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Glossary

  • Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes over time in line with movements in the index.
  • Adjustment Periods: The length of time between interest rate changes on an ARM. For example: A loan with an adjustment period of one year is called a one year ARM, which means that the interest rate can change once a year.
  • Amendment: A change that alters, adds or corrects a part of an agreement without changing the key idea or content.
  • Amortization: Gradual repayment of a loan in equal installments of principal and interest, rather than interest only payments.
  • Annual Percentage Rate (APR): The total finance charge (interest, loan fees, points expressed as percentage of the loan amount) stated as a yearly rate.
  • Appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser.
  • Assumption Of Mortgage: A buyer's agreement to assume the liability under an existing note that is secured by a mortgage or Deed of Trust. The lender must approve the buyer in order to assume the loan.
  • Balloon Mortgage: A mortgage that has level monthly payments of principal and interest that do not fully amortize the loan. The balance is due in a lump sum payment at a specified date, usually at the end of the term.
  • Bankruptcy: A proceeding in a federal court in which a debtor who has greater debts than assets can get debt relief by transferring those assets to a trustee or agreeing to reorganization of assets and liabilities.
  • Beneficiary: The recipient of benefits, usually a lender, and often from a deed of trust.
  • Broker: A person who brings parties together and assists in negotiating contracts between them for a commission or fee.
  • Buy-down Mortgage: A mortgage in which an initial lump sum payment is made to reduce a borrower's monthly payments during the early years in a loan.
  • Cap: The limit of how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.
  • Cash-out Refinance: A refinance transaction in which the borrower receives additional cash for any purpose.
  • CC&R's: Covenants, Conditions, and Restrictions: A document controlling the use, requirements and restrictions of a property.
  • Certificate Of Reasonable Value (CRV): A document that establishes the maximum value and loan amount for a VA guaranteed loan.
  • 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 Statement: The financial disclosure statement that accounts for all of the funds received and expected at the closing including deposits for taxes, hazard insurance, and mortgage insurance.
  • Cloud On Title: A claim, encumbrance or condition that impairs the title to real property until disproved or eliminated through such means as a quitclaim deed or a quiet title legal action.
  • Comparable Sales: Sales with similar characteristics as the subject property, used for appraisal analysis. Commonly known as "comps."
  • Contingency Clause: The condition or 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.
  • Conversion Provision: A provision in some ARM's to convert  the loan to a fixed rate loan, usually after the first adjustment period.  The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgage. This conversion feature may be an extra cost.
  • Credit Bureau: An organization that gathers, records and keeps financial and public records data about the payment records of persons being considered for credit.
  • Creditor: A person to whom money is owed.
  • Deed: The legal document transferring or conveying title to a property from one party to another.
  • Deed Of Trust: An instrument used in many states in place of a mortgage.
  • Deed Restrictions: Limitations in a deed to a property that dictates certain uses that may or may not be made of the property.
  • Delinquency: Failure to make payments when payments are due.
  • Down Payment: The part of the purchase price that a buyer pays in cash and does not finance with a mortgage.
  • Due On Sale Clause: An acceleration clause that requires full payment of a mortgage or Deed of Trust when the secured property changes ownership.
  • Earnest Money: The portion of the down payment delivered to the seller or escrow agent by the buyer with a written offer as evidence of good faith.
  • Easement: A right, privilege or interest limited to a specific purpose that one party has in the land of another.
  • Escrow: An impartial third-party stakeholder for both buyer and seller who is responsible for completing paperwork and distributing funds.
  • Equity: The difference between the value of a property and the amount still owed on its mortgage.
  • Fair Market Value: The price at which a property will sell from a willing buyer to a willing seller.
  • Federal National Mortgage Association (FNMA):Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the FHA or guaranteed by VA, as well as conventional home mortgages.
  • Fee Simple: An estate in which the owner has unrestricted power to dispose of the property as he/she wishes including leaving by will or inheritance. It is the greatest interest a person can have in real estate.
  • Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.
  • Fixed Rate Mortgage: A mortgage in which the payments and interest rate do not change during the term of the loan.
  • Foreclosure: A legal action allowing a lender to sell a borrower's property in order to satisfy the debt.
