Mortgage
Terms Defined A-F
Basic
Terms Used for Mortgages
Terms: A-F
G-M
N-S
T-Z
A | B
| C | D |
E | F
Abstract (of Title)
The title to the property is a
synopsis of all recorded transactions that an
attorney or title company has to analyze to
find out whether there are any unsuitable problems
influencing the title to the property. All problems
are then validated before the buyer is issued
the title.
Acceleration Clause
A loan provision allowing the
lender to have credibility to render all assets
owed to the lender promptly. The renter is in
infraction of the loan provision, such as the
sale of the property, or unable to make payments
on time.
Accretion
Enlarging the amount of land through
innate forces (water, wind, erosion, etc).
Example : location of new soil
by a stream.
Agreement of Sale
A written signed agreement between
the seller of a property and the purchaser in
which the purchaser agrees to buy real estate
and the seller agrees to sell upon the terms
of the agreement.
Beneficiary
A person who acquires or is going
to acquire benefits from indisputable events.
Example : The beneficiary on a
mortgage loan is the lender.
Bi-weekly Mortgage
A mortgage which requires 1/2
the normal monthly payment every two weeks.
Over the course of the year, 26 half payments
are made which is equivalent to 13 full mortgage
payments. As a result of this extra payment
the loan amortizes much faster than a loan with
normal monthly payments.
Blanket Mortgage
A contract comprising of multiple
amounts of property.
Example : A man gets a blanket
mortgage for his 3 tracts of land.
Borrower
A person who receives a loan and
is responsible to make mortgage payments.
Bridge Loan
A loan used for someone who is
having trouble selling his/her current home
and needs money to buy a new home. Once the
current home is sold the loan is then paid off.
Buy Down
A lower interest rate is offered
through a point system set by the lender (buying
the rate lower). The rate may last through the
life of the loan or for only a year or so. The
buy down system is a method for someone to qualify
who is not suitable as a potential borrower.
With a buy down the monthly payments are lowered.
Buyers Broker
A buyer seeks someone, usually
an agent, to find and locate property that is
for sale. The broker, a delegate on the behalf
of the buyer, tries to deal with the sellers
brokers to achieve the best possible deal.
Buyers Market
When buyers are able to bargain
with sellers for a lower prices over property
this may be a cause known as the buyers market
(more sellers then buyers). The market is in
favor of the buyers since more property for
sale is in abundance. This type of buyers market
may be seen during an economic drop or widespread
developments.
Bylaws
How an establishment/organization
handles business (set of regulations), e.g.
a condo community constructs bylaws that define
the number of people that may live in one household.
Capital Gains
The money gained from the sale
of the property. A seller can delay the taxes
on the capital gain by two years if they purchase
a more expensive home within that time.
Cash Flow
The money accumulated over a given
amount of time from an income producing property.
The amount of money coming in from the property
should be able to cover the cost of the income
producing property (mortgage, basic upkeep,
etc.).
Caveat Emptor
Actual definition meaning "let
buyer beware". Pre-purchasing and examination
of the property is done at the buyers own risk.
e.g. a property can be shown/represented without
the assurance of condition or quality.
Covenants, conditions,
and restrictions - CC&Rs.
The basic rules establishing the
rights and obligations of owners of real estate
in a condominium, townhouse, PUD, subdivision
or other tract of land. An association is organized
in order to maintain the property commonly owned
by the individual owners. The association is
typically made up of all of the home owners.
Certificate of Reasonable
Value (CRV)
Appraisals given by an approved
VA (Veterans Administration) appraiser. They
are to set the maximum value on the VA mortgage
loan principal.
Certificate of Occupancy
A form that must be given to the
lender prior to closing a loan. The document
must state the number of people living in one
residency and that the home meets public health
and building codes.
Certificate of Title
A statement by an attorney stating
the status to the title of property. This certificate
does not give the same benefits and protection
as title insurance.
Clear Title
A retail title, clear of questionable
and controversial issues. Some lenders have
a clear title as a requirement before closing.
Closing
Changing ownership of land from
the current owner to the buyer.
Closing Costs
Expenses incurred by the buyer
and seller in a real estate or mortgage transaction.
Types of costs are recurring and non-recurring.
Non-recurring costs are one time
costs which include discount and origination
points.
Lender fees - underwriting, processing,
document preparations, flood certificate, tax
service, wire transfer, courier, etc.
Title insurance fees
Escrow, attorney or closing agent
fees
Recording fees
Inspection and appraisal fees
Real estate brokerage commissions
Recurring fees are costs associated
with owning the property and they recur month
after month. These costs may include hazard
insurance, interest, property taxes, mortgage
insurance (PMI), and association fees. A pro-rated
amount of these fees may have to be paid at
closing including Pre-paid interest - interest
charges from the date of closing to the end
of the month
Cloud on Title
Questionable claims that could
jeopardize the owner's title.
Commitment
A lender agreeing or committed
to specific terms, on a written document, to
a contractor or borrower.
Condemnation
1. Using private property for
public use while providing a considerable amount
of compensation (usually money) to the owner.
The land in turn is usually used for schools,
streets and other community projects.
2. A home in violation of housing
codes and consequently goes under government
regulation.
Conditional Commitment
A lender making a commitment to
a loan however, certain conditions must be meet
before the closing date of the property.
Condominium
Single ownership of a property
unit with a shared interest in commonly owned
areas and facilities which appeal to everyone
in the condo community.
