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Real Estate Terms and Definitions

This section contains a dictionary-style list of common real estate and mortgage terms. The terms and vocabulary of the real estate industry can be confusing at times so we have tried to create these pages to be as user friendly yet still as comprehensive as possible. These pages are intended to help you to better understand some of the terms more clearly but should not be taken as legal definitions or as legal advise. If you are confused about anything you come across in any real estate transaction, contract, or purchase agreements you should speak to your real estate agent or seek the council of an attorney. We hope that you find this of value.

A  B  C  D  E  F  G  H  I  J  K  L  M   N  O  P  Q  R  S  T  U  V  W  X  Y  Z

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

Some employers will provided their employees with matching funds to the 401k account in addition to the benefits package. Not only with the funds not be taxed before placing them in the account, but it will also reduce the employees taxable income.

401(k)/403(b) loan
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Some directors of 401(k)/403(b) plans concur to loans against the monies you have saved up in these plans -- monies must be repaid to avoid large penalty charges. Some plans will allow loans for any purpose, others restrict use for medical expenses, to prevent foreclosure, education expenses, or to finance a first home.


A

acceleration clause
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A clause/provision in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

acceptance
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The act of agreeing or consenting to the terms of an offer, thereby establishing the "meeting of the minds" that is an essential element of acontract.

acre
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A unit of area in a form of land, estate or a matter (sea floor). A measurement of land area equals 43,560 square feet or 208.71 feet by 208.71 feet. Equivalent to 4840 square yards or 4,047 square meters. A square mile contains 640 acres.

additional principal payment
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A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan. This goal enables the borrower's future interest payments to be reduced.

adjustable-rate mortgage (ARM)
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An ARM is based on the index rate. It is a mortgage that allows adjustments of the loan interest rate at pre-specified regular intervals.  A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index.

Adjustable rate mortgages will often be fixed for the first 1, 3, or 5 years.  Only after this period passes is the rate subject to change based on an index including the activity of 1, 3, and 5 year treasury securities. There are many other indexes, however the treasury securities are commonly used.

Additionally there are two types of interest rate caps. A periodic cap limits the amount your rate can change from one period to the next.  Not all ARMs have this kind of cap. An overall cap limits how much the rate can increase over the life of the loan.  This type of cap is required by law.

adjusted basis
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The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken. The proportionate value of an asset or security that reflects any deductions taken on, or capital improvements to the asset or security.

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

adjustment period
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This is the period of time between changes in the interest rate on an ARM. For example, an ARM that changes its rate once a year has a one-year adjustment or the period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

administrator
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A person empowered by a court to act for another person who is deemed incapable of acting for himself/herself.  A court-appointed person or bank who takes charge of an estate if the deceased failed to leave a will.

affordability analysis
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A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.

amenity
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A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

amortization
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It is a distribution of a single lump-sum cash flow into many smaller cash flow installments for easier repayment. Unlike other repayment models, each repayment installment consists of both principal and interest. Amortization is chiefly used in loan repayments (a common example being a mortgage).  The payments are usually of equal amounts. In the case of a loan, a greater amount of the payment is applied to interest at the beginning, while during the latter portion, more money is applied to principal.

amortization schedule
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A table which shows dates of payments and how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.

amortization term
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The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months, 15-year fixed rate mortgage would be 180 months.

amortize
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To repay a mortgage with regular/ installment payments that cover both principal and interest of a loan.

annual mortgagor statement
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A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.  This is usually used for tax returns.

annual percentage rate (APR)
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An expression of the effective interest rate that will be paid on a loan.  It is different from the "note rate" (the advertised interest rate) because it includes one-time fees in an attempt to calculate a "total cost" of borrowing money.

Here is a simplified example, if you borrow $100 for one year at 5% simple interest (meaning that you will owe $105 at the end of the year) and you pay the lender a $5 origination fee, your total cost to borrow the money will be $10 and your APR is about 10%.There are several acceptable ways to calculate the exact APR, the general process is:

  1. Total the included one-time costs and add them to the face amount on the loan.
  2. Calculate a monthly payment for that amount at the loan's "note rate.
  3. Calculate what interest rate would have to be applied to just the face amount of the loan in order to equal the calculated monthly payment in step 2

annuity
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An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis. An annuity is essentially a level stream of cash flows for a fixed period of time. It is most often used as a form of income during retirement.

application
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The form (paper or computer) used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, employment information, address history etc.

appraisal
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A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby and a tentative evaluation or rough calculation, as of worth, quantity, or size, condition of the property.

appraised value
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An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. An appraisal is based on comparable sales, condition of the property and the most recent sale on the property in question, the appraisal can come out equal to the purchase price, or it can come in above or below the purchase price.

appraiser
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An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

appreciation
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An increase in the value of a property due to changes in market conditions or remodeling/upgrades to the property. The opposite of depreciation.

assessed value
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It is a dollar value placed/assigned to property for the purpose of assessing taxes. This is done by a licensed public tax assessor for purposes of taxation.

assessment
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The process of placing a value on property for the strict purpose of taxation. This may also refer to a levy against property for a special purpose, such as a sewer, and ditch assessment.

assessment rolls
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A list/public record of taxable property.

assessor
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A licensed public official who establishes the value of a property for taxation purposes.

asset
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A valuable items that is owned by an individual. Assets that can be quickly converted into cash are considered liquid assets." These include bank accounts, stocks, bonds, mutual funds, real estate, personal property.

assignment
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When ownership of your mortgage is transferred /sold to from one company to another company or individual.

assumable mortgage
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A mortgage that can be assumed by the buyer when a home is sold. The borrower must "qualify" in order to assume the loan. When you assume a mortgage, you inherit not only the monthly payment schedule, but the interest rate as well.  It can lead to big savings if the interest rate on the existing mortgage is lower than the current rate. However, the lender can change the loan's terms.

assumption
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The transfer of the seller's existing mortgage to another buyer. See assumable mortgage.

assumption clause
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A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

assumption fee
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The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

attorney-in-fact
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An person/attorney who may or may not be a lawyer who is given written authority to act on another's behalf. One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.


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B

balance sheet
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A statement of a business or institution that lists the assets, debts, and owners' investment as of a specified date. It is also known as a financial statement.

balloon mortgage
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A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

balloon payment
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The final lump sum payment that is due at the termination of a balloon mortgage.

bankrupt
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A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

bankruptcy
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By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

before-tax income
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Income before taxes are deducted.

beneficiary
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A recipient/person that receives a benefit such as funds, property, or from an insurance policy, trust estate, a deed of trust or a will.

bequeath
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To leave, give, or transfer personal property through a will.

betterment
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An improvement that increases property value as distinguished from repairs or replacements that simply maintain value. It can be an improvement beyond normal upkeep and repair that adds to the value of real property.

bill of sale
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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.

binder
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A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

biweekly payment mortgage
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A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage.

Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

blanket insurance policy
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A single policy that covers more than one piece of property (or more than one person).

blanket mortgage
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The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

bona fide
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In good faith, without fraud.

bond
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An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

bond market
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Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.

breach
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A violation of any legal obligation. An act or instance of breaking a law or regulation or of non-fulfillment of an obligation or promise.

bridge loan
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Bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.

broker
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Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working for 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 broker loans to larger lenders or investors. As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

budget
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A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.

budget category
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A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. "Rent" is an example of an expense category. "Salary" is a typical income category.

building code
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A building code is a set of laws that specify how buildings should be constructed. This is generally considered the minimum acceptable level of safety for a new building in a jurisdiction.  Local regulations control design, construction, and materials that are used in construction of buildings.  Building codes are based on safety and health standards.

buydown
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Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower's payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

buydown account
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An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.

buydown mortgage
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A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.


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C

call option
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A financial contract between two parties, the buyer and the seller. A provision in a mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period.

cap
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Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." ARM Mortgage, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.

capital
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Money used to create income, either as an investment in a business or an income property, the money or property comprising the wealth owned or used by a person or business enterprise, the accumulated wealth of a person or business and/or the net worth of a business represented by the amount by which its assets exceed liabilities.

capital expenditure
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Funds spent for the acquisition of a long-term asset. Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

capital improvement
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Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.  The cost of an improvement made to extend the useful life of a property or to add to its value.

cash-out refinance
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A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. It is a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

certificate of deposit
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A certificate from a bank stating that the named party has a specified sum on deposit, usually for a given period of time at a fixed rate of interest or another way to say it is a document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period.

certificate of deposit index
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A table of interest rates paid on certificates of deposit that is used to determine interest-rate changes for adjustable-rate mortgages. One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.

certificate of eligibility
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A document that verifies that the bearer is eligible for a loan guaranteed by the Veterans Administration. A legal document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) loan.

certificate of reasonable value (CRV)
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Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

certificate of title
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A statement / document provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.

chain of title
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Legal records usually from the recorders office that traces ownership of a property from the most recent owner to the original owner.  The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

change frequency
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The scheduled period in which an adjustable-rate mortgage adjusts or the frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

chattel
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Another name for personal property that is not permanently attached to a house.

clear title
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Ownership of property that is free of all claims or disputed interests that would allow others to challenge the transfer of ownership. A title that is free of liens or legal questions as to ownership of the property.

closing
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This has different meanings in different states. In some states a real estate transaction is not considered "closed" until the documents record at the local recorders office. In others, it is a meeting at which the sale of a property is completed. The buyer signs the lender agreement for the mortgage and pays closing costs and escrow amounts. The buyer and seller sign documents to transfer ownership of the property. Also known as settlement the "closing" is a meeting where all of the documents are signed and money changes hands.

closing costs
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Expenses incurred by buyers and sellers when transferring ownership of a property. Closing costs include lender fees, title charges, attorney fees, government recording fees, escrow accounts are taxes and Insurance and pre-paid items. A list of fees on the closing statement or amount that a home buyer must pay at closing for a service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.

closing cost item
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Expenses incurred by buyers and sellers when transferring ownership of a property. Closing costs include lender fees, title charges, attorney fees, government recording fees, escrow accounts are taxes and Insurance and pre-paid items.  A list of fees on the closing statement or amount that a home buyer must pay at closing for a service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.

closing statement
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A standard form that discloses costs at completion of the sale of real estate, including discount and origination points, settlement fees, title insurance, brokers fees and commissions and money set aside in escrow. Lenders, title companies, Loan Officers call it a HUD-1 statement or a Settlement Statement.

cloud on title
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Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action. A claim on title to property that could impair the ability to transfer ownership.

coinsurance
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A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.  Usually it is when the deductible has been met then the insurer and insured share costs after the incurred.

coinsurance clause
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A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.

co-borrower
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An individual (second person) added to a loan who is obligated just as much as the borrower on the loan and is on title to the property.  Main person is the borrower and the second person is the co-borrower.

collateral
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In a home loan, the property is the collateral. The borrower however, risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.  Other kinds of collateral can be in stocks, 401k, monetary (checking & savings), along with other personal property of value that can be liquidated if repayment is not made.

collection
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The act or process of collecting a debt. The efforts used to bring a delinquent mortgage current and/or to file the necessary notices to proceed with foreclosure when necessary.

co-maker
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A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid if the primary borrower defaults on the loan.  The borrower and the co-maker are equally responsible for the repayment.

commission
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A fee or percentage allowed to a sales representative or an agent for services rendered. Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller and/or buyer in the purchase transaction.

commitment letter
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A letter from a lender stating they will lend the buyer up to a certain dollar amount for a purchase of a home and terms of a loan.

common area assessments
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Fees paid by the owners of a condominium project or planned-unit development to maintain, repair, improve or operate common areas. In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property in common areas, it used for snow removal, trash removal, mowing, and general upkeep.

common areas
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Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress.

common law
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The common-law is a major part of the law of many countries, especially those with a history as British territories or colonies. It is notable for its inclusion of extensive non-statutory law reflecting a consensus of centuries of judgments by working jurists.  It is used to avoid conflict during the relationship and upon its breakdown as to property ownership, debt obligations, and support obligations.

community property
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In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage area.

comparable sales
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It is data that helps you analyze the value of your home or other homes in your area.  An appraiser will pull comps within a five mile radius unless it is rural and sometimes the lenders will let them search more than a five mile radius. Results include price, square footage, bedrooms, recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."

comparables
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An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser estimated property values, and prices of homes that sold to determine the fair market value of the property.

compound interest
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Interest that is added not only to the principal of a loan or savings account but also to the interest already added to the loan or account; interest paid on interest.

condemnation
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The act of condemning land forfeited for public use or judging to be unfit for use (as a food product or an unsafe building) The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.

condominium
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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. A housing consisting of a complex of dwelling units (as an apartment house) in which each unit is individually owned.

condominium hotel
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A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.

conforming loan
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A conventional mortgage under $417,000 for a single family home that conforms to the loan amounts and mortgage guidelines used by Fannie Mae and/or Freddie Mac. The limits for 2,3, and 4 family homes are $533,850, $645,300, and $801,950 respectively. These figures can change yearly. For up-to-date information on limits:http://www.fanniemae.com/aboutfm/loanlimits.jhtml

construction loan
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Construction loans are story loans. That means that the lender has to know the story behind the planned construction before they're willing to loan you money. Because it's a story loan, it's not going to be standardized like mortgage loans underwritten to Freddie Mac or Fannie Mae guidelines. That said, there are some common features to a construction loan. Construction loans typically require interest-only payments during construction and become due upon completion. Completion for homeowners means that the house has its certificate of occupancy.  A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

consumer bureau
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An agency that researches and collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans. Typical clients include banks, mortgage lenders, credit card companies and other financing companies. Also commonly referred to as consumer reporting agency or credit reporting agency.  A credit bureau doesn't decide whether an individual qualifies for credit or not. It only collects information that it considers relevant to a person's credit history and habits. The three main credit bureaus in the United States are Equifax, Experian and Trans Union.

contingency
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A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector. Something generally is not anticipated but something that can happen.

contract
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An oral or written agreement to do or not to do a certain thing.  Contrary to common wisdom, an informal exchange of promises can still be binding and legally as valid as a written contract. A spoken contract is often called an "oral contract," not a "verbal contract." A verbal contract is simply a contract that uses words. All oral contracts and written contracts are verbal contracts. Contracts that are created without the use of words are called "non-verbal, non-oral contracts" or "a contract implied by the acts of the parties."

