Abstract of Title— Condensed history of title to realty.
Acre—43,560 square feet of realty.
Acceleration clause— Makes the entire debt due and owed immediately upon default or other event.
Adjustable rate— Aka variable rate, an alternative mortgage feature, interest rate adjusts periodically by contract, upon certain events, or in response to certain index.
Affidavit of Title— Sworn statement of owner that there are no liens, etc. that have arisen since the date of title examination.
Amortization— The gradual reduction of a debt by means of periodic payments sufficient to pay principal and thereby liquidate the debt.
Appraisal— An estimate of the quantity, quality, or value of something.
Appreciation— an increase in worth.
Assignment of mortgage— The lender transfers its tights under the mortgage to another person.
Assumption of mortgage— Agreeing to be bound to an existing loan, including payments.
Balloon payment— Lump sum due at future date, found on interest only or partially amortized loans, an alternative mortgage feature.
Blanket mortgage— Covers more than one parcel with provision for partial release as the loan is repaid.
Caveat Emptor— An expression used that means BUYER BEWARE.
Chain of title— The succession of conveyances regarding realty.
Closing agent— The transactional intermediary for buyer, seller, and lender, can be an attorney, but is usually a representative of a title company.
Closing statement— The document that sets forth the debits and credits of the transaction, the HUD-1.
Cloud on title— Any matter that impairs free and clear title to property.
Commitment— A written promise by a lender to make a specific loan to a prospective borrower.
Construction loan— Finances the construction of improvements to realty.
Comparables— Properties listed on an appraisal report that are substantially equivalent to the subject property.
Conventional loan— Payment of debt rests solely upon borrower, so does not include government insured or guaranteed loans.
Conveyance— The transfer of the title to land from one person or class of persons to another.
Deed of Restriction— A limitation placed in a deed limiting or restricting the use of real property.
Debt to Income Ratio (DTI)— The ratio determined by a borrower’s gross monthly income divided by the borrowers total outgoing expenses.
Default— The nonperformance of a duty, whether arising under a contract or otherwise.
Depreciation— The gradual reduction in value of an asset.
Discount Point— One percent of the face value of the loan.
Dower— The inchoate right of a spouse in property acquired during marriage that matures upon death of the other spouse.
Easement— A right or interest in the land of another entitling the holder thereof to some use, privilege, or benefit, such as to pole lines, pipelines, road thereon, or travel over.
Encroachment— An improvement that intrudes illegally upon another’s property.
Escrow— The method of closing a real estate transaction using a disinterested third party.
Escrow Analysis— The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance and other bills when due.
Equity— The market value of a property to the owner less all lien amounts outstanding against it. Equity is usually estimated by subtracting debts owed on the property from the property’s estimated market value. Fannie Mae
(FNMA) — Federal National Mortgage Association- A privately owned corporation created by Congress in 1938 to support the secondary market by purchasing and selling government underwritten residential mortgages. Today, FNMA purchases more conventional mortgages than government mortgages. Commonly known as Fannie Mae.
Federal Reserve— (The Bankers Bank) A government institution that controls and regulated the operation of all nationally chartered banks.
FHA— Federal Housing Administration, created under the National Housing Act of 1934, operates under HUD, doesn’t lend money, but insures approved lenders against loss. Typical loan is 203(b) loan 1-4 family. Loan size limits, interest rate limits, small insurance premium plus fee limits, requires FHA appraiser, minimum building standards.
Fiduciary— A relationship that implies a position or trust or confidence wherein one person is usually entrusted to hold or manage property for another.
First Mortgage— A mortgage that is a first lien on the property pledged as security.
Foreclosure— A legal procedure where the property is sold to satisfy debt, usually wipes out most other lien holders, leaving property free and clear.
Freddie Mac (FHLMC) — Federal Home Loan Mortgage Corporation- A private corporation authorized by Congress in 1970 to provide secondary mortgage market support to conventional mortgages. Commonly known as Freddie Mac.
Fully amortized loan— Level payment amount, at the end of loan term, all loan principal and interest is reduced to zero, aka direct reduction loan.
Ginnie Mae (GNMA) — Government National Mortgage Association- GNMA- A governmental agency that participates in the secondary mortgage market. It sponsors mortgage-backed securities programs backed by FHA and VA loans.
