REAL ESTATE AND MORTGAGE

TERMS
Abstract
A summary; an abridgment. Before the use of photo static copying public
records were kept by abstracts of recorded documents.

Abstract of Title
A summary of the public records relating to the title to a particular piece of
land. An attorney or title insurance company reviews an abstract of title to
determine whether there are any title defects which must be cleared before a
buyer can purchase clear, marketable, and insurance title.

Acceleration Clause
Provision in a mortgage document stating that if a payment is missed or any
other provision is violated the whole debt becomes immediately due and
payable.

Acknowledgment
Formal declaration before a public official that one has signed a document.
Prior to recording real estate legal documents, such as grant deeds and deeds
of trust, a Notary Public acknowledges the person's signature on the document.

Acre
A measure of land equal to 43,560 square feet.

Action to Quiet Title

A court action to establish ownership of real property. Although technically
not an action to remove a cloud on title, the two actions are usually referred to
as "Quiet Title" actions.

Adjustable Rate Mortgage (ARM)

A mortgage where the interest rate is not fixed for the life of the loan. These
mortgages adjust periodically based on an index that changes with market
conditions. The rate of interest is the sum of the index plus a margin ( the
margin remains fixed for the life of the loan). Most ARMs have periodic
interest rate and payment caps, as well as a life cap. ARM's may also be
referred to as AML's or VRM's.

Ad Valorem
Designates an assessment of taxes against property. Literally, according to
value; based on the "ability to pay" theory.

Adverse Possession
The actual, exclusive, open notorious, hostile and continuous possession and
occupation of real property under an evident claim of right or title. The time
required legally to obtain title by adverse possession varies from state to state.

Agency
A contract by which the agent undertakes to represent the principal in business
transactions, using some degree of discretion.

Agent
Person authorized to act on behalf of another in dealings with third parties.

Agreement of Sale
An agreement between parties for the sale of real estate. In some states it is
synonymous with a Purchase Agreement, Sales Agreement, or Land Contract.
In Texas it is known as an Earnest Money Contract.

Alienation Clause
Provision in a mortgage document stating that the loan must be paid in full if
ownership is transferred.

Amenities
The qualities and state of being pleasant and agreeable. In appraising, those
qualities that attach to property in the benefits derived from other than
monetary. Satisfactions of possession and use arising from architectural
excellence, scenic beauty and social environment.

American Land Title Association

Title policy that assures a lender that it has the proper rights as the beneficiary
on a mortgage loan.

Amortization
Gradual payment of a debt through regular installments that cover both
interest and principal.

Annual Percentage Rate (APR)

A measure of the total cost of credit (interest as well as other recurring
charges) expressed as a yearly percentage rate. Because all lenders apply the
same rules in calculating the annual percentage rate, it provides consumers
with a good basis for comparing the cost of loans.

Appraisal and Credit Report Fees

These fees are generally collected by the lender and paid to outside companies
performing the services.

Appraised Value
An expert option of the value of a property at a given time, based on facts
regarding the location, improvements, etc., of the property and surroundings.

Appraisal Report
Estimate of real estate value, presumably by an expert. An appraisal evaluates
the property at a given time based on facts regarding the location,
improvements, neighborhood and comparable sales. Generally, the value is
based on three approaches: cost, market and income.

Appreciation
Increase in value or worth of property.

Arrears
Payment made after it is due is in arrears. Interest is said to be paid in arrears
since it is paid to the date of payment rather than in advance.

"as is"
A clause that is sometimes used in the transfer of property. It means that the
present property is being transferred with no guarantee or warranty provided
by the seller.

Assessment Base
The total assessed value of all property in a given assessment district.

Assessed Valuation
Value placed on real estate by governmental assessors as a basis for levying
property taxes; not identical with appraised or market value.

Assignment
Transfer of a contract from one party to another.

Assumption
 New owner assumes the responsibility for repaying an existing mortgage.
Both FHA and VA loans are fully assumable. Some adjustable rate mortgages
may be partially assumable, but the new owners may be required to re-qualify
for the loan.

Attached Homes
A home that has one or more common walls adjoining another home.
Condominiums and row houses are attached homes.

Balloon Loan
Mortgage in which the remaining principal balance becomes fully due and
payable at a predetermined time. Most of the time, balloon loans have level
payments until the note becomes due and payable.

Balloon Payment
The final payment of a mortgage which is larger than the regular payment; it
usually extinguishes the debt.

Bankruptcies
A court action to restructure debt.

Basis
Original cost of property plus value of any improvements put on by the seller
minus the depreciation taken by the seller.

Beneficiary
The lender named on the mortgage note. One entitled to the proceeds of
property held in trust; also proceeds of wills, insurance policies, or trusts.

Bill of Sale
Written agreement transferring personal property from one person to another.

Binder
Preliminary agreement of sale, usually accompanied by earnest money (term
also used with property insurance).

Blanket Mortgage
A mortgage covering more than one property of the mortgage.

Bond
 A debt instrument in the capital markets. The US government, corporations
and municipalities use bonds to raise money. Bonds can also be backed by real
estate loans and the payments from mortgages.

Bridge Financing
A form of an interim loan, generally made between a short term loan and a
long term loan when the borrower needs additional time before obtaining
permanent financing.

Broker
A person that represents another for a fee in real estate transactions. Real
Estate brokers help consumers locate suitable real estate and are paid a fee for
their services.

Building Code
Government regulations specifying minimum construction standards.

Building Line or Setback

Distances from the ends and/or sides of the lot beyond which construction may
not extend. The building line may be established by a filed plat of subdivision,
by restrictive covenants in deeds or leased, by building codes, or by zoning
ordinances.

