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| Abstract
(of title) |
A written summary of the
title history of a particular piece of real estate. |
| Acceleration
Clause |
A provision of a mortgage
or note which provides that the entire outstanding balance will
become due and payable in the event of default. |
| Adjustable
Rate Mortgage (ARM) |
A mortgage in which the
interest rate is adjusted periodically, based on the movement of
a financial index. |
| Amortization |
Repayment of loan by installment
payments. As the payments are made, the debt is reduced so that
at the end of fixed period or term, no money will be owed. |
| Annual Percentage Rate
(APR) |
The annual percentage rate refers
to the total cost of the loan, expressed as a yearly rate. |
| Application Fee |
That part of the closing costs pre-paid
to the lender at time of application to cover initial expenses. |
| Appraisal |
A report made by a qualified person
as to the value of a property as of a given date. |
| Assessed Value |
The value placed on a piece of real
estate by the taxing authority for the purpose of taxation. Also
called an assessment. |
| Assumption of Mortgage |
The purchaser takes over mortgage
payments for the balance of the loan, assuming primary liability.
Unless specifically released by the lender, the seller remains secondarily
liable. |
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| Balloon Mortgage |
A mortgage with periodic payments
that do not fully amortize the loan. The outstanding balance of
the mortgage is due in a lump sum at the end of the term. |
| Bridge Loan |
A short-term loan secured by the equity
in an as-yet-unsold house, with the funds to be used for a down
payment and/or closing costs on a new house. There is no payment
of principal until the house is sold or the end of the loan term,
whichever comes first. Interest payments may or may not be deferred
until the house is sold. |
| Broker |
The person who, for a commission or
a fee, brings parties together and assists in negotiating contracts
between them. |
| Buydown |
Money advanced by an individual (e.g.
builder, seller, buyer, lender, developer) to lower monthly mortgage
payments for a few years or the whole term. |
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| Cap (interest rate) |
The maximum interest rate increase
allowable on an adjustable rate mortgage. Does not result in negative
amortization. See Negative amortization. |
| Cap (payment rate) |
The maximum payment amount increase
allowable on an adjustable rate mortgage. May result in negative
amortization. See Negative amortization. |
| Certificate Of Title |
A statement that shows ownership of
property, stating that the seller has clear legal title. |
| Closing |
The concluding day of the real estate
transaction, when title and deed pass from seller to buyer, the
buyer signs the mortgage and pays the purchase price and closing
costs. |
| 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." |
| Closing Statement |
A financial disclosure giving an account
of all funds received and expected at closing, including the escrow
deposit for taxes, hazard insurance and mortgage insurance for the
escrow account. |
| Commission |
An agent's or broker's fee for bringing
the pricipals together and helping to negotiate a real estate transaction,
often a percentage of the sales price or flat fee. |
| Commitment |
An agreement, frequently in writing,
between a lender and a borrower to loan money at a future date,
subject to certain conditions. |
| Comparables |
Refers to similar properties used
for comparison purposes in the appraisal process. These properties
will be reasonably the same size and location, with similar amenities
and characteristics, so that the approximate fair market value of
the subject property can be determined. |
| Condominium |
Ownership of a single unit in a multiunit
building or complex of buildings. Along with this goes a share of
ownership of the common areas. |
| Contingency |
A condition that must be met for a
contract or a commitment to remain binding. |
| Conventional Mortgage |
Any mortgage loan that is not insured
by FHA, guaranteed by VA, of funded by a government authorized bond
sale or grant. |
| Convey |
To transfer real estate from one person
to another. |
| Credit Report |
The report to a prospective lender
on the credit standing of a prospective borrower. |
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| Deed |
A legal written document by which
title to property is transferred. |
| Default |
Failure to fulfill the terms as agreed
to in the mortgage of note. |
| Down Payment |
The difference between the sale price
of a property and the mortgage amount. |
| Due-On-Sale |
A clause in a mortgage which gives
the lender the right to require immediate repayment of a mortgage
balance if the property changes hands. |
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| Earnest Money |
The deposit money given to seller
or his agent by the potential buyer at the time of the purchase
offer. If the offer is accepted, the money will become part of the
down payment. |
| Easement |
A right to the limited use of land
owned by another. An electric company, for example, could have an
easement to put up electric power lines over someone's property. |
| Encumbrance |
Anything that affects or limits the
title to a property, such as outstanding mortgages, easement rights
or unpaid back taxes. |
| Equity |
The value in which the owner has in
real estate over and above the mortgages against it. When the mortgage
and all other debts against the property are paid in full, the owner
has 100% equity in his property. |
| Escrow |
Funds and/ or deed left in trust to
a third party. Generally, a portion of the monthly mortgage payment
is held in escrow by the lender to pay for taxes, hazard insurance
and yearly mortgage insurance premiums. |
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| First Mortgage |
A mortgage that has a primary lien
against a property. |
| Fixed-Rates Mortgage |
A mortgage with an interest rate and
monthly payments that remain constant over the life of the loan. |
| Fixture |
Property, such as a hot water heater
or plumbing fixture, that has become permanently attached to piece
of real estate and goes with the property when it is sold. |
| Flood Certification |
An independent agency report required
by the lender to determine whether a property is located in a flood
hazard zone, which would then require a federally mandated flood
insurance policy. |
| Foreclosure |
A legal procedure in which property
mortgaged as security for a loan is sold to pay the defaulting borrower's
debt. |
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Graduated Payment
Mortgage |
A fixed rate loan with monthly payments
that start low, increasing by a fixed amount for a specific number
of years. After that period, the payments typically remain constant
for the duration of the loan. |
| Gross Income |
Normal income, including overtime,
prior to any payroll deductions, that is regular and dependable.
This income may come from more than one source. |
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| Hazard Insurance |
Insurance protection against damage
to a property from fire, windstorms, and other common hazards. |
| Homeowner's Insurance |
An insurance policy that covers the
dwelling and its contents in case of fire or wind damage, theft,
liability for property damage and personal liability. |
| HUD-1 Form |
See Real Estate Settlement Statement. |
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| Income Property |
Real estate that is owned for investment
purposes and not used as the owner's residence. |
| Interest |
A charge paid for the use of money. |
| Interim Financing |
See Bridge Loan. |
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| Land Contract |
When the buyer agrees to make payments
directly to the seller at pre-negotiated terms. The seller agrees
to deed the property to the buyer upon completion of the agreement.
The buyer becomes the owner of equity in this type of sale. (Also
see Owner Financing) |
| Lien |
A legal claim on a property used as
security for a debt. |
| Loan-To-Value Ratio |
The relationship between the amount
of the mortgage and property value, usually shown as a percentage. |
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| Market Value |
The price at which a property will
sell, assuming a knowledgeable buyer and seller, both operating
without undue pressure. |
| Mortgage |
A contract in which a borrower's property
is pledged as security for a loan which is to be repaid on an installment
basis. |
| Mortgage Note |
A written promise to pay a debt at
a stated interest rate during a specified term. The agreement is
secured by a mortgage. |
| Mortgagee |
The lender in a mortgage contract. |
| Mortgagor |
The borrower in a mortgage contract. |
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| Negative Amortization |
A loan in which the outstanding principal
balance goes up instead of down because the monthly payments are
not large enough to cover the full amount of interest due. Also
called deferred interest. |
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| Offer to Purchase |
A written proposal to buy a piece
of real estate that becomes binding when accepted by the seller.
Also called a sales contract. |
| Origination Fee |
A fee charged for the work involved
in the evaluation preparation and submission of a proposed mortgage
loan. |
| Owner Financing |
A purchase in which the seller provides
all or part of the financing. |
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| PITI |
An acronym for payments to lender
that cover principal, interest, taxes and insurance on a property. |
| Plat |
A map of a piece of land showing boundary
lines, streets, actual measurements and easements. |
| Point |
A fee paid to the lender on closing
day to increase the effective yield of the mortgage. A point is
one percent of the amount of the mortgage loan. Also called a discount
point. |
| Prepayment Penalty |
A charge paid to the lender by the
borrower if a mortgage loan is repaid before its term is over. |
| Pre-Approval |
A commitment by a lender to extend
credit provided that specific conditions are met. |
| Pre-Qualification |
A preliminary assessment of a buyer's
ability to secure a loan, based on a specific set of lending guidelines
and buyer representations made. This is not a guarantee or commitment
by a lender to extend credit. |
| Prime Rate |
The interest rate charged by banks
to their preferred corporate customers, it tends to be an estimator
for general trends in short term interest rates. |
| Principal |
The amount borrowed or remaining unpaid;
also, that part of the monthly payment that reduces the outstanding
balance of a mortgage. |
| PMI (Private Mortgage
Insurance) |
Insurance written by a private company
to protect the lender against loss caused by mortgage default. |
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| Qualifying Ratios |
Guidelines applied by lenders to determine
how large a loan to grant a home buyer. |
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| Real Estate Settlement
Statement |
Final settlement statement often referred
to as the HUD-1 form, used to itemize buyer, seller, broker, and
lender charges and credits at closing. |
| Realtor |
A real estate broker or sales associate
affiliated with the National Association of Realtors. |
| Recording Fee |
The charges made by the register of
deeds to record the legal documents. |
| Refinancing |
Repaying a debt with the proceeds
of a new loan, using the same property as collateral or security. |
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| Second Mortgage |
A loan on property which already has
an existing mortgage(the first mortgage). The second mortgage is
subordinate to the first. |
| Secondary Mortgage Market |
The buying and selling of existing
mortgages through agencies (i.e. Fannie Mae, Freddie Mac). |
| Survey |
A map prepared by an engineer or surveyor
charting a particular piece of real estate. |
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| Title |
Ownership of a property. A clear title
is one without any outstanding liens or encumbrances. A cloud on
title refers to any outstanding liens or encumbrances which could
impair the title. |
| Title Insurance Policy |
Protection against financial loss
arising from defects in the title occurring before purchase. |
| Title Search |
A check of public record to disclose
the past and current facts regarding ownership of a particular piece
of property. |
| Transfer Tax |
In some areas city, county or state
taxes imposed when property passes from one person to another. |
| Truth-In-Lending |
A federal law that requires lenders
to fully disclose, in writing, the terms and conditions of a mortgage,
including the APR and other charges. |
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| Underwriting |
The process of evaluating a loan application
to determine the risk involved for the lender. |
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