Ever wonder what "Lien" means?
Or why mortgage insurance is required on some home loans?
Use our comprehensive yet uncomplicated list of industry terms and definitions and learn the lingo.
-A-
Adjustable Rate Mortgage (ARM)
A mortgage for which the interest rate, after a given period of time, is
adjusted periodically according to the movement of a pre-selected index.
Amortization
A payment plan enabling a borrower to reduce debt through gradual monthly
principal payments. An “Amortization Schedule” is a timetable for mortgage
loan payments.
Annual Percentage Rate (APR)
The total yearly cost of a mortgage including rate of interest paid. Includes
the base interest rate, points, and any other add-on loan fees and costs. The
APR is higher for the rate of interest than what the lender quotes for the
mortgage, because most mortgages are not held for their full 15 or 30-year
terms. The effective APR is higher than the quoted APR because points
and loan fees are spread out over fewer years.
Appraisal
A licensed appraiser’s professional opinion of a property's fair
market value, based on an appraiser's knowledge, experience, and analysis
of the property.
Appreciation
An increase in the value of a house due to changes in market conditions
or other causes.
Assessment
A monetary value assigned to a property for the strict purpose of taxation. May
also refer to a collection of money created by a property for a specific
purpose, such as installing a new roof, sewer system, etc.
Asset
Any item of monetary value owned by a person. Assets include real
property, personal property, and enforceable claims against others (including
bank accounts, stocks, mutual funds, etc.).
Assignment
The transfer of a mortgage from one person to another.
Assumption of Mortgage
An obligation taken on by a property purchaser, creating
legal liability for payment of an existing mortgage. In taking on this liability, the
purchaser replaces the original mortgagor – who is released from further
liability in the assumption. The current mortgagee’s consent is usually
required.
-B-
Bankruptcy
A person, firm, or corporation that, through a court proceeding,
is relieved of the payment of all debts after the surrender of all assets
to a court-appointed trustee.
Beneficiary
A person designated to receive the income from a trust, estate, or a deed
of trust.
Binder or "Offer to Purchase"
A preliminary agreement between a buyer and seller to purchase real estate
within agreed terms and time. This agreement is secured by the payment
of earnest money. If the buyer changes his mind or is unable to purchase,
earnest money is forfeited unless otherwise expressed in the binder.
Borrower
One who receives funds with the expressed or implied intention
of repaying the loan in full.
Bridge Loan
A form of second trust collateralized by the borrower's present home (which
is usually for sale) in a manner allowing the proceeds to be used for closing
on a new house before the present home is sold.
Broker
An individual in the business of arranging or negotiating – but not funding
– financing for a client. Brokers typically charge a fee or receive
a commission for their services.
Buy Down
Money advanced by an individual (seller, builder, etc.) to reduce monthly
payments for a mortgage either during the entire term or for an initial period
of years.
-C-
Cap
A provision of an ARM limiting how much an interest rate or mortgage payments
may increase.
Cash-out Refinance
A transaction in which the amount of money received from a new loan exceeds
the total required to repay an existing first mortgage, closing costs, points,
and the amount required to satisfy any outstanding subordinate mortgage liens.
Certificate of Title
A certificate issued by a title company (or a written opinion rendered by
an attorney) attesting that the seller has good marketable and insurable
title to the property, which he is offering for sale. A certificate of title
offers no protection against any hidden defects in the title, which an examination
of the records could not reveal. The issuer of a certificate of title is
liable only for damages due to negligence.
Chain of Title
The transfer history of all title documents relating to real property, beginning
with the earliest existing document and ending with the most recent.
Clear title
A title that is free of liens, and clear of legal questions regarding property
ownership.
Closing
The event where a sale is finalized. The buyer signs the mortgage
and pays closing costs. The certificate of title, abstract and deed are generally
prepared for the closing by an attorney or closing agent, whose service is
charged to the buyer. The final closing confirms the original agreement
reached in the agreement of sale. Also called “settlement.”
Closing Costs
Expenses (over and above the price of the property) incurred by buyers and
sellers in transferring ownership of a property. Also called "Settlement
Costs.”
Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan.
A borrower risks losing the asset if the loan is not repaid according to
the terms of the loan contract.
