservation of the free enterprise system and the right of the individual to own real property as guaranteed by the Constitution of the United States of America. Each member of the NATIONAL ASSOCIATION OF REALTORS must adhere to a strict Code of Ethics and Standards of Practice designed to provide assurances to the public of the REALTORS integrity and professionalism.

Negative Amortization

Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.

An arrangement whereby the Broker receives as commission all monies received above a minimum sales price agreed to by the owners and the Broker.

No Cash-Out Refinance

A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."

Loans that are above the loan limits set by FNMA and FHLMC. Also known as jumbo loans.

A property which does not conform to the zoning of an area.

Note Rate

The interest rate stated on a mortgage note.

O

Impairment of desirability and usefulness brought about by changes in the art, design or process or from external influencing circumstances that make a property less desirable and valuable for a continuity or use.

A promise by one party to do a specified deed as the other party in turn performs a specific deed.

A federal government regulatory agency that oversees some commercial banks.

A federal government regulatory agency that oversees savings and loans.

A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions.

An authorization given by a property owner to a real estate Broker wherein said Broker is given the nonexclusive right to secure a purchaser; open listings may be given to any number of Brokers without liability to compensate any except the one who first secures a buyer ready, willing and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer.

The individual (s) named on a deed that has been recorded at the local municipality.

Title insurance for the owner of property, rather than a lien holder.

The right to possess and use property to the exclusion of others.

P

Mortgage covering both real and personal property.

A mortgage, deed of trust or land contract which is given instead of cash.

The legal rule which prevents previous oral or written negotiations to a signed contract from changing the contract.

A release of a portion of property covered by a mortgage.

Periodic Payment Cap

For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period. 

Periodic Rate Cap

For an adjustable-rate mortgage, 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.

A mortgage on completed construction on the same property under one mortgage or trust deed.

The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing.

Property which is movable. All property is either personality, realty or mixed.

A term that is frequently used when physical deterioration is intended. In a broad concept it may relate to those elements contributing to depreciation that are existent or inherent in the physical property itself, as distinguished from other and external circumstances that may influence its utilization. Not a clear or proper them without qualification and explanation.

Planned Unit Development (PUD)

A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.

A map or chart of a lot, subdivision or community, showing boundary lines, buildings and easements.

Abbreviation for private mortgage insurance: insurance issued by a company, which insures the lender against loss in the event that the borrower defaults on the mortgage.

Point
A point is 1 percent of the amount of the mortgage. 

Loans held as an investment by a bank, savings and loan or credit union.

Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on the 15th of the month and the first payment is due 45 days later, the lender will charge 15 days of prepaid interest.

Perorations of prepaid items of expense which are credited to the seller in the closing statement.

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 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.  

The process of obtaining a real estate loan, including the consumer's completion of a loan application form, validation of the credit and property information, loan underwriting by the lender and closing of the mortgage loan.

Considered the permanent location of residency.

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. See remaining balance. 

Principal, Interest, Taxes, and Insurance (PITI)

The four components of a monthly mortgage payment on impounded loans. 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 mortgage 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 MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent. 

Charges for the lender's services associated with making the loan.

Promissory Note

A written promise to repay a specified amount over a specified period of time. 

The rights of ownership. The right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights. Property is generally classified into two groups, personal property and real property.

A tax levied by the local municipality or county on real and personal property.

To divide in proportionate shares, such as taxes, insurance, rent, or other items.

Purchase Money Transaction

The acquisition of property through the payment of money or its equivalent.  

Q

Quitclaim Deed
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made. 

R

Land and anything permanently affixed to the land and those things attached to the building.

Real Estate Agent

A person licensed to negotiate and transact the sale of real estate.

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 agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Salesperson associated with a broker who is a member of the NATIONAL ASSOCIATION OF REALTORS.

A synonym for real estate.

Annulling a contract and placing the parties to it in a position as if there had not been a contract.

Setting forth in a deed or other writing some explanation for the transaction.

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.

The right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment.

