of Real Estate Terms "A - G"
Real Estate Terms "H - P"
of Real Estate Terms "Q - Z"
Real Estate Terms A - G
acceleration clause A
provision in a mortgage that gives the
lender the right to demand payment of the entire principal balance if a monthly
payment is missed. acceptance An offerees consent to enter into a
contract and be bound by the terms of the offer.
additional principal payment A payment by a borrower of more than
the scheduled principal amount due in order to reduce the remaining balance on
adjustable-rate mortgage (ARM) A mortgage that permits the lender
to adjust its interest rate periodically on the basis of changes in a specified
adjusted basis The original cost of a property plus the value of
any capital expenditures for improvements to the property minus any
adjustment date The date on which the interest rate changes for
an adjustable-rate mortgage (ARM).
adjustment period The period that elapses between the adjustment
dates for an adjustable-rate mortgage (ARM).
administrator A person appointed by a probate court to administer
the estate of a person who died intestate.
affordability analysis A detailed analysis of your ability to
afford the purchase of a home. An affordability analysis takes into
consideration your income, liabilities, and available funds, along with the
type of mortgage you plan to use, the area where you want to purchase a home,
and the closing costs that you might expect to pay.
amenity A feature of real property that enhances its
attractiveness and increases the occupants or users satisfaction
although the feature is not essential to the propertys use. Natural
amenities include a pleasant or desirable location near water, scenic views of
the surrounding area, etc. Human-made amenities include swimming pools, tennis
courts, community buildings, and other recreational facilities.
amortization The gradual repayment of a mortgage loan by
amortization schedule A timetable for payment of a mortgage loan.
An amortization schedule shows the amount of each payment applied to interest
and principal and shows the remaining balance after each payment is made.
amortization term The amount of time required to amortize the mortgage loan.
The amortization term is expressed as a number of months. For example, for a
30-year fixed-rate mortgage, the amortization term is 360 months.
amortize To repay a mortgage with regular payments that cover
both principal and interest. annual mortgagor statement A report sent to the
mortgagor each year. The report shows how much was paid in taxes and interest
during the year, as well as the remaining mortgage loan balance at the end of
annual percentage rate (APR) The cost of a mortgage stated as a
yearly rate; includes such items as interest, mortgage insurance, and loan
origination fee (points).
annuity An amount paid yearly or at other regular intervals,
often on a guaranteed dollar basis. application A form used to apply for a
mortgage loan and to record pertinent information concerning a prospective
mortgagor and the proposed security.
appraisal A written analysis of the estimated value of a property
prepared by a qualified appraiser. Contrast with home inspection.
appraised value An opinion of a property's fair market value,
based on an appraiser's knowledge, experience, and analysis of the property.
appraiser A person qualified by education, training, and
experience to estimate the value of real property and personal property.
appreciation An increase in the value of a property due to
changes in market conditions or other causes. The opposite of depreciation.
assessed value The valuation placed on property by a public tax
assessor for purposes of taxation.
assessment The process of placing a value on property for the
strict purpose of taxation. May also refer to a levy against property for a
special purpose, such as a sewer assessment.
assessment rolls The public record of taxable property. assessor
A public official who establishes the value of a property for taxation
asset Anything of monetary value that is owned by a person.
Assets include real property, personal property, and enforceable claims against
others (including bank accounts, stocks, mutual funds, and so on).
assignment The transfer of a mortgage from one person to another.
assumable mortgage A mortgage that can be taken over ("assumed") by the buyer
when a home is sold.
assumption The transfer of the sellers existing mortgage to
the buyer. See assumable mortgage.
assumption clause A provision in an assumable mortgage that
allows a buyer to assume responsibility for the mortgage from the seller. The
loan does not need to be paid in full by the original borrower upon sale or
transfer of the property.
assumption fee The fee paid to a lender (usually by the purchaser
of real property) resulting from the assumption of an existing mortgage.
attorney-in-fact One who holds a power of attorney from another
to execute documents on behalf of the grantor of the power.
balance sheet A financial statement that shows assets,
liabilities, and net worth as of a specific date.
balloon mortgage A mortgage that has level monthly payments that
will amortize it over a stated term but that provides for a lump sum payment to
be due at the end of an earlier specified term.
balloon payment The final lump sum payment that is made at the
maturity date of a balloon mortgage. bankrupt A person, firm, or corporation
that, through a court proceeding, is relieved from the payment of all debts
after the surrender of all assets to a court-appointed trustee.
bankruptcy A proceeding in a federal court in which a debtor who
owes more than his or her assets can relieve the debts by transferring his or
her assets to a trustee.
before-tax income Income before taxes are deducted. beneficiary
The person designated to receive the income from a trust, estate, or a deed of
bequeath To transfer personal property through a will. betterment
An improvement that increases property value as distinguished from repairs or
replacements that simply maintain value.
bill of sale A written document that transfers title to personal
binder A preliminary agreement, secured by the payment of an
earnest money deposit, under which a buyer offers to purchase real estate.
biweekly payment mortgage A mortgage that requires payments to
reduce the debt every two weeks (instead of the standard monthly payment
schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half
of the monthly payment that would be required if the loan were a standard
30-year fixed-rate mortgage, and they are usually drafted from the
borrowers bank account. The result for the borrower is a substantial
savings in interest.
blanket insurance policy A single policy that covers more than
one piece of property (or more than one person).
blanket mortgage The mortgage that is secured by a cooperative
project, as opposed to the share loans on individual units within the project.
bona fide In good faith, without fraud. bond An interest-bearing
certificate of debt with a maturity date. An obligation of a government or
business corporation. A real estate bond is a written obligation usually
secured by a mortgage or a deed of trust.
breach A violation of any legal obligation.
bridge loan A form of second trust that is collateralized by the
borrower's present home (which is usually for sale) in a manner that allows the
proceeds to be used for closing on a new house before the present home is sold.
Also known as "swing loan."
broker A person who, for a commission or a fee, brings parties
together and assists in negotiating contracts between them. See mortgage
budget A detailed plan of income and expenses expected over a
certain period of time. A budget can provide guidelines for managing future
investments and expenses.
budget category A category of income or expense data that you can
use in a budget. You can also define your own budget categories and add them to
some or all of the budgets you create. "Rent" is an example of an expense
category. "Salary" is a typical income category.
building code Local regulations that control design,
construction, and materials used in construction. Building codes are based on
safety and health standards.
buydown account An account in which funds are held so that they
can be applied as part of the monthly mortgage payment as each payment comes
due during the period that an interest rate buydown plan is in effect.
buydown mortgage A temporary buydown is a mortgage on which an
initial lump sum payment is made by any party to reduce a borrowers
monthly payments during the first few years of a mortgage. A permanent buydown
reduces the interest rate over the entire life of a mortgage.
call option A provision in the mortgage that gives the mortgagee
the right to call the mortgage due and payable at the end of a specified period
for whatever reason.
cap A provision of an adjustable-rate mortgage (ARM) that limits
how much the interest rate or mortgage payments may increase or decrease. See
lifetime payment cap, periodic payment cap, and periodic rate cap.
capital (1) Money used to create income, either as an investment
in a business or an income property. (2) The money or property comprising the
wealth owned or used by a person or business enterprise. (3) The accumulated
wealth of a person or business. (4) The net worth of a business represented by
the amount by which its assets exceed liabilities.
capital expenditure The cost of an improvement made to extend the
useful life of a property or to add to its value.
capital improvement Any structure or component erected as a
permanent improvement to real property that adds to its value and useful life.
cash-out refinance A refinance transaction in which the amount of
money received from the new loan exceeds the total of the money needed to repay
the existing first mortgage, closing costs, points, and the amount required to
satisfy any outstanding subordinate mortgage liens. In other words, a refinance
transaction in which the borrower receives additional cash that can be used for
certificate of deposit A document written by a bank or other
financial institution that is evidence of a deposit, with the issuers
promise to return the deposit plus earnings at a specified interest rate within
a specified time period.
certificate of deposit index An index that is used to determine
interest rate changes for certain ARM plans. It represents the weekly average
of secondary market interest rates on six-month negotiable certificates of
deposit. See adjustable-rate mortgage (ARM).
Certificate of Eligibility A document issued by the federal
government certifying a veterans eligibility for a Department of Veterans
Affairs (VA) mortgage. Certificate of Reasonable Value (CRV) A document issued
by the Department of Veterans Affairs (VA) that establishes the maximum value
and loan amount for a VA mortgage.
certificate of title A statement provided by an abstract company,
title company, or attorney stating that the title to real estate is legally
held by the current owner.
chain of title The history of all of the documents that transfer
title to a parcel of real property, starting with the earliest existing
document and ending with the most recent.
change frequency The frequency (in months) of payment and/or
interest rate changes in an adjustable-rate mortgage (ARM).
chattel Another name for personal property. clear title A title
that is free of liens or legal questions as to ownership of the property.
closing A meeting at which a sale of a property is finalized by
the buyer signing the mortgage documents and paying closing costs. Also called
closing cost item A fee or amount that a home buyer must pay at
closing for a single service, tax, or product. Closing costs are made up of
individual closing cost items such as origination fees and attorney's fees.
Many closing cost items are included as numbered items on the HUD-1 statement.
closing costs Expenses (over and above the price of the property)
incurred by buyers and sellers in transferring ownership of a property. Closing
costs normally include an origination fee, an attorney's fee, taxes, an amount
placed in escrow, and charges for obtaining title insurance and a survey.
Closing costs percentage will vary according to the area of the country;
lenders or realtors® often provide estimates of closing costs to
closing statement See HUD-1 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 a quitclaim deed, release, or court action.
coinsurance A sharing of insurance risk between the insurer and
the insured. Coinsurance depends on the relationship between the amount of the
policy and a specified percentage of the actual value of the property insured
at the time of the loss.
coinsurance clause A provision in a hazard insurance policy that
states the amount of coverage that must be maintained -- as a percentage of the
total value of the property -- for the insured to collect the full amount of a
collateral An asset (such as a car or a home) that guarantees the
repayment of a loan. The borrower risks losing the asset if the loan is not
repaid according to the terms of the loan contract.
collection The efforts used to bring a delinquent mortgage
current and to file the necessary notices to proceed with foreclosure when
co-maker A person who signs a promissory note along with the
borrower. A co-maker's signature guarantees that the loan will be repaid,
because the borrower and the co-maker are equally responsible for the
repayment. See endorser.
commission The fee charged by a broker or agent for negotiating a
real estate or loan transaction. A commission is generally a percentage of the
price of the property or loan.
commitment letter A formal offer by a lender stating the terms
under which it agrees to lend money to a home buyer. Also known as a "loan
common area assessments Levies against individual unit owners in
a condominium or planned unit development (PUD) project for additional capital
to defray homeowners' association costs and expenses and to repair, replace,
maintain, improve, or operate the common areas of the project.
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 the United States.
Community Home Improvement Mortgage Loan® An alternative
financing option that allows low- and moderate-income home buyers to obtain 95
percent financing for the purchase and improvement of a home in need of modest
repairs. The repair work can account for as much as 30 percent of the appraised
Community Land Trust Mortgage Loan An alternative financing
option that enables low- and moderate-income home buyers to purchase housing
that has been improved by a nonprofit Community Land Trust and to lease the
land on which the property stands.
community property In some western and southwestern states, a
form of ownership under which property acquired during a marriage is presumed
to be owned jointly unless acquired as separate property of either spouse.
Community Seconds® An alternative financing option for low-
and moderate-income households under which an investor purchases a first
mortgage that has a subsidized second mortgage behind it. The second mortgage
may be issued by a state, county, or local housing agency, foundation, or
nonprofit organization. Payment on the second mortgage is often deferred and
carries a very low interest rate (or no interest rate at all). Part of the debt
may be forgiven incrementally for each year the buyer remains in the home.
comparables An abbreviation for "comparable properties"; used for
comparative purposes in the appraisal process. Comparables are properties like
the property under consideration; they have reasonably the same size, location
, and amenities and have recently been sold. Comparables help the appraiser
determine the approximate fair market value of the subject property.
compound interest Interest paid on the original principal balance
and on the accrued and unpaid interest.
condemnation The determination that a building is not fit for use
or is dangerous and must be destroyed; the taking of private property for a
public purpose through an exercise of the right of eminent domain.
condominium A real estate project in which each unit owner has
title to a unit in a building, an undivided interest in the common areas of the
project, and sometimes the exclusive use of certain limited common areas.