conventional mortgage
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Conventional mortgages or conforming loans are classified as non-conforming or jumbo loans when the amount of the loan exceeds $417,000 and the mortgage falls within Fannie Mae / Freddie Mac guidelines, and covers loans up to predetermined amount. Also refers to home loans other than government loans (VA and FHA).

convertibility clause
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A condition in some adjustable-rate mortgages (ARMs) that lets the borrower to change the ARM to a fixed-rate mortgage under specified circumstances, and definite timeframe after loan origination.

convertible ARM
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An adjustable rate mortgage (ARM) that permits a borrower to switch their mortgage to a fixed rate loan for the rest of the loan term if certain circumstances are met.

cooperative (co-op)
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A kind of multiple ownership in which the inhabitants of a multiunit housing complex own shares in the cooperative corporation that has possession of the property, giving each occupant the right to live in a specific apartment or unit.  An enterprise or organization that is owned by and run for the advantage of those using its services.

cooperative mortgages
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Mortgages related to a cooperative plan. This usually refers to the multifamily mortgage covering the whole project and sometimes describes the share loans on the personal units.

corporate relocation
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As part of the company/employer's normal course of business or under which it transfers a considerable part or all of its operations and workers to another vicinity because it is relocating its headquarters or making its office capacity larger.  When a company/employer decides to move and transfer the employee to another site usually out of state, they make arrangements with a moving company to help them pack, ship, and deliver to new location, then drop off all of the employee possessions.

covenant
[x] Close
A contract in its whole or a pledge within a contract for the performance or nonperformance of a certain act. A promise that involves the transfer or ownership of real property. A section in a mortgage that makes necessary or restricts the borrower and that, if dishonored, can result in foreclosure.

credit
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There are several differences of the meaning of the word credit, but they all relay to the central concepts of approval, praise, value, or confidence. As a term, used in such terms as credit card, it refers to the granting of a loan and the creation of debt. Any movement of financial capital is normally quite dependent on credit, which in turn is reliant on the reputation or creditworthiness of the entity which takes liability for the resources.

credit history
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The documentation of an individual's or company's past borrowing and repaying. It will catalog personal credit currently in the person's or company's name, and risk features like late payments and bankruptcy. Credit card companies and other lenders look at a credit history to decide if a person or company is likely to repay on time, if not then they can be deprived of credit. However if someone does have a negative credit record, then a lender may still choose to issue them credit, but at a elevated APR (Annual percentage rate.

credit life insurance
[x] Close
A kind of insurance often purchased by mortgagors because it will pay off the mortgage liability if the mortgagor dies while the policy is in place.

creditor
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An individual to whom funds are owed.

credit report
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A account of an individual's credit history organized by a credit bureau and used by a lender in deciding a loan applicant's creditworthiness. Refer to merged credit report.

credit repository
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An institute that gathers, records, updates, and keeps financial and public records information about the payment proceedings of individuals who are being considered for credit.


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D

debt
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An total owed to someone else.

deed
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The legal paper turning over title to a property.

deed-in-lieu
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Short for "deed in lieu of foreclosure," this communicates title to the lender when the borrower has failed to pay and needs to avoid foreclosure. The lender may or may not stop foreclosure activities if a borrower requests to provide a deed-in-lieu. In any case of whether the lender accepts the deed-in-lieu, the forestalling and non-repayment of debt will almost always show on a credit history. What a deed-in-lieu may avoid is having the documents preparatory to a foreclosure being recorded and becoming a subject of public record.

deed of trust
[x] Close
Some states, like California, do not confirm mortgages. Instead, they record a deed of trust which is basically the same thing.

default
[x] Close
Failure to make mortgage payments on a time or to meet the terms of a mortgage.

delinquency
[x] Close
Not making mortgage payments when they are owed. For many mortgages, payments are due by the first day of the month. Even though they may not charge a "late fee" for a specified number of days, the payment is still thought to be late and the loan delinquent. By the time a loan payment is more than 30 days late, most lenders account the late payment to one or more credit bureaus.

deposit
[x] Close
A sum of money given to attach to the sale of real estate, or a sum of money given to make sure of a  payment or an advance of funds in the processing of a loan (See earnest money deposit).

depreciation
[x] Close
A decline in the worth of property; the reverse of appreciation. Depreciation is also an accounting term that illustrates the declining monetary value of an asset and is employed as an expense to lessen taxable income. Since this is not a true expense where cash is actually paid, lenders will add back depreciation outlays for self-employed borrowers and add it as income.

discount points
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In the mortgage business, this term is mostly used in only in orientation to government loans, meaning FHA and VA loans. Discount points refer to any "points" rewarded in addition to the one percent loan origination fee. A "point" is one percent of the loan total. By paying the lender to purchase discount points, the borrower can lower their mortgage interest rate. Typically each discount point purchased on a 30-year loan will lower the interest rate by .125 percent.

dower
[x] Close
The privileges of a widow in the assets, property, of her husband at his death

down payment
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The piece of the purchase price of a property that the buyer gives in cash and does not finance using the mortgage.

due-on-sale provision
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A condition in a mortgage that permits the lender to insist repayment in full if the borrower sells the property that is provided as security for the mortgage.

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E

earnest money deposit
[x] Close
A deposit made by the potential home buyer to demonstrate that he or she is really interested in buying the house.

easement
[x] Close
A right of way allowing persons other than the owner access to or over the land. Unlike a lease, an easement does not give right of possession, rather it simply gives the right of use to someone other than the owner.

effective age
[x] Close
An appraiser's approximation of the physical state of a building. The authentic age of a building may be different than its effective age.

effective gross income
[x] Close
Normal annual wages including overtime that is regular or assured. The earnings may be from more than one place. Salary is normally the principal source, but other income may meet the criteria if it is noteworthy and stable.

eminent domain
[x] Close
The right of a government to seize private property for public use upon compensation of its fair market value. Eminent domain is the foundation for condemnation procedures.

Employer-assisted housing
[x] Close
A unique Fannie Mae housing plan that offers several different ways for companies to work with local lenders to increase plans to help their employees in buying homes.

encroachment
[x] Close
An enhancement that interferes illegally on another's property. Common structures include a wall or fence that extends beyond the owner's land onto an adjacent property.

encumbrance
[x] Close
Anything that affects or restricts the fee simple title to a property, such as mortgages, leases, easements, or limitations.

endorser
[x] Close
Someone who signs ownership interest over to another person that is in difference with co-maker.