  • Government Mortgage: A mortgage insured by the Federal Housing Administration (FHA) or guaranteed by the Veteran's Administration (VA) or the Rural Housing Service (RHS).
  • Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.
  • Grant Deed: A deed used to transfer real property, containing warranties against prior conveyances or encumbrances.
  • Grantor : The person transferring title, or an interest in real property. A grantor must be competent to convey title. The grantor must be clearly identified in the deed.
  • Hazard Insurance: Insurance that compensates for fire, wind, vandalism or hazardous physical damage to a property. Buyer may add liability insurance and extended coverage for personal property.
  • Home Inspection Report: A qualified inspector's report on a property's overall condition, usually including an evaluation of the structure and internal mechanical systems.
  • Home Owner's Association (HOA): A nonprofit, formal group of condominium owners who desire to manage, maintain and improve the development's common areas.
  • Home Warranty Plan: Type of insurance that covers against failure of mechanical systems on a property, such as plumbing, electrical, heating systems and installed appliances.
  • Impounds: A trust type of account established by lenders for the accumulation of borrower funds to meet periodic payments of taxes, mortgage insurance premiums and/or future insurance policy premiums required to protect their security.
  • Index: A published rate plus a margin that determines interest rates on an adjustable-rate mortgage.
  • Insurance: An agreement covering home owners for specific losses in exchange for a periodic payment.
  • Joint Tenancy: An equal undivided ownership of property by two or more persons, including the right of survivorship.
  • Legal Description: A highly specific description recognized by law, based on government surveys, that identifies the exact boundaries of an entire piece of land.
  • Lien: A legal hold or claim on property as security for a debt or charge that must be repaid when that property is sold.
  • Loan: An amount of borrowed money (principal) that is usually repaid with interest.
  • Loan Commitment: A written promise to make a loan for a specified amount on specific terms.
  • Loan To Value (LTV) Ratio: The relationship between the amount of the appraised value of the property and the amount of the loan, expressed as a percentage.
  • Margin: The number of percentage points the lender adds to the index rate to calculate the adjustable mortgage (ARM) interest rate at each adjustment date.
  • Mortgage: A legal document that pledges a property to a lender as security for debt payment.
  • Negative Amortization: Increase in mortgage debt that occurs when monthly payments are too low to cover the full amount of interest due. When this shortfall is added to the remaining balance, it creates "negative" amortization.
  • Origination Fee: A fee or charge paid for establishinga loan.
  • PITI: A payment combining Principal, Interest, Taxes & Insurance
  • Point: A fee collected by a lender that is equal to 1 % of the principal amount of an investment or note.
  • Power Of Attorney: A written instrument whereby a principal gives authority to an agent, who may also be called an "Attorney-in-Fact."
  • Preliminary Title Report: A report showing the condition of title before a sale or loan transaction,
  • Prepayment Penalty: A fee charged to a mortgagor who pays a loan before it is due.
  • Private Mortgage Insurance (PMI): Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.
  • Purchase Agreement: Written document stating terms and conditions between a property buyer and seller.
  • Quitclaim Deed: A deed operating as a release, intending 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 by the grantor.
  • Realtor: A real estate broker or associate active in a local real estate board affiliate with the National Association of Realtors.
  • Recording: Filing documents affecting real property with the County Recorder as a matter of public record.
  • Tenancy In Common: A type of joint ownership in a property with no right of survivorship.
  • Title: A legal document that confirms a person's right to own or ownership of a property.
  • Title Insurance Policy: A policy that protects the purchaser, mortgagee, or other party against losses.
  • VA Loan: A loan that is guaranteed by the Veterans Administration and made by a private lender.
  • Warranty Deed: A real estate oriented document used to convey fee title to real property from the grantor to the grantee (usually the seller to the buyer). A deed in which the grantor fully warrants good clear title to the premises; also called a general warranty deed. The usual covenants of title are covenant of possession, covenant of quiet enjoyment, covenant against encumbrances, covenant of warranty forever and covenant of further assurance. A warranty deed warrants the title, not the quality of construction of the real property. A warranty deed is used in most real estate deed transfers and offers the greatest protection of any deed.