Time to hit the books!
Brush up on your Real Estate Lingo with this Glossary of Terms
Annual Percentage Rate (APR)
The annual interest rate on a loan that includes closing costs in its calculation. APR is sometimes calculated differently by different lenders
The estimated value of a piece of property that is either based on the recent sale prices of similar properties or the projected cash flow that the property will yield
The rise in a property’s value over time
Arm’s Length Transaction
A transaction between two parties that are either affiliated or related that is carried out as if they were not to minimize conflicts of interest
An overdue or unpaid amount of a debt
A local tax charged on a property that is usually used to pay a specific expense of the local government
Anything that is worth something that can be sold or surrendered to cover a debt
The person to whom something has been transferred
One who transfers something he or she owns to someone else
A clause in a sales contract that gives the buyer permission to transfer his or her share of the property to someone else
A mortgage that can be transferred to someone else, usually without any change in the terms as long as the lender is aware of and agrees to the transfer. The person who assumes the loan may be required to qualify the loan and may have to pay an assumption fee. The lender should then give the seller a written notice stating that they are no longer liable for making payments.
Balloon (Payment) Mortgage
Typically, fixed-rate and short-term lending practice where minimal payments are required for a fixed length of time (as though the mortgage has been amortized for a normal 30-year segment) and then the borrower must pay a lump sum of the remaining principal as agreed from the outset. EG A balloon mortgage for $30,000 could charge interest-only payments for 10 years at 13% ($325 each month) then the full principal of $30,000 would come due at the end of those ten years.
This is where someone legally certifies that they are unable to repay their liabilities. The person claiming bankruptcy must give her assets to the bankruptcy court to go towards payment of her liabilities at time of filing.
A person in receipt (or able to receive) the proceeds from some action or process.
This is when a would-be buyer makes an offer to pay a certain sum for something or some service they desire. For example, people bid for items they wish to purchase during an auction, based on the amount they are willing to pay for it.
Differentiating it from a standard mortgage, this requires that the value of half the standard monthly payment is paid in halves every two weeks. Therefore, instead of paying 13 full payments, you will pay 26 halved bi-weekly payments. As you pay more frequently, this payment plan allows you to pay off the total debt more quickly (by avoiding some interest accumulation).
This is a single loan used to pay for multiple properties. EG A land developer buys up a large piece of land and divides it into smaller chunks to sell to individual families. The developer can get a blanket mortgage to pay for the whole lot of what are now multiple properties.
This is the price of an asset as listed in a person or business’s financial records. This may be very different from what the asset would bring on the market.
The person who obtains a loan for real estate and is liable to pay that loan back.
This is a certified person or company helps connect buyers and sellers and typically gets a fee for doing so. Examples of brokers include those who provide this service for real estate, mortgages and business loans.
Buy Back Agreement
The seller and Buyer made an agreement that the seller will repurchase the house back after a predetermined amount of time has passed and for a previously stated price.
The buyer has the ability to obtain lower interest rates through their lender. This is done through paying the lender more upfront to lower points (fees). The decreased interest rate my be used for a few months and or a few years. This allows the borrower to qualify where they otherwise would be denied. Having lower points decreases the amount of the payment due during a buy downs term.
A buyer would hire an agent to assist in finding suitable properties, and they represent the sellers interests in purchasing (the buyer and agent work together to get the lowest possible price for the buyer).
Money used for operating expenses or generating income.
The amount of which the selling price is greater than it initially cost to buy, also monies earned from the selling of a real estate property.
The rate using the current property value to predict future earnings from the property.
A limit on the change of the interest rate on an adjustable rate mortgage either per year and over the life of the loan, thus protecting the consumer.
A term used on an income-producing property which shows the amount of cash made after payments received and payments made. This amount should be enough to pay utilities, mortgage payments, and the maintenance on the income-producing property.
“Let buyer beware” in legal terms. The buyer should examine the property for flaws, and make the purchase at their own risk. Example: A property may be offered in a condition without any expressed or implied guarantee of quality or condition and to be accepted in an “as is” condition.
Certificate of Occupancy
Document issued by an agency working for the local government, saying that the building or property meets the standards set by the local government for occupancy, and complies with all the public health and building codes.The lender should get this document prior to closing the loan.
Certificate of Title
This is a certificate given by an attorney authorizing the person as correct owner of the property, that is his title as an owner.This title certificate is not considered as protective as the insurance.
Chain of Title
This shows the chronological order of the owner of this part of land acquired by the present owner from the original owner. An abstractor can get into details of the titles of previous owner dating back to the time it was given to the United States.