Collection
The process used to bring a delinquent mortgage current – and by filing
foreclosure notices when necessary.
Commitment Letter
A lender’s formal offer stating the terms under which it agrees to loan
money to a homebuyer.
Common Areas
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 the common areas’ operation
and maintenance.
Comparables
An abbreviation for comparable properties that have characteristics similar
to the property under consideration. Comparables are analyzed to approximate
the fair market value of the subject property. Characteristics
such as size, location and amenities are considered for the appraisal process.
Condominium
Individual ownership of a dwelling unit –and an individual interest in the
common areas and facilities – which serve the multi-unit project.
Condominium Conversion
Occurs when the ownership changes for an existing building (usually a rental
project) to the condominium form of ownership.
Construction Loan
A short-term loan for funding the cost of construction. The lender advances
funds to the builder as work progresses.
Consumer Reporting Agency (or Bureau)
An organization that prepares reports used by lenders to determine a potential
borrower’s credit history. A credit repository, along with other
sources, provides data for these reports.
Contingency
A condition that must be met before a contract is legally binding.
Contractor
In the construction industry, the individual who contracts to erect buildings
or portions of buildings. Contractors are used for each phase of construction:
heating, electrical, plumbing, air conditioning, road building, bridge and
dam erection, and others.
Conventional Mortgage
Any mortgage not insured or guaranteed by the federal government.
Convertibility Clause
A provision in some adjustable rate mortgages (ARM’s) that allows the borrower
to change the ARM to a fixed-rate mortgage at a specified time. A Convertible
ARM is an adjustable-rate mortgage that can be converted to a fixed-rate
mortgage under specified conditions.
Cooperative (co-op)
A type of multiple ownership in which residents of a multi-unit complex own
shares in a 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 Housing
An apartment building or a group of dwellings owned by a corporation with
the residents acting as stockholders. The dwellings are operated by
an elected board of directors for the residents’ benefit.
Commitment
A written letter of agreement detailing the terms and conditions by which
a lender will lend – and a borrower will borrow funds – to finance a home.
Credit History
A record of an individual's debts (both open and fully repaid). A
credit history helps a lender determine whether a potential borrower has
a history of repaying debts in a timely manner.
Creditor
A person to whom money is owed.
Credit Report
A report, prepared by a credit bureau, outlining an individual’s credit
history. A lender uses this report to determine a loan applicant’s
creditworthiness.
Credit Repository
An organization that gathers, records, updates, and stores financial and
public records data about the payment records of individuals under consideration
for credit.
-D-
Debt-to-Income Ratio (DTI)
Ratio of aggregate monthly debt to aggregate monthly income.
Deed-in-Lieu
A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure. Also
called a "voluntary conveyance."
Deed of Trust
A transaction where real property is given as security for a debt. The
borrower, the trustee and the lender (or beneficiary) are all parties to
this transaction. The borrower transfers the legal title for the property
to the trustee who holds the property in trust as security for the payment
of the debt to the lender. If the borrower pays the debt as agreed,
the deed of trust becomes void. If the borrower defaults in the debt
payment, the trustee may sell the property at a public sale, under the terms
of the deed of trust. Often the borrower is subject to having his property
sold without the benefit of legal proceedings. A few states have recently
begun to treat the deed of trust as if it were a mortgage.
Default
A failure to make mortgage payments on a timely basis, and/or a failure
to comply with other conditions of a mortgage.
Delinquency
A loan in which a payment is overdue but not yet in default.
Depreciation
A decline in the value of property; the opposite of "appreciation."
Discount Points
Please see [Link to “Points”] Points.
Down Payment
A portion of the purchase price paid for, in cash, by the buyer.
-E-
Earnest Money
Deposit money given to the seller (or his agent) by a potential buyer upon
signing of an agreement of sale to indicate the buyer’s intention. If a sale
goes through, earnest money is applied against the down payment. If a sale
does not go through, earnest money will be forfeited or lost unless the binder
or offer to purchase expressly provides otherwise.
Effective Age
An appraiser’s 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 come from more than one source. Salary is generally
the principal source, but other income may qualify if significant and stable.