Construction loan
This type of loan is temporary
and used for construction of buildings and homes.
A construction loan also gives the contractor
small amounts of money over the construction
period. It is not till the job is completely
finished when a permanent loan is used to pay
off the rest of the construction.
Consideration
Anything that would entice a seller
into a contract (example: money deposits).
Contingency
Contingencies are conditions usually
set forth in the contract that must be met before
the buyer will close the purchase of the property.
E.G. if the sales contract stated the buyer
has 21 days to check all necessary repairs needed
to the property and asks the seller to perform
them. If the buyer is not pleased with the repairs
or if they were not performed the buyer is then
allowed to back out of the contract. However,
after the 21 days are up the buyer can not back
out due to the condition of the property.
Contract
A mutual agreement between the
two parties which are involved in buying and
selling property. E.G. an acceptable contract
for sale contains: an offer, an acceptance,
competent parties, consideration, legal purpose,
written documentation, description of the property,
signatures by principals.
Contract sale or deed
An installment arrangement between
the buyer and seller stating that the buyer
may reside on the property but the seller holds
the title till sale is official and paid.
Conventional Loan
Their are two types of conventional
loans: conforming and non-conforming. This is
any type of mortgage other then VA and FHA loans.
Conveyance
The change of a real estate title
from one party to another.
Co-op - cooperative
In a cooperative, an apartment
building is owned by a corporation that holds
the title to the property or real estate. A
resident however, is able to buy stock from
the corporation which in turn allows him to
live in the building unit owned by the cooperative.
The person owning the stock does not have a
title to the property but they are allowed to
remain in their unit as long as they still hold
stock.
Convertible ARMs
Certain loans are able to be converted
to a fixed loan provided it follows a set formula.
Credit Report
A detailed report showing someone's
credit history such as credit cards (revolving
accounts) and car loans (installment accounts).
Some reports will also show detailed descriptions
from tax liens and judgments.
Deed
The title of property, normally
changed from one owner to another at closing.
The deed contains information about the property
and the location. It is given to the buyer at
closing.
Deed Restriction
Limiting the use of land by a
clause, e.g. not permitted to construct a new
road through the land.
Defective Title
The inability to give a clear
title.
Deficiency Judgment
Personal claim made against a
debtor when the sale of a foreclosed property
does not yield sufficient proceeds to pay off
mortgages, accrued interest, legal fees, ...
Depreciation
The decreasing value of a house
caused by damages to the house or other means.
Discount Points
Decreasing an interest rate by
paying fees to a lender.
Documentary Tax Stamps
Stamps on a deed showing the total
amount of a transfer tax.
Down payment
The amount paid in advance on
a property.
Earnest Money
Money showing evidence of good
faith. The money is usually kept in safe keeping
with a real estate broker or escrow company.
Easement
Using land for a specific purpose,
the easement can either be temporary or permanent.
Eminent Domain
The governments ability to take
over property (condemnation) for public use
with compensation to the property owner.
Encroachment
Anything that physically lays
or touches on the property of another.
Example: A fence being built.
Encumbrance
A legal right or interest in land/property
that affects a good or clear title, and reduces
the land/properties value. Such as zoning ordinances,
easement rights, claims, mortgages, liens, charges,
a pending legal action, unpaid taxes, or restrictive
covenants. An encumbrance will not legally prevent
the transfer of the property. A title search
is typically done to find the existence of encumbrances.
It is up to the buyer to determine whether he
wants to purchase an encumbered land/property
and what can be done to remove the encumbrance.
Equity
Equity (usually given in a percentage)
is equal to the property value minus any liens.
Escrow
A neutral third party that deals
with the financial aspects of a real estate
transaction. A deposit is put into escrow, the
mortgage lender funds the loan into escrow,
escrow pays the realtor commission, pays of
any liens/loans on the property and any property
taxes and other costs associated with the transfer.
The remaining funds are then transferred to
the property seller.
Federal National Mortgage
Association (FNMA, Fannie Mae)
Purchases loans from lenders and
then sells FNMA mortgage backed securities on
Wall street.
Federal Home Loan Bank
Board (FHLBB)
Financing for farmers.
Farmer's Home Administration
(FMHA)
Programs that assist people who
want to buy farms and homes in rural areas.
Federal Home Loan Mortgage
Corporation (FHLMC, Freddie Mac)
Purchases loans from members of
the Federal Reserve and the Federal Home Loan
Bank Systems, and sells FHLMC mortgage backed
securities on wall street.
Federal Housing Administration
(FHA)
An agency that issues loan guarantees
and administers loan programs which makes more
housing available.
Federal Reserve System
Provides regulation of the federal
bank and gives services to commercial banks.
Also sets the nations monetary policy as well.
Fee Simple
The owner that has absolute ownership
of the property in the case of this person's
death the property is given to their heirs.
Fiduciary
Someone who is to act in the best
interest of a client. A realtor is a fiduciary
for his/her clients.
Finance Charge
Interest charged by a lender.
First Mortgage
A mortgage with precedence over
the second mortgage. In the case of closing
on property the first mortgage will we covered
before the second.
Flood Insurance
Insurance that covers the cause
of damage to a home due to flooding.
Foreclosure
Forcing the sale of property by
a default stated in a mortgage, e.g. not meeting
payments on time.
Free and clear
A property that has no liens.
FSBO
For sale by owner. |