The practice of refusing to provide loans or insurance in a certain neighborhood.

Refinance Transaction

The process of paying off one loan with the proceeds from a new loan using the same property as security.

A charge for a title insurance policy if a previous policy on the same property was issued within a specified period of time. Reissue is less than the original charge.

A method in investing real estate in a group, with certain tax advantages.

An instrument releasing property from the lien of the mortgage, judgment, etc.

Remaining Balance

The amount of principal that has not yet been repaid. See principal balance. 

Remaining Term

The original amortization term minus the number of payments that have been applied.  

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. 

A federal regulation that requires lenders and mortgage brokers to disclose to borrowers, in advance, the fees required to obtain a mortgage loan.

Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and be binding only between the original seller and buyer.

Formerly, federal tax on a sale of real property. Canceled and replaced by state tax stamps.

A special program for the elderly that provides income until death. Payment requirements are arranged through the increase in the principal amount of the loan.

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.

Pertaining to the banks of a river, stream, waterway, etc.

                                                            S                                                          top

See agreement of sale.

Document issued by mortgagee when the mortgage is paid off.

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.

Second Mortgage

A mortgage that has a lien position subordinate to the first mortgage. 

Secondary Market

The buying and selling of existing mortgages, usually as part of a "pool" of mortgages.

An entity, such as FNMA or FHLMC, that buys mortgage loans for investment or sells them again to another secondary market investor. Secondary market investors do not service loans and do not collect payments from borrowers.

Secured Loan

A loan that is backed by collateral. 

Security

The 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.  

Agent who takes the seller as a client, is legally obligated to a set of fiduciary duties and is required to put the seller's interests above all other's.

An Underground tank in which sewage from the house is reduced to liquid by bacterial action and drained off.

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 mortgage market. 

Servicing

The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Regulates the distance from the lot line to the point where improvements may be constructed.

This booklet gives an overview of the lending process and is required by HUD. It is provided to consumers after the loan application is completed.

Settlement Statement

A statement prepared by broker, escrow or lender giving a complete breakdown of the cost associated with a real estate transaction.

A deed given at the sheriff's sale in foreclosure of a mortgage.

A residential home that is not attached physically to another home.

A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.

A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien).

A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.

Lawsuit requesting that a contract be exactly carried out, usually asking that the seller be ordered to convey the property as previously agreed.

An application developed by FNMA and FHLMC that is widely used in the mortgage industry.

Unique housing finance programs to assist first time home buyers and low to moderate housing groups. Each state and local group has different sets of criteria.

The law requires that certain contracts, such as agreements of sale, to be in writing in order to be enforceable.

An involuntary lien, includes tax liens, judgment liens, mechanic liens, etc.

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. 

A document which is recorded to change the trustee under the deed of trust.

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.  

All rights of a joint tenant passes to the surviving joint tenant.

Sweat Equity

Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.

T

Tax as applied to real estate is an enforced charge imposed on persons, property, or income to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public.

Lien for nonpayment of taxes.

Public sale of property at an auction by a governmental authority, due to non payment of property taxes.

A holding, as of land, by any kind of title, occupancy of land, a house or the like under a lease or on payment of rent or tenure.

Tenancy in Common

As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.

A tenancy which arises when a tenant holds over after expiration of his lease.

A tenancy which may be terminated at the will of either the Lessor or lessee.

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

Any person in possession of real property with the permission of the owner.

Having made a will before death.

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 mortgage market.

Legal phrase in a contract requiring punctual performance of all obligations.

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. 

These companies charge various fees for their services.

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. 

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. 

A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. (See 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. 

Trustee

A fiduciary who holds or controls property for the benefit of another. 

U

On a loan, claiming a rate of interest greater than permitted by law.

V

VA Mortgage

A mortgage that is guaranteed by the Department of Veterans Affairs (VA). 

The act or process of estimating value; the amount of estimated value.

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 Administration (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. 

W

Most valuable type of deed in which the grantor makes formal assurance of title.

Income tax form that is provided by employers to employees that states the income and taxes paid in a calendar year.