| | Real Estate Glossary | Abstract of Title - A history of the title to a property including a summary of the original grant and all subsequent conveyances and encumbrances to the property.Addendum - A page separate from the purchase agreement used to amend, add, correct or modify a term or terms of the agreement without changing the remaining terms.Adjustment period - The length of time between interest rate changes. Example: one year ARM-interest changes annually.Adjustable-Rate Mortgage (ARM) - The interest rate is linked to a financial index, such as a Treasury security or a cost of funds - so your monthly payments can vary up or down over the life of the loan - usually 25 to 30 years. Interest rates can change monthly, annually, or every 3 or 5 years. Some ARMs have a cap on the interest rate increase, to protect the borrower.Agent - A person acting on behalf of another, called the principal.
Amortization - A loan repayment plan that will pay off the loan by making regular payments of principle and interest.Appraisal - An expert judgment or estimate of the quality or value of real estate as of a given date.Assessed Value - The valuation placed upon property by a public tax assessor as the basis for taxes.Assumable Mortgage - Buyer "takes over" or assumes the mortgage obligation of the seller (with concurrence of the lender). The interest rate doesn't change and is sometimes lower than current rates. Often the loan fees are less as well.Balloon Mortgage - This is a loan which must be paid off after a certain period. The advantage they offer is an interest rate that is lower than a mortgage that is made for 30 years.Bill of Sale - An instrument which transfers title to personal property (chattels); a "Deed" transfers real property.Breach of Contract - Failure to perform a term or terms of a contract as agreed upon in the contract.Broker - A real estate professional who is licensed by the state and represents one or more parties in a real estate transaction. A broker helps clients to determine market values, lists properties for sale, advertises properties for sale, shows properties to prospective buyers, prepares offers and counter offers, negotiates on behalf of their clients, and ensures that their client's) comply will all applicable laws governing the transfer of property. A broker may employ other brokers or salespersons under his or her license.Cap - The limit on how much an interest rate or monthly payment can change at each adjustment or over the life of the loan.CC&R's Covenants, conditions and restrictions - A document that controls 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 mortgage.Certificate of Title - A document signed by a title examiner or attorney stating that the seller has a good marketable and insurable title.Chain of Title - A reconstruction of how title to a property came to be held by the current purported owner by working backwards from the current owner to the original sovereign (government) to confirm that each owner, over time, held good title to the property by acquiring title from a person or entity who had the legal right to convey it.Cloud on Title - A problem or an irregularity that adversely affects or impairs the title of the property. A Cloud on Title may make it difficult or impossible to transfer title.Close of Escrow (Closing) - The final step in a real estate transaction when title of the property passes from Seller to Buyer. The Buyer becomes legal owner on this date, when the deed and deed of trust are recorded with the county recorder's office in the buyer's name and the seller's loan's), if any, is paid off and the seller receives any net proceeds.Closing Statement (Settlement) - The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the real estate and seller's net proceeds. Also, 'settlement sheets,' 'HUD-1.'Commission - Payment to a real estate broker for services performed.Comparable Sales - Sales statistics that show sales prices for neighboring homes which have similar characteristics. It is used for sellers to determine the listing price and for buyers to make an offer. It is also used by lenders and appraisers.Condominium - A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors and ceilings) serve as its boundaries.Contingency - A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.Conversion clause - A provision in some loans that enables you to change an ARM to a fixed rate loan, usually after the first adjustment period. This may require additional fees.Co-Ownership - Two or more persons hold the title to the property.- a) Community Property - Property that is owned by a husband and wife during their marriage. In California, any real property acquired during the marriage is presumed to be community property absent evidence to the contrary.
- b) Joint Tenancy - Property that is owned by two or more persons in equal share, who acquired their interests at the same time. Property held in Joint Tenancy is subject to the right of survivorship in the surviving joint tenant's). When a joint tenant dies, title to the property is automatically conveyed by operation of law to the surviving joint tenant's).
- c) Tenancy in Common - Property that is owned by two or more individuals in undivided fractional interests. Each Tenant in Common owns a share of the property. The shares need not be equal, can be acquired or transferred at different times and can be disposed of at the death of tenant in common through a will, trust or by operation of law to heirs at law.
