Glossary of Real Estate Terms
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The right of the mortgagee (lender) to demand the immediate
repayment of the mortgage loan balance upon the default of the
mortgagor (borrower), or by using the right vested in the
- Additional Principal Payment
A payment made by a borrower of more than
the scheduled principal amount due. You
might do this if you want to quickly
reduce the remaining balance owed.
- Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is
adjusted periodically based on a preselected
index. Also sometimes known as the
renegotiable rate mortgage, the variable
rate mortgage or the Canadian rollover
The original cost of a property, plus the
value of any capital expenditures for
improvements, minus any depreciation.
The date on which the interest rate changes
for an adjustable-rate mortgage (ARM).
On an adjustable rate mortgage, the time
between changes in the interest rate and/or
monthly payment -- typically one, three or
five years, depending on the index.
A detailed analysis of your ability to buy a
home. This includes your income, holdings,
and debts. It may also include the type of
mortgage you plan to use, the location of
the home, and your closing costs.
A nice feature of the house, but something
which isn't crucial to the house's very
existence. A roof, for instance, is not an
amenity; it's a necessity. An amenity might
be a lovely view of the sunset over the
ocean, or a swimming pool or tennis court.
The period of time during which you will owe
interest and principal to your lender.
- Amortization Means
Regular loan payments calculated to pay off
the debt at the end of a fixed period,
including accrued interest on the
- Amortization Schedule
A schedule that provides a breakdown of the
principal and interest payments, and the
amount outstanding at any given point during
the amortization period.
To repay a mortgage with regular payments,
both the principal due and the interest.
- Annual membership or participation fee
An amount that is charged annually for
having the line of credit available. It is
charged regardless of whether or not you use
Percentage Rate (A.P.R.)
An interest rate reflecting the cost of a
mortgage as a yearly rate.
This rate is likely to be higher than the
stated note rate or advertised rate on the
mortgage, because it takes into account
points and other credit costs. The APR
allows home buyers to compare different
types of mortgages based on the annual cost
for each loan.
A form used to apply for a loan, on which you'll put relevant
information about yourself. Also refers to the whole process of
applying for a loan.
An estimate of the value of the property,
made by a qualified professional called an
"appraiser". An appraisal is required by
your bank to determine how much money it
will lend you.
An opinion of a property's fair market
value, given by an appraiser, whose job it
is to evaluate such things.
An increase in the value of a property due
to changes in market conditions, or for
other reasons. The opposite of depreciation.
A local tax levied against a property for a
specific purpose, such as a sewer or street
The public record of taxable property.
A public official who establishes the value
of a property for purposes of taxation.
Anything with a dollar value that you own.
Your assets are tallied up when the bank is
trying to figure out what it can afford to
The transfer of a mortgage from one
individual to another. This isn't always
A mortgage (on a home) that can be taken
over by the buyer of the home.
The agreement between buyer and seller in
which the buyer takes over the payments on
an existing mortgage from the seller.
Assuming a loan can usually save the buyer
money, since this is an existing mortgage
debt, unlike a new mortgage where closing
costs as well as new, possibly higher,
market-rate interest charges may apply.
Fee usually paid by the buyer to a lender if
the buyer assumes, or takes on an existing
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Ratio, or Debt Ratio
The amount you pay in monthly debt (credit
cards, student loans, etc.) divided by your
gross monthly income.
- Balloon (payment)
Usually a short-term fixed-rate loan which
involves small payments for a certain period
of time, and one large payment for the
remaining amount of the principal at a time
specified in the contract.
An improvement that increases property
value, as distinct from repairs that simply
maintain value. It's an upgrade, not just
- Bill of
A written document that transfers title to
A preliminary agreement, secured by an
earnest money deposit, through which the
buyer offers to purchase the home.
A mortgage that requires payments to be made
every two weeks (instead of monthly).
- Blanket Mortgage
A mortgage covering at least two pieces of
real estate as security for the same
- Blended Payments
It's a repayment method
by which the same amount is paid each month,
but the composition of the interest and
principal changes with each payment. With
each payment, the amount allocated to the
principal increases as the amount allocated
to interest decreases.
Most mortgages use blended payments because
it provides a consistent monthly payment
amount for the borrower.
The attempt to induce someone to sell their
home because someone from a protected class
is rumored to be moving into the
neighborhood. The classic example of this
would be a real estate agent passing out her
card to neighbors while telling them that a
minority family is moving in down the block
and they should sell now before the
neighborhood gets any worse. This is
In good faith, real, not fraudulent.
- Borrower (Mortgagor)
One who applies for and receives a loan in
the form of a mortgage, with the intention
of repaying the loan in full.