Personal belongings of a person like a piece of furniture, tools, etc; that are not classified under real estate.
Certificate for marketable title that the property if free of any liens and legal questions concerning the ownership of the property. A clear title is a must for closing any loans required by a lender.
1.The act of transferring the property’s ownership from the seller to buyer pertaining to all the rules in the sales contract. 2. The time when the closing is done. 3. The action of signing the documents related to the property transfer.
The expenses incurred by the seller and the buyer during the process of real estate or a mortgage transaction apart from the price of the property. There are two types of costs: Recurring and Non-recurring. Non-recurring charges are one time charges which include discount and origination points, lender fees (underwriting, processing, document preparations, flood certificate, tax service, wire transfer, courier, etc;), title insurance fees, escrow, attorney or closing agent fees, recording fees, inspection and appraisal fees and real estate brokerage commissions. Recurring costs occur month after month like hazard insurance, interests, property tax, mortgage insurance and association fees. An approximated amount of these fees have to be paid before closing including prepaid interest, any property tax that is overdue and hazard insurance.
These are the terms which must me satisfied by all parties before the buyer can close a property purchase. These contingencies are typically stated in the purchase contract between the buyer and seller. Example The buyer is given a 14 day period to remove the property contingency under the sales contract. From this example, the buyer is given 14 days to inspect the property, and request repairs from the seller. If any disagreement should arise stemming from repairs or the buyer is dissatisfied with property condition, the buyer may pull out of the contract penalty-free. After 14 days, the buyer loses the right to pull out, penalty-free, as a result of property condition issues.
This outlines a binding agreement between competent parties to undertake or abstain from certain things for consideration.
Contract for Deed
A selling arrangement in real estate where the buyer may occupy the property while making installment payments. The seller retains the title until the full agreed sales price is paid off. Also referred to as installment land contract
Contract for Sale
Equivalent to the Agreement of Sale
Contract to Purchase
Details the transaction in form of an Agreement of Sale. Submitted by the buyer to seller.
All mortgage loans which do not fall under VA or FHA. It may be conforming or non-conforming
Variable rate loans sometimes offer an option to be converted to fixed rate loans based on a pre-determined formula within a set time frame.
A transfer of real property title from one party to the other.
A housing complex with multiple units, where residents own stock in the building rather than individual units.
One or more shareholders making up a legal entity separate from the individual shareholders.
An agreement in writing or limitations on how land is used. It also promises certain acts.
Fannie Mae/Federal National Mortgage Association (FNMA)
FNMA mortgage backed securities acquired by a federal organization which obtains loans from lenders and resells them
Farmer’s Home Administration (FmHA)
The U.S. Department of Agriculture’s agency which creates and insures loans for farms and other forms of rural housing
Federal Deposit Insurance Corporation (FDIC)
The U.S. governments supervising agency responsible for insuring finical accounts held by lending institutions
Fee Simple (Fee Absolute or Free Simple Absolute)
The unrestricted ownership of a property in which the owner holds absolute power of disposition for their entire life and upon death transfer that power to an heir of their choice
Federal Housing Administration (FHA)
HUD’s internal government agency which insures mortgage loans and administers such loans for qualified private lending organizations
Government program that provides opportunity to protect lenders against mortgage default risk for qualified buyers, and is open to all home purchasers which pass their qualification standards
Fair Isaac & Company, created by the reported credit scores of Equifax, Experian, and Trans-Union which make up the three major credit bureaus in the U.S., these scores can vary between each bureau’s report depending on the value each assigns to varying items
The finical decision power and legal author given to a trustee over another person
A lender’s charged interest on a principle amount
Fixed Rate Mortgage (FRM)
An agreed, set amount of interest rate on a mortgage which will remain the same for the life of the mortgages term
A lender delaying the foreclosure process thereby allowing the borrowers the opportunity to repay the past due amount and become current again on the loan. Additionally it could be a temporary agreement between lender and borrower such that the borrower makes higher monthly payments on the loan to catch up with payments and pay past due amount.
The legal sale of a property that where the mortgage loan was defaulted on by the borrower thereby allowing the lender to sell the property.
Free and Clear
A property that does not have any liens against it.
This is the time between the loan’s due date and the date upon which late fees and penalties would be assessed if the payment comes in after this date. an example is a grace period of one week would mean that if a payment is due on the 1st and the payment is received prior to or on the 8th no late fees would be assessed.
Graduated Payment Mortgage GPM
A program that is meant for those who currently have lower incomes but have the potential for higher future income. This is accomplished by having initially lower payments but the payments increase yearly until the loan is fully amortized.
