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Mortgage Glossary

abstraction method
This method of estimating the value of property uses similar properties available in the same market to extract the value of a parcel of land.

acceleration clause
The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other covenant.

addendum
A supplement to any document that contains additional information pertinent to the subject. Appraisers use an addendum to further explain items for which there was inadequate space on the standard appraisal form.

adjustable-rate mortgage (ARM)
A mortgage characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.

adjustment date
The date that the interest rate changes on an adjustable-rate mortgage (ARM).

amortization
The loan payment consisting of a portion which will be applied to pay the interest on a loan, with the remainder being applied to the principal balance. The interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off in the specified time.

amortization schedule
A table which shows how much of each payment will be applied toward principal balance and how much toward interest over the entire life of the loan. It also shows the decrease of the loan balance until it is paid in full.

amenity
Any feature of a property that increases its value or desirability. These might include natural amenities such as location or proximity to mountains, or man-made amenities like swimming pools, parks or other recreation.

annual percentage rate (APR)
The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth-in-Lending Act.

appraisal
A written justification of the price paid for a property, based mainly on an analysis of comparable sales of similar homes near the subject property.

appraised value
Opinion of a property’s fair market value which is based on an appraiser’s knowledge, experience, and analysis of the property.

appraiser
An independent person trained to provide and unbiased estimate of a property’s market value.

appreciation
The increase in the value of a property due to changes in market conditions, inflation, or other causes.

assessed value
The valuation that is placed upon property by a public tax assessor for purposes of taxation.

assessment
The placing of a value on property for the purpose of taxation.

assessor
A public official who establishes the value of a property for purpose of taxation by government.

asset
Items of value that are owned by an individual. Those that can be quickly converted to cash are considered "liquid assets," such as bank accounts, stocks, bonds and mutual funds.

assignment
When ownership of your mortgage is transferred from one company or individual to another, it is known as an assignment.

assumable mortgage
A mortgage that can be assumed by the buyer when a home is sold. Most of the time, the borrower must qualify before being allowed to assume the mortgage.

assumption
The term applied when a buyer assumes the seller’s mortgage.

balloon mortgage
A mortgage loan with a final payment that is larger than the required periodic payments because the loan amount was not full amortized.

bankruptcy
By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities.

bill of sale
A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

biweekly mortgage
A mortgage whereby the borrower makes a half monthly payment every two weeks instead of the usual 12 monthly payments. This arrangement results in 26 half monthly payments per year and a significant reduction in interest since an extra monthly payment is made.

bridge loan
Bridge loans are loans intended to be used for a short period time between the initial requirement for funds and a permanent, usually less costly, financial solution. Bridge loans are typically funded by collateralized real estate. There are typically very few limitations on the uses of funds for a bridge loan, although lenders will review the use to insure that payback can be met.

broker
Broker may have several meanings in different situations. Most real estate agents work under a broker. Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but brokers loans to larger lenders or investors.

buy down
A cash payment made by any party to reduce a borrower’s monthly loan payment.

building code
Regulations that ensure the safety and material compliance of new construction within a municipality. Building codes are localized to ensure they are adequate to meet the risk of common hazards.

call option
A clause in a mortgage which allows the lender to demand payment of the outstanding balance at a specific time.

cap
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.

capital
Accumulated goods and money which is most often used to generate additional income.

cash-out refinance
When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of using some money for his own personal use.

certificate of deposit (CD)
Also called a time deposit, this is a certificate issued by a bank or thrift that indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest rate, and can be issued in any denomination.

Certificate of Eligibility

Document issued by the Veterans Administration to qualified veterans and that verifies a veteran’s eligibility for a VA guaranteed loan. Obtainable through local VA office by submitting form DD-214 (Separation Paper) and VA form 1880 (request for Certificate of Eligibility).