Equal Credit Opportunity Act (ECOA)
[x] Close
A federal law that necessitates lenders and other creditors to make credit uniformly available without favoritism based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

equity
[x] Close
A homeowner's monetary interest in a property. Equity is the discrepancy between the fair market value of the property and the amount still payable on its mortgage.

escrow
[x] Close
Something of value, money, or documents put down with a third party to be distributed upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to disburse taxes and insurance premiums when they become owed, or the deposit of funds or papers with an attorney or escrow agent to be paid out upon the closing of a sale of real estate.

escrow account
[x] Close
Once you finish your purchase transaction, you might have an escrow account or impound account with your lender. This means the amount you disburse each month includes an amount above what would be obligatory if you were only paying your principal and interest. The additional money is held in the impound account (escrow account) for the payment of things like property taxes and homeowner's insurance when they become payable. The lender pays the bills with your money instead of you paying them for yourself.

escrow analysis
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Once each year your lender will perform an "escrow analysis" to make sure they are gathering the right amount of money for the expected expenditures.

escrow collections
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Funds gathered by the servicer and set away in an escrow account to disburse the borrower's property taxes, mortgage insurance, and hazard insurance.

escrow disbursements
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The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

escrow payment
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The piece of a mortgagor's monthly payment that is detained by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become payable. This is known as "impounds" or "reserves" in some states.

estate
[x] Close
The ownership interest of an person in real property. The complete total of all the real property and personal property owned by a person at time of death.

eviction
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The lawful exclusion of an occupant from real property.

examination of title
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The report on the title of a property from the public records or an abstract of the title.

exclusive agency listing
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An exclusive agency listing is a contract with a single broker for a predetermined period of time for a predetermined commission rate. An exclusive agency listing differs however from an exclusive listing in the fact that it retains for the seller the right to find a buyer on their own without being liable to pay the broker the agreed upon commission.

exclusive listing
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An exclusive listing is a written contract that provides a licensed real estate broker the exclusive right to sell a property for a certain amount of time. It also binds the seller to pay the agreed upon commission rate to the broker regardless of who brings a buyer to the closing table.

executor
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An individual named in a will to manage an estate. The court will appoint an manager if no executor is named. "Executrix" is the feminine form.


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F

Fair Credit Reporting Act
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A customer protection law that controls the disclosure of consumer credit reports by consumer/credit reporting agencies and sets up procedures for righting mistakes on one's credit record.

fair market value
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The uppermost price that a buyer, willing but not obligated to buy, would pay, and the lowest a seller, willing but not obligated to sell, would agree to.

Fannie Mae
[x] Close
An income-based public lending model, under which mortgage insurers and Fannie Mae present flexible underwriting courses of action to boost a low- or moderate-income family's buying power and to reduce the total amount of cash required to buy a home. Borrowers who take part in this model are required to be present at pre-purchase home-buyer learning sessions.

Fannie Mae's Community
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The Federal National Mortgage Association, which is a congressionally contracted, shareholder-owned company that is the nation's largest dealer of home mortgage funds. For a discussion of the responsibilities of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.

Fannie Mae's Community Home Buyer's Program
[x] Close
An income-based public lending model, under which mortgage insurers and Fannie Mae present flexible underwriting courses of action to boost a low- or moderate-income family's buying power and to reduce the total amount of cash required to buy a home. Borrowers who take part in this model are required to be present at pre-purchase home-buyer learning sessions.

Fannie 97®
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A financing alternative for a fixed-rate mortgage that presents home buyers a 3 percent down payment loan with either a 25- or 30-year term. The mortgage facets a loan-to-value (LTV) percentage of 97 percent, and is intended to increase homeownership chances for people with reserved incomes. Borrowers must take a pre-purchase home-buyer education meeting to meet the criteria for a Fannie 97 mortgage.

Federal Housing Administration (FHA)
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An organization of the U.S. Department of Housing and Urban Development (HUD). Its main doings are the insuring of residential mortgage loans completed by private lenders. The FHA makes standards for construction and underwriting but does not lend funds or plan or make homes.

fee simple
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The maximum possible interest an individual can possess in real estate.

fee simple estate
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An unrestricted, limitless estate of inheritance that symbolizes the greatest estate and most widespread interest in land that can be enjoyed. It is of continuous duration. When the real estate is in a condominium project, the unit proprietor is the exclusive owner only of the air space within his or her piece of the building (the unit) and is an owner in common with respect to the land and other common portions of the land and building.

FHA coinsured mortgage
[x] Close
A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender split the risk of loss in the event of the mortgagor's non-payment.

FHA mortgage
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A mortgage that is covered by the Federal Housing Administration (FHA). It is also known as a government mortgage.

finder's fee
[x] Close
A charge or commission paid to a mortgage dealer for finding a mortgage loan for a potential borrower.

firm commitment
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A lender's agreement to make a loan to a definite borrower on a certain property.

first mortgage
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The mortgage that is first among any loans recorded against a property. This usually refers to the date in which loans are recorded, but there are exclusions.

fixed installment
[x] Close
The monthly expense due on a mortgage loan. The set installment includes payment of both principal and interest.

fixed-rate mortgage (FRM)
[x] Close
A mortgage where interest rate cannot be altered during the entire term of the loan.

fixture
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Personal property that becomes real property when put up in a permanent way to real estate.

flood insurance
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Insurance that pays costs for physical property damage resulting from flooding. It is necessary for properties situated in federally designated flood areas.

foreclosure
[x] Close
The legal procedure by which a borrower in default under a mortgage is not given his or her interest in the mortgaged property. This usually engages a forced sale of the property at public auction with the profits of the sale being applied to the mortgage debt.

forfeiture
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The loss of money, property, rights, or privileges because of a violation of legal obligation.

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

Some employers will provided their employees with matching funds to the 401k account in addition to the benefits package. Not only with the funds not be taxed before placing them in the account, but it will also reduce the employees taxable income.

401(k)/403(b) loan
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Some directors of 401(k)/403(b) plans concur to loans against the monies you have saved up in these plans -- monies must be repaid to avoid large penalty charges. Some plans will allow loans for any purpose, others restrict use for medical expenses, to prevent foreclosure, education expenses, or to finance a first home.

Freddie Mac
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Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases mortgages from lenders and packages them into securities that are sold to investors. By doing so, Freddie Mac ultimately provides homeowners and renters with lower housing costs and better access to home financing.

fully amortized ARM
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An adjustable-rate mortgage (ARM) with a monthly payment that is large enough to amortize the balance left, at the interest accrual rate, over the amortization term.


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G

government loan (mortgage)
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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). Mortgages that are not government loans are classified as conventional loans.

government mortgage
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A mortgage that is guaranteed by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). This is in contrast with a conventional mortgage.

Government National Mortgage Association (Ginnie Mae)
[x] Close
A government-owned business within the U.S. Department of Housing and Urban Development (HUD). Produced by Congress on September 1, 1968, GNMA carries out the same role as Fannie Mae and Freddie Mac in offering funds to lenders for making home loans. The dissimilarity is that Ginnie Mae supplies funds for government loans (FHA and VA)

grantee
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The individual to whom an interest in real property is expressed.

grantor
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The individual transmission an interest in real property.

ground rent
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The quantity of money that is paid for the use of land when title to a property is detained as a leasehold estate instead of a fee simple estate.

group home
[x] Close
A single-family residential arrangement designed or modified for occupancy by unrelated developmentally disabled persons. The makeup provides long-term housing and support services that are residential in nature.

growing-equity mortgage (GEM)
[x] Close
A fixed-rate mortgage that gives scheduled payment increases over an known period of time, with the increased amount of the monthly payment applied directly toward lowering the rest of the balance of the mortgage.

guarantee mortgage
[x] Close
A mortgage that is assured by a third party.

guaranteed loan
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This is also known as a government mortgage.


