Professional Documents
Culture Documents
REAL ESTATE
AND TITLE
TERMINOLOGY
Be Prepared! Be Knowledgeable! Be Understood!
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REAL ESTATE AND TITLE TERMINOLOGY
A
A.L.T.A.: (American Land Title Association) an organization, comprised of title insurance
companies, which has adopted certain insurance policy forms to standardize coverage on
a national basis
A.R.M.: Adjustable Rate Mortgage. The interested rate is not fixed for the term of the
mortgage. This is a mortgage in which the interest rate is adjusted periodically based on
a pre-selected index.
ABONDONMENT: (1) Turning damaged property over to an insurer and claiming its full
value. (2) The elimination of an asset or property from use (3) Investments: The refusal
of a shipment, because of damage, by the person who is authorized to ship it.
ABSOLUTE GIFT: A gift of property by will, which carries with it, possession of and
complete dominion over the property: opposed to a conditional gift.
ABSOLUTE TITLE: A legal document stating that a person or other legal entity has the
unqualified right of ownership to some personal or real property.
ABSTRACT: A summary; an abridgment. Before the use of photo static copying, public
records were kept by abstracts of recorded documents.
ABUTTING OWNER: One whose land is contiguous to (abuts) a public right of way.
ACCEPTANCE QUALIFIED: Where the offeree accepts certain provisions of an offer but
rejects others. It is a counter offer, or, more accurately a new offer.
ACCESS RIGHT: A right to ingress and egress to and from one's property. May be
express or implied.
ACCESSION: The acquisition of title to additional real estate by its annexation to existing
property. This can be caused by man, such as the addition of fixtures to the land, or by
nature, such as alluvial deposits on the banks of a stream by accretion.
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ACCOUNT HISTORY: The payment history of an account over a specified period of
time, including the number of times the account was past due or over limit.
ACCOUNT: (1) Credit established under a particular name, usually by deposit, against
which withdrawals may be made. (2) A record of the financial transactions affecting a
particular phase of business. The financial transactions are dated and entered in the
account as debits or credits. (3) As used in the Electronic Fund Transfer Act, account
means a demand deposit, savings deposit, or other asset account established primarily
for personal, family or household purposes.
ACCREATION: The gradual increases in dry land by the forces of nature, as when water
deposits sediment on waterfront property. The owner of that property becomes owner of
the new soil.
ACCRUAL DATE: The date the lien holder begins to charge interest.
ACCRUED INTEREST: Interest that has been charged but not yet paid.
ACRE: An acre of land equal to 43,560 square feet, or 4,840 square yards or 150 square
rods. There are 640 acres in a section of land and 36 sections in a township.
AD VALOREM: "According to value." A method of taxation using the value of the thing
taxed to determine the amount of tax. Taxes can be either "ad valorem" or "specific."
Example: a tax of $5.00 per $1000.00 of value per house is "ad valorem." A tax of $5.00
per house (irrespective of value is specific.
ADDITIONAL DEPOSIT: A buyer of real property will generally give a small deposit
with an offer, and a more substantial deposit after the offer has been accepted. The
second deposit is the "additional deposit."
ADJUSTABE MORTGAGE LOANS (AML'S): Mortgage loans under which the interest
rate is periodically adjusted to more closely coincide with current rates. The amounts
and times of adjustment are agreed to at the inception of the loan. Also called:
Adjustable Rate Loans, Adjustable Rate Mortgages (ARM'S), Flexible Rate Loans, And
Variable Rate Loans. (See also: Indexing, Rate Index).
ADJUSTMENT PERIOD: For adjustable-rate loans, the period of time between interest
rate changes. For example, a mortgage with an adjustment period of one year is called
a one-year ARM, and the interest rate can change once each year.
ADVERSE LAND USE: A use, which causes surrounding property to lose value, such
as an industrial development in a residential area.
AFFIANT: One who makes an affidavit. Also called a deponent, although technically not
the same.
AFFIDAVID: A sworn statement in writing usually given while under oath or in the
presence of a notary
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AFFIRMATIVE EASEMENT: An easement described from the benefited estate
(dominant tenement). Also called a parcel 2 easement. The same easement described
from the burdened estate (servient tenement) would be a negative easement.
AGENCY: Any relationship in which one party (agent) acts for or represents another
(principal) under the authority of the latter agency involving real property should be in
writing, such as listings, trusts, powers of attorney, etc.
AGENCY AGREEMENT: (agency listing) - In some states, the term describing a listing
under which the broker's commission is protected against a sale by other agents but not
by a sale by the principal. Called a "not-exclusive" listing in some states.
AGENT: One who is authorized to act for or represent another (principal), usually in
business matters.
AGREED RATE: The rate that is agreed upon to be charged to the loan balance. See
also APR or Annual Percentage Rate.
AGREEMENT: A general term usually describing a common view of two or more people
regarding the rights and obligations of each with regard to a given subject. Not
necessarily a contract, although all contracts are agreements.
AGREEMENT OF SALE: A written contract entered into between the seller (vendor)
and buyer (vendee) for sale of real property (land) on an installment or deferred
payment plan. It is also known as an agreement to convey, a long form Security
Agreement, or a real estate installment contract.
ALIEN: An individual who is not a citizen or national of the United States. Aliens are
further defined as resident or nonresident depending on the situation.
ALIENATION: Alienation occurs when title to a property passes to another party, such
as when a property is sold.
ALL- INCLUSIVE TRUST DEED (AITD): A second or junior deed of trust with a face
value of both the amount it secures and the balance due under the prior deed of trust. The
beneficiary under the All Inclusive Deed of Trust collects a payment based on its face
value and then pays the prior beneficiary.
ALL- INCLUSIVE RATE: Rate, which includes charges for title insurance, searching or
abstract fees and examination fees.
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ALLOCATION: A method for appraising a site (land) by comparing other site values as
a percentage of total value of a site (including \improvements). Property x has a total
(improved) value of $100,000. The land is worth $35,000. The term is often (and
incorrectly) used synonymously with abstraction.
AMORTIZE: Provisions for repayment of loan principal in periodic payments over a stated
period of time.
AMORTIZED LOAN: A loan that is paid off, both interest and principal, by regular
payments that are equal or nearly equal.
AMOUNT FINANCED: The loan amount less the Prepaid Finance Charges paid at
closing. (Depending on the State and the Lender these Prepaid Finance Charges can
also be financed. They are still considered "Prepaid". The Lender adds them to the
principal amount of the loan.) Examples of a Prepaid Finance Charge are the loan
origination fee and the discount points.
APPLICATION FEE: The fee charged by the lender to the borrower for applying for a
loan. Payment of this fee does not guarantee that a loan will be approved. Some
lenders may apply the cost of the application fee to certain closing costs.
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APPRAISAL METHODS: Generally, three major methods of appraisal: Cost Approach,
Income Approach, Market Value (Comparables) Approach
APPRAISED VALUE: An opinion of the value of a property at a given time, based on facts
regarding the location, improvements, etc., of the property and surroundings.
APPRAISER: One who is trained and educated in the methods of determining the value
of property through analysis of various factors, which determine said value.
APPURTENANCE: Anything attached to the land or used with it passing to the new
owner. Something that belongs to someone else. An example would be the right to
cross through someone else's property.
ARTICLES OF INCORPORATION: Documentation filled with the state, which sets forth
general information about a corporation. More specific rules of the corporation would be
contained in the by-laws.
AS IS: When a property is sold as is, the seller does not warrant or guarantee that the
property is free of defects. The buyer accepts the property in its present condition,
without modification.
ASSESS: To fix a value; to appraise. Most commonly used in connection with taxes.
ASSESSED VALUE: Value placed upon property for tax purposes by the tax assessor.
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ASSIGNEE: The person to whom an agreement or contract is assigned. If you were
assigning interest in your note to an investor, that investor would be the assignee.