If you don't have the intention to repay the
loan, then there are other terms that you
might not want to see applied to you: crook,
deadbeat, scam artist, fugitive from
A violation of any legal obligation.
1) An individual in the business of helping
to arrange funding or negotiating contracts
for a client, but who does not loan the
money himself. This is a mortgage broker;
mortgage brokers usually charge a fee or
receive a commission for their services.
2) Someone who helps you find a house and
charges a fee for their services as well.
This is a real estate broker; the term is
usually synonymous with real estate agent,
although there are, technically,
Local regulations having to do with design
and construction of a building. This means,
of course, that it's not OK to build a house
made of oatmeal, no matter what that builder
may tell you.
The lender and/or the home builder subsidize
the mortgage by lowering the interest rate
during the first few years of the loan.
While the payments are initially low, they
will increase when the subsidy expires.
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We're not talking stocks here. It's a clause
your mortgage that gives the lender the
right to 'call' the mortgage due and payable
at the end of a given length of time, for
whatever reason. In other words, you've got
to come up with all the money owed at that
time, and repay the lender.
The cost of an improvement made either to
lengthen the useful life of a property or to
add value to it. It's a fancy term for the
money you pony up for improvements. See also
Any structure which is a permanent
improvement to the property.
- Caps (interest)
Consumer safeguards which limit the amount
that the interest rate on an adjustable rate
mortgage may change per year and/or during
the life of the loan.
- Caps (payment)
Consumer safeguards which limit the amount
that monthly payments on an adjustable rate
mortgage may change.
- Cash Flow
The amount of cash derived over a certain
period of time from an income-producing
property. The cash flow should be large
enough to pay the expenses of the
income-producing property (including
mortgage payment, maintenance, utilities,
- Certificate of Eligibility
The document given to qualified veterans
which entitles them to VA guaranteed loans
for homes, business, and mobile homes.
Certificates of eligibility may be obtained
by sending DD-214 (Separation Paper) to the
local VA office with VA form 1880 (request
for Certificate of Eligibility.
- Certificate of Reasonable Value (CRV)
An appraisal issued by the Veterans
Administration showing the property's
current market value.
- Certificate of
A statement which confirms that the title to
the house is legally held by the current
owner. This is important, because you don't
want to buy something from someone who
doesn't really own it, now do you?
- Certificate of Veteran Status
The document given to veterans or reservists
who have served 90 days of continuous active
duty (including training time).
It may be obtained by sending DD-214 to the
local VA office with form 26-8261a (request
for certificate of veteran status). This
document enables veterans to obtain lower
down payments on certain FHA-insured loans.
- Chain of
The history of all of the documents that
transfer title to a a piece of real estate.
Think of it as being a genealogy for the
home since it was built.
- Change frequency
The frequency of payment and/or interest
rate changes in an adjustable-rate mortgage
(ARM). Generally expressed in months.
Another name for personal property. You've probably heard the
expression 'goods and chattels.
A title that is free of liens. You've
probably heard of 'you own it free and
clear.' Meet 'clear.' See also cloud on
The meeting between the buyer, seller and
lender or their agents at which the property
and funds legally change hands. Also called
'settlement.' See also Closing Costs.
Expenses incurred by buyers and sellers in
transferring ownership of a property. These
may include an origination fee, taxes, the
costs of obtaining title insurance, transfer
fees, etc. They can often total several, or
many, thousands of dollars.
- Cloud on
Anything found by the title search which
indicates that the property is not owned
free and clear by the purported owner.
An asset (such as a car or a home) that can
be used to guarantee the repayment of a
loan. You, the borrower, risk losing that
asset if the loan is not repaid in a timely
The process of forcing a borrower to pay
what he owes on a loan and,if it comes to
that, to proceed with foreclosure.
A promise by a lender to make a loan, on
specific terms or conditions, to a borrower
or builder. It can also be a promise by an
investor to purchase mortgages from a lender
with specific terms or conditions.
It can also be the agreement (or, in its
absence, the refusal) to engage in a
long-term relationship with someone with
whom you may or may not be in love. There
are no easy answers here. However (OK, we'll
continue this digression) you might consider
the old 80/20 rule: if it's really good 80%
of the time, it's probably love, and you
might as well commit.
No, these aren't free tickets to your
favorite team's game. The word is short for
"comparable properties" -- properties which
have recently sold that are about the same
size, in the same area, with similar
amenities. These help both you and the
appraiser figure out what your home ought to
A building or group of buildings in which
each unit owner has title to a specific
unit. They may also have the exclusive use
of certain common areas. See Also co-op.
Loan (or interim loan)
A loan to provide the funds necessary to pay
for the construction of buildings or homes.
The lender advances funds to the builder at
periodic intervals as the work progresses.