Buy down
An interest rate buy down is the temporary reduction of the note rate and
resulting monthly payments a borrower pays to the lender. The shortfall
between the rate on the note and initial payment made by the borrower is
usually paid by a third party such as a seller or builder.

Buyer's Broker
Agent who takes the buyer as a client, and is obligated to represent their
interest above all others, and owes specific fiduciary duties to the buyer.

Capital
Accumulated wealth. A portion of wealth which is set aside for the production
of additional wealth; specifically, the funds belonging to the partners or
shareholders of a business, invested with the expressed intention of their
remaining permanently in the business.

Capital Gain
Taxable profit on the sale of an appreciated asset.
Caps
Caps are used on adjustable rate mortgages (ARM's) to limit the interest rate
and/or the payment. Most ARMs have a periodic cap that is around 2% per
year and a life cap of around 5%-6% over the life of the loan. "Payment only"
caps sometimes create negative amortization where the principal balance of
the loan increases rather than decreases over time.

Caveat Emptor
A legal term meaning "let buyer beware".

Certificate of Eligibility
A certificate obtained by a veteran from a Veteran's Administration office
which states that the veteran is eligible for a VA insured loan..

Certificate of Occupancy
Document issued by a local governmental agency that states a property meets
the local building standards for occupancy.

Certificate of Reasonable Value (CRV)

An appraisal of property for the purpose of insurance by the Veteran's
Administration.

Certificate of Title
A certification issued by a title company or a written opinion rendered by an
attorney that the seller has good marketable and insurable title to the property
which he is offering for sale. A certificate of title offers no protection against
any hidden defects in the title which an examination of the public records
could not reveal. The issuer of a certificate of title is liable only for damages
due to negligence. The protection offered a homeowner under a certificate of
title is not as great as that offered in a title insurance policy.

Certified Copy
A true copy, attested to be true by the officer holding the original.

Cestui Que Trust

One having an equitable interest in property with the legal title being vested to
the trustee.

Chain of Title
The chronological order of conveyance of a parcel of land from the original
owner to the present owner.
Chattel
Personal property.

Client
Person who employs the agent. Typically the seller is a client. The buyer can
be a client (buyer's broker) or customer (seller's broker).

Closing
Conclusion of a real estate sale where the title of the property is transferred to
the new owners and funds are transferred to the appropriate parties ( seller, old
lender, real estate broker, etc.).

Closing Agent
A neutral third party that facilities the closing of a real estate transaction. The
closing agent can be an escrow company, title company or attorney.

Closing Costs
Expenses incurred by the buyer/borrower and the seller in a real estate or
mortgage transaction. There can be non-recurring costs that include a one time
charge for points, appraisal fees, etc. or a prorating of recurring costs such as
taxes and insurance incurred while the new buyer/borrower owns the real
estate.

Closing Statement
Statement prepared for the buyer and seller itemizing all of the costs of a real
estate transaction.

Closing Day
The day on which the formalities of a real estate sale are concluded. The buyer
signs the mortgage, and closing costs are paid. The final closing merely
confirms the original agreement reached in the agreement of sale..

Cloud on Title
An outstanding claim or encumbrance which, if valid, adversely affects the
marketability of title.

Code of Ethics
Standards subscribed to by members of the National Association of Realtors.

Co-Maker
Equally responsible for repayment as the borrower.

Commercial Property
Property intended for use by all types of retail and wholesale stores, office
buildings, hotels and service establishments.

Commission
Fee paid to a broker or other entity for services rendered. Real estate brokers
and mortgage brokers receive a commission for the services they provide; a
real estate broker secures a buyer for a property that is for sale and a mortgage
broker secures a mortgage loan for the buyer to finance the purchase of a
property. Commissions are generally paid as a percentage of the sales price in
a real estate transaction or the loan amount in a mortgage transaction.

Commitment
A written promise to make or insure a loan for a specified amount and on
specified items.

Common Law
Rules based on usage as demonstrated by decrees and judgments from the
courts.

Community Property
Property owned jointly by husband and wife.

Comparables
Properties which are similar in value to a particular property and are used as
comparisons to determine the fair market value of a specified property.

Condemnation
The taking of private property for public use by a government unit, against the
will of the owner, but with payment of just compensation under the
government's power of eminent domain. Condemnation may also be a
determination by a governmental agency that a particular building is unsafe or
unfit for use.

Conditional Commitment
A lenders promise to issue a loan subject to certain conditions. Generally, the
lender will not fund the loan until the conditions have been met.

Conditional Offer
Purchase offer in which the buyer proposes to purchase property only after
certain events (sale of another home, finding a loan commitment, etc.) occur.

Condominium
A structure of two or more units, the interior space of which are individually
owned.

Consideration
Anything of value given to induce another to enter into a contract. Earnest
money deposit on a sales contract is consideration.

Construction Loan
Short-term financing for real estate construction. Generally followed by long
term financing called a "take out" loan issued upon completion of
construction.

Contingency
Condition which must be satisfied before the buyer can consummate the
purchase of a property. Contingencies are generally outlined in the purchase
contract between the buyer and seller.

Contract of Purchase
An agreement between parties for the sale of real estate. In some states it is
synonymous with a Purchase Agreement, Sales Agreement, or Land Contract.
In Texas it is known as an Earnest Money Contract.

Contract of Sale
A purchase transaction in which the buyer receives possession of the property,
but the seller retains title.

Contract Sales Price

The full purchase price as stated in the contract.

Conventional Loan
A mortgage loan that is not guaranteed or insured by the government. FHA
and VA loans are not conventional loans.

Convertible ARMs
ARMs that have a provision allowing the borrower to convert the mortgage to
a fixed rate term. The conversion feature is outlined in the mortgage note and
has certain restrictions.
 Conventional Mortgage
A loan neither insured by the FHA nor guaranteed by the VA.

Cooperative Housing
An apartment building or a group of dwellings owned by a corporation, the
stockholders of which are the residents of the dwellings. It is operated for their
benefit by their elected board of directors. In a cooperative, the corporation or
association owns title to the real estate. A resident purchase stock in the
corporation which entitles him to occupy a unit in the building or property
owned by the cooperative. While the resident does not own his unit, he has an
absolute right to occupy his unit for as long as he owns the stock.

Cost Plus Contract

A building contract setting the builder's profit at a set percentage of actual cost
of labor and materials.

Cost Basis
Accounting figure that includes original cost of property plus certain expenses
to purchase, money spent on permanent improvements and other costs, minus
any depreciation claimed on tax returns over the years.

Counteroffer
A new offer made as a result of another offer, which cancels the original offer

County
A division within a state, usually encompassing one or more cities or towns.

Covenant
An agreement written into deeds and other instruments promising performance
or nonperformance of certain acts or stipulating certain uses or non users of
the property.

Customer
Typically, the buyer (before buyer agency laws), as opposed to the principal
(seller).

Declaration of Restrictions
A set of restrictions filed by a sub divider to cover an entire tract or
subdivision.
Dedication
The voluntary giving of private property to some public use by the owner, as
the dedication of land for streets, schools, etc., in a development.

Deed
Formal written document transferring title to real estate; a new deed is used
for each transfer. The deed should contain an accurate description of the
property being conveyed, should be signed and witnessed according to the
laws of the State where the property is located, and should be delivered to the
purchaser at closing day. (See also deed of trust, general warranty deed,
quitclaim deed, and special warranty deed.)

Deed of Trust
An instrument given by the borrower to a third party (trustee) vesting title to
the property in the trustee as security for the borrower's repayment of the
mortgage loan.

Deed of Trust Rider

The document required by the lender to be recorded along with the security
instrument for an ARM.

Deed Restriction
Restrictions placed on use of real property by writing in a deed to control use
and occupancy of the property by future owners.

Default
Failure to make mortgage payments or violations other provisions of the
mortgage note.

Defective Title
Title to real property which lacks some of the elements necessary to transfer
good title. Title to a negotiable instrument obtained by fraud.

Deficiency Judgment:
Personal claim against the debtor when the sale of foreclosed property does
not yield sufficient proceeds to pay off the loan (s) and accrued interest.

Deposit
Also called Earnest Money Deposit, the deposit is money given to the seller or
his agent by the potential buyer upon the signing of the agreement of sale to
show that he is serious about buying the house. If the sale goes through, the
earnest money is applied against the down payment. If the sale does not go
through, the earnest money deposit will be forfeited to the seller unless the
purchase contract expressly provides conditions for its return to the buyer.

Depreciation
Decrease in value to real property improvements due to wear and tear, adverse
changes in the neighborhood, or any other reason.

Devise
Real Estate left by will.

Devisee
One to whom real estate is given by will.

Devisor
A testator who leaves real estate.

Direct Endorsement
A lender that can complete the processing and closing of an FHA loan without
prior approval from FHA.

Direct Reduction Mortgage

An amortized mortgage in which principal and interest are computed on the
remaining balance.

Discount
A loan funded below par (100%). Lenders or investors will fund loans at a
discount in order increase the overall yield on the note.

Discount
A loan funded below par (100%). Lenders or investors will fund loans at a
discount in order to increase the overall yield on the note.

Disbursements
Payments made during the course of an escrow or at closing.

Documentary Tax Stamps

Stamps affixed to a deed showing the amount of transfer tax. In Nebraska the
documentary tax is $1.75 for each thousand dollars of the selling price.
 Dower
The rights of a widow to a portion of her deceased husband's property.

Down Payment
Cash to be paid by the buyer at closing to consummate a real estate
transaction. Down payment is the difference between the sales price and the
mortgage amount.. Buyer cash required at closing includes the down payment,
closing costs and prepaid expenses.

Dragnet Clause
A clause in a mortgage or deed of trust which places the real estate as security
for existing debts between the parties.

Earnest Money
The earnest money is the deposit money given to the seller or his agent by the
potential buyer upon the signing of the agreement of sale to show that he is
serious about buying the house. If the sale goes through, the earnest money is
applied against the down payment. If the sale does not go through, the earnest
money deposit will be forfeited to the seller unless the purchase contract
expressly provides conditions for its return to the buyer.

Easement
A right-of-way created by grant, reservation, agreement, prescription or
necessary implication which one has in land owned by another.

Economic Obsolescence
Impairment of desirability or useful life arising from economic forces, such as
changes in optimum land use, legislative enactments which restrict or impair
property rights and changes in supply-demand relationships. Loss in the use
and value of property arising from the factors of economic obsolescence is to
be distinguished from loss in value from physical deterioration and functional
obsolescence.

Eminent Domain
A government right to acquire private property for public use by
condemnation and the payment of just compensation.

Encroachment
Unauthorized intrusion of a building or improvement such as a wall, fence,
etc. onto another's land.