Equal Credit Opportunity Act (ECOA)
A federal law requiring 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
The difference between the market value of a property and the homeowner's
outstanding mortgage balance.
Equity Loan
A loan originated prior to closing based on the borrower’s equity in his
or her home. An equity loan can also act as account into which a homeowner
pays money to the lender for taxes and insurance.
Escrow Account
The account in which a mortgage servicer holds the borrower’s escrow payments
prior to paying property expenses.
Escrow Collections
Funds collected by the servicing agency and set-aside in an escrow account
to pay the borrower’s 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.
Estate
An individual’s ownership interest in real property; the total of all real
and personal property owned by an individual at time of death.
-F-
Fair Credit Reporting Act
A consumer protection law regulating the disclosure of consumer credit reports
by consumer/credit reporting agencies. Established 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.
FDIC (Federal Deposit Insurance Corporation).
Provides insurance of accounts for institutions whose deposits were formerly
covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).
Fee Simple
The greatest possible interest a person can hold in real estate.
FHA (Federal Housing Administration)
A division of the Department of Housing and Urban Development. The FHA’s
main activity is to insure residential mortgage loans made by private lenders,
and to set standards for construction and underwriting. FHA does not
lend money, nor does it plan or construct housing.
FHA Loan
A loan guaranteed or purchased the Federal Housing Administration.
FHLMC (Federal Home Loan Mortgage Corporation or “Freddie Mac”)
A private corporation authorized by Congress, which later became an independent,
stockholder-owned government corporation. Freddie Mac promotes the flow
of funds into housing markets by purchasing conventional mortgages in the
secondary market and selling securities backed by those mortgages in the
capital market.
Finance Charge
The total dollar amount a loan will cost, including all interest payments
for the life of the loan, any interest paid at closing, origination fee and
any other charges paid to the lender and/or broker. Appraisal, credit report
and title search fees are not included in the finance charge.
First Mortgage
A mortgage holding first claim in the event of default.
Fixed Installment
The monthly payment due on a mortgage loan.
Fixed-Rate Mortgage (FRM)
A mortgage in which the interest rate does not change for the life of the
loan.
FNMA (Federal National Mortgage Association or “Fannie Mae”)
A government-sponsored corporation, owned solely by private investors, created
to provide support to the secondary market for FHA, VA, and conventional
mortgages.
Flood Insurance
Insurance compensating for physical property damage resulting from flooding. Required
for properties located in federally designated flood areas.
Forfeiture
The loss of money, property, rights, or privileges due to a breach of legal
obligation.
Foreclosure
The process by which a property may be sold when a mortgage is in default.
Fully amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment sufficient to amortize
the remaining balance, at the interest accrual rate, over the amortization
term.
-G-
Gift Letter
A letter or affidavit indicating that a portion of the down payment is supplied
by the borrower’s relatives or friends in the form of a gift, which does
not have to be repaid.
Good Faith Estimate
The estimate of charges a borrower is likely to incur in connection with
a loan closing.
Graduated Payment Mortgage (GPM)
A mortgage where payments are scheduled to increase, usually annually, for
a set number of years, and then level off. A GPM can be used with
a fixed or adjustable interest rate, and usually carries a 30-year term.
Grantee
The buyer or recipient of a deed.
Grantor
The seller or provider of a deed.
Gross Monthly Income
The total dollar amount a borrower earns per month, excluding any taxes
or expenses. Often used in calculations to determine whether a borrower qualifies
for a particular loan.
-H-
Hazard Insurance
Insurance protecting both homeowner and lender against physical damage to
a property from fire, wind, vandalism, or other hazards.
Homeowner's Insurance
An insurance policy combining liability coverage with hazard insurance.
Homeowner's Warranty
A type of insurance covering repairs to specified parts of a house for a
specific period of time.
Housing Ratio
The ratio of a monthly housing payment to total gross monthly income. Also
called “Payment-to-Income Ratio” or “Front-End Ratio.”
HUD (Department of Housing & Urban Development)
Cabinet department responsible for the implementation and administration
of government housing and urban development programs.
-I-
IAMB (Illinois Association of Mortgage Brokers)
Membership organization providing oversight and licensure to mortgage brokers
and mortgage bankers in the State of Illinois.