A specified condition that must be met
before a contract is legally binding. The
two most common contingencies in home
purchasing are that 1) the house must pass
the home inspection, and 2) the borrower
must get the loan.
Sale or Deed
A contract between a buyer and a seller
which conveys title after certain conditions
have been met. It is a form of installment
A mortgage not insured by the FHA or
guaranteed by the VA.
A clause in certain adjustable-rate
mortgages (ARMs) which permit the borrower
to switch to a fixed-rate mortgage at
specified time. Not to be confused with
- Cooperative (co-op)
The residents of this type of housing
complex own shares in the cooperative
corporation that owns the property, and each
has the right to occupy a specific dwelling.
They don't actually own the dwelling; they
own shares in the corporation.
- Cost of funds index (COFI)
The weighted-average cost of savings,
borrowings, and advances of the 11th
District members of the Federal Home Loan
Bank of San Francisco. It's an index used,
not surprisingly, for the type of ARMs known
as COFI loans. It's a slow-moving index, but
often these types of ARMs have no caps.
The maximum amount that you can borrow.
- Credit Report
A report documenting the credit history and
current status of a borrower's credit
If there are debts you owe which you never
paid, or times in which you've been
delinquent in paying, these items will
presumably show up on your credit report and
can hurt your chances of getting approved
for a loan.
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- Debt-to-Income Ratio
The ratio, expressed as a percentage, which
results when a borrower's monthly payment
obligation on long-term debts is divided by
his or her net effective income (FHA/VA
loans) or gross monthly income (conventional
loans). See housing expenses-to-income
- Deed of
In many states, this document is used in
place of a mortgage to secure the payment of
Failure to meet legal obligations in a
contract; specifically, failure to make the
monthly payments on a mortgage. If this
happens, you can end up losing the house.
When a mortgage is written with a monthly
payment that is less than required to
satisfy the note rate, the unpaid interest
is deferred by adding it to the loan
balance. See also negative amortization.
Failure to make payments on time. This can
lead to foreclosure.
- Department of Veterans Affairs (VA)
An independent agency of the federal
government which guarantees long-term,
low-or no-down payment mortgages to eligible
A decline in the value of property over
- Discrimination in Advertising
Any printed or published material that uses
words, no matter how subtle, that are of a
discriminatory nature aren't allowed by HUD.
Some of the examples that HUD gives are
"adult building, Jewish home, restricted,
private, integrated, or traditional."
Money paid to make up the difference between
the purchase price and the mortgage amount.
Down payments usually are 10 percent to 20
percent of the sales price on conventional
A clause inserted in a mortgage that allows
the lender, at its option, to call the loan
due and payable upon the transfer of the
Also known as "paragraph 17" in FNMA/FHLMC
A provision in a mortgage or deed of trust
that allows the lender to demand immediate
payment of the balance of the mortgage if
the mortgage holder sells the home.
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- Earnest Money
Money given by a buyer to a seller as part
of the purchase price, in order to bind a
transaction or to assure payment.
A right of way giving people other than the
owner access to a property. If there is one
of these on the house you're considering,
make sure you understand what it is, or you
may have troops of 1953 alien-landing
devotees plodding through your back yard on
the way to that sacred corn field just next
1) An improvement that intrudes illegally on
someone else's property. 2) defensive
lineman getting overanxious in a football
Anything which limits the title to a
property, such as leases, mortgages,
easements, or other restrictions.
The VA home loan benefit is known as
entitlement. It is also known as
- Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and
other creditors to make credit equally
available without discrimination based on
race, color, religion, national origin, age,
sex, marital status or receipt of income
from public assistance programs.
The value an owner has in real estate over
and above the obligation against the
property. In other words, that portion of
the property which the owner actually owns,
having already paid for it. (It's also
referred to as the owner's interest.)
If a homeowner owns a house valued at
$200,000.00 and has a mortgage of
$50,000.00, the homeowner's equity is
$150,000.00 (the value less the mortgage).
As the value of the house increases or
decreases, the homeowner's equity increases
or decreases accordingly. The lender's
equity is always equal to the value of the
Funds that are set aside and held in trust,
usually for payment of taxes and insurance
on real property.
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- Fannie Mae
(see Federal National Mortgage Association)
- Farmers Home Administration (FmHA)
Organization which provides financing to
farmers and other qualified borrowers who
are unable to obtain loans elsewhere.
- Federal Home Loan Bank Board (FHLBB)
A regulatory and supervisory agency for
federally chartered savings institutions.
- Federal Home Loan Mortgage Corporation
(FHLMC), or "Freddie Mac"
A quasi-governmental agency that purchases
conventional mortgage from insured
depository institutions and HUD-approved
- Federal Housing Administration (FHA)
A division of the Department of Housing and
Urban Development. Its main activity is the
insuring of residential mortgage loans made
by private lenders. FHA also sets standards
for underwriting mortgages.