Certificate of Reasonable Value (CRV)
Certificate showing the appraised value of the property and maximum VA guaranteed loan a veteran under GI guaranteed mortgage loan may obtain from a private lender. See also certificate of eligibility.

chain of title
The analysis of the transfers of title for a property over the years.

chattel
Any personal property which is not attached to or an integral part of a property. Chattel is not commonly taken into consideration when appraising the value of real property.

clear title
A title that is considered free of liens or legal issues as to ownership of the property.

closing
In the sale of real estate it is the final moment when all documents are executed and recorded and the sale is complete. Can have different meanings in different states.

closing costs
The numerous expenses that buyers and sellers normally incur to complete a transaction in the transfer of ownership of property. These costs are in addition to price of the property and are items prepaid on the day of closing.

cloud on title
Any claim or encumbrance, usually discovered in a title search, that may impair the title to a property, and make its validity questionable.

collateral
Assets pledged by a borrower to secure a loan or other credit , and subject to seizure in the event of default.

commission
The majority of salespeople earn commissions for the work that they do and there are many sales professionals involved in each real estate transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative and more. A commissions is paid out of the charges paid by the seller or buyer in the purchase transaction. Real estat agents generally earn the largest commissions, followed by lenders.

common area
In condominium and some cooperative housing projects, the areas not owned by an individual owner of the condominium or cooperative residence, but shared by all owners, either by percentage inter- est or owned by the management organization. Common areas may include recreation facilities, outdoor space, parking, landscaping, fences, laundry rooms and all other jointly used space. Management is by a homeowners’ association or cooperative board, which collects assessments from the owners and pays for upkeep, some insurance, maintenance and reserves for replacement of improvements in the common area.

common law
An unwritten body of law based on general custom in England and used to an extent in some states.

community property
Method by which a married couple owns property in some states whereby each spouse owns a one-half interest. Upon the death of one spouse, the survivor’s half remains with the survivor, and the deceased’s half becomes part of their probate estate.

concessions
Additional value granted by a buyer or seller to entice another party to complete a deal.

condominium
A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title.

construction loan
A short-term loan used for financing the construction cost of a home, in which the lender makes payments to the builder at periodic intervals as the work progresses.

contingency
A condition that must be met before a contract is legally binding. A typical real estate transaction often includes a contingency that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector service.

conventional mortgage
A mortgage loan that is not insured or guaranteed by the federal government.

convertible ARM
An adjustable rate mortgage that can be converted to a fixed-rate mortgage under certain circumstances.

cooperative (co-op)
A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that actually owns the property, giving each resident the right to occupy a specific unit.

cost of funds index (COFI)
Cost-of-Funds Index, one of many interest rate indexes used to determine interest rate adjustments on an adjustable rate mortgage.

credit history
When a lender reviews an applicant’s credit history, the lender examines all the information in a credit report. This includes your credit cards, student loans, automobile loans, and other loans. The lender reviews how you have made your payments — on time or late. Your credit report also notes whether any of your creditors discharged a debt because they believed it would never be repaid, you declared bankruptcy, or your home had been foreclosed.

creditor
A person or institution to whom money is owed.

credit report
A report of an individual’s credit history prepared by a credit bureau which is used by lenders in determining a loan applicant’s creditworthiness.

deed
The legal document conveying title to a property.

deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."

deed of release
A document which dismisses a lien or other claim on a property.

deed of trust
The document used in some states instead of a mortgage. Title is conveyed to a trustee rather than to the borrower.

default
Failure to abide by the terms of a mortgage loan agreement. May result in the lender taking legal action to possess or foreclose the mortgaged property.

delinquency
Failure to make mortgage payments when mortgage payments are due to the lender.

depreciation
The decrease in the value of an asset allowed when computing property value for tax purposes. It can also be a loss in the appraised value of a property due to physical deterioration. This latter type of depreciation is curable when it can be remedied by repair or an addition to the property, and incurable when there is no easy or ecomomic remedy.

discount points
An added loan fee charged by a lender to make the yield on a lower-than-market-interest VA or FHA loan competitive with higher-interest conventional loans. One discount point is equal to 1 percent of the loan amount.

distressed property
A mortgaged property which has been foreclosed on.

down payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

due-on-sale provision
A provision in a mortgage that allows the mortgage lender to demand repayment of the entire balance in full if the borrower sells the property that serves as security for the mortgage.