ASSIGNMENT: The transfer of property to be held in trust or to be used for the benefit
of the creditors (lenders).
ASSUMPTION: The act of conveying real property; taking title to a property with the
Buyer assuming liability for paying an existing note secured by a deed of trust against
the property.
ASSUMPTION FEE: Lender's charge for paperwork involving in processing records for a
new buyer assuming an existing loan.
ATTORNEY-IN-FACT: One who is appointed to act (as agent) for another (principal)
under a power of attorney. The scope of the agent's authority is limited to that given by
the power of attorney, which may be limited to one specific act or may be broader. (See
also Power of Attorney).
AUCTION: The process of selling property at a public sale to the highest bidder. The
person conducting the sale will call out the initial asking price and each price that
anyone in the audience bids until no one will bid a higher price.
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AUTOMATIC STAY: A bankruptcy court order. When bankruptcy is filed, the
bankruptcy court will issue a court order that prevents any creditor from attempting to
collect any debt from the person who declared bankruptcy. Creditors, even though they
are owed money, may not undertake foreclosure, repossession, eviction or seizure, or
even call or write the debtor demanding payment. Instead, they must all come to the
bankruptcy court
B
BACK TITLE LETTER: In states where attorneys examine title for title insurance
purposes, a title insurance company gives this letter to an attorney, giving to said
attorney the condition of title as of a certain date. The attorney then begins his
examination as of that date. Also called a starter or back title certificate. (See also
Starter).
BALANCE OWED ON THE LOAN: The part of the original loan that remains unpaid by
the borrower at a given point in time. This is not the same as the amount to pay off the
loan, which would include back payments and late charges.
BALLOON NOTE: A note calling for periodic payments, which are insufficient to fully
amortize the face amount of the note prior to maturity, so that a principal sum known as
a "balloon" is due at maturity.
BALLOON: A final payment that is greater than the regular scheduled payment.
BASE LINE: (1) A survey line used in the government survey to establish township
lines. The base line runs east and west through a principal meridian (line running north
and south). (2) A horizontal elevation line used as the centerline in a survey for a
highway route.
BASE MAP: A map having background information, such as state, county, or city
boundaries, upon which more detailed data is plotted.
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BASE PROPERTY: Private property owned by a cattle owner required before a permit
will be issued to allow the cattle to graze on public land.
BASE TITLE: The result of an examination of title for the internal use of a title insurance
company. Usually covers a large area and is done in anticipation of future sales or
subdividing of the area.
BASIS POINT: A term used in relationship to interest rates. One basis point is equal to
one 100th of one percent. The difference between 7% and 7.5% is 50 basis points.
BENEFICIARY: (1) Someone entitled to the benefit of a trust: (2) Someone who
receives profit from an estate, the title of which is vested in a trustee: (3) The lender on
a security of a note and deed of trust.
BINDER: A preliminary agreement between a buyer and seller that includes the price and
terms of the contract.
BLANKET MORTGAGE: A mortgage covering more than one property of the mortgagor,
such as a mortgage covering all the lots of a builder in a subdivision. A mortgage covering
all real property of the mortgagor, both present and future. When used in this meaning, it is
also called a "general Mortgage". This sort of loan is more common for commercial
property or "special case" loans.
BLOCK: (1) In a city, a square or rectangular area enclosed by streets. (2) in some
states, a part of a subdivision legal description, such as lot 1, block 1, tract 1. (3) a
pulley in a frame. (4) an auctioneer's platform.
BONA FIDE: A legal term, which refers to any actions, situations, or persons that are
honest, in good faith, and without fraud.
BOTTOM LAND: Low land along a river formed by alluvial deposits. Also low lying
ground such as a valley or dale.
BOUNDS: Boundaries.
BRIDGE FINANCING: A form of interim loan, generally made between a short-term loan
and a permanent (long term) loan, when the borrower needs to have more time before
taking the long term financing.
BROKER, REAL ESTATE: One who is licensed by the state to carry on the business of
dealing in real estate. A broker may receive a commission for his or her part in bringing
together a buyer and seller, landlord and tenant, or parties to an exchange.
BUY-DOWN: When the lender and/or the homebuilder subsidized the mortgage by
lowering the interest rate during the first few years of the loan. While the payments are
initially low, they will increase when the subsidy expires. Two disinterested persons of
suitable qualifications sometimes use these to qualify borrowers for a loan amount that
they would not otherwise qualify for but will be able to pay in subsequent years as their
income increases. With a buy-down, the seller pays an amount to the lender so that the
lender can offer a lower rate to the borrower with lower payments usually for an early
period of the loan. The seller may increase the sales price to cover the cost of the buy-
down.
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BUYER’S MARKET: A market condition favoring the buyer. In real estate, when more
homes are for sale than thee are interested buyers.
C
C.V.R. (CERTIFICATE OF REASONABLE VALUE): An appraisal of property for the
purpose of insurance by the Veteran's Administration.
CALL: A provision in a note requiring that the principal be paid on a certain date. This is
also known as the "due" or "maturity" date.
CAP: A number that when added to either the initial note rate or subsequent note rate
determines the maximum note rate of a loan usually for the life of the loan. (A limit on
how much the interest rate or monthly payment can change, either at each adjustment
or over the life of the mortgage). A limit on how much the interest rate or the monthly
payment can change, either at each adjustment or during the life of the mortgage.
Payment caps don't limit the amount of interest the lender is earning, so they may cause
negative amortization.
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CAPITALIZATION: Determines a present value of income property by taking the annual
net income (either known or estimated) and discounting by using a rate of return
commonly acceptable to buyers or similar properties. A method used to estimate value of
a property based on the rate of return on investment. For example: net income of a
property is $40,000 per year. Capitalizing at a rate of 10%, the property would be worth
$400,000.
CASH FLOW: In investment property, the actual cash the investor will receive after
deduction of operating expenses and debt service (loan payment) from his gross income.
CASH OUT: To take as much cash equity out of a borrower's property as possible rather
than to retain equity.
CASH RESERVE: Borrowers are required to have a cash reserve that equals two
months PITI (Principal, Interest, Taxes and Insurance) payments after the loan has
been closed (this is after closing costs and prepaid feeds are calculated).
CASH FLOW: The amount of cash derived over a certain period of time from an
income-producing property. The cash flow should be large enough to pay the expenses
of the income-producing property (mortgage payment, maintenance, utilities, etc.).
CAVEAT EMPTOR: Buyer beware. The buyer must inspect the property and satisfy
himself that it is adequate for his needs. The seller is under no obligation to disclose
defects but may not actively conceal a known defect or lie if asked.
CEMETARY: Large parcels of land used for burying deceased persons. May be public
or private, the private usually being of a specific religious denomination.
CERTIFICATE: Writing, either from a court or other public body, giving assurances of
existing conditions or facts, and giving rights or creating obligations.
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CERTIFICATE OF SATISFACTION: A document signed by the Note holder and
recorded in the land records evidencing release of a deed of trust, mortgage lien on the
property.
CERTIFIED COPY: A true copy, attested to be true by the officer holding the original.
CERTIFIED NOTE APPRAISING: The appraisal of individual and multiple notes. The
American Appraisal Institute of Privately Held Notes and Mortgages certify appraisers.
CHAPTER 13: One of the bankruptcy chapters in the federal Bankruptcy Code. Under
Chapter 13, a wage earner can reduce debt payments through a bankruptcy court order
according to the terms of a plan approved by the bankruptcy court.
CHATTEL MORTGAGE: A document offering personal property other than real estate as
security for payment of debt.
CLOSE OF ESCROW: The date the documents are recorded and title passes from
Seller to Buyer. On this date, the Buyer becomes the legal owner, and title insurance
becomes effective.