Encumbrance
A legal right or interest in land that affects a good or clear title and may
diminish the land's value. It can take numerous forms, such as zoning
ordinances, easement rights, claims, mortgages, liens, charges, a pending legal
action, unpaid taxes, or restrictive covenants. An encumbrance does not
legally prevent the transfer of real property. It is up to the buyer to determine
whether to purchase with the encumbrance.

Equity
The market value of the property less the homeowner's unpaid mortgage
balance and any outstanding liens or other debts against the property.

Escheat
Reversion of property to the State by reason of failure to find persons legally
entitled to hold or lack of heirs. The State must try to find heirs.

Escrow
The deposit of instruments and/or funds into the care of a neutral third party
with instructions to carry out the provisions of an agreement or contract once
all instruments and/or funds have been deposited. Many closings are handled
by escrow agents. In this situation, the seller deposits the deed and the buyer
deposits the funds necessary with the escrow agent. Once all requirements of
the purchase contract are in the control of the escrow agent, the money and
deed are distributed accordingly.

Escrow Payment
That portion of a mortgagor's monthly payment held in trust by the lender to
pay for taxes, mortgage insurance, hazard insurance, lease payments and other
items as they become due. Also known as "impounds" in some states.

Escrow Reimbursement
The buyer reimburses the seller for the current balance of his escrow (or
impounded) funds.

Estate at Will
Possession of property at the discretion of the owner.

Estate for Years

Tenant has rights in real property for a designated number of years.

Estimated Closing Costs Statement

 The statement which lists the financial settlement between buyer and seller
and the costs each must pay. A separate statement for buyer and seller is
sometimes prepared.

Estoppels
An impediment to a law of action, whereby one is forbidden to contradict or
deny one's own previous statement or act.

Exclusive Agency
Listing agreement in which only the listing office may sell the property and
earn the commission. If the owner sells the house, the listing office would not
receive any commission.

Exclusive Right-to-Sell
Listing agreement under which the owner promises to pay a commission if the
property is sold during the listing period by anyone, even the owner.

Fannie Mae (Federal National Mortgage

Association/FNMA)
FNMA is one of the major secondary market investors that purchases loans
from mortgage companies and other depository institutions. The company is a
private corporation and its stock is traded on the New York Stock Exchange.

Federal Home Board

The board which oversees the Federal Home Loan Bank systems.

Federal Home Loan Bank

Provides liquidity to supervised financial service companies, such as savings
and loans and credit unions. The bank system has several districts.

Federal Home Loan Board

The board which charters and forbids discrimination in the sale.

Federal Home Loan Mortgage Corporation

(Freddie Mac/FHLMC)
A government sponsored agency that is also a publicly traded company on the
New York Stock Exchange that purchases mortgage loans from mortgage
bankers and financial depository institutions. FHLMC is a major secondary
market investor.

Federal Housing Administration

A federal agency which insures first mortgages, enabling lenders to loan a
very high percentage of the sale price.

Federal National Mortgage Association

See Fannie Mae.

Federal Reserve Bank

The regulatory agency for certain commercial banks and bank holding
companies. Sets monetary policy for the country and provides liquidity for
supervised financial institutions.

Federal Tax Lien

A lien attached to property for nonpayment of a federal tax.

Federal Tax Return

The U.S. government's method to identify individual and company's annual
tax responsibility. The tax returns identify the income and taxes.

Fee Simple
Highest possible degree of ownership of land. The estate allows owners to
have unrestricted powers to dispose of property, and which can be left by will
or inherited.

Fiduciary
A person in a position of trust or responsibility with specific duties to act in
the best interest of a client. Real estate brokers and mortgage brokers are
fiduciaries.

Financial Depositor Institutions

Banks, savings and loans or credit unions.

First Mortgage
Mortgage holding priority over the claims of subsequent lenders against the
same property.

Fixture
Personal property affixed to structures or land, usually in such manner that
they cannot be independently moved without damage to themselves or the
property housing, supporting, or pertinent to them. Varies under state laws.
 Foreclosure
A proceeding in or out of court to extinguish all rights, title and interest of the
owner (s) of a property in order to sell the property and satisfy a lien against it.

Freddie Mac
See Federal Home Loan Mortgage Corporation.

Full Disclosure
Revealing all known facts which may affect the decision of a buyer or tenant.

Functional Obsolescence
Impairment of functional capacity or efficiency. For example, homes without
indoor plumbing (while they may contain working outdoor plumbing
facilities) are considered functionally obsolete.

General Lien
A lien such as a tax lien or judgment lien, which attaches to all property of the
debtor rather than the lien of, for example, a trust deed, which attaches only to
a specific property.

General Warranty Deed

A deed which conveys not only all the grantor's interests in and title to the
property to the grantee, but also warrants that if the title is defective or has a
"cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or
mechanic's liens against it) the grantee may hold the grantor liable.

Government National Mortgage Association

(GNMA/Ginnie Mae))
A government owned agency that acts as a secondary market conduit for FHA
and VA loans. GNMA guarantees the timely principal and interest payments to
investors.

Grandfather Clause
The clause in a law permitting the continuation of a use, business, etc., which
was permissible but because of a change in the law is now no longer
permissible.

Ground Rent
Rent paid for vacant land. If the property is improved, ground rent is the
portion attributable to the land only.
 Grantee
The buyer, who receives a deed.

Grantor
The seller, who gives a deed.

Hazard Insurance
Insurance on a property against damages caused by fire, wind storms, and
similar risks.

Heirs and Assigns

One who might inherit or succeed to an interest in a property under the rules
of law applicable when a property owner dies.

Holographic Will
Will written in the testator's handwriting and not witnessed.

Homeowners Association
An association of people who own homes in a given area for the purpose of
improving or maintaining the quality of the area.