earnest money deposit
A deposit made by a potential home purchaser to demonstrate that he is serious about purchasing the property.

easement
A right-of-way giving persons other than the owner of the property access to or through a certain property.

effective age
An appraiser’s estimate of the physical condition of a building. The actual age of a building may differ.

eminent domain
The right of government to take private property for public use upon payment of its fair market value to the owner.

encroachment
Construction or imposition of a structure onto the property of another.

encumbrance
A legal right or interest in land that affects or limits complete ownership and control over property. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes or restrictive convenants. An encumbrance does not necessarily prevent transfer of the property to another, but may diminish its value. A title search will usually reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase the property with the encumbrance.

Equal Credit Opportunity Act (ECOA)
Federal law that prohibits a lender or other creditor from refusing to grant credit based on the applicant’s sex, marital status, race, religion, national origin, or age, or because the applicant receives public assistance.

equity
A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.

escrow
An independent third party, such as an Escrow Officer, who acts as the agent for buyer and seller, or for borrower and lender, carrying out instructions of both and disbursing documents and funds. Escrow closes and the transfer of property or document is completed upon fulfillment of certain conditions specified in the written instructions, whereupon the necessary deeds and other instruments are recorded.

escrow account
An account that a lender or mortgage servicer establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes. Also known as an impound account.

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
The ownership interest of an individual in real property.

eviction
The lawful removal of an occupant from real property. Usually due to non-payment or mortgage debt or rent.

examination of title
The report on the title of a property from the public records or an abstract of the title. Conducted by an attorney in New Hampshire but may differ in other states.

executor
A person named in a will to administer an estate. A court will appoint an administrator if no executor is specifically named in the will.

Fair Credit Reporting Act
A federal law passed in 1971 that regulates the activity of credit bureaus. It is designed to prevent inaccurate or obsolete information from staying in a consumer’s credit file and requires credit bureaus to have reasonable procedures for gathering, maintaining and disseminating credit information. The act also requires credit bureaus to show a consumer their credit file if the consumer presents proper identification, although the bureau reserves the right to charge a fee for doing so. New laws are changing this and mandating that credit bureaus will have to provide a certain number of credit reports for free each year.

fair market value
The value of an item as established by a consideration of how much an independent buyer would pay to an independent seller in a completely free transaction for the item.

Fannie Mae (FNMA)
Fannie Mae purchases home mortgages, thus serving as a source of funds for mortgage lenders. It is a privately owned corporation whose shares are traded on the New York Stock Exchange, but it is subject to the strict supervision of the secretary of the U.S. Department of Housing and Urban Development (HUD).

Federal Deposit Insurance Corporation (FDIC)
The U.S. Government agency created in 1933 which maintains the stability of and public confidence in the nation’s financial system by insuring deposits and promoting safe and sound banking practices.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing. top)

fee simple
The greatest and best possible interest a person can have in real estate.

fee simple estate
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.

firm commitment
A lender’s agreement to make a loan to a specific borrower on a specific property.

first mortgage
A mortgage that is the primary lien against a property.

fixed-rate mortgage
A mortgage in which the interest rate remains the same throughout the entire term of the loan.

fixture
Personal property that becomes real property when attached in a permanent manner to real estate.

flood insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

floor plan
The representation of a building which shows the basic outline of the structure, as well as detailed information about the positioning of rooms, hallways, doors, stairs and other features. Often includes detailed information about other fixtures and amenities.

foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

forefeiture
The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.

401(k)/403(b)
An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.

401(k)/403(b) loan
Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans.

general lien
A broad-based claim against several properties owned by a defaulting party.

government loan (mortgage)
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortage.

Government National Mortgage Association (Ginnie Mae)
Agency within the U.S. Department of Housing and Urban Development that buys mortgages from lending institutions and pools them to form securities, known as “Ginnie Maes,” which are then sold to investors.

grantee
The person to whom an interest in real property is conveyed.

grantor
The person conveying an interest in real property to another.

gross area
The sum total of all floor space, including areas such as stairways and closet space. Often measured based on external wall lengths.

hazard insurance
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.

hidden amenities
Assets of a property which contribute to its value, but are not readily apparent. Examples might include upgraded or premium building materials.

highest and best use
The most profitable and likely use of a property. Selected from reasonably probable and legal alternative uses, which are found to be physically possible, appropriately supported and financially feasible to result in the highest possible land value.