- Federal National Mortgage Association
(FNMA), or "Fannie Mae"
A tax-paying corporation created by Congress
that purchases and sells conventional
residential mortgages as well as those
insured by FHA or guaranteed by VA. This
institution, which provides funds for one in
seven mortgages, makes mortgage money more
available and more affordable.
A loan insured by the Federal Housing
Administration, open to all qualified home
purchasers. While there are limits to the
size of FHA loans, they are generous enough
to handle moderately priced homes almost
anywhere in the country.
A way of insuring an FHA loan, this
insurance requires a small fee (up to 3.8
percent of the loan amount) paid at closing,
or a portion of this fee added to each
monthly payment of an FHA loan.
On a 9.5 percent $75,000 30-year fixed rate
FHA loan, this fee would amount to either
$2,850 at closing or an extra $31 a month
for the life of the loan. In addition, FHA
mortgage insurance requires an annual fee of
0.5 percent of the current loan amount, paid
in monthly installments. The lower the down
payment, the more years the fee must be
The Federal Home Loan Mortgage Corporation
provides a secondary market for savings and
loans by purchasing their conventional
loans. Also known as "Freddie Mac."
The agreement by a lender to make a loan to
a specific borrower for a specific property.
- Firm Commitment
A promise by FHA to insure a mortgage loan
for a specified property and borrower. A
promise from a lender to make a mortgage
The mortgage which is the primary lien
against a property.
- Fixed-Rated Mortgage
A mortgage on which the interest rate is set
for the term of the loan, regardless of
future interest rate fluctuations. This
makes payments precisely predictable, but it
is not always the cheapest alternative.
A legal process by which the lender or the
seller forces a sale of a mortgaged property
because the borrower has not met the terms
of the mortgage. Also known as a
repossession of property.
- Freddie Mac
See FHMLC, or Federal Home Loan Mortgage
Your prospective monthly mortgage payments
divided by your gross monthly income. This
comes out to a percentage, and a lender uses
this percentage to get an idea of how much
of your income will be going to pay your
loan. If they like the number (say, below
29%) then they will be more inclined to sell
you the loan.
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- Ginnie Mae
(see Government National Mortgage
A mortgage insured by the Federal Housing
Administration (FHA) or guaranteed by the
Department of Veterans Affairs (VA) or the
Rural Housing Service (RHS).
- Government National Mortgage Association
(GNMA), or Ginnie Mae
Provides sources of funds for residential
mortgage, insured or guaranteed by FHA or
- Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where
the payments increase for a specified period
of time and then level off. This type of
mortgage has negative amortization built
A mortgage that is guaranteed by a third
Another term for government mortgage.
A promise by one party to pay a debt or
perform an obligation contracted by another
if the original party fails to pay or
perform according to a contract.
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- Hazard Insurance
A form of insurance in which the insurance
company protects the insured from specified
losses, such as fire, windstorm and the
Equity Line of Credit
A loan against the amount of equity you may
have in a property.
A complete and thorough inspection of the
physical condition of a property, including
all major systems and structural elements.
It's conducted by someone who knows what to
look for, and who will inform you of what he
finds. If he turns up something you don't
like and which the seller refuses to repair,
you don't proceed with the purchase of the
An insurance policy, required when you take
ownership, that combines personal liability
insurance and hazard insurance for the home
as well as its contents.
A warranty which will cover repairs to
specified parts of a house for a specific
period of time. It is provided by the seller
(or, if the place is new, the builder) as a
condition of the sale.
- Hot Market
A market in which houses are selling fast.
Otherwise known as a 'seller's market' --
the seller is going to sell their house at
very close to the asking price, since
there's a lot of demand.
- Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which
results when a borrower's housing expenses
are divided by his/her net effective income
(FHA/VA loans) or gross monthly income
(conventional loans). See debt-to-income
A document which sets forth an itemized
listing of whatever costs must be paid at
closing, such as real estate commissions,
loan fees, points, and initial escrow
amounts. It's also known as the "closing
statement" or "settlement sheet."
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That portion of a borrower's monthly
payments held by the lender or servicer to
pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items
as they become due. Also known as reserves.
A published interest rate against which
lenders measure the difference between the
current interest rate on an adjustable rate
mortgage and that earned by other
These other investments may include one-,
three-, and five-year U.S. Treasury security
yields, the monthly average interest rate on
loans closed by savings and loan
institutions, and the monthly average
costs-of-funds incurred by savings and
loans. This information is then used to
adjust the interest rate on an adjustable
mortgage up or down.
The interest rate of the mortgage at the
time of closing. This rate will change for
an adjustable-rate mortgage (ARM). