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Real Estate Glossary |
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- A - B - C - D - E - F - G - H - I - J - L - M - N - O - P - R - S - T - U - V - W -
Acknowledgment: A formal declaration made before an
authorized official (usually a notary public), by the person who
has executed (signed) a document, that such execution is his/her
own act and deed. In most instances documents must be acknowledged
(notarized before it can be accepted for recording).
Adjustable Rate Mortgage (ARM): A mortgage with an interest
rate that changes over time in line with movements in the index.
ARMs are also referred to as AMLs (adjustable mortgage loans) or
VRMs (variable rate mortgages).
Adjustable Period: The length of time between interest rate
changes on an ARM. For example, a loan with adjustment period of
one year is called a one-year ARM, which means that the interest
rate can change once a year.
Affidavit: A sworn statement in writing, made before an
authorized official.
A.L.T.A.: Abbreviation for the American Land Title
Association.
Amortization: Repayment of a loan in equal installments of
principle and interest, rather than interest-only payments.
Annual Percentage Rate (APR): The total finance charges
(interest, loan fees, points) expressed as a percentage of the
loan amount.
Assessments: Specific and special taxes (in addition to
normal taxes) imposed on real property to pay for public
improvements within a specific geographic area.
Assumption of Mortgage: A buyer's agreement to assume the
liability under an existing note that is secured by a mortgage or
deed of trust. The lender must approve the buyer in order to
release the original borrower (usually the seller) from liability.
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Balloon Payment: A lump sum principal payment due at the
end of some mortgages or other long-term loans.
Beneficiary: As used in a trust deed, the lender is
designated as the beneficiary, i.e. obtains the benefit of the
security.
Binder: Sometimes known as an offer to purchase or an
earnest money request. A binder is the acknowledgment of a deposit
along with a brief written agreement to enter into a contract for
the sale of real estate.
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Cap: The limit on how much an interest rate or monthly
payment can change, either at each adjustment or over the life of
the mortgage.
CC&R's - Covenants, Conditions and Restrictions: A
document that controls the use, requirement and restrictions of a
property.
Certificate of Reasonable Value (CRV): A document that
establishes the maximum value and loan amount for a VA guaranteed
mortgage.
Conventional Loan: A mortgage loan which is not insured or
guaranteed by a governmental agency.
Closing Statement: The financial disclosure statement that
accounts for all of the funds received and accepted at the
closing, including deposits for taxes, hazard insurance, and
mortgage insurance.
Condominium: A form of real estate ownership. The owner
receives title to a particular unit and has a proportionate
interest in certain common areas. The unit itself is generally a
separately owned space whose interior surfaces (walls, floors, and
ceilings) serve as its boundaries.
Contingency: A condition that must be satisfied before a
contract is binding. For instance, a sales agreement may be
contingent upon the buyer obtaining financing.
Conversion Clause: A provision in some ARMs that enables
you to change an ARM to a fixed-rate loan, usually after the first
adjustment period. The new fixed rate is generally set at the
prevailing interest rate for fixed-rate mortgages. This conversion
feature may cost extra.
Cooperative: A form of multiple ownership in which a
corporation or business trust entity holds title to a property and
grants occupancy rights to shareholders by means of proprietary
leases or similar arrangements.
CRB - Certified Residential Broker: To be certified, a
broker must be a member of the National Association of Realtors,
have five years experience as a licensed broker and have completed
five required Residential Division courses.
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Deed: Written instrument by which the ownership of land is
transferred from one person to another.
Deed of Trust: Written instrument by which title to land is
transferred to a trustee as security for a debt or other
obligation. Also called Trust Deed. Used in place of mortgages in
many states.
Deposit Receipt: Used when accepting "Earnest
Money" to bind an offer for property by a prospective
purchaser, also includes terms of a contract.
Due-On-Sale Clause: An acceleration clause that requires
full payment of a mortgage or deed of trust when the secured
property changes ownership.
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Earnest Money: The portion of the down payment delivered to
the seller or escrow agent by the purchaser with written offer as
evidence of good faith.
Easement: A right or power of the government to take
property for a public purpose upon payment of just compensation.
Escrow: A procedure in which a third party acts as a
stakeholder for both the buyer and the seller, carrying out both
parties' instructions and assuming responsibility for handling all
of the paperwork and distribution of funds.
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FHA Loan (Federal Housing Administration): A federal
agency, created by the national housing act of 1934 for the
purpose of expanding and strengthening home ownership by making
private mortgage financing possible on a long-term, low down
payment basis. The vehicle is a mortgage insurance program with
premiums paid by the homeowner to protect lenders against loss on
these higher risk loans. Since 1965, FHA has been part of the
newly created Department of Housing and Urban Development (HUD).
Federal National Mortgage Association (FNMA): Popularly
known as Fannie Mae. A privately owned corporation created by
Congress to support the secondary mortgage market. It purchases
and sells residential mortgages insured by FHA and guaranteed by
the VA, as well as conventional home mortgages.
Fee Simple: An estate in which the owner has unrestricted
power to dispose of the property as he wishes, including leaving
by will or inheritance. It is the greatest interest a person can
have in real estate.
Finance Charge: The total cost a borrower must pay,
directly or indirectly, to obtain credit according to Regulation
Z.
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Graduated Payment Mortgage: A residential mortgage with
monthly payments that starts at a low level and increases at the
predetermined rate.
Grant: A transfer of real property.
Grantee: The person to whom a grant is made.
Grantor: The person who makes a grant.