Home Equity Conversion Mortgage (HECM)
Also known as a reverse annuity mortgage. Form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as Satisfaction of Mortgage: The document issued by the mortgagee when the mortgage loan is paid in full. Also called a "release of mortgage."

home equity line of credit
A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.

home inspection
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property.

homeowner’s association
A nonprofit association that manages the common areas of a planned unit development or condominium project. In a condominium project, it has no ownership interest in the common elements.

homeowner’s insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

homeowner’s warranty
Type of insurance purchased by home buyers that covers repairs or replacement of certain items, such as heating or air conditioning.

HUD-1 settlement statement
Form used by the settlement agent to itemize all charges for a real estate transaction. It gives each party a complete list of their incoming and outgoing funds.

HUD Median Income
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

improvements
Any item added to vacant land with the intent of increasing its value or usability.

income approach
The process of estimating the value of property by considering the present value of a stream of income generated by the property.

insurable title
The title to property which has been sufficiently reviewed by a title insurance company, such that they are willing to insure it as free and clear

interest rate
A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

joint tenancy
Form of ownership to property which indicates that each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.

jumbo loan
Also known as a non-conforming loan. The amount of the loan exceeds standards that would make it eligible for sale to Fannie Mae and Freddie Mac.

latent defect
Any defect in a piece of property which is not readily apparent, but which has an impact of the value. Structural damage or termite infestation would be examples of latent defects.

lease
The legal agreement between the Landlord and Tenant setting forth the rules and conditions for occupancy by the tenant and limitations of the landlord.

leasehold estate
An arrangement in which the borrower does not own a specific piece of property but possesses a long-term lease.

lease option
An alternative financing option that allows home buyers to lease a home with an option to buy. Each month’s rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.

legal description
A property description, recognized by law, that is sufficient to locate and identify the property.

liabilities
A borrower’s debts and financial obligations.

liability insurance
A policy that protects owners against any claims of negligence, personal injury or property damage.

lien
An encumbrance against property for money, either voluntary or involuntary.

life cap
A limit on the amount that a loan rate can move during the term of the mortgage. For example, the rate on an adjustable-rate mortgage that begins at 5 percent and has a lifetime cap of 6 percentage points cannot rise above 11 percent, even if rates on fixed-rate mortgages soar to 20 percent.

line of credit
Also called an "open line of credit" secured on your home. Often there are no closing costs involved, or the lender offers to pay all closing costs. Use like a checking account, borrowing credit over time up to your credit limit.

liquid asset
A cash asset or an asset that is easily converted into cash.

loan
A sum of borrowed money that is generally repaid with interest.

loan officer
A person that "sells" loans, representing the lender to the borrower, and the borrower to the lender.

loan origination
How a lender refers to the process of obtaining new loans.

loan-to-value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price.

lock-in
An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

lock-in period
The time period during which the lender has guaranteed an interest rate to a borrower.

major deficiency
A deficiency that strongly impacts the usability and habitability of a house. Or a deficiency that may be very expensive to repair.

manufactured housing
Once known as ”mobile homes,” manufactured housing is any building which has been constructed off site, then moved onto a piece of real property.

margin
The number of percentage points the lender adds to the index to calculate the ARM interest rate at each adjustment. For example, an index rate of 8% plus a margin of 2.5% could result in a home loan rate of 10.5%. The fixed margin over the index covers the lender’s operating expenses and profit margin.

maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

metes and bounds
A traditional way of describing property, generally expressed in terms of distance from a known landmark or intersection, and then following the boundaries of the property back to its origin.

mineral rights
The legal right to exploit and enjoy the benefits of any minerals located below the surface of a parcel of land.

modification
A change in any of the terms of the loan agreement.