The buyer or recipient party in the process of a deed.
The seller or giver party in the process of a deed.
Hard Money Lender
Lenders for borrowers who have otherwise a difficult time getting loans from conventional methods by using their own private money. These loans usually have high interest rates attached to those loans associated with hard money lenders.
Home Improvement Loan
A loan that may be used to improve one’s home that may or may not need collateral whereby to procure the loan.
An area’s group of homeowners which agree to oversee a common area to develop and maintain through the passing of rules and regulations
Home Warranty Plan
A warranty purchased by a buyer which covers either new or used homes against defects in plumbing, appliances, heating/cooling systems, and electrical systems, by a private insurance insurance company during a home’s closing sale.
A status supplied by some states which protects the homes from certain legal judgments for a specified sum and provided only to a homeowner’s principal residence
Used in some states to calculate property tax in which the assessed value of the property to be reduced by a determined exemption amount.
Housing and Urban Development (HUD)
A federal program which implements housing and other community development projects, and is controlled by the U.S. government.
Additions which add market value to a designated area of raw land, such as the additional of buildings and streets.
An appraisers approach of using a property’s history of generated income, combined with its presents value, in order to estimate the rental value of the property.
A property solely used to generate funds through rental income.
Ingress and Egress (also see easements)
The right to travel throughout a piece of property but not the right to remain, or park on it.
An assessment with the purpose to determine the condition of a property through examination, and may also be used to guarantee the property meets a set standard of a contract.
Refer to ‘land contract’.
The set limit in which an adjustable rate mortgage cannot supersede or change, no matter how much an index may change.
A lenders set percentage rate for a principal sum of funds.
A person investing money as a resource to be used by a lender.
A collective project with a set desired outcome in which two or more parties outline their financial terms, roles and duties towards the desired goal of the project.
A loan whose amount exceeds the standards created by Freddie Mac or Fannie Mac.
A subordinate lien on a property.
Any mortgages or liens which are subordinate to the original mortgage of a property.
An arranged installment agreement in which a buyer may occupy the property, but ownership is retained by owner until payments reach the agreed amount made by the buyer to the owner.
The owner of a property agrees to allow a designated tenant to occupy their property in exchange for rent or leases funds.
A person, known as a trustee, goes on public record as the managing party of a property while a beneficiary remains private.
An agreement to exchange funds between a landlord and tenant for the right to occupy a property.
A set quantity added to the index to calculate the amount on an adjustable rate mortgage.
The largest amount that a purchaser would pay and the smallest amount that a seller would take on an estate.
A documented contract that makes a legal claim on an estate as fulfillment for the retribution of an amount owed; a borrowed amount to purchase property that often has interest rates and a set date of payment.
A person or business which yields borrowers and lenders in proximity in order to establish loans, but also does not create or become involved in the borrowing debt.
A purchaser who has a great intention of buying.
A vendor who had a great intention of selling.
Multiple Listing Service (MLS)
A collection of brokers who have adjoined in a advertising company in order to bring together their listed properties. In trading for the opportunity of a greater following of purchasers, the sellers consent to combine earnings. The records are spread equally with the use of an electronic method.
A rise in primary remainders, which happens when the monthly installments are not covered by the return value. The return value, which is not included in the initial monetary amount, is put together with the remaining amount owed.
Net Operating Income (NOI)
The quantity of money received that you have remaining once working costs are subtracted (but prior to subtracting interest and taxes). Arrears (estate premiums) are not included.
This is a contact, which forbids the mortgage, without any prior approval of lender.Non ComplianceThis refers to not fulfill the obey.
This loans does not have any standards.
This is the person who acknowledge the deeds and mortgages.
This is a legal document.
Notice of Default
This is the notice, which gives the warning to the borrower that, the legal action will be taken.
Give extra for purchase.
This is the seller who made the offer.
This is the buyer, who makes the offer to the seller.
Right time to buy or sell.
This is the person who receives the option.
This is the person who gives or sells the option.
Option to Purchase
This is the facility to purchase within the specific period.
This is an oral or told agreement.
This is the fee charged for processing the loan application.
An owner of the property who also lives on the property.
Owner of Record
The person whose name is on the deed which is recorded at the county recorders office.
A document such as a mortgage or deed given to the lender in lieu of payment.
A single monthly payment which covers principal, interest, taxes, and insurance.
A map of a piece of land.
A public record which shows how the land is divided into streets, blocks, and lots and the measurements of each piece of land.