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H

hazard insurance
[x] Close
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

Home Equity Conversion Mortgage (HECM)
[x] Close
Usually referred to as a reverse annuity mortgage, this type of mortgage is unique because instead of making payments to a lender, the lender makes payments to you. It allows older home owners to convert the equity they have in their homes into cash. This is usually done in the form of monthly payments. Unlike customary home equity loans, a borrower does not qualify on the basis of income but instead they qualify on the value of their home. The loan does not have to be repaid until the borrower (homeowner) no longer lives on the property.

home equity line of credit
[x] Close
A mortgage loan, which is almost always in a secondary position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own judgment, up to an amount that represents a particular percentage of the borrower's equity in a property.

home inspection
[x] Close
A methodical inspection that assesses the structural and mechanical state of a property. A acceptable home inspection is often included as a contingency by the buyer. This is in contrast with appraisal.

HomeKeeper
[x] Close
Fannie Mae's adjustable-rate conventional reverse mortgage, that permits older homeowners to borrow against the value of their homes and obtain the proceeds according to the payment option they choose. The amount obtainable is based on the amount of borrowers and their ages and the adjusted property value.  This loan is for anyone 62 years or older who either owns his or her own home free and clear or has very low mortgage debt.

homeowners' association
[x] Close
A nonprofit organization that runs the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the widespread elements.

homeowner's insurance
[x] Close
An insurance policy that unites personal liability insurance and hazard insurance coverage for a home and its contents.

homeowner's warranty (HOW)
[x] Close
A kind of insurance that is usually purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they stop working within the coverage period. The buyer often asks the seller to pay for this coverage as a stipulation of the sale, but either party can pay.

HomeStyle® Mortgage Loan
[x] Close
A mortgage that allows qualified borrowers to get financing to remodel, repair, and upgrade their existing homes or homes that they are buying. The financing takes the form of a conventional second mortgage or a Federal Housing Administration (FHA) Section 203(k) first mortgage.

housing expense ratio
[x] Close
The percentage of gross monthly earnings that goes to paying housing expenses.

HUD median income
[x] Close
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the U.S. Department of Housing and Urban Development.

HUD-1 statement
[x] Close
A document that gives an itemized listing of the resources that are payable at closing. Items that emerge on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is symbolized by a separate number within a standardized numbering system. The sums at the bottom of the HUD-1 statement describe the seller's net proceeds and the buyer's net payment at closing. The blank form for the report is available from the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet."


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I

income property
[x] Close
Real estate developed or bettered to create income.

index
[x] Close
A number used to calculate the interest rate for an adjustable-rate mortgage (ARM). The index is usually a published figure or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to decide what the interest rate is that will be charged on the ARM.. This interest rate is subject to any caps that are connected with the mortgage.

in-file credit report
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An objective account, usually computer-generated, of credit and legal information acquired from a credit repository.

inflation
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A boost in the amount of money or credit available in relation to the quantity of goods or services accessible, which causes an amplification in the general price level of goods and services. Over time, inflation lowers the purchasing power of a dollar, making it worth less.

initial interest rate
[x] Close
The beginning interest rate of the mortgage at the point in time known of closing. This rate varies for an adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser."

installment
[x] Close
The usual periodic payment that a borrower consents to make to a lender.

installment loan
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Borrowed money that is paid back in equivalent payments, known as installments. A car loan is often paid for as an installment loan.

insurable title
[x] Close
A property title that a title insurance business consents to insure against flaws and disputes.

insurance
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A contract that gives compensation for particular losses in exchange for a periodic payment. An individual agreement is known as an insurance policy, and the periodic payment is recognized as an insurance premium.

insurance binder
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A document that affirms that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy needs to be acquired before the expiration date.

insured mortgage
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A mortgage that is sheltered by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower does not pay on the loan, the insurer must compensate the lender the lesser of the loss incurred or the insured amount.

interest
[x] Close
The fee associated with borrowing money.

interest accrual rate
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The percentage rate that interest accrues on the mortgage. In most cases, it is also the rate used to compute the monthly payments, although it is not utilized for an adjustable-rate mortgage (ARM) with payment change boundaries.

interest rate
[x] Close
The charge of interest in used for the monthly payment due.

interest rate buydown plan
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An understanding wherein the property seller (or any other party) deposits money to an account so that it can be given out each month to lower the mortgagor's monthly payments for the duration of the early years of a mortgage. During the specified time, the mortgagor's effective interest rate is "bought down" lower the actual interest rate.

interest rate ceiling
[x] Close
For an adjustable-rate mortgage (ARM), the highest interest rate, as shown in the mortgage note.

interest rate floor
[x] Close
For an adjustable-rate mortgage (ARM), the lowest interest rate, as shown in the mortgage note.

investment property
[x] Close
A property that the owner is not living in.

IRA (Individual Retirement Account)
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A retirement account that lets individuals make tax-deferred donations to a personal retirement fund. Individuals can put IRA funds in bank accounts or in other forms of investment.


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J

joint tenancy
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A form of co-ownership that offers each tenant equal interest and equal rights in the property, including the right of survivorship. A form of possession or taking title to property which means each side owns the entire property and that ownership is not divided. In the event of the death of one party, the survivor owns the whole property.

judgment
[x] Close
A verdict made by a court of law. In judgments that necessitate the repayment of a debt, the court may put a lien against the debtor's real property as security for the judgment's creditor.

judgment lien
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A lien on the land and home of a nonpayer ensuing from the decree of a court.

judicial foreclosure
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A kind of foreclosure proceeding used in certain states that is handled as a civil lawsuit and carried out entirely under the backing of a court. Other states use non-judicial foreclosure.

jumbo loan
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A loan that goes beyond Fannie Mae's and Freddie Mac's loan restrictions, currently at $417,000, this is also referred to as a nonconforming loan. Freddie Mac and Fannie Mae loans are called conforming loans.


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K

(K-Sorry their are currently no terms for this letter)

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L

late charge
[x] Close
The price a borrower must give when a payment is made 15 days after the due date.

lease
[x] Close
A written contract between the property owner and a tenant that specifies the conditions under which the tenant may have the real estate for a specified period of time and rent.

leasehold estate
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A method of holding title to a property wherein the mortgagor does not in fact own the property but rather has a recorded long-term lease on it.

lease-purchase mortgage loan
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A substitute financing option that permits low- and moderate-income home purchaser  to lease a home from a nonprofit organization with an choice to buy. Each month's rent payment is made up of of principal, interest, taxes and insurance (PITI) payments on the first mortgage in addition to an additional amount that is earmarked for deposit to a savings account in which money for a down payment will build up.

legal description
[x] Close
A property explanation, recognized by law, that is adequate to locate and recognize the property without oral testimony.

lender
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A term which can refer to the organization making the loan or to the individual on behalf of the firm. For example, loan officers are frequently referred to as "lenders."

liabilities
[x] Close
A person's monetary obligations. Liabilities include long-term and short-term obligations, as well as any other amounts that are owed to others.

liability insurance
[x] Close
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.

lien
[x] Close
A legal declaration against a property that must be remunerated when the property is sold. A mortgage or first trust deed is regarded as a lien. Other types of liens include judgment liens and mechanical liens like an unpaid debt to a roofing contractor e.g.

lifetime payment cap
[x] Close
For an adjustable-rate mortgage (ARM), a boundary on the extent that payments can increase or decrease over the life of the mortgage. See cap.

lifetime rate cap
[x] Close
For an adjustable-rate mortgage (ARM), a boundary on the amount that the interest rate can go up or down over the life of the loan. See cap.