Homeowner's Policy
Policy which expands the insurance for a homeowner. It may include theft,
liability, earthquake, etc.

Homeowner's or Maintenance Fees

Payments made by property owner (s) of a condominium or a unit in PUD to
the homeowners' association for expenses incurred in upkeep of the common
areas.

Homestead
Tract of land occupied as a family home.

Housing and Urban Development (HUD)

The federal government agency that oversees FHA.

HUD 1
 A closing document required by HUD that outlines the settlement cost of a
loan. The closing agent generally prepares the document and buyer receives it
shortly after the loan is closed.

Impound Account
Account held by a lender for payment of taxes, insurance or other related
expenses. Also known as an escrow account.

Improvement
Valuable additions to property which raise the value of the property.

Incidental Recording, Delivery, Wire, etc., Fees

Other costs that are incurred when a real estate loan is closed.

Index
A published rate or benchmark measure of current interest rate levels used to
calculate periodic changes in rates charged on adjustable rate mortgages.

Installment Sale
A tax term used to describe a sale which is usually accomplished by use of a
land contract.

Insured Mortgage
A mortgage insured against loss to the mortgagee (lender) in the event of
default and failure of the mortgaged property to satisfy the balance owing plus
cost of foreclosure.

Interest Payment Notification (1098)

A federal tax form that lenders use at year end to notify borrowers of the
interest that was paid on their mortgage over the last year.

Interest Rate
The percentage of an amount of money which is paid for its use for a specified
time.

In testate
Someone who has died without leaving a valid will.

Investment Property
 A property that is not occupied by the owner and in most cases produces
income or is held for gains from appreciation.

Joint and Several Liability

A liability which allows the creditor to sue any one of the debtors or sue all
together.

Joint Tenancy
An undivided interest in property taken by two or more joint tenants. The
interests must equal, accruing under the same conveyance and beginning at the
same time. Upon death of a joint tenant, the interest passes to the surviving
joint tenants rather than to the heirs of the deceased.

Judgment
The decision of a court of law. Money judgments, when recorded, become a
lien on real property of the defendant.

Junior Mortgage
A mortgage subordinate to another mortgage.

Land
In a legal sense, the solid part of the surface of the earth, as distinguished from
water; any ground, soil or earth whatsoever regarded as the subject of
ownership and everything annexed to it, whether by nature, e.g., trees and
everything in or on it, such as minerals and running water, or annexed to it by
man; e.g., buildings, fences, etc. In an economic sense, land consists of all
those elements in the wealth of a nation which is supposed to be furnished by
nature as distinguished from those improvements which owe their value to the
labor and organizing power of man.

Land Contract
Installment plan for buying a house. It is used as an alternative to obtaining a
loan from a traditional, source such as a mortgage banker or savings and loan.

Late Charge
A penalty for failure to pay an installment on time.

Latent Defect
Hidden structural defect.

Lease with Option to Purchase

A lease under which the lessee has the right to purchase the property. The
option may run for the length of the lease or only for a portion of the lease
period.

Legal Description
An expanded and unique description of a property that is used on legal
documents, such as deeds and deeds of trust. Recorded documents generally
require a legal description.

Lender
A general term encompassing all mortgages, and beneficiaries under deeds of
trust.

Lender's Instructions
A document that lenders prepare for the closing agent that outlines the
requirements for loan closing.

Lessee
One who possesses the right to use or occupy a property under lease
agreement.

Lessor
One who holds title to and conveys the right to use and occupy a property
under lease agreement.

Letter of Intent
A formal method of stating that a prospective developer, buyer or lessee is
interested in property.

Lien
An encumbrance against property for the payment of debt; a lien may be a
mechanic's lien, mortgage, unpaid taxes or judgment.

Life Estate
An estate in real property for the life of a living person. The estate then reverts
back to the grantor or to a third party.

Limited Partnership
A partnership consisting of one or more general partners who conduct the
business and are responsible for losses, and one or more special partners, who
contributes capital and are liable only to the amount contributed.
Lis Pen dens
A public notice that litigation is pending on a property.

Listing
A record of property for sale by a broker who has been authorized by the
owner to sell. Also used to denote the property so listed.

Listing Agreement
Agreement between a property owner and a real estate broker, authorizing the
broker to find a buyer for the property. If the sale is consummated, the listing
broker will be paid a fee.

Loan Discount/Premium Fees

Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to
the yield requirement of the investor. Loan discount denotes an investor yield
requirement higher than the note rate. Loan premium denotes an investor yield
requirement lower than the note rate.

Loan Lock
Guarantee from a lender that a borrower will receive the interest rate in effect
at the time of loan application.

Loan Officer
A person that helps borrowers through the loan selection, processing, and
closing of a mortgage loan. Loan officers can be paid a commission or salary
for their services and can work for mortgage brokers, mortgage bankers, or
depository institutions.

Loan Origination Fees

The cost to obtain a loan that is paid to the originating lender or broker.

Loan Package
The information regarding a borrower and property necessary which is the
basis for a lender's credit decision to extend or deny credit.

Loan Ratio
The amount of a loan to the value or selling price of real property.

Loan Servicing
 The function of collecting loan payments, managing the property tax and
insurance escrows, foreclosing on defaulted loans and remitting payments to
the investor/beneficiary.

Loan-to-Value Ratio
The ratio of the mortgage loan amount to the property's appraised value or
selling price, whichever is less.

Margin
The number of percentage points the lender adds to the index rate to calculate
the adjustable rate mortgage (ARM) interest rate at each adjustment.