CLOSING COSTS: Expenses incidental to the sale of real estate, such as loan fees, title
fees, appraisal fees, etc.
CLOSING DATE: The date upon which the buyer takes over the property and seller
receives his funds.
CLOSING STATEMENT: The statement, which lists the financial settlement between
buyer and seller, and also the costs each must pay. A separate statement for buyer and
seller is sometimes prepared.
CLOSING: The meeting between the buyer, seller and lender or their agents where the
property and funds legally change hands. Also called settlement. Closing costs usually
include an origination fee, discount points, appraisal fee, title search and insurance,
survey, taxes, deed recording fee, credit report and notary fees. Buyer and seller sign
papers to transfer title.
CLOUD ON TITLE: An invalid encumbrance on real property, which, if valid, would affect
the rights of the owner. For example: A sells lot 1, tract 1, to B. The deed is mistakenly
drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous
deed. The cloud may be removed by quitclaim deed, or, if necessary, by court action. Any
encumbrance or burden that adversely affects title to a property. Examples would also
include liens or unpaid taxes.
COFI: Cost of Funds Index. An index referring to the cost lenders pay for attracting
funds. The average rate paid on savings and borrowings. Adjustable rates.
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COINSURANCE: Ordinary coinsurance is defined as a transaction under which each of
two or more insurers assumes a designated portion of the liability for the total risk and is
liable for only such portion of any loss beginning at the first dollar of loss. (See
Reinsurance.)
COLLATERAL LOAN: A loan is guaranteed by giving the lender a claim against property
as a security debt. The claim is called a Chattel Mortgage. With a collateral loan, title is
with the borrower. (If title is with the seller, you have a "Conditional Sales Agreement".)
COMMITMENT: A binding contract with a title company to issue a specific title policy,
showing only those exceptions contained in the commitment and any intervening
matters after the date of the commitment and prior to the effective date of the policy.
The commitment contains all information included in the preliminary title report, plus a
list of the title company's requirements to insure the transaction. It also includes the
standard exceptions from coverage that will appear in the policy.
COMMITMENT LETTER: A formal offer by a lender stating the terms under which it
agrees to lend money to a homebuyer.
COMMON LAW: The body of laws originated and developed in England, which was
adopted by most states and still prevails if not superseded by statutes. Also referred to
as case law.
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COMMON WALL: (See Party Wall).
COMPARABLE SALES: Sales that have similar characteristics as the subject property,
used for analysis in the appraisal. Commonly called "comps".
COMPOUND INTEREST: Interest compounded on both the original principal amount and
on all interest earned to date.
CONDEMNATION: The taking of private property by the government for public use - as
for a street or a storm drain - upon making just compensation to the owner. This right or
power of government to take property for a necessary public use is called eminent
domain.
CONDOMINIUM: A structure of two or more units, the interior space of which are
individually owned; the balance of the property (both land and building) is owned in
common by the owners of the individual units. The size of each unit is measured from
the interior surfaces (exclusive of paint or other finishes) of the exterior walls, floors, and
ceiling the balance of the property is called the common area.
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CONDOMINIUM MAP (Plan): A recorded map showing the condominium units and
common area. The map includes both horizontal and vertical measurements of the
units. It is important that the map agree with the declaration of restrictions (recorded at
the same time).
CONSERVATOR: A person appointed by the court to care for the person and/or
property of an incompetent adult or an adult unable to care for their person or property
because of health.
CONSOLIDATION: Combining several debts into one loan usually to reduce the annual
percentage rate or the dollar amount of payments made each month, by extending them
over a longer period of time.
CONSTRUCTIVE NOTICE: Notice imparted by the public records of the county when
documents entitled to recording are recorded.
CONTIGUOUS: Near or close to, whether actually touching or not. Generally refers to
actual touching or bordering on.
CONTINGENCY: Commonly, the dependence upon a stated event, which must occur
before a contract, is binding. For example: the sale of a house, contingent upon the
buyer obtaining financing.
CONTRACT FOR DEED: Title to the property remains in the seller’s name while the
buyer receives equity title and possession of the property and assumes the obligation to
purchase the property. When conditions of the contract are fulfilled, legal title passes to
the purchaser.
CONTRACT SALE OR DEED: A contract between purchaser and a seller of real estate
to convey title after certain conditions
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CONVENTIONAL ARM: An ARM that can be converted to a fixed rate mortgage under
specified conditions.
CONVERSION CLAUSE: A provision in some ARMs (and some balloons) that allows
you to change the ARM to a fixed-rate loan at some point during the term. Usually
conversion is allowed at the end of the first adjustment period. At the time of the
conversion, the new fixed rate is generally set at one of the rates then prevailing for
fixed rate mortgages. The conversion feature may be available at extra cost.
CONVEY: To transfer title to property from one person to another. To pass or transfer title
to another party.
CORNOR LOT: A lot contiguous to two intersecting streets, and, for purposes of value,
having access to both streets.
CO-TENANCY: A general term covering both joint tenancy and tenancy in common.
COTENANCY: Ownership in the same land by more than one person. See, Tenants in
Common, Joint Tenants, Tenants by the Entirety.
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CO-TRUSTEE: One who shares the duties of trustee with one or more other trustees.
COUNTY: A political division within a state, usually encompassing one or more cities or
towns. There are exceptions such as New York City, which contains more than one
county. Louisiana uses the word Parrish instead of county; New York uses both
borough and county, as in king’s county (the borough of Brooklyn).
CREDIT: (1) The financial worthiness of a borrower. The history of whether this
borrower has met financial obligations on time in the past. (2) an accounting term
designating money received or receivable, as opposed to debit, which is money paid or
payable.
CREDIT BID: A bid on behalf of the lender at a foreclosure sale. The bid amount must
be less than or equal to the balance of the loan in default.
CREDIT SCORE: Each Credit Reporting Company assigns a Credit Score to your credit
report. Lenders use these scores to determine your creditworthiness.
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CURB CUTS: The part of a curb, which lowers to street level to form the apron of a
driveway.
CUSTODIAN: (1) One who is entrusted with the care and keepin of real or personal
property. (See also Custody). (2) a janitor.
CUSTODY: The care and keeping of property (real or personal). For example: an
escrow agent has custody of documents and funds until closing.
D
DAMAGES: (1) Money recoverable by one suffering a loss or injury. (2) the loss of
value to property adjoining a property taken in condemnation proceedings, rather than
the value of the property taken.
DEED OF TRUST OR TRUST DEED: A written document by which the title to land is
conveyed as security for the repayment of a loan or other obligation. It is a form of
mortgage. The landowner or debtor is called the "trustor." The party to whom the legal
title is conveyed (and who may be called on to conduct a sale thereof if the loan is not
paid) is the "trustee." The lender is the "beneficiary." When the loan is paid off, the
trustee is asked by the beneficiary to issue a "recon" or Reconveyance. This
Reconveyance corresponds to the release that the holder of a mortgage executes when
the mortgage is paid off.
DEED OF TRUST: The deed of trust is the document in which the borrower pledges to
property as collateral for the note. A three party security instrument conveying title to land
as security for the performance of an obligation. Also called a "Trust Deed".
DEED RESTRICTION: A restriction imposed in a deed to limit the use of the land. A
deed restriction may prevent certain type of usage or may prevent sub-division of the
land.
DEFAULT JUDGMENT: A judgment entered against a party who fails to appear in court
at the scheduled time.
DEFAULT: When something you agree to is not done. An example is not making payment
on a loan when due. Some loan agreements specify the entire amount is due if any
covenants are in default. Failure to meet legal obligations in a contract.
DEFEASIBLE TITLE: Title, which is not absolute but possibly, may be annulled or
voided at a later date. For example: Title conveyed to A with condition that if A marries
before age 30, title will go to B. A's title may be good (doesn't marry) or may be
defeated (marries before 30).