GRI: Graduate Realtors Institute. A professional
designation granted to a member of the National Association of
Realtors who has successfully completed three courses covering
Law, Finance and Principles of Real Estate.
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Home Inspection Report: A qualified inspector's report on a
property's overall condition. The report usually includes an
evaluation of both the structure and mechanical systems.
Home Warranty Plan: Protection against failure of
mechanical systems within the property. Usually includes plumbing,
electrical, heating systems and installed appliances.
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Impound Account: Funds retained by a lender to cover such
items as taxes and hazard insurance premiums.
Index: A measure of interest rate, changes used to
determine changes in an ARM's interest rate of the term of the
loan.
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Joint Tenancy: An equal undivided ownership of property by
two or more persons. Upon the death of any owner, the survivors
take the descendant's interest in the property.
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Lien: A legal hold or claim on property as security for a
debt or charge.
Loan Commitment: A written promise to make a loan for a
specified amount of specified terms.
Loan-To-Value Ratio: The relationship between the amount of
the mortgage and the appraised value of the property, expressed as
a percentage of the appraised value.
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Margin: The number of percentage points the lender adds to
the index rate to calculate the ARM interest rate at each
adjustment.
Mortgage Banker: A company or individual engaged in the
business or originating mortgage loans with its own funds. Selling
those loans to long-term investors, and servicing the loans for
the investor until they are paid in full.
Mortgage Life Insurance: A type of term life insurance
often bought by mortgagee. The coverage decreases as the mortgage
balance declines. If the borrower dies while the policy is in
force, the debt is automatically covered by insurance proceeds.
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Negative Amortization: Negative amortization occurs when
monthly payments fail to cover the interest cost. The interest
that isn't covered is added to the unpaid balance, which means
that even after several payments you could owe more than you did
at the beginning of the loan. Negative amortization can occur when
an ARM has a payment cap that results in monthly payments that
aren't high enough to cover the interest.
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Origination Fee: A fee or charge for work involved in
evaluating, preparing, and submitting a proposed mortgage loan.
The fee is limited to 2 percent for FHA and VA loans.
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Personal Property: Movable property; all property which is
not real property. Property consisting of chattels as contracted
to real estate; e.g. furniture, car, clothing.
PITI: Principal, interest, taxes and insurance.
Planned Unit Development (PUD): A zoning designation for
property developed at the same or slightly greater overall density
than conventional development, sometimes with improvements
clustered between open, common areas. Uses may be residential,
commercial or industrial.
Point: An amount equal to one percent of the principal
amount of the investment or note. The lender assesses loan
discount points at closing to increase the yield on the mortgage
to a position competitive with other types of investments.
Pre Payment Penalty (PRE): A fee charged to a mortgagor who
pays a loan before it is due. Not allowed for FHA or VA loans.
Premium: The amount payable for an insurance policy.
Principal:
1. A sum of money owed as a debt on which interest is payable.
2. The person who empowers another to act as his representative or
realtor.
3. The person having prime responsibility for an obligation as
distinguished from one who acts as a surety or endorser.
Private Mortgage Insurance (PM[): Insurance written by a
private company protecting the lender against loss if the borrower
defaults on the mortgage.
Purchase Agreement: A written document in which the
purchaser agrees to buy certain real estate and seller agrees to
sell under stated terms and conditions. Also called a sales
contract, earnest money contract, or agreement for sale.
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Real Estate: Also called "real property".
1. Land and anything permanently affixed to the land; such as
buildings, fences and those things attached to the buildings; such
as light fixtures, plumbing and heating fixtures, or other such
items that would be personal property if not attached.
2. May refer to the rights in real property as well as property
itself.
Real Property: Land and buildings as opposed to personal
property or chattels.
Realtor: A real estate broker or associate active in a
local real estate board affiliated with the National Association
of Realtors.
Recordation: Filing for record in the office of the county
recorder.
Regulation Z: The set of rules governing consumer lending
issued by the Federal Reserve Board of Governors in accordance
with the Consumer Protection Act.
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Sale Agreement: A contract entered into between a buyer and
seller, setting forth the terms, provisions and conditions.
Subordination: The act or process by which a person's
rights are ranked below the rights of others.
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Tenancy in Common: A type of joint ownership of property by
two or more persons with no right of survivorship.
Tide: Evidence of a person's right or the extent of his
interest in property.
Title Convenants: Covenants ordinarily inserted in
conveyances and in transfers of title to real estate for the
purpose of giving protection to the purchaser against possible
insufficiency of the title received. A group of such covenants
known as "common law covenants" includes: covenants
against encumbrances; covenants for further assurance; covenants
of good right and authority to convey; covenants of quiet
enjoyment; covenants of seisin; covenants of warranty.
Title Insurance Policy: A policy that protects the
purchaser, mortgages or other party against losses.
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Underwriter: An insurance company that issues insurance
policies to the public or to another insurer.
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Variable Interest Rate: Also called "flexible interest
rate." An interest rate that fluctuates as the prevailing
rate moves up or down. In mortgages, there are usually maximums as
to the frequency and amount of fluctuation.
VA Loan: A loan that is partially guaranteed by the
Veterans Administration and made by a private lender.
Veterans Administration (VA): An independent agency of the
federal government created by the Service Men's Readjustment Act
of 1944 to administer a variety of benefit programs designated to
facilitate the adjustment of returning veterans to civilian life.
Among the benefit programs is the home loan guarantee program.
This is designed for lenders to offer long term low down payment
financing to eligible veterans by guaranteeing the lender against
loss on these higher risk loans.
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Waiver: The voluntary and intentional relinquishment of a
known right, claim or privilege.
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