Market Value
The most likely price a given property will bring if widely exposed on the
market, assuming fully informed buyer and seller.

Marketable Title
A title that is free and clear of objectionable liens, clouds or other title defects.
A title which enables an owner to sell his property freely to others and which
others will accept without objection.

Marketing
The management process through which efforts to conceive, develop and
deliver goods and services are integrated to satisfy the needs and wants of
selected customers as a means of achieving company objectives.

Market Price
The price paid for a property; the amount of money that must be given or
which can be obtained at the market in exchange under the immediate
conditions existing at a certain date. To be distinguished from market value.

Market Value
The highest price estimated in terms of money which a buyer would be
warranted in paying and a seller justified in accepting, provided both parties
were fully informed, acted intelligently and voluntarily and, further, that all
the rights and benefits inherent in or attributable to the property were included
in the transfer.

Mechanics Lien
A lien created by statute for the purpose of securing priority of payment for the
price or value of work performed and materials furnished in construction or
repair of improvements to land.
Misrepresentation
False statement made to or concealment of knowledge from another party with
the intent to provoke action from that party.

Mortgage
A lien or claim against real property given as security for a loan. It is a two
party agreement as apposed to the three-party agreement of a deed of trust.

Mortgage Broker
A professional that helps consumers through the loan selection, processing and
closing of a mortgage loan. Most mortgage brokers have access to a wide
range of mortgage products through many mortgage lenders. Mortgage
brokers are paid a fee by the borrower when a suitable mortgage is found and
closed.

Mortgage Commitment
A written notice from the bank or other lending institution saying it will
advance mortgage funds in a specified amount to enable a buyer to purchase a
house.

Mortgagee
The lender of money or the receiver of the mortgage document.

Mortgage Insurance
Insurance required for a loan-to-value ratio above 80.01%.

Mortgage Banker
Financial intermediaries that originate mortgage loans through loan officers or
independent mortgage brokers and sell the mortgages into the secondary
mortgage market.

Mortgage Note
The document outlining the amount of the debt, the terms and payments, the
interest rate, margins and caps for ARMs, the name of the lender and the
borrower, and any other material item required by the lender.

Mortgage Warehousing
A funding facility, such as a commercial bank, that is used by mortgage
companies to fund loans which are sold to an investor shortly thereafter. The
mortgage notes are used as collateral for this interim financing.
 Mortgagor
The borrower of money or the giver of the mortgage document.

Multiple Listing Service

A means of making possible the orderly dissemination and correlations of
listing information to its members so that REALTORS may better serve the
buying and selling public.

NATIONAL ASSOCIATION OF REALTORS

The association of REALTORS dedicated to the protection and the
preservation of the free enterprise system and the right of the individual to
own real property as guaranteed by the Constitution of the United States of
America. Each member of the NATIONAL ASSOCIATION OF REALTORS
must adhere to a strict Code of Ethics and Standards of Practice designed to
provide assurances to the public of the REALTORS integrity and
professionalism.

Negative Amortization
An increase in principal balance which occurs when the monthly payments do
not cover all of the interest cost. The interest cost which is not covered by the
payment is added to the unpaid principal balance.

Net Listing
An arrangement whereby the Broker receives as commission all monies
received above a minimum sales price agreed to by the owners and the Broker.

Non-conforming Loan
Loans that are above the loan limits set by FNMA and FHLMC. Also known
as jumbo loans.

Nonconforming Use
A property which does not conform to the zoning of an area.

Note
A written promise to repay a certain sum of money on specified terms.

Obsolescence
Impairment of desirability and usefulness brought about by changes in the art,
design or process or from external influencing circumstances that make a
property less desirable and valuable for a continuity or use.
 Offer
A promise by one party to do a specified deed as the other party in turn
performs a specific deed.

Office of Comptroller Currency

A federal government regulatory agency that oversees some commercial
banks.

Office of Thrift Supervision

A federal government regulatory agency that oversees savings and loans.

Open End Mortgage

A mortgage permitting the mortgagor to borrow additional money under the
same mortgage, with certain conditions.

Open Listing
An authorization given by a property owner to a real estate Broker wherein
said Broker is given the nonexclusive right to secure a purchaser; open listings
may be given to any number of Brokers without liability to compensate any
except the one who first secures a buyer ready, willing and able to meet the
terms of the listing, or secures the acceptance by the seller of a satisfactory
offer.

Origination Fee
A fee or charge for work involved in the evaluation, preparation and
submission of a proposed mortgage loan.

Owner of Record
The individual (s) named on a deed that has been recorded at the local
municipality.

Owners Policy
Title insurance for the owner of property, rather than a lien holder.

Ownership
The right to possess and use property to the exclusion of others.

Package Mortgage
Mortgage covering both real and personal property.
Paper
A mortgage, deed of trust or land contract which is given instead of cash.

Parole Evidence
The legal rule which prevents previous oral or written negotiations to a signed
contract from changing the contract.

Partial Release
A release of a portion of property covered by a mortgage.

Permanent Mortgage
A mortgage on completed construction on the same property under one
mortgage or trust deed.

Personality
Property which is movable. All property is either personality, realty or mixed.

Physical Depreciation
A term that is frequently used when physical deterioration is intended. In a
broad concept it may relate to those elements contributing to depreciation that
are existent or inherent in the physical property itself, as distinguished from
other and external circumstances that may influence its utilization. Not a clear
or proper them without qualification and explanation.

PITI
Abbreviation for principal, interest, taxes and insurance, often combined in a
single monthly mortgage payment.