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DEFECT: A blemish, imperfection or deficiency. A defective title is one that is irregular
and faulty.
DEFECTIVE TITLE: (1) Title to a negotiable instrument obtained by fraud. (2) Title to
real property, which lacks some of the elements necessary to transfer good title.
DELIVERY: The final, unconditional and absolute transfer of a deed to the Grantee so
that the Grantor may not revoke it. A Deed, signed but held by the Grantor, does not
pass title.
DEMAND NOTE: A note having no date for repayment, but due on demand of the lender.
DEMISE: A lease or conveyance for life or years. Loosely used to describe any
conveyance, whether in fee, for life, or for years.
DEPOSIT: (1) Money given by the buyer with an offer to purchase. Shows good faith.
Also called earnest money. (2) A natural accumulation of resources (oil, gold, etc.)
which may be commercially recovered and marketed.
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DEPRECIATION: A decline in the value of property; the opposite of “appreciation.”
DESCRIPTION: The exact location of a piece of real property stated in terms of lot,
block, tract, part lot, metes and bounds, recorded instruments, or U.S. Government
survey (sectionalized). This is also referred to as legal description of property.
DEVELOPER: (1) A builder. (2) one who prepares the raw land for construction and
then sells lots to a builder.
DISCHARGE OF A LIEN: Recorded release of a lien when debt has been paid.
DIVISION WALL: (1) A wall between two buildings, but not a part of either. (2) a wall,
which divides a building into rooms. Differs from a partition in that it is load bearing.
DIVORCE: The legal dissolution of a marriage, leaving the parties with the results of the
marriage (includes alimony, child support, property settlements, etc.) Rather than an
annulment, which puts the parties in the position, they were before the marriage.
DOMICILE: (1) A legal term signifying a place where a person has his permanent
home. The most accurate meaning is the layman's understanding of the place where a
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person "lives", since this takes into consideration the intent of the person to make a
particular property his "home". (2) the state or country in which a corporation is
chartered (organized), such as a corporation "domiciled" in the U.S.
DONEE: One who receives a gift. (Such as in a gift letter for the down payment for the
purpose of purchasing real estate).
DOUBLE ESCROW: Two concurrent escrows on the same property, having the same
party as buyer and seller of the property. Example: escrow 1-a buys from b. Escrow 2-a
sells the same property to c, a is using c's money to buy b's property. The process is
illegal in many states unless full disclosure is made
DOWN PAYMENT: The part of the purchase price that the buyer pays in cash and does
not finance with a mortgage down. A buy-down can occur in all types of mortgages, not
just in adjustable rate mortgages.
DRY MORTGAGE: A lien, which places no personal liability on the mortgagor, looking
only to the property as security.
DUE DATE: The day of the month by which payments are agreed to be paid.
DUE ON SALE CLAUSE: A clause in a mortgage note, which provides that the entire loan
amount is due and payable to the lender upon the sale of the mortgaged property. It is an
effective wedge for the lender to renegotiate the interest rate, and perhaps points in the
event of sale on the mortgaged property.
DUPLEX: (1) Any building containing exactly two dwelling units. Most commonly refers
to the units, which are side by side, with a common wall and roof. (2) an apartment on
two floors
E
EARNEST MONEY DEPOSIT: Down payment made by a purchaser of real estate as
evidence of good faith; a deposit or partial payment.
EARNEST MONEY: A deposit made by the potential homebuyer to show that he or she is
serious about buying the house.
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land (appurtenant), such as right to cross a to get to b, or "in gross," such as a pubic
utility easement.
EFFECTIVE AGE: Age of a structure as estimated by its condition rather than actual age.
Takes into account rehabilitation and maintenance.
EFFECTIVE DEMAND: A qualifying term meaning the ability to pay as well as desire to
buy.
EFFICIENCY: An apartment consisting of one room, sectioned into areas for a kitchen,
bedroom, etc.
EGRESS: A term concerning a right to come and go across the land (public or private)
of another. Usually part of the term ingress and egress.
EMINENT DOMAIN: The power of the state to take private property for public use upon
payment of just compensation.
EQUAL CREDIT OPPORTUNITY ACT: A federal law that prohibits lenders from
discriminating on the basis of the borrower’s race, color, religion, national origin, age, sex,
marital status, or receipt of income from public assistance programs.
EQUITABLE OWNERSHIP: Ownership by one who does not have legal title, such as a
vendee under a land contract or, technically, a trustor under a deed of trust (legal title
being in the trustee). Also called equitable title.
EQUITABLE TITLE: The present right to possession with the right to acquire legal title
once a preceding condition has been met.
EQUITY: (1) A legal doctrine based on fairness, rather than strict interpretation of the
letter of the law. (2) the market value of real property, less the amount of existing liens.
(3) any ownership investment (stocks, real estate, etc.) As opposed to investing as a
lender (bonds, mortgages, etc.).
EQUITY BUILD UP: The reduction of principal on a mortgage or deed of trust by periodic
payments, which increases (builds-up) the difference (equity) between the property value
and the amount of the lien.
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EQUITY LINE OF CREDIT: A combination of a line of credit and equity loan. A
maximum loan amount is established based on credit and equity. A mortgage (deed of
trust) is recorded against the potential borrower's property for said maximum loan
amount. The potential borrower has the right to borrow, as needed, up to the amount of
the mortgage.
EQUITY LOAN: A loan based upon the equity in a property. The credit of the borrower
is not a major factor. (See also Personal Property Loan).
EQUITY MORTGAGE: A mortgage given in connection with borrowing money after the
borrower already owns the real estate. The borrower's "equity" in his residence is the
security for the loan.
EROSION: The wearing away, over a prolonged period, of rock, earth, or other portions
of land.
ESCAPE CLAUSE: A way out. This is a clause in a legal document that allows a party
to avoid liability and/or the performance of contractual obligations under certain
conditions.
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 INSTRUCTIONS: Instructions which are signed by both buyer and seller, and
which enable an escrow agent to carry out the procedures necessary to transfer real
property, a business, or other assignable interest.
ESCROW OFFICER: An escrow agent, who has, through experience and education,
gained a certain degree of expertise in escrow matters.
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ESCROW: Funds that are set aside and held in trust, usually for payment of taxes and
insurance on real property. Also earnest deposits held pending loan closing. Escrow is a
deposit of valuable consideration such as money or documents with an impartial third
party. Items of value are placed in escrow to assure the successful compliance of
agreements such as a contract of sale.
ESTATE: (1) The interest or nature of the interest which one has in property, such as a
life estate, the estate of a deceased, real estate, etc. (2) a large house with substantial
grounds surrounding it, giving the connotation of belonging to a wealthy person.
ESTOPPEL: The prevention of one from asserting a legal right because of prior actions
inconsistent with the assertion.
EVICTION: The legal procedure to have a tenant forcibly removed from a dwelling.
EXCEPTIONS: (1) specific items set forth in an insurance policy, which are not covered
by said policy. (2) any item specifically excluded.
EXCHANGE: A reciprocal transfer of real property, which has certain tax advantages over
a sale. Definite procedures must be followed in order to qualify the transfer as an
exchange.
EXECUTION SALE: Sale of real property under a writ of execution by a court. A judicial
mortgage foreclosure sale is in this category
EXECUTOR: One who is appointed under a will to carry out (execute) the terms of the
will.
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EXECUTOR’S DEED: A deed issued by the executor of an estate. (See Executor).
EXTERIOR WALL: The outer vertical surface of a structure, which encloses the entire
structure, and the dimensions of which are used to find the gross area of the enclosure
for appraisal purposes.
F
F.D.I.C.: (Federal Deposit Insurance Corporation. The federal Corporation, which insures
against
F.H.A.: (Federal Housing Administration). A federal agency, which insures first mortgages,
enabling lenders to loan a very high percentage of the sales price of real property.