line of credit
[x] Close
A contract by a commercial bank or other financial institution to give credit up to a certain total for a certain time to a particular borrower. See home equity line of credit.

liquid asset
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A cash asset or an asset that is without difficulty is transformed into cash.

loan
[x] Close
A amount of borrowed money (principal) that is normally repaid in the company of interest.

loan commitment
[x] Close
See "commitment letter."

loan officer
[x] Close
Also known by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others. The loan officer provides for several purposes and has many responsibilities: they solicit loans, they are the spokesperson of the lending institution, and they stand for the borrower to the lending institution.

loan origination
[x] Close
The procedure by which a mortgage lender brings into existence a mortgage protected by real property.

loan servicing
[x] Close
After you acquire a loan, the business you make the payments to is "servicing" your mortgage. They process payments, send statements, administer the escrow/impound account, give collection efforts on delinquent loans, make sure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and supply a variety of other services.

loan-to-value (LTV) percentage
[x] Close
The association between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 house with an $80,000 mortgage has a LTV percentage of 80 percent.

lock-in
[x] Close
A written contract in which the lender promises a particular interest rate if a mortgage goes to closing within a certain period of time. The lock-in also typically tells the number of points to be paid at closing.

lock-in period
[x] Close
The time period in which the lender has promised an interest rate to a borrower. See lock-in.


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M

margin
[x] Close
The dissimilarity between the interest rate and the index on an adjustable rate mortgage. The margin stays stable over the life of the loan. The only thing that moves up and down is the index.

master association
[x] Close
A homeowners' association in a big condominium or planned unit development (PUD) project that is compromised of representatives from associations covering certain areas within the project. As a result, it is a "second-level" association that manages matters affecting the whole development, while the "first-level" associations deal with matters affecting their particular sections of the project.

maturity
[x] Close
The date that the principal balance of a loan, bond, or other financial instrument becomes due and owed.

maximum financing
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A mortgage quantity that is within 5 percent of the highest loan-to-value (LTV) percentage permissible for a certain product. Thus, the utmost financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the most that is allowable LTV percentage for that product.

merged credit report
[x] Close
A credit report which tells the raw data obtained from two or more of the major credit repositories. This is the difference from a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.

MIBOR
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The Metropolitan Indianapolis Board of Realtors® (MIBOR) is a professional association that functions as the origanizational HUB for real estate activity in the greater Indianapolis area. MIBOR was founded in 1912 with the stated purpose of providing a "professional, supportive environment for MIBOR members." MIBOR consists of some 6,500 members located in Boone, Brown, Hamilton, Hancock, Hendricks, Johnson, Marion, Montgomery, Morgan, and Shelby counties in the Central Indiana area. A Broker Listing Cooperative® provides service to Realtors® in three other counties: Decatur, Madison and Putnam counties.

At the heart of the MIBOR organization is a 15-member board which directs the activities its members in the Central Indiana area. This board includes a president president and secretary/treasurer in addition to 13 directors, each of whom serve 3-year terms.

To most home-buyers and home-sellers in the Indianapolis area, the term "MIBOR" is practically synonymous with "real estate listings." It is where homes for sale find their way to the market as listings. Indeed, MIBOR maintains a vast collection of property listings of all types, including single family residences, condominiums, multi family properties, farms/agricultural land, vacant lots/land as well as commercial properties.

To be a member of MIBOR, an agent must not only possess an Indiana real estate license, but must also be a Realtor®. Being a Realtor® means promising to adhear to a higher code of ethics. You will be hard-pressed to find any type of transaction where ethics is more important than it is in real estate transactions. Because they are inherently complex it is vitally important to understand the entire process. A good Realtor® can assist you through all aspects of the home buying and selling process, both large and small, not to mention help you avoid common pitfalls along the way. A Realtor® is a trusted fuduciary who will keep your best interests in mind at all times.


modification
[x] Close
Sometimes, a lender will concur to adjust the terms of your mortgage without making you refinance. If any changes are completed, it is referred to as a modification.

money market account
[x] Close
A savings account that gives bank depositors many of the rewards of a money market fund. Some regulatory restrictions are relevant to the withdrawal of resources from a money market account.

money market fund
[x] Close
A mutual fund that enables individuals to partake in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

monthly fixed installment
[x] Close
That bit of the total monthly payment that goes toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not take in affect any amount for principal reduction.

monthly payment mortgage
[x] Close
A mortgage that needs payments to be made in order to reduce the debt once a month.

mortgage
[x] Close
A legal document that promises a property to the lender as safe measures for payment of a debt. Instead of using mortgages, certain states use First Trust Deeds.

mortgage banker
[x] Close
For a more inclusive discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally understood to originate and fund their own loans, which are then put up for sale on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, companies rather loosely apply this term to themselves, whether they are proper mortgage bankers or simply mortgage brokers or correspondents.

mortgage broker
[x] Close
A mortgage business that makes loans, then puts those loans out with a assortment of other lending institutions with whom they frequently have pre-established relationships.

mortgagee
[x] Close
The person who agrees to be the lender in a mortgage agreement.

mortgage insurance (MI)
[x] Close
A legal agreement that assures the lender against loss caused by a mortgagor's failure to pay on a government mortgage or conventional mortgage. Mortgage insurance can be given out by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the kind of mortgage insurance, the insurance may cover a percentage of or almost all of the mortgage loan. See private mortgage insurance (MI).

mortgage insurance premium (MIP)
[x] Close
The quantity paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) business. This type of insurance is more common when the amount borrowed on any given loan is more than 80% of the purchase price.

mortgage life and disability insurance
[x] Close
A kind of term life insurance frequently bought by borrowers. The amount of coverage goes down as the principal balance declines. Some policies also shield the borrower in the event of disability. In the event that the borrower passes away while the policy is in place, the debt is routinely satisfied by insurance proceeds. In the case of disability insurance, the insurance will pay the mortgage payment for a certain amount of time during the disability. Be careful to read the conditions of coverage, however, because often the coverage does not start right away upon the disability, but after a particular period, sometime forty-five days.

mortgagor
[x] Close
The person who is borrowing money in a mortgage agreement.

Multi-dwelling units
[x] Close
Properties that offer separate housing sections for more than one family, although they have only a single mortgage.

Multi-family mortgage
[x] Close
A residential mortgage on a home that is designed to accommodate more than four families, such as a high-rise apartment building.