Plat
A map or chart of a lot, subdivision or community, showing boundary lines,
buildings and easements.

PMI
Abbreviation for private mortgage insurance: insurance issued by a company,
which insures the lender against loss in the event that the borrower defaults on
the mortgage.

Points
Origination fees charged by the originating lender or broker and/or discount
fees charge by lenders to increase the overall yield. A point is equal to one
percent of the principal amount of your mortgage.

Portfolio Loan
Loans held as an investment by a bank, savings and loan or credit union.

Power of Attorney
A written instrument authorizing a person to act as the agent of the person
granting it, and a general power authorizing the agent to act generally in behalf
of the principle. A special power limits the agent to a particular or specific act
as: a landowner may grant an agent special power of attorney to convey a
single and specific parcel of property. Under the provisions of a general power
of attorney, the agent having the power may convey any or all property of the
principal granting the general power of attorney..

Prepaid Interest
Prepaid interest is the interest charged to borrowers at loan closing to pay for
the cost of borrowing for a partial month. For example, if a loan closes on the
15th of the month and the first payment is due 45 days later, the lender will
charge 15 days of prepaid interest.

Prepaid Items of Expense

Perorations of prepaid items of expense which are credited to the seller in the
closing statement.

Prepayment
Full payment of the principal before the due date; occurs when a property is
sold or the borrower refinances the existing loan.

Prepayment Penalty
Charge levied by the lender for paying off a mortgage loan before its maturity
date.

Primary Mortgage Market

The process of obtaining a real estate loan, including the consumer's
completion of a loan application form, validation of the credit and property
information, loan underwriting by the lender and closing of the mortgage loan.

Primary Residence
Considered the permanent location of residency.
 Principal
1) The outstanding balance of a loan. 2) A party to a real estate transaction. 3)
The head of a real estate firm.

Private Mortgage Insurance (PMI)

Insurance which covers the portion of a mortgage loan above 80% thereby
reducing the lenders risk to principal loss in the event of a borrowers default.
The insurance coverage allows lenders to make higher loan-to-value ratios
(95% LTV).

Processing, Underwriting and Document Fees

Charges for the lender's services associated with making the loan.

Property
The rights of ownership. The right to use, possess, enjoy, and dispose of a
thing in every legal way and to exclude everyone else from interfering with
these rights. Property is generally classified into two groups, personal property
and real property.

Property Tax
A tax levied by the local municipality or county on real and personal property.

Perorations
The allocation of expenses, such as taxes between buyer and seller at closing
based on the number of days the property is owned during the month of
closing.

Prorate
To divide in proportionate shares, such as taxes, insurance, rent, or other
items.

Planned Unit Development (PUD)

A housing development where there is a homeowners association and common
areas owned by the homeowners.

Purchase Money Mortgage

A mortgage used to finance the purchase of real property.

Quit Claim Deed

 A deed operating as a release; intended to pass any title, interest or claim
which the grantor may have in the property.

Real Estate
Land and anything permanently affixed to the land and those things attached
to the building.

Real Estate Broker

A middle man or agent who buys and sells real estate for a company, firm, or
individual on a commission basis. The broker does not have title to the
property, but generally represents the owner.

Real Estate Tax

A pecuniary charge laid upon real property for public purposes.

REALTOR
Registered name for a member of the NATIONAL ASSOCIATION OF
REALTORS.

REALTOR ASSOCIATE
Salesperson associated with a broker who is a member of a the NATIONAL
ASSOCIATION OF REALTORS.

Realty
A synonym for real estate.

Recital
Setting forth in a deed or other writing some explanation for the transaction.

Recording
The act of writing or entering an instrument in a book or public record, usually
in the office of the county clerk and recorder. Such recording constitutes notice
to all persons of the rights or claims contained in the instrument. This type of
notice is called "constructive notice" or "legal notice."

Recourse
The right of the holder of a note secured by a mortgage or deed of trust to look
personally to the borrower or endorser for payment.

Redlining
The practice of refusing to provide loans or insurance in a certain
neighborhood.

Refinancing
The repayment of a debt from the proceeds of a new loan using the same
property as security.

Reissue rate
A charge for a title insurance policy if a previous policy on the same property
was issued within a specified period of time. Reissue is less than the original
charge.

REIT (Real Estate Investment Trusts)

A method in investing real estate in a group, with certain tax advantages.

Recession of Contract
Annulling a contract and placing the parties to it in a position as if there had
not been a contract.

Release
An instrument releasing property from the lien of the mortgage, judgment, etc.

RESPA (Real Estate Settlement Procedures Act)

A federal regulation that requires lenders and mortgage brokers to disclose to
borrowers, in advance, the fees required to obtain a mortgage loan.

Restrictive Covenants
Private restrictions limiting the use of real property. Restrictive covenants are
created by deed and may "run with the land," binding all subsequent
purchasers of the land, or may be "personal" and be binding only between the
original seller and buyer.

Revenue Stamps
Formerly, federal tax on a sale of real property. Canceled and replaced by state
tax stamps.

Reverse Mortgage
A special program for the elderly that provides income until death. Payment
requirements are arranged through the increase in the principal amount of the
loan.
 Riparian
Pertaining to the banks of a river, stream, waterway, etc.

Sales Agreement
See agreement of sale.

Satisfaction of Mortgage
Document issued by mortgagee when the mortgage is paid off.

Second Home
Commonly known as a vacation home. This home is not rented and is
occupied occasionally by the owners.

Secondary Financing
A loan secured by a mortgage or trust deed, which lien is junior to another
mortgage or trust deed.