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.
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.
consumer reporting agency (or bureau) An organization that
prepares reports that are used by lenders to determine a potential borrower's
credit history. The agency obtains data for these reports from a credit
repository as well as from other sources.
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
conventional mortgage A mortgage that is not insured or
guaranteed by the federal government. Contrast with government mortgage.
convertibility clause A provision in some adjustable-rate
mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate
mortgage at specified timeframes after loan origination.
convertible ARM An adjustable-rate mortgage (ARM) that can be
converted to a fixed-rate mortgage under specified conditions.
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.
cooperative corporation A business trust entity that holds title
to a cooperative project and grants occupancy rights to particular apartments
or units to shareholders through proprietary leases or similar arrangements.
cooperative mortgages Mortgages related to a cooperative project.
This usually refers to the multifamily mortgage covering the entire project but
occasionally describes the share loans on the individual units.
cooperative project A residential or mixed-use building wherein a
corporation or trust holds title to the property and sells shares of stock
representing the value of a single apartment unit to individuals who, in turn,
receive a proprietary lease as evidence of title.
corporate relocation Arrangements under which an employer moves
an employee to another area as part of the employer's normal course of business
or under which it transfers a substantial part or all of its operations and
employees to another area because it is relocating its headquarters or
expanding its office capacity.
cost of funds index (COFI) An index that is used to determine
interest rate changes for certain adjustable-rate mortgage (ARM) plans. It
represents the weighted-average cost of savings, borrowings, and advances of
the 11th District members of the Federal Home Loan Bank of San Francisco. See
adjustable-rate mortgage (ARM).
covenant A clause in a mortgage that obligates or restricts the
borrower and that, if violated, can result in foreclosure.
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 open and fully repaid
debts. A credit history helps a lender to determine whether a potential
borrower has a history of repaying debts in a timely manner.
credit life insurance A type of insurance often bought by
mortgagors because it will pay off the mortgage debt if the mortgagor dies
while the policy is in force.
creditor A person to whom money is owed.
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. See merged credit report.
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.
debt An amount owed to another. See installment loan and
deed The legal document conveying title to a property.
deed-in-lieu A deed given by a mortgagor to the mortgagee to
satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."
deed of trust The document used in some states instead of a
mortgage; title is conveyed to a trustee.
default Failure to make mortgage payments on a timely basis or to
comply with other requirements of a mortgage.
delinquency Failure to make mortgage payments when mortgage
payments are due.
deposit A sum of money given to bind the sale of real estate, or
a sum of money given to ensure payment or an advance of funds in the processing
of a loan. See earnest money deposit.
depreciation A decline in the value of property; the opposite of
discount points See point.
dower The rights of a widow in the property of her husband at his
down payment The part of the purchase price of a property that
the buyer pays in cash and does not finance with a mortgage.
dual agency The right for a agency or agaent to represent both
parties (with a limited role) in a legal transaction.
due-on-sale provision A provision in a mortgage that allows the
lender to demand repayment in full if the borrower sells the property that
serves as security for the mortgage.
due-on-transfer provision This terminology is usually used for
second mortgages. See due-on-sale provision.
earnest money deposit A deposit made by the potential home buyer
to show that he or she is serious about buying the house.
easement A right of way giving persons other than the owner
access to or over a property.
effective age An appraisers estimate of the physical
condition of a building. The actual age of a building may be shorter or longer
than its effective age.
effective gross income Normal annual income including overtime
that is regular or guaranteed. The income may be from more than one source.
Salary is generally the principal source, but other income may qualify if it is
significant and stable.
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.