Income Property
Real estate developed or improved with the intent to produce income.
Index (a.k.a. “Rate Index”)
A regularly published rate, which is independent of the lending institution. Used
to measure the prevailing cost of funds and set accrual rates with the “margin.”
Inflation
An increase in the general price level of goods and services as a result
of an increase in the amount of money or credit available. As a result,
a dollar’s purchasing power is reduced.
Initial Interest Rate
The original interest rate of a mortgage at the time
of closing.
Installment loan
A loan repaid in equal payments, known as installments.
Insurance
A contract providing compensation for specific losses in exchange for a
periodic payment. An individual contract is known as the insurance
policy, and the periodic payment is known as the insurance premium.
Interest
The fee charged for borrowing money.
Interest-Only Loan
A loan in which the borrower pays only the interest due on a loan. When
possible, the borrower may pay down the principal as well.
Interest Accrual Rate
The percentage rate at which interest accrues on a mortgage. Also
often used to calculate monthly payments, although not for an adjustable
rate mortgage (ARM) with payment change limitations.
Interest Rate
The percentage of a loan amount which is repaid for its use over a specified
time.
Interest Rate Cap
A provision for an adjustable rate mortgage (ARM) limiting the amount an
interest rate may increase during an adjustment period.
Interest Rate Floor
For an adjustable rate mortgage (ARM), the minimum interest rate, as specified
in the mortgage note.
Investment Property
A property not occupied by the owner.
IRA (Individual Retirement Account)
A personal retirement fund account allowing tax-deferred contributions into
bank accounts or other forms of investments such as stocks, bonds, or mutual
funds.
-J-
Joint Tenancy
Co-ownership giving each tenant equal interest and rights to a property. Also
includes the right of survivorship, for which, in the event of death of one
party, the survivor owns the property in its entirety.
Judgment
A decision made by a court of law. For judgments requiring debt repayment,
the court may place a lien against the debtor's real property as collateral
for the judgment's creditor.
Judgment Lien
A lien on a debtor’s property resulting from a court decree.
Jumbo Loan (Non-Conforming Loan)
Any loan whose amount exceeds the amount eligible for purchase by Fannie
Mae or Freddie Mac.
-L-
Late Charge
A penalty a borrower must pay a lender when a payment is received after
a stated number of days (usually 15) after the agreed-upon due date.
Lease
A written agreement between a property owner and a tenant stipulating conditions
under which the tenant may possess real estate for a specified period of
time.
Legal Description
A lawfully recognized property description. Sufficient to locate
and identify the property without oral testimony.
Lender
An institution providing loans to borrowers for real estate acquisition.
Liabilities
Financial obligations including long-term debt, short-term debt, and any
other amounts owed to others.
Liability Insurance
Insurance coverage offering protection against claims alleging a property
owner's negligence or inappropriate action resulted in bodily injury or property
damage to another party.
Lien
A legal claim against a property. Must be paid when the property is
sold.
Lifetime Cap
A provision of an adjustable rate mortgage (ARM) limiting the total increase
in interest rates over the life of the loan.
Lifetime Payment Cap
A provision of an ARM limiting a payment’s increase or decrease over the
life of a loan.
Line of Credit
An agreement by a commercial bank or other financial institution to extend
credit for a specified amount and time to a specified borrower.
Liquid Asset
A cash asset, or an asset easily converted into cash.
Loan
A sum of money borrowed (also known as “principal”). Generally repaid
with interest.
Loan Commitment
A lender’s formal offer stating terms for a loan to a homebuyer.
Loan Origination
The process by which a mortgage lender secures a mortgage for real property.
Loan Servicing
Tasks a lender performs to protect a mortgage investment, including collecting
monthly payments from borrowers and dealing with delinquencies.
Loan-To-Value (LTV)
The ratio of the original loan amount to the lesser of 1.) the sales price
or, 2.) the appraised value.
Lock
The period, expressed in days, during which a lender will guarantee an interest
rate.
Margin
Premium set by a lender for an adjustable rate mortgage (ARM). The
margin, when added to the “index,” delivers the fully indexed rate.
Maturity
The date on which the principal balance of a loan, bond, or other financial
instrument becomes due and payable.
Merged Credit Report
A credit report containing data from three national credit repositories
(Equifax, Experian and Trans Union), which are combined to provide a credit
summary.
Margin
The amount the lender adds to the “index” to determine the Fully Indexed
Accrual Rate.
Monthly Housing Expense
Total principal, interest, taxes, and insurance paid by a borrower on a
monthly basis. With gross income, used to determine a borrower’s ability
to afford real estate.
Monthly Payment Mortgage
A mortgage requiring monthly payments to reduce a loan.
Mortgage
A legal document pledging real estate to the lender as security for repayment
of a loan.
Mortgage Banker
A company originating mortgages exclusively for resale in the secondary
market.
Mortgage Broker
A company paid to match borrowers with lenders.
Mortgagee
The lender in a mortgage agreement.
Mortgage Commitment
A written notice from a bank or other lending institution indicating an
advance of mortgage funds in a specified amount to enable a buyer to purchase
real estate.
Mortgage Insurance Premium
A payment made by a borrower to a lender for transmittal to HUD. This
payments helps defray the cost of the FHA mortgage insurance program, and
provides a reserve fund to protect lenders against loss in insured mortgage
transactions.
Mortgage Note
A written agreement, secured by a mortgage, to repay a loan. Serves
as proof of indebtedness, and states the loan amount – and terms under which
the loan shall be repaid.
Mortgagor
The borrower in a mortgage agreement.
Multi-Dwelling Units
Single-mortgage properties providing separate housing units for more than
one family.
Multifamily Mortgage
A residential mortgage on a dwelling designed to house more than four families,
such as a high-rise apartment complex.
-N-
Negative Amortization (“Deferred Interest”)
A gradual increase in mortgage debt as a result of a monthly payment lower
than the cost of the principal and interest due.
Net Cash Flow
An investment property’s monthly operating income. Calculated after
monthly housing expenses are paid, including principal, interest, taxes,
insurance (PITI) for mortgage, homeowners’ association dues, leasehold payments,
and subordinate financing payments.
Net Effective Income
Gross income less federal income tax.
Net Worth
Value of all assets (including cash) less total liabilities.
No Cash-Out Refinance
A refinance transaction in which the new mortgage amount is limited to the
sum of the remaining balance of the existing first mortgage, closing costs
(including prepaid items), points, the amount required to satisfy any mortgage
liens that are more than one year old (if the borrower chooses to satisfy
them), and other funds for the borrower's use (as long as the amount does
not exceed 1% of the principal amount of the new mortgage).
Non-Conforming Loan
A loan whose amount exceeds the amount eligible for purchase by Fannie Mae
or Freddie Mac. All loans above this amount are considered non-conforming
or “Jumbo” loans.
Non-Liquid Asset
An asset that cannot be easily converted into cash.
Note
A legal document obligating a borrower to repay a mortgage loan at a stated
interest rate during a specified period of time.
Note Rate
A mortgage note’s stated interest rate.
Notice of Default
A formal written notice to a borrower indicating that a default has occurred,
and that legal action may be taken.
-O-
OBRE (Office of Banks and Real Estate)
State chartered oversight division regulating mortgage bankers and mortgage
brokers in the State of Illinois.
Original Principal Balance
The total amount of principal owed on a mortgage before payments are made.
Owner Financing
A transaction wherein a property seller provides all (or a portion) of the
financing.
Owner Occupied
A property serving as the owner's primary residence.
-P-
Payment Adjustment Period
The length of time (typically a year) between changes to the borrower's
P&I (Principal & Interest) payment.
Payment Buy Down
A payment made by a third party (typically a builder) towards the initial
P&I to provide a borrower with smaller monthly payments for a specified
amount of time.
Payment Cap
A limit on the amount a payment can be changed at the end of each Payment
Adjustment Period.
Payment Discount
A decrease of the first year’s interest rate as an incentive for borrowers.
Periodic Rate Cap
A limit on the amount that an interest rate can increase or decrease during
a single adjustment period, regardless of how high or low the index might
be.