Secondary Market
The buying and selling of mortgage notes between sophisticated investors
such as pension funds, commercial banks, savings and loans and wall street
firms.

Secondary Market Investor

An entity, such as FNMA or FHLMC, that buys mortgage loans for investment
or sells them again to another secondary market investor. Secondary market
investors do not service loans and do not collect payments from borrowers.

Secondary Mortgage Market

The buying and selling of first mortgages of trust deeds by banks, insurance
companies, government agencies, and other mortgagers.

Security
Real or personal property pledged by a borrower as additional protection for
the lender's interest.

Seller's Broker
Agent who takes the seller as a client, is legally obligated to a set of fiduciary
duties and is required to put the seller's interests above all other's.
Septic Tank
An Underground tank in which sewage from the house is reduced to liquid by
bacterial action and drained off.

Set Back Ordinance

Regulates the distance from the lot line to the point where improvements may
be constructed.

Settlement
See "closing".

Settlement Cost, a HUD Guide

This booklet gives an overview of the lending process and is required by
HUD. It is provided to consumers after the loan application is completed.

Settlement Statement
A statement prepared by broker, escrow or lender giving a complete
breakdown of the cost associated with a real estate transaction.

Sheriff's Deed
A deed given at the sheriff's sale in foreclosure of a mortgage.

Single Family Detached Home

A residential home that is not attached physically to another home.

Special Assessments
A special tax imposed on property, individual lots or all property in the
immediate area, for road construction, sidewalks, sewers, street lights, etc.

Special Lien
A lien that binds a specified piece of property, unlike a general lien, which is
levied against all one's assets. It creates a right to retain something of value
belonging to another person as compensation for labor, material, or money
expended in that person's behalf. In some localities it is called "particular" lien
or "specific" lien. (See lien).

Special Warranty Deed

A deed in which the grantor conveys title to the grantee and agrees to protect
the grantee against title defects or claims asserted by the grantor and those
persons whose right to assert a claim against the title arose during the period
the grantor held title to the property. In a special warranty deed the grantor
guarantees to the grantee that he has done nothing during the time he held title
to the property which has, or which might in the future, impair the grantee's
title.

Specific Performance
Lawsuit requesting that a contract be exactly carried out, usually asking that
the seller be ordered to convey the property as previously agreed.

Standard Uniform Application

An application developed by FNMA and FHLMC that is widely used in the
mortgage industry.

State and Local Housing Programs

Unique housing finance programs to assist first time home buyers and low to
moderate housing groups. Each state and local group has different sets of
criteria.

Statute of Frauds
The law requires that certain contracts, such as agreements of sale, to be in
writing in order to be enforceable.

Statutory Lien
An involuntary lien, includes tax liens, judgment liens, mechanic liens, etc.

Substitute of Trustee
A document which is recorded to change the trustee under the deed of trust.

Survey
Map or plat made by a licensed surveyor who measures land and charts its
boundaries, improvements, and relationship to the property surrounding it. A
survey is often required by the lender to assure him that a building is actually
sited on the land according to its legal description.

Survivorship
All rights of a joint tenant passes to the surviving joint tenant.

Sweat Equity
Equity created by the labor of the purchaser or borrower that increases the
value of the property.
Tax
Tax as applied to real estate is an enforced charge imposed on persons,
property, or income to be used to support the State. The governing body in
turn utilizes the funds in the best interest of the general public.

Tax Lien
Lien for nonpayment of taxes.

Tax Sale
Public sale of property at an auction by a governmental authority, due to non
payment of property taxes.

Tenancy
A holding, as of land, by any kind of title, occupancy of land, a house or the
like under a lease or on payment of rent or tenure.

Tenancy at Sufferance
A tenancy which arises when a tenant holds over after expiration of his lease.

Tenancy at Will
A tenancy which may be terminated at the will of either the Lessor or lessee.

Tenancy by the Entirety

A form of ownership by husband and wife whereby each owns the entire
property. In event of the death of one, the survivor owns the property without
probate.

Tenant
Any person in possession of real property with the permission of the owner.

Testate
Having made a will before death.

Time is of the Essence

Legal phrase in a contract requiring punctual performance of all obligations.

Title
 Often used interchangeably with the word ownership. It indicates the
accumulation of all rights in property by the owner and others.

Title, Escrow and Closing Agent Fees

These companies charge various fees for their services.

Title Insurance
An insurance policy which protects the insured (purchaser and lender) against
loss arising from defects in title.

Title Search
A review of the public records generally at the local courthouse, to make sure
the buyer is purchasing a house from the legal owner and there are no liens,
overdue special assessments, or other claims or outstanding restrictive
covenants filed in the records, which would adversely affect the marketability
or value of title.

Trustee
A party who is given legal responsibility to hold property in the best interest of
or "for the benefit of" another. The trustee is one placed in a position of
responsibility for another, a responsibility enforceable in a court of law. (See
deed of trust).

Truth in Lending Statement (Regulation Z)

A federal government regulation that provides details of the cost of obtaining a
mortgage loan. Lenders must provide this shortly after the loan application has
been completed.

Usury
On a loan, claiming a rate of interest greater than permitted by law.

Valuation
The act or process of estimating value; the amount of estimated value.

Warranty Deed
Most valuable type of deed in which the grantor makes formal assurance of
title.

W2 Form)
Income tax form that is provided by employers to employees that states the
income and taxes paid in a calendar year.
Yield
The interest earned by an investor on his investment (or bank on the money it
has lent). Also called Return.

Zoning Ordinances
The acts of an authorized local government establishing building codes, and
setting forth regulations for property land usage.