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N

negative amortization
[x] Close
Some adjustable rate mortgages permit the interest rate to change independently of a requisite lowest payment. If a borrower pays the minimum payment it may not cover all of the interest that would usually be due at the present interest rate. In essence, the borrower is postponing the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows bigger instead of smaller, which is called negative amortization.

net cash flow
[x] Close
The income that is left for an investment property following the monthly operating income is lowered by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

net worth
[x] Close
The worth of all of a person's assets, including cash, subtracting all liabilities.

no cash-out refinance
[x] Close
A refinance deal in which the new mortgage amount is restricted to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to persuade any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not go above 1 percent of the principal amount of the new mortgage).

no-cost loan
[x] Close
Many lenders suggest loans that you can get at "no cost." You should ask whether this means there are no "lender" costs linked with the loan, or if it also obscures the other costs you would normally have in a purchase or refinance dealings, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are charges and costs which may be connected with buying a home or attaining a loan, but not charged directly by the lender. Remember that, like a "no-point" loan, the interest rate will be higher than if you get a loan that has costs coupled with it.

non-liquid asset
[x] Close
An asset that cannot be effortlessly changed into cash.

no-points loan
[x] Close
Almost all lenders offer loans at "no points." You will discover the interest rate on a "no points" loan is just about a quarter percent higher than on a loan in which you pay one point.

note
[x] Close
A legal paper that necessitates a borrower to pay back a mortgage loan at a affirmed interest rate during a certain period of time.

note rate
[x] Close
The interest rate acknowledged on a mortgage note.

notice of default
[x] Close
A official written notice to a borrower that a failure to pay has occurred and that legal action may be implemented.


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O

original principal balance
[x] Close
The entire amount of principal to be paid on a mortgage before any payments are made.

origination fee
[x] Close
On a government loan the loan origination fee is one percent of the loan amount, but extra points may be charged which are called "discount points." One point is one percent of the loan amount. On a conventional loan, the loan origination fee refers to the full amount number of points a borrower pays.

owner financing
[x] Close
A property obtained deal in which the property seller gives all or part of the financing.


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P

partial payment
[x] Close
A payment that is not adequate to cover the listed monthly amount to be paid on a mortgage loan. in general, a lender will not allow a partial payment, but in times of adversity you can make this request of the loan servicing collection department.

payment change date
[x] Close
The date when a new monthly payment quantity takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Normally, the payment change date happens in the month right away after the adjustment date.

periodic payment cap
[x] Close
For an adjustable-rate mortgage where the interest rate and the minimum payment amount vary separately of one another, this is a boundary on the amount that payments can go up or down during any one adjustment period.

periodic rate cap
[x] Close
For an adjustable-rate mortgage (ARM), a boundary on the amount that the interest rate can go up or down during any one adjustment period, no matter how high or low the index is. See cap.

personal property
[x] Close
Any land and or home that is not real property.

PITI
[x] Close
PITI stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender is compromised all of these and most likely includes mortgage insurance as well. If you do not possess an impounded account, then the lender will still compute this amount and uses it as part of deciding your debt-to-income ratio.

PITI reserves
[x] Close
A cash amount that a borrower possess after making a down payment and paying all closing costs for the procurement of a home. The principal, interest, taxes, and insurance (PITI) reserves must be equivalent the amount that the borrower would have to pay for PITI for a certain number of months.

planned unit development
[x] Close
kind of ownership where individuals truly own the building or unit they occupy, but common areas are owned mutually with the other members of the development or association. Dissimilarity with condominium, where an individual really owns the airspace of his unit, but the buildings and common areas are owned in cooperation with the others in the development or association.

point
[x] Close
A one-time cost by the lender for originating a loan. A point is 1 percent of the total of the mortgage.

power of attorney
[x] Close
A legal paper that allows another person to do something on one’s behalf. A power of attorney can allow total authority or can be limited to particular acts and/or certain periods of time.

prearranged refinancing agreement
[x] Close
A formal or informal understanding between a lender and a borrower in which the lender agrees to offer particular terms (such as a decrease in the costs) for a upcoming refinancing of a mortgage being originated as an incentive for the borrower to go into the original mortgage transaction.

pre-approval
[x] Close
A loosely used term which frequently means that a borrower has completed a loan application and given debt, income, and savings documentation which an underwriter has went over and approved. A pre-approval is typically done at a specific loan amount and making hypothesizes about what the interest rate will really be at the time the loan is really made, as well as approximations for the amount that will be paid for property taxes, insurance and others. A pre-approval is relevant only to the borrower. Once a property is picked, it must also meet the underwriting guidelines of the lender. Contrast with Pre-Qualification.

pre-foreclosure sale
[x] Close
A method in which the investor permits a mortgagor to keep away from foreclosure by selling the property for an amount that is less than that is owed to the investor.

prepayment
[x] Close
Any amount paid to lower the principal balance of a loan prior to the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's choice to pay off the loan, or a foreclosure. In each case, prepayment means imbursement occurs before the loan has been completely amortized.

prepayment penalty
[x] Close
A cost that may be charged to a borrower who pays off a loan prior to its due date.

pre-qualification
[x] Close
This generally refers to the loan officer's written belief of the capacity of a borrower to qualify for a home loan, after the loan officer has made studies about debt, income, and savings. The information given to the loan officer may have been obtained verbally or in the form of documents, and the loan officer may or may not have went over a credit report on the borrower.

prime rate
[x] Close
The interest rate that banks charge to their favored customers. Changes in the prime rate are extensively revealed in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Alterations in the prime rate do not directly involve other types of mortgages, but the same factors that sway the prime rate also have an effect on the interest rates of mortgage loans.

principal
[x] Close
The total amount borrowed or the amount left that is unpaid. The piece of the monthly payment that lowers the outstanding balance of a mortgage.

principal balance
[x] Close
The part of the balance that is left of principal on a mortgage. The principal balance does not take into account the interest or any other charges.

principal, interest, taxes, and insurance (PITI)
[x] Close
The four parts of a monthly mortgage payment. Principal refers to the section of the monthly payment that lowers the outstanding balance of the mortgage. Interest is the amount charged for borrowing money. Taxes and insurance refer to the quantities that are paid into an escrow account  monthly for property taxes and mortgage and hazard insurance.

private mortgage insurance (MI)
[x] Close
Mortgage insurance that is presented by a private mortgage insurance company to keep lenders protected against loss if a borrower fail to pay. Most lenders normally necessitate MI for a loan with a loan-to-value (LTV) percentage in surplus of 80 percent. />

promissory note
[x] Close
A written assurance to pay back a specified amount over a certain period of time.

public auction
[x] Close
An assembly in an publicized in public location to sell property to pay back a mortgage that is in default.

purchase and sale agreement
[x] Close
A written contract signed by the buyer and seller telling the terms and conditions that apply to the way that a property will be sold. Terms and conditions could include things such as type of deed used, inspection dates and conditions, home warranty, closing date, amount of earnest money, type of mortgage being applied for, contingencies and other stipulations.

purchase money transaction
[x] Close
The attainment of property through the imbursement of money or its equivalent.


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Q

qualifying ratios
[x] Close
This refers to the computations that are used in deciding whether a borrower can meet the criteria for a mortgage. There are two ratios. The "top" or "front" ratio is a computation of the borrower's monthly housing expenses (principle, taxes, insurance, mortgage insurance, and homeowner's association fees) as a percentage of monthly earnings. The "back" or "bottom" ratio takes in housing costs as well as all other monthly debt.

quitclaim deed
[x] Close
A deed that moves without warranty whatever interest or title a grantor may have at the time the conveyance is made.