Failure to perform provisions of a contract.
FAIR CREDIT REPORTING ACT: A federal law giving one the right to see his or her
credit report so that errors may be corrected. A lender refusing credit based on a credit
report must inform the buyer which company issued the report. The buyer may see the
report without charge if refused credit, or for a charge if just curious.
FAIR MARKET VALUE: Price that probably would be negotiated between a willing seller
and willing buyer in a reasonable time. Usually arrived at by comparable sales in the area.
FANNIE MAY: The Federal National Mortgage Association (FNMA). This is a federally
charted, public company, which purchases mortgages from lenders. It has specific
standards with respect to mortgages it will purchase (i.e., concerning loan to value,
maximum loan limits, buyer creditworthiness, etc.). Most lenders sell or intend to sell the
mortgages they make to FNMA. Loans and mortgages meeting FNMA have become
known as "qualified" or "conforming" loans.
FEDERAL FAIR HOUSING LAW: Title V111 of the Civil Rights Act which forbids
discrimination in the sale or rental of residential property because of race, color, sex,
religion or national origin.
FEDERAL HOME LOAN BANK BOARD: The board which charters and regulates federal
savings and loan associations, as well as controlling the system of Federal Home Loan
Banks.
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FEDERAL HOME LOAN BANKS: Banks created under the Federal Home Loan Bank Act
of 1932, in order to keep a permanent supply of money available for home financing. The
Federal Home Loan Bank Board controls the bands.
FEDERAL REVENUE STAMP: Also called IRS stamp. A transfer of tax based on the
sales price of real estate (less remaining loans). The tax ended as a federal tax and was
taken up by most states with slight modifications in some areas.
FHA MORTGAGE INSURANCE: Requires a fee (up to 2.25 percent of the loan
amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage
insurance requires an annual fee of up to 0.5 percent of the current loan amount, paid in
monthly installments. The lower the down payment, the more years the fee must be
paid.
FHA: A mortgage that is insured by the Federal Housing Administration. Also referred to
as a “government” mortgage.
FHLMC (FREDDIE MAC): Federal Home Loan Mortgage Corporation. A federal agency
purchasing first mortgages, both conventional and federally insured, from members of the
Federal Reserve System, and the Federal Home Loan Bank System.
FIDUCIARY: Having a duty to act primarily for another's benefit. If you hire an
Attorney, for example, that attorney has a duty to act primarily for your benefit.
FIXED-RATE MORTGAGE: A mortgage in which the interest rate does not change during
the entire term of the loan.
FLOAT: Between the time of application and closing, a borrower may choose to bet on
interest rates decreasing by electing to float. Floating is essentially choosing not to lock
the interest rate. Since it is the borrower's responsibility to lock his or her rate before (or
at) closing, choosing to float is considered risky and may result in a higher interest rate.
Request information from your lender regarding lock procedures.
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FLOATING RATE LOAN: Interest charged, "floats" up and down with base interest rate
changes. Also known as a Variable Rate Loan. (VAR)
FOUR-PLEX: Most commonly a single structure designed with four separate living
units.
G
GAIN-PROFIT: Important for tax purposes when realized from the sale of a capital
asset.
GAP COMMITMENT: A commitment to loan the difference between the floor amount of
a take out loan and the full amount. The commitment is issued to enable a construction
lender to loan the full amount of a take out commitment, rather tan only the floor
amount.
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GAP FINANCING: (1) Interim financing. (2) A loan between the floor amount and full
amount of a take out loan. (See Gap Commitment).
GENERAL INDEX (G.I.): A title insurance company term for the books used to find liens
against individuals which may affect real property, but which are not recorded against
the property being insured, such as liens against a buyer.
GENERAL LIEN: (1) 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 specific property. (2) The right of a creditor to hold personal property of a debtor
for payment of a debt not associated with the property being held. Must be done under
an agreement since against general precepts of law.
GIFT LETTER: A letter to HUD from the donor (giver) stating that a gift of money has
been made to the buyer in order to purchase specific property The relationship of the
donor and donee is stated, as well as the amount of the gift.
GIFT TAX: A federal and sometimes a state tax on inter vivos transfers without
consideration.
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GNMA (Ginnie Mae): Government National Mortgage Association. A federal
association, working with F.H.A., which offers special assistance in obtaining
mortgages, and purchases mortgages in a secondary capacity.
GOOD FAITH: Something done with good intentions, without knowledge of fraudulent
circumstances, or reason to inquire further.
GOOD WILL: A salable asset of a business, based on its reputation rather than its
physical assets.
GORE: Small parcel of land, usually triangular in shape, resulting form the failure of a
legal description to join 2 tracts. (Also called Hiatus).
GOVERNMENT SURVEY: The survey from which our present system of townships,
sections, etc., was developed.
GRANT DEED: One of the many types of deeds used to transfer real property. Contains
warranties against prior conveyances or encumbrances. When title insurance is
purchased, warranties in a deed are of little practical significance.
grant.
GRANT: To transfer an interest in real property; either the fee or a lesser interest, such as
an easement.
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GRANTEE: One to whom a grant is made. Generally, the buyer. Also called the
mortgagee. If you own a note, you are the grantee or mortgagee. The grantee is the
person to whom a grant or promise is made.
GRANTOR: One who grants property or property rights. Also called the mortgagor and
debtor. If you own a note, the grantor is the person who makes payments to you. In
technical terms, it is the person who makes a
GRANTOR-GRANTEE INDEX: The record of the passing of title to all the properties in
a county as kept by the county recorder's office. Property is checked by tracing the
names of the sellers and buyers (chain of title). Title companies usually have more
efficient methods by keeping records according to property description, rather than
people's names.
GROSS MONTHLY INCOME: The total amount the borrower earns per month, not
counting any taxes or expenses. Often used in calculations to determine whether a
borrower qualifies for a particular loan.
H
HARD MONEY LOANS: Although the derivation is obscure, it refers to those loans which
by reason of the creditworthiness of the borrower are riskier and, therefore, have a higher
interest rate for which the "hard money lender", and the hard money lender charges higher
points than for a qualified loan.
HOLDER IN DUE COURSE: A person or entity that obtains a note without notice of any
borrower defenses to its enforcement may enforce payment of that note in a court
despite any borrower defense or other reason for not paying.
HOLDOVER TENANT: A leaseholder that remains in possession of the real estate after
the close of a lease term. Interest Rate The rate charged for borrowed money.
Involuntary Lien a lien ordered against a property without the acceptance of the owner.
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HOMEOWNER’S ASSOCIATION: An association of people who own homes in a given
area, formed for the purpose of improving or maintaining the quality of the area. (An
association formed by the builder of condominiums or planned developments, and
required by statute in some states. The builder's participation as well as the duties of the
association is controlled by statute).
I
IMPOUND ACCOUNT: Account held by a lender for payment of taxes, insurance, or other
periodic debts against real property. The mortgagor or trustor pays a portion of, for
example, the yearly taxes, with each monthly payment. The lender pays the tax bill from
the accumulated funds.
INDEX: The base number used to calculate the actual payments that will be collected on a
loan. It is a measure of interest rate changes that the lender uses to determine how much
the interest rate will change over time on an ARM. A published interest rate against which
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lenders measure the difference between the current interest rate on an adjustable rate
mortgage and that earned by other investments (such as one, three, and five year U.S.
Treasury security yields, the monthly average interest rate on loans closed by savings
and loan institutions, and the monthly average costs-of-funds incurred by savings and
loans), which is then used to adjust the interest rate on an adjustable mortgage up or
down.
INITIAL INTEREST RATE: This refers to the original interest rate of the mortgage at the
time of closing. This rate changes for an adjustable-rate mortgage (ARM). It's also
known as "start rate" or "teaser."