mortgage
A legal document specifying a certain amount of money to purchase a home at a certain interest rate, and using the property as collateral.

mortgage banker
The lender or one making the loan in a mortgage contract.

mortgage broker
A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.

mortgagee
The lender in a mortgage agreement.

mortgage insurance (MI)
Guaranty insurance that protects conventional lenders from losses on a portion of a particular loan. Also known as MI, PMI or Private Mortgage Insurance.

mortgagor
The borrower in a mortgage agreement.

multidwelling units
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

negative amortization
Occurs when loan payments are not enough to cover the amount of interest due for that payment period. The unpaid interest is calculated and added to the total loan amount, increasing your outstanding balance.

no-cost loan
Almost all lenders offer loans at "no points." You will find the interest rate on a "no points" loan is approximately a quarter percent higher than on a loan where you pay one point.

non-conforming use
The use of land for purposes contrary to the applicable municipal zoning specifications. Often occurs when zoning changes after a property is in use.

note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

note rate
The interest rate stated on a mortgage note.

notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.

obsolescence
The process of an assets value diminishing due to the development of more desirable alternatives or because of the degradation of its capabilities.

off-site improvements
Buildings, structures or other amenities which are not located on a piece of property, but are necessary to maximize the use of the property or in some way contribute to the value of the property.

on-site improvements
Buildings, structures or other amenities that are erected on a piece of property and contribute to its value.

original principal balance
The total amount of principal owed on a mortgage before any payments are made.

origination fee
A fee charged by most lenders–also called points–for processing a loan. A point is 1 percent of the total loan amount.

owner financing
A property purchase transaction in which the property seller provides all or part of the financing.

owner occupied
The state of property wherein the owner occupies at least some portion of the property.

partial payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.

payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM).

periodic payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period.

periodic rate cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

personal property
Any property that is not real property.

PITI
Principal, Interest, Taxes and Insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and may includes mortgage insurance as well.

PITI reserves
An amount a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predetermined time.

point
Represents 1 percent of the amount of a mortgage.

power of attorney
A legal document that authorizes an individual to act on behalf of someone else.

pre-approval
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved.

prefabricated
Any building or portion thereof which is manufactured and assembled off site, then erected on a property.

prepayment
Any amount paid to reduce the principal balance of a loan before the due date.

prepayment penalty
A fee that may be charged to a borrower who pays off a loan before it is due.

pre-qualification
The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

prime rate
The minimum short-term interest rate charged by commercial banks to their most creditworthy clients. Home loan rates typically are several points above the prime rate, which is also used as the basis for mortgages, business loans, and personal loans.

principal
The amount borrowed or remaining unpaid. This is the portion of the monthly payment that reduces the remaining balance of the mortgage.

principal balance
The outstanding balance of principal on a mortgage.

private mortgage insurance (PMI)
A form of insurance required by a lender when the borrower’s down payment or home equity percentage is less than 20 percent of the home value. This insurance partially protects the lender if the borrower defaults on the loan.

promissory note
A written promise to repay a specific amount over a specified duration.

purchase agreement
A written contract signed by buyer and seller stating terms and conditions under which a property will be conveyed.

purchase money transaction
The acquisition of property through the payment of money or its equivalent.

qualifying ratios
Lenders compute qualifying ratios to determine how much a potential buyer can borrow.

quitclaim deed
A type of deed where a grantor (person with ownership interest) transfers all interests he or she has in a property. With this type of deed the person offers no warranties or promises about the title to the new owner.

rate lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

real estate agent
A licensed professional who facilitates the buying and selling of real estate.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of all closing costs.

real property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Realtor®
A real estate agent or broker who holds active membership in a local real estate board that is affiliated with the National Association of Realtors (NAR).

recorder
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."

recording
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

refinance transaction
The process of paying off one loan with the proceeds from a new loan using the same property as security.

rent loss insurance
A policy that covers any loss of rent or rental value in the event of fire or other damage that renders the property uninhabitable.

repayment plan
An arrangement made to repay delinquent installments or advances.