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R

radon
[x] Close

A radioactive gas found in several homes that in sufficient concentrations can potentially cause health problems in the future. It comes from the natural breakdown of uranium in soil, rock, and water. The gas can then seep into a structure via:

  1. Cracks in the floor
  2. Construction joints
  3. Cracks in the walls
  4. Gaps in suspended floors
  5. Gaps around service pipes
  6. Cavities inside walls
  7. The water supply

There are tests that evaluate the radon levels within a given structure.  Additionally there are radon reduction systems that can be installed.  The EPA also recommends that you mitigate the radon should the radon level reach 4 picoCuries per liter, or higher. Additionally there are radon reduction systems that can be installed. According to the EPA some can even reduce radon levels by up to 99%.


rate-improvement mortgage
[x] Close
A fixed-rate mortgage that incorporates a provision that provides the borrower a one-time choice to reduce the interest rate (without refinancing) early on during the mortgage term.

rate lock
[x] Close
A pledge issued by a lender to a borrower or other mortgage originator promising a particular interest rate for a precise period of time. See lock-in.

real estate agent
[x] Close
An individual licensed to discuss and transact the sale of real estate on behalf of the owner of the property.

Real Estate Settlement Procedures Act (RESPA)
[x] Close
RESPA is a body of law which forces all parties involved in the transfer of real property, in any transaction in which federal funds are being used, to fully disclose all transfers of monies and closing costs to all parties. Since virtually all sales of real property include the borrowing of money from a bank or other lender which receives some type of coverage or funding from the Federal Government most transactions fall under the guidelines of RESPA.

real property
[x] Close
Land and appurtenances, including everything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

REALTOR®
[x] Close
A real estate broker or an associate who holds active membership in a local real estate board that is associated with the NATIONAL ASSOCIATION OF REALTORS®.

rescission
[x] Close
The abolition or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers frequently have the option to cancel a refinance transaction within three business days after it has closed.

recorder
[x] Close
The public official who maintains records of transactions that concern real property in the area. Also known as a "Registrar of Deeds" or "County Clerk."

recording
[x] Close
The noting in the registrar's office of the fine points of a appropriately executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, making it an element of the public record.

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

rehabilitation mortgage
[x] Close
A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property. FHA's streamline 203 (k) mortgage will permit a homebuyer to finance additional money into their mortgage to upgrade their home before moving in.

remaining balance
[x] Close
The amount of principal that has not yet been paid back. See principal balance.

remaining term
[x] Close
The original amortization term taking away the number of payments that have been applied.

rent loss insurance
[x] Close
Insurance that defends a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

rent with option to buy
[x] Close
See lease-purchase mortgage loan.

repayment plan
[x] Close
An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."

replacement reserve fund
[x] Close
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project — chiefly that which has a short life expectancy, such as carpeting, furniture, etc.

revolving liability
[x] Close
A credit arrangement, such as a credit card, that allows a client to borrow against a pre-approved line of credit when buying goods and services. The borrower is billed for the amount that is really borrowed plus any interest due.

right of first refusal
[x] Close
A provision in an agreement that obliges the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

right of ingress or egress
[x] Close
The right to enter or leave designated premises.

right of survivorship
[x] Close
In joint tenancy, the right of survivors to obtain the interest of a deceased joint tenant.

Rural Housing Service (RHS)
[x] Close
An agency within the Department of Agriculture, which operates chiefly under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other fit borrowers buying property in rural areas who are unable to find loans elsewhere. Funds are borrowed from the U.S. Treasury.


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S

sale-leaseback
[x] Close
A method in which a seller deeds property to a buyer for a consideration, and the buyer concurrently leases the property back to the seller.

second mortgage
[x] Close
A mortgage that has a lien position subordinate to the first mortgage.

secondary mortgage market
[x] Close
The buying and selling of existing mortgages.

secured loan
[x] Close
A loan that is backed by assets that belong to the borrower. This is done to decrease the risk to the lender. Should the borrower fail to make the payments, the assets might be forfeited to the lender.

security
[x] Close
The property that will be pledged as collateral for a loan.

seller carry-back
[x] Close
A concurrence in which the owner of a property provides financing, often in arrangement with an assumable mortgage. See owner financing.

servicer
[x] Close
An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been bought by an investor in the secondary mortgage market.

servicing
[x] Close
The compilation of mortgage payments from borrowers and related responsibilities of a loan servicer.

settlement
[x] Close
See closing.

settlement sheet
[x] Close
See HUD-1 statement.

special deposit account
[x] Close
An account that is established for rehabilitation mortgages to keep the funds needed for the rehabilitation work so they can be paid out from time to time as particular portions of the work are finished.

standard payment calculation
[x] Close
The method used to decide the monthly payment necessary to repay the remaining balance of a mortgage in considerably equal installments over the remaining term of the mortgage at the current interest rate.

step-rate mortgage
[x] Close
A mortgage that allows for the interest rate to go up according to a specified schedule (i.e., seven years), resulting in higher payments as well. At the end of the specified period, the rate and payments will stay the same for the remainder of the loan.

subdivision
[x] Close
A housing development that is made by dividing a tract of land into separate lots for sale or lease.

subordinate financing
[x] Close
Any mortgage or other lien that has a precedence that is lower than that of the first mortgage.

subsidized second mortgage
[x] Close
An alternative financing option known as the Community SecondsĀ® mortgage for low- and moderate-income households. An investor buys a first mortgage that has a subsidized second mortgage following it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second mortgage is often deferred and has a very low interest rate (or no interest rate). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.

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

sweat equity
[x] Close
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.


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T

tenancy by the entirety
[x] Close
A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.

tenancy in common
[x] Close
As opposed to joint tenancy, when there are two or more individuals on title to a property, this type of ownership does not pass ownership to the others in the event of death.

tenant-stockholder
[x] Close
The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy contract.

third-party origination
[x] Close
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. See mortgage broker.

title
[x] Close
A legal document showing a person's right to or ownership of a property.

title company
[x] Close
A company that focuses on examining and insuring titles to real estate.

title insurance
[x] Close
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss happening because of disputes over ownership of a property.

title search
[x] Close
A check of the title records to make certain that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

total expense ratio
[x] Close
otal obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing costs plus other monthly debts.

trade equity
[x] Close
Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.

transfer of ownership
[x] Close
Any means by which the ownership of a property changes hands. Lenders consider all of the following positions to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership

transfer tax
[x] Close
State or local tax that are payable when title passes from one owner to another.

Treasury index
[x] Close
An index that is used to decide interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the consequences of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

trustee
[x] Close
A fiduciary who holds or controls property for the benefit of another.

Truth-in-Lending
[x] Close
A federal law that makes lenders fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.

two-step mortgage
[x] Close
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

two- to four-family propert
[x] Close
A property that is made up of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.


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U

underwriting
[x] Close
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an investigation of the borrower's creditworthiness and the quality of the property itself.

unsecured loan
[x] Close
A loan that is not backed by collateral.


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V

VA mortgage
[x] Close
A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.

vested
[x] Close
Having the right to use part of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.

Veterans Administration (VA
[x] Close
An agency of the federal government that makes sure residential mortgages are made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.


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W

what-if analysis
[x] Close
An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have comprehensive data or if you want to investigate the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.

what-if scenario
[x] Close
A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario can include alterations to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that are used in the analysis. You can use a what-if scenario to explore other ways to improve your ability to afford a house.

wraparound mortgage
[x] Close
A mortgage that includes the outstanding balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.


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X

(X-Sorry their are currently no terms for this letter)

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Y

(Y-Sorry their are currently no terms for this letter)

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Z

(Z-Sorry their are currently no terms for this letter)

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