INITIAL NOTE RATE: The note rate on an adjustable loan at its inception. Beware of
initial note rates that are abnormally low (less than 1% below FNMA rates for fixed
mortgages).
INSURED DEED OF TRUST: A deed of trust insured against loss to the beneficiary in the
event of default and failure of the secured property to satisfy the balance owing plus costs
of foreclosure. (Mortgage Insurance)
INTEREST INCLUDED NOTE: A note having equal payments (usually monthly). Interest
is figured on the declining principal balance. As the principal decreases, interest also
decreases, applying more of each payment to principal.
INTEREST ONLY LOAN: A loan on which only interest is payable during the term of the
loan, with the principal at the end of the loan term.
INTEREST RATE: The percentage of an amount of money, which is paid for its use for a
specified time. Usually expressed as an annual percentage.
INTEREST: Money paid for the use of money. Interest is the periodic charge for use of
credit.
INTESTATE: Without leaving a will, or leaving an invalid will so that the property of the
estate passes by the laws of succession rather than by the direction of the deceased.
J
JOINT TENANCY: A form of co-ownership giving each tenant equal interest and equal
rights in the property, including the right of survivorship.
JUDGMENT LIEN: A lien against the property of a judgment debtor. An involuntary lien.
JUMBO LOAN: A loan, which is larger than the limits set by the FNMA or FHLMC.
Because jumbo loans cannot be funded by these two agencies, they usually carry a
higher interest rate.
JUNIOR LIEN HOLDER: A holder of a right to force the sale of property that is inferior
and subordinate to another lien holder’s right to do the same. A junior lien holder who
forces the sale of the real estate must either pay off the senior lien or make
arrangements to make payments on it to prevent it from being foreclosed. The
foreclosure of a first lien destroys the right of a junior lien-holder to foreclose, but the
foreclosure of a junior lien does not affect the right of a senior lien to foreclose.
JUNK FEES: Excess fees charged to the borrower by the lender, examples:
photocopying fee, processing fee etc.
L
LAND CONTRACT: Contract for the purchase and sale of land. Title to the land is
transferred upon execution of the contract. This means the property seller retains title
to the land until the loan is paid off. The term commonly refers to an installment
contract for the sale of land whereby a purchaser (vendee) receives the deed from an
40
owner (vendor) upon payment of a final installment. The vendor/seller finances the sale
for the buyer and retains legal title to the property as security. Equivalent terms are
"contract for deed" and "installment land contract."
LATE CHARGE: The penalty a borrower must pay when a payment is made after the due
date.
LATE PAYMENT: Payments that are made past their due dates according to the loan
documents.
LEASE: An agreement by which an owner of real property (lessor) gives the right of
possession to another (lessee), for a specified period of time (term) and for a specified
consideration (rent).
LENDER: Any person or entity advancing funds, which are to be repaid. A general term
encompassing all mortgagees, and beneficiaries under deeds of trust.
LESSEE: The person who makes lease payments. One who has right of possession
and use of a property under the terms of a lease.
LESSOR: The person who receives lease payments. One who leases property.
LIEN: An encumbrance against property for money, either voluntary or involuntary. All
liens are encumbrances but all encumbrances are not liens.
LIFETIME CAP: A provision of an ARM that limits the total increase in interest rates over
the life of the loan.
LINE OF CREDIT: A lending limit is established and a borrower can obtain funds to the
limit at any time.
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LIQUIDATION APPRAISAL: An estimate of the value of property when it is sold quickly
in a forced sale. Usually, this figure is lower than fair market value for a regularly
conducted sale.
LIS PENDENS: A recorded notice that tells the world that a lawsuit is in progress, the
outcome of which could affect the title to a particular piece of land.
LOAN FEE: A fee or charge for the work involved in the evaluation, preparation, and
submission of a proposed mortgage loan. Also known as an Origination Fee.
LOAN MODIFICATION: A procedure in which a loan's terms, such as the interest rate,
monthly payment or term, are altered with the approval of a lender.
LOAN SERVICING: The collection of mortgage payments from borrowers and related
responsibilities of a loan servicer. Loans like the 3/1 and 5/1 adjustable, which have an
initial fixed period, are quoted with 3 numbers as in 2/6/3, which would mean that the
first adjustment might be as much as 3%, subsequent adjustments are capped at 2%
each, and the lifetime cap is 6%.
LOAN-TO-VALUE RATIO: The ratio of all loans (mortgages), including the one being
applied for, to the appraised value (or selling price, whichever is less) of the property.
M
MARGIN: The fixed number, expressed in basis points, that when added to the index
determines the note rate on a loan.
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MECHANICS LIEN: A lien placed against real property for work done on the property. The
lien can pass from buyer to seller and the sales contract should include a rider clause
specifying any mechanics liens after title passes when a mechanic lien can be filed and 90
days is typical.
METES & BOUNDS: A term used in describing land by setting forth all the boundary
lines together with their uncompensated improvement.
might cause health problems.
MIP: Mortgage Insurance Premium – It is insurance from FHA to the lender against
incurring a loss on account of the borrower’s default.
MORTGAGE: (1) To hypothecate as security, real property for the payment of a debt.
The borrower (mortgagor) retains possession and use of the property. (2) The
instrument by which real estate is hypothecated as security for the repayment of a loan.
MORTGAGE BANKER: A company that originates mortgages exclusively for resale in the
secondary market.
MORTGAGE NOTE: The document, which evidences the debt of the mortgage. The
mortgage device is a lien.
MORTGAGEE: The party lending the money and receiving the mortgage (Lender).
MORTGAGOR: The party who borrows the money and gives the mortgage (Borrower).
N
NEGATIVE AMORTIZATION: The increase in a loan balance resulting from scheduled
payments being less than what is necessary to reduce or keep a loan balance even.
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NEGATIVE EQUITY: A position in which a borrower owes more on property than the
property is worth.
NONCONFORMING USE: A property, which does not conform to the zoning of the
area. Usually, the property was built in conformity and then the zoning was changed.
NOTE RATE: The base rate of interest that will determine the effective cost of the loan to
the borrower not withstanding any other rates, such as qualifying or payment rate.
NOTICE OF RIGHT TO CANCEL: A 3-day business period (72 hours), during which
time the borrower can cancel the transaction. In the mortgage industry applies to
refinance transactions only. During this period, funds cannot be disbursed pending the
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decision of the borrower. This regulation is part of the Truth in Lending Act, Regulation
Z. Under certain emergency circumstances, this requirement may be waived.
NOTICE OF SALE: A notice giving specific information about the loan in default and the
proceedings about to take place. This notice must be recorded with the county where
property is located and advertised as stated in the security document or as dictated by
state law.
O
OBLIGEE: One to whom an obligation (promise) is owned.
OBLIGOR: One who legally binds (obligates) oneself, such as the maker of a
promissory note.
ORIGINAL COST: The purchase price of property, paid by the present owner. The
present owner may or may not be the first owner.
ORIGINATION FEE: A fee made by the lender for making a real estate loan. Usually a
percentage of the amount loaned, such as one percent.
OUTSTANDING: Unpaid.
OWNER’S POLICY: A policy of title insurance usually insuring an owner of real estate
against loss occasioned by defects in, liens against or unmarketability of the owner's
title.
OWNER’S TITLE INSURANCE: Title insurance for the owner of property, rather than a
lien holder.
P
P.I.T.I.: Stands for Principal, Interest, Taxes and Insurance. The components of a monthly
mortgage payment.
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PACKAGE MORTGAGE: Mortgage covering both real and personal property.
PAR: Pricing for mortgage loan that involves neither discount nor premium. i.e. "0".
PARTIAL PAYMENTS: Payments that are less than the full payment the borrower
owes on a loan.
PARTY WALLS: A wall generally erected on a property boundary or between two lots
for the common benefit and use of the property owners on either side.