PITI
Principal, Interest, Taxes and Insurance are components of a mortgage payment.
Plat
A map or chart of a lot, subdivision or community drawn by a surveyor showing
boundary lines, buildings, improvements on the land, and easements.
Points
A one-time charge by the lender to increase the yield of the loan; a point
is 1% of the amount of the mortgage.
Power of Attorney
A legal document authorizing an individual to act on another’s behalf –
either completely or in a limited capacity and/or amount of time.
Prepayment
Payment of mortgage loan, or part of it, before its due date.
Pre-Approval
Statement issued by an underwriter to a borrower pre-approving the loan application,
which provides debt, income and savings information to the underwriter.
Pre-Qualification
Process of determining the dollar amount a prospective homebuyer will be
eligible to borrow prior to completing a mortgage application.
Prime Rate
The interest rates that banks charge to their preferred customers.
Principal
The borrowed or remaining unpaid portion of a loan.
Private Mortgage Insurance (PMI)
Insurance provided by nongovernmental insurers protecting lenders against
loss, should a borrower default. Typically charged to the borrower
when the loan-to-value (LTV) ratio is less than 80%.
Promissory Note
A promise, in writing, to repay a specified amount over a specified period
of time.
Public Auction
A meeting in an announced public location to sell property to repay a mortgage
that is in default.
Planned Unit Development (PUD)
A project or subdivision including common property that is owned and maintained
by a homeowners' association for the benefit and use of the individual
PUD unit owners.
Purchase Agreement
Agreement between the seller of real estate and a potential buyer.
Purchase Transaction
The acquisition of property through the payment of money or its equivalent.
-Q-
Qualifying Ratios
Two ratios used to determine whether a borrower qualifies for a mortgage. The
“top” or “front” ratio calculates the borrower’s monthly housing costs (principle,
interest, taxes and insurance) as a percentage of monthly income. The
“back” or “bottom” ratio includes housing costs as well as other monthly
debt.
Quitclaim Deed
A deed transferring, without warranty, interest or title a grantor may have
at the time conveyance is made.
-R-
Rate Caps
Also called "Interest Rate Caps.” A limit on the amount of change
allowed to a borrower’s interest rate.
Rate Lock
Commitment made by a lender to a borrower (or other mortgage originator)
guaranteeing a specific interest rate for a specific period of time at a
specific cost.
Real Estate Broker
An agent buying or selling real estate for a company, firm, or individual
for a commission. A broker does not hold title to the property, but
generally represents the owner.
RESPA (Real Estate Settlement Procedures Act)
A Federal law requiring lenders to provide mortgage borrowers with information
about known (or estimated) settlement costs.
Real Property
Land and appurtenances, including anything of a permanent nature (such as
structures, trees, and minerals) and the interest, benefits, and inherent
rights thereof.
Realtor
A real estate broker or associate who holds active membership in a local
real estate board affiliated with the National Association of Realtors.
Rescission
The cancellation or annulment of a transaction or contract by law or mutual
consent.
Recorder
A public official who maintains public records of executed legal property
documents (such as a deed, mortgage note, satisfaction of a mortgage or an
extension of a mortgage) affecting real property in an area.
Rehabilitation Mortgage (Rehab Loan)
A mortgage created to cover costs of improving or acquiring existing property.
Remaining Balance
The amount of loan principal remaining to be repaid.
Remaining Term
The original amortization term minus the number of payments applied to the
loan.
Repayment Plan
A borrower’s arrangement to repay delinquent installments or advances. Also
called “relief provisions.”
Replacement Reserve Fund
A fund set aside for replacement of common property in a condominium, PUD,
or cooperative project – particularly for items carrying a short life expectancy
(carpeting, furniture, etc.).
Revolving Liability
A credit arrangement (such as a credit card) allowing a customer to borrow
against a pre-approved line of credit when purchasing goods and services.
The borrower is billed for the amount actually borrowed, plus any interest
due.
Right of First Refusal
A provision in an agreement requiring a property owner to provide another
party with the first opportunity to purchase or lease real estate before
the owner offers it to others.
Right of Survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased
joint tenant.
