Real Estate Terms and Definitions
1. REO -- Real Estate Owned.
2. Adjustable Rate Mortgage (ARM) -- mortgage in which the interest changes according to fluctuations in an index. All ARMs are tied to indexes.
3. Amortization Schedule -- A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan.
4. Annual Percentage Rate (APR) -- This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage.
5. Appraised Value -- An opinion of a property's fair market value.
6. Appreciation -- The increase in the value of a property due to changes in market conditions, inflation, or other causes.
7. Broker -- A Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors.
8. Closing Costs -- Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.
9. Condominium -- A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title.
10. Deed-In-Lieu -- Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure.
11. Depreciation -- A decline in the value of property; the opposite of appreciation.
12. Down Payment --The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
13. Earnest Money Deposit -- A deposit made by the potential home buyer to show that he or she is serious about buying the house.
14. Escrow -- Is a neutral third party. Escrow companies provide a service. They are paid to follow the instructions between the buyer and seller.
15. Exclusive Listing -- A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
16. Fannie Mae (FNMA) -- The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.
17. Fee Simple -- The greatest possible interest a person can have in real estate.
18. FHA mortgage -- A mortgage that is insured by the Federal Housing Administration (FHA).
19. Fixed-Rate Mortgage -- A mortgage in which the interest rate does not change during the entire term of the loan.
20. Foreclosure -- The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property.
21. Home Inspection -- A thorough inspection by a professional home inspector that evaluates the structural and mechanical condition of a property.
22. Homeowners' Association -- A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project.
23. HUD-1 Settlement Statement -- A document that provides an itemized listing of the funds that were paid at closing.
24. Joint Tenancy -- A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
25. Line of Credit -- An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
26. Loan Officer -- Helps a potential borrower obtain a loan for a house.
27. Loan-To-Value (LTV) -- The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).
28. Mortgage -- A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
29. Mortgage Insurance (MI) -- Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan.
30. Negative Amortization -- Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring 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 larger instead of smaller, which is called negative amortization.
31. Note -- A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
32. No-Points Loan -- Almost all lenders offer loans at "no points."
33. Notice of Default -- A formal written notice to a borrower that a default has occurred and that legal action may be taken.
34. Origination Fee -- On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
35. Owner Financing – The Seller provides all or part of the financing.
36. Personal Property -- Any property that is not real property.
37. PITI -- This stands for principal, interest, taxes and insurance.
38. Planned Unit Development (PUD) -- A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association.
39. Point -- A point is 1 percent of the amount of the mortgage.
40. Power of Attorney -- A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
41. Pre-Approval -- The borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved.
42. Prepayment -- Any amount paid to reduce the principal balance of a loan before the due date.
43. Prepayment Penalty -- A fee that may be charged to a borrower who pays off a loan before it is due.
44. Pre-Qualification -- This usually refers to the loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings.
45. Principal -- The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
46. Purchase Agreement -- A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
47. Quitclaim Deed -- A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
48. Rate Lock -- A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.
49. Real Estate Agent -- A person licensed to negotiate and transact the sale of real estate.
50. Real Property -- Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights there of.
51. Realtor -- A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
52. Recording -- The noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
53. Right of First Refusal -- A provision in an agreement that requires 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.
54. Right of Survivorship -- In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
55. Seller Carry-Back -- An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
56. Servicer -- An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts.
57. Tenancy in Common -- As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
58. Title -- A legal document evidencing a person's right to or ownership of a property.
59. Title Insurance -- Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
60. VA mortgage -- A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
61. Veterans Administration (VA) --- An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.