PAYER OR PAYOR: The person who makes a payment. The payer pays the payee.
PAYMENT CAP: A provision some ARMs limiting the amount by which a borrower’s
payments may increase regardless of any interest rate increase; may result in negative
amortization.
PAYMENT CHANGE DATE: The date when a new monthly mortgage payment amount
takes effect on an adjustable rate mortgage (ARM) or a graduated payment adjustable
rate mortgage (GPARM). Generally, the payment change date occurs in the month
immediately after the adjustment date.
PERSONAL PROPERTY LOAN: A loan, which is secured by both real and personal
property. Law sets the minimum ratio of personal to real property. The credit of the
borrower is a major consideration in making the loan. (See also Equity Loan).
PIGGYBACK LOAN: A loan made jointly by two or more lenders on the same property
under one mortgage or trust deed.
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PITI - A payment that combines Principal, Interest, Taxes, and Insurance.
PLAT: A plan, map or chart of a tract or town site dividing a parcel of land into lots.
POINTS: Points are a cost frequently charged on mortgages. Payment time is typically the
day you actually obtain mortgage money. The Internal Revenue Service has ruled points
are deductible as interest expense in the year paid. Points can be charged on any type of
loan. Points are expressed as a percent, i.e., 2 points which is expressed as a decimal .02.
Two points on a $40,000 loan is (.02 times 40,000) or $800.00. Points are usually
collected at closing and may be paid by the borrower or the home seller, or may be split
between them.
POSTING: The act of placing a legal notice, such as a notice specifying the date, time
and place of a foreclosure sale, on public display in the proper place for such notices.
POSTPONEMENT: To put off to a later time. In the case of a foreclosure sale, this is
generally done by announcement at the original sale or by posting notices establishing
the new date and time the foreclosure sale will take place.
POWER OF SALE CLAUSE: The clause in a deed of trust or mortgage, by which the
borrower pre-authorizes the sale of a house to pay off the balance on a loan in the
event of the borrower's default. Usually a trustee conducts the sale, although in some
states the sheriff or constable does this.
PREPAIDS: Fees collected at closing to cover items such as setting up escrow accounts
for property taxes, homeowner’s insurance, and mortgage insurance premiums.
PRIME INTEREST RATE: The rate of interest charged most favored by commercial
customers of banks. The rate of interest charged other commercial customers is
expressed as a percent or points (1% equals one point) over prime.
PRIORITY: The order of preference, rank or position of the various liens and
encumbrances affecting the title to a particular parcel of land. Usually, the date and time
of recording determine the relative priority between documents
PRO-RATE: To divide in proportionate shares, such as taxes, interest, rent or other items
which buyer and seller share as of time of closing.
PUBLIC DOMAIN: Land owned by the government and belonging to the community at
large.
PURCHASE AND SALES AGREEMENT: A written contract signed by the buyer and
seller stating the terms and conditions under which a property will be sold.
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PURCHASE MONEY MORTGAGE: A mortgage given to obtain the loan to pay for all or
part
Q
QUALIFYING RATE: An arbitrary number used in determining the monthly payment used
in the debt ratio calculations.
QUALIFYING RATIOS: Guidelines applied by the lenders to determine how large a loan
to grant a homebuyer.
QUIET TITLE: To free the title to a piece of land from the claims of other persons by
means of a court action called a "quiet title" action. The court decree obtained is a "quiet
title" decree.
QUITCLAIM DEED: A deed operating as a release; intended to pass any title, interest, or
claim which the grantor may have in the property, but not containing any warranty of a
valid interest or title in the grantor.
R
RADON: An invisible, odorless gas found in some homes that in sufficient concentrations
RATIO: The qualifying ratio of the borrower's fixed monthly expenses to his gross
monthly income. Ratios are expressed as two numbers like 28/36 where 28 would be
the Front-End Ratio and 36 would be the Back-End Ratio.
REAL ESTATE OWNED: (REO Property acquired by a lender through foreclosure and
held in inventory; commonly referred to as REO.
REAL ESTATE PROCEDURES ACT: RESPA is a federal law that allows consumers to
review information on known or estimated settlement costs once after application and
once prior to or at a settlement. The law requires lenders to furnish the information after
application only.
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REAL PROPERTY: Land, buildings and anything attached to land or buildings. Buildings
are attached to land and are considered real property.
RECASTING: Restructuring a loan with a new interest rate and term. It may be the
same loan from the same lender, but the terms change. FHA has a formal procedure to
recast loans to assist homebuyers to stay in their houses.
RECORDING FEES: Money paid to the lender for recording a home sale with the local
authorities, thereby making it part of the public records.
REINSURANCE: A contract which one insurer makes with another to protect the first
insurer, wholly or partially, against loss or liability by reason of a risk under a separate
and distinct contract as insurer of a third party. Reinsurance differs from coinsurance in
that, in the case of reinsurance, only one insurer has a direct contractual relationship
with the insured, and that insurer (commonly referred to as the "lead insurer")
purchases reinsurance in order to lessen or spread the risk. The "lead insurer" will
assume a risk up to a limit (the amount of which is referred to as the "retention") and
any loss, which exceeds this limit, would be borne by the reinsures. In the case of
coinsurance, each coinsurer has a direct contractual relationship with the insured, and
the risk is shared in agreed-upon proportions from the first dollar of loss.
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RELEASE OF LIABILITY: The document that relieves a person who is obligated to pay
a loan of any further obligations. It may be obtained when a buyer takes over the
payments on the seller's old loan, provided the buyer meets the lender's standards for
income and creditworthiness. If granted, the release of liability means the seller will not
be responsible if the buyer fails to pay.
REVOLVING LOAN: A loan with a credit limit that is repaid by proportional payments. The
payment percentage increases as the outstanding balance increases. -Second mortgage
of $100,000
RIGHT OF WAY: (1) The right to pass over property owned by another, usually based
upon an easement. (2) A path or thoroughfare over which passage is made. (3) A strip
of land over which facilities such as highways, railroads or power lines are built.
S
SALE AND LEASE BACK: A situation in which the grantor in a deed to a parcel of
property sells it and retains possession by simultaneously leasing it from the grantee.
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SCIRE FACIAS: A court command to a borrower to show up at a hearing and show
cause why a foreclosure should not be authorized.
SEARCH: In title industry parlance, a careful exploration and examination of the public
records in an effort to find all recorded instruments relating to a particular chain of title.
SEASONED LOAN: A loan which as been outstanding for a period of time. In some
cases you cannot refinance the loan until it is a "Seasoned Loan". This can cause
problems when getting a second and then trying to refinance a first mortgage. In some
cases you may have to wait until your second becomes "Seasoned".
SEASONONG: This term refers to the pay history on a loan. A loan that is "seasoned"
will have at least six months of pay history. Notes that are brand new, having only a few
payments received, are non-seasoned. Non-seasoned loans are more risky than
seasoned loans because they lack a pay history.
SECONDARY MARKET: The primary market is where securities are originally created.
A secondary market is where securities are bought and sold after their original issue.
SENIOR LIEN: A lien that has been recorded before another. A lien that was recorded
after a previous lien is called a junior lien. Liens that are in first position have more legal
rights than junior liens.
SEPARATE PROPERTY: Real property owned by one spouse exclusive of any interest
of the other spouse.
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SERVICING: Servicing lenders: collect mortgage payments and then disperse principal,
interest, and in most cases, taxes and insurance. The mortgage company you make
your payments to is the Servicing Lender.
SHORT PAYOFF: A workout procedure in which the lender accepts less than the full
balance due on the loan as part of a deal in which the borrower cooperates with the
lender to obtain a quick sale. The lender skips foreclosure, which would take time, cost
money and expose the house to vandalism, further declines in market value, and
marketing costs for resale.