Second Mortgage
A secondary lien subordinating to the rights of the first mortgage
holders. Can
be originated to replace a lender’s requirement for Mortgage Insurance for
loans carrying a loan-to-value ratio less than 80%. Second mortgages
may carry fixed or adjustable rates.
Secondary Mortgage Market
Buying and selling of existing mortgages.
Seller-Provided Funds (“Seller Contributions”)
Transaction costs paid by a seller, excluding a real estate agent’s (or
broker’s) fee.
Servicer
The party who has entered into an agreement to service a loan.
Single Premium
A premium providing insurance coverage for more than one year.
Special Assessments
Special taxes imposed on property, individual lots or all property in an
immediate area for road construction, sidewalks, sewers, streetlights, etc.
Special Warranty Deed
A deed in which a grantor conveys title to a grantee, and agrees to protect
the grantee against title defects or claims asserted by the grantor and those
persons whose right to assert a claim against the title may have arisen during
a period in which the grantor held title to the property.
Survey
A map or plat made by a licensed surveyor displaying a property’s elevations,
improvements, boundaries, and relationship to surrounding tracts of land.
-T-
Tax
A charge on persons, property or income used to support the State, which
in turn utilizes the funds in the best interest of the general public.
Tax Lien
A claim against real estate for a specific amount of unpaid taxes.
Teaser Rate
A large initial rate discount offered by a lender to a qualified borrower
for the purpose of securing real estate financing.
Tenancy by the Entirety
A type of joint tenancy. Provides the right of survivorship to a husband
and wife.
Tenancy in Common
A type of ownership. Does not pass ownership to other owners in the
event of death.
Third Party Origination
A process by which a lender uses another party to completely or partially
originate, process, underwrite, close, fund, or package a mortgage it plans
to deliver to the secondary mortgage market.
Title
The rights of ownership and possession of particular property. May
refer to instruments or documents by which right of ownership is established. May
also refer to an individual’s ownership interest in real estate.
Title Company
A company specializing in examining and insuring real estate titles.
Title Insurance
Protects lenders or homeowners against loss of interest in property due
to a title’s legal defects. Benefits are paid to the “named insured”
in the title policy. Accordingly, the owner must purchase an “owner’s
title policy” for title insurance protection.
Title Search or Examination
A search of title records (generally at a local courthouse) to ensure a
buyer is purchasing real estate from a legal owner without liens, overdue
special assessments, or other claims or outstanding restrictive covenants
filed in the record.
Total Debt Ratio
The ratio of monthly debt and housing payments to the gross monthly income.
Total Expense Ratio
A percentage of gross monthly including monthly housing expenses and other
monthly debts.
Trade Equity
Equity resulting from a property purchaser providing existing property (or
another asset) as trade for all or a portion of the down payment for the
subject property.
Transfer of Ownership
Means by which the ownership of a property changes hands.
Transfer Tax
State or local tax payable when title passes from one owner to another.
Treasury Index
Index used to determine interest rate changes for certain adjustable rate
mortgages (ARM’s).
Trustee
A party placed in a position of legally enforced responsibility to hold
property in the best interest of or “for the benefit of” another.
Truth-In-Lending (TIL)
A Federal Law requiring lenders to fully disclose, in writing, the terms
and conditions of a mortgage, including the APR and other charges, on a Truth-In-Lending
form, or “TIL.”
Two- to Four-Family Property
A single-deeded property consisting of a structure with living space (dwelling
units) for two to four families.
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Underwriting
An evaluation of a loan application used to determine risk involved for
a lender, depending on the borrower’s creditworthiness, ability to repay
the debt, and the quality of the property.
Unsecured Loan
A loan not supported by collateral.
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Department of Veterans Affairs (VA)
Agency of the Federal Government guaranteeing residential mortgages to eligible
veterans of the military services. The guarantee protects the lender
against loss, and encourages lenders to make mortgages to veterans.
VA Loan
Government loan guaranteed or purchased by the Veteran’s Administration.
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Wraparound Mortgage
A mortgage carrying the remaining balance on an existing first mortgage,
plus an additional amount requested by the mortgagor. Full payments
on both mortgages are made to the wraparound mortgagee, who then forwards
payments of the first mortgage to the first mortgagee.