Deed - A formal written instrument by which title to real property is transferred from one owner to another. Also, 'conveyance'.Deed of Trust - Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument; the borrower, the trustee, and the lender (or beneficiary).Due-On-Sale Clause - An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.Negative Amortization - Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid principal balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren't high enough to cover the interest.Origination Fee - A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent of FHA and VA loans.PITI - Principal, interest, taxes and insurance.Planned Unit Development (PUD) - A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Uses may be residential, commercial or industrial.Point - An amount equal to 1 percent of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.Pre-approval - A commitment by a lender to give the borrower a home loan prior to the borrower entering a contract to buy a home. The commitment to lend is subject only to the property appraising for the correct amount. During the home buying process, being pre-approved for a home loan is an advantage. Pre-approval helps the buyer to identify their price range and enables them to close quickly when they have found the right house. It also gives the buyer a competitive advantage against other buyers who have not been pre-approved since they are considered more risky by sellers.Preliminary Title Report - A report prepared by a title company that shows the state of the title to a property that will be the basis for issuing a title insurance policy.Prepayment Penalty - A fee charged to a mortgagor who pays a loan before it is due. Not allowed for FHA or VA loans.Pre-qualification - It refers to an informal evaluation of your borrowing ability based on the lender's guidelines. No application is submitted and no commitment is made. The evaluation uses general information about your financial situation. It is called "pre-qual" for short.Principal - This word has several meanings:- a) to denote the most important;
- b) a capital sum lent on interest;
- c) one who appoints an agent to act on their behalf;
- d) either party to a contract.
Private Mortgage Insurance (PMI) - Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.Prorate - To allocate between seller and buyer their proportionate share of an obligation paid or due. For example a prorate on real property taxes, fire insurance, or condominium fee.Purchase Agreement - A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.Quitclaim Deed - A type of deed that releases any interest or claims that the grantor may have in the property. It does not warrant that the grantor had any interest or claims to the property. Usually used to clear a cloud on title.Quiet Title - The right to possess and use a property free from claims of other persons. It also includes the right to exclude others from possessing and using the property.Reconveyance - The release from a deed of trust by the trustee to the owner of real estate when the underlying loan has been paid in full. The release is in the form of a deed of reconveyance which essentially cancels the deed of trust.Real Property - Land that extends downward to the center of the earth and upward into space, including all things permanently attached thereto by nature or man. For example: minerals, trees, buildings, and appurtenant rights.Recording - Formal filing of documents affecting the title of a property with the county recorder's office. Recorded documents become a matter of public record, giving notice to all parties of the state of title for the property.Realtor - A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors®.Regulation Z - The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection act.Second Mortgage - A mortgage that is in second position to the first mortgage. The second mortgage is "junior" to the first meaning that if the property goes into foreclosure, the first mortgage must be paid in full before the second mortgage holder is entitled to be paid. Some buyers will get a second mortgage if they cannot obtain enough of a loan from the first mortgage or if they can qualify for better terms on the first mortgage by obtaining a smaller second mortgage. There is no limit to the number of junior mortgages that can be placed against a property.Seller Assisted Second Mortgage - The seller of the house lends the buyer enough to make up the difference between the purchase price and the down payment plus first-mortgage balance (a commercial lender may also make this kind of loan). The terms including the interest rate, are based on buyer/seller agreement. It is often a short-term (5 to 15 year) loan; sometimes "interest only" payments until the term date when the balance is due in full. A buyer can then refinance the home.Sole Ownership - Ownership of property by a single person or entity.Starker Agreement ()Section 1031) - A provision of the Internal Revenue Code that allows owners of investment property to "exchange" a property for other "like-kind" property and to defer any capital gains into the acquired property. Also called a "1031 Exchange" or a "Starker Exchange."Survey - A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure a building is actually sited on the land according to its legal description.Tenancy in Common - A type of joint ownership of property by two or more persons with no right of survivorship.Title - The proof of ownership of property.Title Insurance - Protects lenders and home owners against loss of their interest in property due to legal defects in title.Title Search or Examination - A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims.Transfer tax - State tax, local tax (where applicable) and tax stamps (in some areas) required by law when title passes from one owner to another.Trustee - A person or entity who holds, for the benefit of the beneficiary, title to property. For example, the Trustee under a deed of trust holds the deed of trust for the lender and is responsible for enforcing the provisions of the deed of trust.Truth In Lending - A required disclosure given to the prospective borrower by a lender itemizing all the terms and conditions and costs of a loan.Underwriting - The process where a lender evaluates a loan application and determines the creditworthiness and ability of the applicant to repay a loan. The underwriter makes sure that the loan will conform to the lender's guidelines for lending and verifies that all necessary documentation is provided.VA Loan - The VA does not lend money, it guarantees a portion of the loan so that lenders who originate the loan feel comfortable with their risk. Qualified veterans can obtain loans up to $203,000 with no down payment. VA-guaranteed loans can be combined with second mortgages and are assumable upon qualifying by any future buyer. |
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