SQUATTER: One who settles upon unoccupied land without legal claim or authority.
(See Adverse Possession.)
STANDING LOAN: A loan requiring interest payments only, the principal being paid upon
maturity.
STARTER: (movable) - A copy of the last policy or report issued by a title insurer which
described the title to land upon which a new search is to be made. In some states, this
is called a back title letter or back title certificate.
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STRAIGHT NOTE: A promise to repay a loan, signed by the debtor and containing the
date executed, amount owing and to whom, date due (or on demand), rate of interest and
how it is payable. A straight note is not amortized.
STRAIGHT TERM MORTGAGE: A mortgage calling for principal to be paid in a lump sum
at maturity.
SUBDIVISION: An area of land laid out and divided into lots, blocks, and building sites,
and in which public facilities are laid out, such as streets, alleys, parks, and easements
for public utilities.
SUBJECT TO: The recognition of an existing lien or encumbrance but not assuming
personal liability thereof. The original trustor is responsible for any deficiency if there is a
foreclosure of a deed of trust.
SUBORDINATION: A lender with a first claim against assets of the borrower agrees to a
second or subordinate position. This happens in business start-ups if an investor loans
money to a new corporation and a bank loan is also obtained. The bank would require the
other lender to sign a Subordination Agreement.
SUMMARY JUDGMENT: A legal procedure in which one side wins a lawsuit without a
trial by showing that the case involves no material fact issues, but only legal issues that
can be decided by the judge. If the judge agrees, then one side wins by Summary
Judgment.
SURACE RIGHTS: Rights to enter upon and use the surface of a parcel of land, usually
in connection with oil and gas lease or other mineral lease. They may be "implied" by
the language of the lease (no explicit reservation or exception of the surface rights) or
"explicitly" set forth.
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the title to the property in question. A title insurance company may require a survey
whenever the company is requested to issue an ALTA Extended Coverage Policy.
A drawing or map showing the precise legal boundaries of a property and the location of
improvements, easements, rights of way, encroachments, and other physical features.
T
TAX DEED: A deed executed by the tax collector to the state, county or city when no
redemption is made from a tax sale.
TAX SALE: Property on which current county taxes have not been paid is "sold to the
state." No actual sale takes place - the title is transferred to the state and the owner may
redeem it by paying taxes, penalties and costs.
If it has not been redeemed within five years, the property (referred to as "tax sold
property") is actually deeded to the state. (Similar "sales" to cities take place for unpaid
city taxes.)
TEMPORARY INJUNCTION: A court order that freezes the status quo for an extended
time period, typically until a full court trial on the merits of a case can be held. It often
requires posting a bond.
TENANT AT WILL: One who holds possession of premises by permission of the owner
or landlord, but without agreement for a fixed term of possession.
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TERM LOAN: To a business borrower, a term loan is a loan with equal principal payments
and interest payments calculated on principal balance due. Term loan is sometimes used
as a synonym for an installment loan.
TITLE: (1) A combination of all the elements that constitute a legal right to own,
possess, use, control, enjoy and dispose of real estate or a right or interest therein. (2)
The rights of ownership recognized and protected by the law.
TITLE COMPANY: A company that specializes in examining and insuring titles to real
estate.
TITLE DEFECT: Unresolved claim against the ownership of property that prevents
presentation of a marketable title. Such claims may arise from failure of the owner's
spouse, or former part owner, to sign a deed, current liens against the property, or an
interruption in the title's records of a property.
TITLE PLANTS: A filing of all recorded information to real property, paralleling the
records of the county recorder's office, although the filing system may be different.
TITLE REPORT: Document indicating the current state of the title, such as easements,
covenants, liens, and any other defects. The title report does not describe the chain of
title.
TITLE SEARCH: A review of all recorded documents affecting a specific parcel of land
to determine the present condition of title. An experienced title officer or attorney
reviews and analyzes all material relating to the search, then determines the sufficiency
and status of title for insurance of a title insurance policy. A check of public records to
determine current ownership and liens on a parcel of real estate.
TRAILING SPOUSE INCOME: When his or her employer has transferred a borrower to
a new area, and he/she is purchasing a home there, it is possible that the spouse's
income may be used to qualify for the mortgage, even if the spouse has not yet found
employment.
TRANSFER TAX: A tax imposed upon transfers of title to real property, based on
purchase price or money changing hands. (Also called Documentary tax.)
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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 fields on actively traded
Treasury securities in the over-the-counter market.
TRIPLEX: Most commonly a single structure designed with three separate living units.
TRUSTEE: One who holds normal title to real property under the terms of a deed of trust.
TRUSTOR: The borrower under a deed of trust. One who deeds his property to a trustee
as security for the repayment of a loan.
TRUTH-IN-LENDING ACT: A federal law that requires lenders to fully disclose, in writing,
the terms and conditions of a mortgage, including the APR (Annual Percentage Rate) and
other charges.
U
UNDER WATER HOME: A house that is worth less than what is owed on the mortgage.
UNDERWRITING COMPANY: A title firm that conducts title searches but is not
qualified to insure, and therefore issues policies of a qualified title insurer (underwriter)
in return for a portion of the premium.
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UNENCUMBERED: Free of liens and other encumbrances. Free and clear.
UPSET BID: A recorded bid placed after a foreclosure sale has ended that is higher
than the highest bid received at the actual foreclosure sale.
UPSIDE DOWN HOME: A house that is worth less than what is owed on the mortgage
it secures.
V
VA LOAN: A loan that is guaranteed by the U.S. Department of Veterans Affairs.
VARIABLE INTEREST RATE: An interest rate, which fluctuates as the prevailing rate,
moves up or down. In mortgages there are usually maximums as to the frequency and
amount of fluctuation.
VENDEE: The buyer or purchaser, particularly the purchaser under a real estate or land
contracts.
VENDOR: The seller, particularly the seller of realty under a real estate land contract.
VENDOR’S LIEN: An implied lien given by law to a vendor for the remaining unpaid and
unsecured part of a purchase price.
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the mortgage payments. It also provides the balance and verifies the mortgage
payments.
VERIFICATION OF RENT (VOR): In the case of Renters, the mortgage lender gets a
signed document from the Landlord of the renter. This will give the lender a 12 to 24
month history of how well the rental payments have been made.
VESTED: An immediate fixed right, interest or title in real property, even though the right
to possession might not occur until some time in the future.
W
WAGE EARNER PLAN: A name for Chapter 13 bankruptcy.
WARRANT: To legally assure that the title conveyed is good and possession will be
undisturbed.
WARRANTY DEED: Deed, which warrants and guarantees the title from seller to buyer.
WITHOUT RECOURSE: Words used in endorsing a note or bill to denote that the future
holder is not to look to the endorser in case of nonpayment.
WRAP AROUND LOAN: The debt secured includes an existing debt already on the
property. The payments made to the holder of the wraparound include payments due on
the existing loan and the holder must forward the appropriate portion of each payment
to the existing note holder. A wrap around loan is a subordinate deed of trust or real
estate contract that includes the balance due on the existing first lien and contains
provisions for the seller to remain responsible
WRIT OF EXECUTION: A court order authorizing the holder to seize and sell a debtor's
property to pay off a judgment.
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WRIT OF POSSESSION: A court document that authorizes a constable or other officer
of the law to break down a tenant's door, drag the tenant from the premises and throw
the tenant's belongings out of the house or apartment.
WRIT: An order or mandatory process in writing issued in the name of a court or judicial
officer commanding the person to whom it is directed to perform or refrain from
performing a specified act.
Y
YIELD: The return of profit to an investor on an investment, stated in a percentage of the
amount invested.
Z
ZONE: An area of land set off for a particular use or uses, subject too certain restrictions.
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Books available from Earl
Huses’ Real Estate Series:
www.howtohavezeromortgagepayments.net
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