Hazard Insurance— A contract whereby, for an agreed premium, one party undertakes to compensate the other for loss on a specified subject by specified hazards, such as fire, flood and windstorm. Also referred to as homeowners insurance. Check your policy closely because many insurance companies are getting very specific on what they cover under your traditional policy and what they do not.
Highest and Best Use— The available present use or series of future uses that will produce the highest present property value and develop a site to its full economic potential.
Home Equity Loan— A loan based on the accumulated equity in the property. Can be either a lump sum or an equity line of credit, and is usually a junior mortgage or second lien.
Housing and Urban Development, Department of (HUD) — The federal department that manages various housing programs throughout the nation: also the parent regulator of FHA and GNMA.
Junior Mortgage/ Junior Lien— A lien that is subsequent to the claims of the holder of a prior mortgage. Any lien that is not a first mortgage. (Priority of a mortgage is determined by the date and time of recording).
Late Charge— A 4% penalty is permitted by both FHA and VA covering any monthly payment that is not made by the 15th of the month in which the payment is due. A late charge for a conventional loan is typically 5%. Payments are generally due on the first of the month and are considered late any day received after the 15th.
Leasehold— An interest in real property held by virtue of a lease.
Legal Description— A description of a parcel of land sufficient to identify the property.
Lien— A hold or claim which one person or a taxing authority has upon the property of another as a security for some debt or charge.
Involuntary Lien— A lien imposed by law, for delinquent taxes.
Judgment Lien— A lien placed upon a debtor as a result of a court decree.
Loan to Value Ratio (LTV) — The ratio between a mortgage loan and the market or appraised value, whichever is less. Used as a standard to measure the borrower’s vested interest in the property and his or her consequent willingness to repay the loan. The higher the loan to value ratio, the riskier the loan because the borrower ahs less to lose upon default.
Metes and Bounds— A description in a deed of the land location in which the boundaries are identified by directions and distances.
Mortgage— A contract by which specific property is hypothecated for the performance of an act without the necessity of a change of possession.
Mortgage Broker— An intermediary agent who brings together borrowers and lenders to originate loan transactions. A mortgage broker generally has numerous banks that they can do business with, shop your loan around with, and numerous programs available that a traditional bank probably will not have.
Mortgage Insurance Premium (MIP) — The price paid by the borrower for insurance under an FHA loan, furnished by the federal government in favor of the lender, insuring payment of the loan in the event of default by the borrower after foreclosure. All FHA loan require MIP.
Mortgagee— The lender who receives the security interest (personal property).
Mortgagor— The realty owner/borrower who gives the security interest.
Note— The promise to repay the debt sets forth the terms of the loan.
Real property— Land and things affixed to the land, e.g. homes, growing trees, aka realty.
Right of Rescission— Refers to the 3 day period that consumers have to rescind certain types of transaction. This applies to owner occupied properties refinance transaction, but is not applicable to purchase transactions.
Second Mortgage— A mortgage that ranks immediately behind the first mortgage in priority.
Secondary Mortgage Market— The market in which already existing mortgages are bought and sold. Dominated by major agencies and organizations, which buy discounted mortgages in order to generate a yield for investors, provide a source of liquidity to mortgage sellers, and redistribute funds from cash-rich to cash-poor localities.
Security Interest— An interest that a lender takes in the borrower’s property to assure repayment of a debt.
Seller Carryback—An idiom commonly used in real estate for whenever the seller, acting as a lender, holds or “carries back” a mortgage note from the buyer. Servicing—The collection of payments of principal and interest, and trust fund items such as fire insurance, taxes, etc.. on a note by the borrowers in accordance with the terms of the note.
Subordination— The act of a party acknowledging, by written recorded instrument, that a debt due is inferior to the interest of another in the same property. (An example would be voluntarily moving from first lien position to second lien position)
Table Funding— A financing technique that occurs when a correspondent lender closes a mortgage loan with funds belonging to an acquiring investor and immediately assigns the loan to that investor.
Title— The manner and the person in which and in whom property is vested.
Title examination— A review of the public record for matters entered against title.
Title insurance— A retrospective policy of insurance against clouds on title that benefits new owner or the lender.
Underwriting— The financial analysis of a borrower made to determine the borrower’s ability to repay a loan.
Uniform Settlement Statement— HUD-1
VA— Veterans Administration, created under Servicemen’s Readjustment Act of 1944, doesn’t usually lend money, but guarantees loans by approved lenders, guarantee limits, VA can lend its own money