Employer-assisted housing A special Fannie Mae housing initiative
that offers several different ways for employers to work with local lenders to
develop plans to assist their employees in purchasing homes.
encroachment An improvement that intrudes illegally on
anothers property. encumbrance Anything that affects or limits the fee
simple title to a property, such as mortgages, leases, easements, or
endorser A person who signs ownership interest over to another
party. Contrast with co-maker.
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.
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 deposit by a borrower with the lender of funds to pay taxes and insurance
premiums when they become due, or the deposit of funds or documents with an
attorney or escrow agent to be disbursed upon the closing of a sale of real
escrow account The account in which a mortgage servicer holds the
borrowers escrow payments prior to paying property expenses.
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.
escrow collections Funds collected by the servicer and set aside
in an escrow account to pay the borrowers property taxes, mortgage
insurance, and hazard insurance.
escrow disbursements The use of escrow funds to pay real estate
taxes, hazard insurance, mortgage insurance, and other property expenses as
they become due.
escrow payment The portion of a mortgagors monthly payment
that is held by the servicer to pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they become due. Known as
"impounds" or "reserves" in some states.
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.
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.
exclusive listing A written contract that gives a licensed real
estate agent the exclusive right to sell a property for a specified time, but
reserving the owners right to sell the property alone without the payment
of a commission.
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
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 Fannie Mae is a New York Stock Exchange company and
the largest non-bank financial services company in the world. It operates
pursuant to a federal charter and is the nation's largest source of financing
for home mortgages. Over the past 30 years, Fannie Mae has provided nearly $2.5
trillion of mortgage financing for over 30 million families.
Fannie Mae's Community Home Buyer's ProgramSM 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.
Fannie 97® A financing option for a fixed-rate mortgage that
offers home buyers a 3 percent down payment loan with either a 25- or 30-year
term. The mortgage features a loan-to-value (LTV) percentage of 97 percent, and
is designed to expand homeownership opportunities for people with modest
incomes. Borrowers must take a pre-purchase home-buyer education session to
qualify for a Fannie 97 mortgage.
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
fee simple The greatest possible interest a person can have in
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 coinsured mortgage A mortgage (under FHA Section 244) for
which the Federal Housing Administration (FHA) and the originating lender share
the risk of loss in the event of the mortgagor's default.
FHA mortgage A mortgage that is insured by the Federal Housing
Administration (FHA). Also known as a government mortgage.
finder's fee A fee or commission paid to a mortgage broker for
finding a mortgage loan for a prospective borrower.
firm commitment A lenders agreement to make a loan to a
specific borrower on a specific property.
first mortgage A mortgage that is the primary lien against a
fixed installment The monthly payment due on a mortgage loan. The
fixed installment includes payment of both principal and interest.
fixed-rate mortgage (FRM) 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 mrotgage debt. forfeiture The loss of
money, property, rights, or privileges due to a breach of legal obligation.
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 --
monies must be repaid to avoid serious penalty charges.
fully amortized ARM An adjustable-rate mortgage (ARM) with a
monthly payment that is sufficient to amortize the remaining balance, at the
interest accrual rate, over the amortization term.
government mortgage A mortgage that is insured by the Federal
Housing Administration (FHA) or guaranteed by the Department of Veterans
Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional
Government National Mortgage Association A government-owned
corporation within the U.S. Department of Housing and Urban Development (HUD).
Created by Congress on September 1, 1968, GNMA assumed responsibility for the
special assistance loan program formerly administered by Fannie Mae. Popularly
known as Ginnie Mae.
grantee The person to whom an interest in real property is
grantor The person conveying an interest in real property.
ground rent The amount of money that is paid for the use of land
when title to a property is held as a leasehold estate rather than as a fee
group home A single-family residential structure designed or
adapted for occupancy by unrelated developmentally disabled persons. The
structure provides long-term housing and support services that are residential
growing-equity mortgage (GEM) A fixed-rate mortgage that provides
scheduled payment increases over an established period of time, with the
increased amount of the monthly payment applied directly toward reducing the
remaining balance of the mortgage.
guarantee mortgage A mortgage that is guaranteed by a third
guaranteed loan Also known as a government mortgage.