replacement reserve fund
An account, or fund, setup for the replacement of short life items , such as carpeting, in the common areas of a cooperative property.

revolving debt
Debt owned on an account that the borrower can repeatedly use and pay back without having to reapply every time credit is used. Credit cards are the most common type of revolving debt.

right of first refusal
An agreement by a property owner to give another person the right to buy or rent the property before it goes on the open market.

right of ingress or egress
The right to enter or leave designated premises.

right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

sale-leaseback
A real estate transaction in which the buyer leases back the property to the seller for a specific period of time. Also called seller rent-back.

second mortgage
A mortgage that has a lien position subordinate to the first mortgage.

secondary market
The buying and selling of existing mortgages.

secured loan
A loan that is backed by collateral.

security
The property that will be pledged as collateral for a loan.

seller carry-back
An agreement in which the seller provides financing for a home purchase.

servicing
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

settlement statement
Form used by the settlement agent to itemize all charges for a real estate transaction. It gives each party a complete list of their incoming and outgoing funds. Also known as a HUD-1 Form.

subdivision
The process in which the owner of a large piece of property divides it into smaller parcels.

subordinate financing
A second mortgage on a property that is not paid off when the first
mortgage is refinanced. The second mortgage lender must allow subordination of the second to the new
first mortgage.

survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

sweat equity
The non-cash value put into a piece of property by the owner, such as do-it-yourself home improvements.

tenancy in common
With tenancy in common, each owner (called a "tenant") has an undivided interest in the possession of the property. Each tenant’s interest is salable and transferable. Each tenant can convey his interest by deed, mortgage or by a will. Joint ownership is presumed tenants in common if nothing further is stated on the deed.

third-party origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

title
A legal document evidencing a person’s right to or ownership of a property.

title company
A company that specializes in examining and insuring titles to real estate.

title insurance
An insurance policy that protects against losses arising from title defects such as forged or misfiled documents.

title search
A title search is a close examination of all public records that involve title to a specific property. The search is conducted to verify that there are no liens or other claims against the property (other than those scheduled to be erased at closing if done for a purchase). Performed by an attorney in New Hampshire.

transfer of ownership
Any means by which the ownership of a property changes hands.

transfer tax
State or local tax payable when title passes from one property owner to another.

Treasury index
An index used to determine interest rate changes for adjustable rate mortgages.

Truth-in-Lending
A requirement that lenders fully disclose credit terms and conditions, the annual percentage rate and other mortgage financing charges in writing to the borrower within three business days of application.

two-step mortgage
An adjustable mortgage with two interest rates, one for the first five or seven years of the loan, and the other for the remainder of the loan term.

trustee
A fiduciary who holds or controls property for the benefit of another.

under improved land
A piece of land which has been improved, but not to the full extent of its potential.

unencumbered property
Any property which has no outstanding claims or liens against it.

Uniform Standards of Professional Appraisal Practice (USPAP)
Developed in 1986 by the Ad Hoc Committee on Uniform Standards and copyrighted in 1987 by The Appraisal Foundation, USPAP forms the guidelines followed by every licensed and certified real estate appraiser in the United States. The purpose of these Standards is to establish requirements for professional appraisal practice, which includes appraisal, appraisal review, and appraisal consulting. The intent of these Standards is to promote and maintain a high level of public trust in professional appraisal practice.

Useful Life
The span of time over which a property can be used or can provide benefits to its owner.

VA mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).

variance
An exception to municipal zoning regulations granted for a specific time period to allow for non-conforming use of the land.

vested
Having the right to use a portion of a fund such as an IRA. Typically vesting occurs over time. If you are 100% vested, you have a right to 100% of the fund.

Veterans Administration (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

walk-through inspection
A process whereby an appraiser examines a property in preparation for estimating its value. Also, the process of inspecting a property for any damage prior to that property being bought or sold.

zero lot line
A municipal zoning category wherein a building or other fixture may abut the property line.

zone
A specific area within a municipality or other jurisdiction which conforms to certain guidelines regarding the use of property in the zone. Typical zones include single-family, multi-family, industrial, commercial and mixed-use.