Origination points or discount points, a measurement of the amount paid to a lender at the origination of a loan which is equal to one percent of the value of the loan.
A loan held in a bank’s portfolio as an investment.
Power of Attorney
A document which authorizes another party to act on one’s behalf as “Attorney in Fact”. Even though it is not necessary to be a licensed attorney to have power of attorney, it is a good idea to consult a licensed attorney for advice in creating power of attorney.
Interest paid in advance at closing to cover the interest that accrues from the closing date until the first payment is due.
Payments made on the principal before they are due, such as when extra payments are made or the property is sold or refinanced.
A fee that the lender charges for sale or refinance of a loan before a certain amount of time passes from the origination of the loan.
A commercial interest rate only available to the customers with the best credit, which is offered by banks on short-term loans.
The original balance of money in an investment or a loan, which is the basis for interest and returns.
Private Mortgage Insurance (PMI)
A service provided by a non-government party on a mortgage that offers protection for a lender in the event that the borrower must default on payment. If the borrower is unable to provide a down payment of at least 20 percent, a lender may allow a lesser down payment or even not require one at all, but if this option is taken, the borrower must most often carry the cost of private mortgage insurance. A borrower usually makes payments on this type of insurance on a monthly or annual basis.
This is a process acted on by a court in order to determine if the will of a deceased person is valid. This process includes the actions of executors, representatives, and court-appointed administrators in order to allocate the property of the deceased.
A projected statement of a company’s financial activities based on known factors and expectations.
A legally binding financial instrument in which one party acknowledges a debt to another party, and promises in writing to repay it.
In corporate practice or banking, the act of dividing share or responsibility proportionately in order to determine the amounts and/or debts associated with each buyer and seller.
A document of disclosure which outlines the terms and financial security of a real estate transaction. This document is most often reviewed by investors before the commit to a project.
A publicly held auction at which a property is awarded to the highest bidder. The auction must be held in a location where the general public can find, enter, and participate, and it should be advertised beforehand.
The act of paying money to acquire a piece of property.
See Agreement of Sale.
Purchase Money Mortgage
A mortgage that is issued to finance an acquisition of property. This is usually an option when a buyer is unable to obtain a mortgage through traditional means.
Single Family Residence (SFR)
Also known as ‘single family detached’, meaning the structure is a standalone home containing its own lot. The structure has no common area which attaches it to other residences such as condominiums, townhomes, and apartment complexes.
Special Warranty Deed
The seller guarantees the title against any defects during a period of his/her ownership of the property, while the grantor holds no warranty against defects that existed before his/her ownership of said property.
A method of purchase which is similar to lease options.
A loan standing with lower priority to another, such as a second mortgage.
Substitution of Liability
Assumption of responsibility for a loan on the part of the buyer.
A map which measures a section of land, including charted boundaries, as well as its improvements and relationship to adjacent land, which must be compiled by a licensed surveyor.
Improvements which add value to a defined amount of property, typically done by the property’s owner.
A government entity’s legal claim against a person’s property for nonpayment of taxes.
A government entity’s public sale of a defined property resulted from a person’s nonpayment of property taxes.
Tenancy at Will
Owner given permission for a tenant to occupy a property for an unspecified amount of time, which may end upon the tenant’s or landlord’s (owner) decision.
Tenancy for Years
Landlord created lease for a set period of time in which a specified tenant may occupy a property.
Tenancy in Common
Two or more persons share ownership of a property, each with undivided interest, and each without survivorship rights- meaning the death of one owner passes their ownership rights to be inherited by a beneficiary of their choosing.Time Is of the Essencea phrase used in legal contracts to indicate that all dates and times listed in the contract are interpreted precisely.
A legal document that proves ownership.
A form of insurance usually used by buyers and lenders to protect the insured from losses caused by disputes of ownership.
A report that contains information about the title including who owns the property and any liens, outstanding mortgages or deeds of trust, restrictions, covenants, easements, and defects.
A search of public records for information on ownership and encumbrances of a property.
A piece of land that is usually subdivided.
See Deed of Trust.
An entity that is given legal responsibility to hold property for another person.
Analyzing a potential borrower’s credit, income, employment, etc. to determine whether or not to lend to them.
Property that does not have any creditors’ claims against it.
A bare piece of land that has not had anything built on it.
A home loan guaranteed by the U.S. Veterans Administration which allows veterans to buy homes with little or no down payment.
An estimate of a property’s value which is determined based on multiple factors.
Variable Rate Mortgage
See Adjustable Rate Mortgage.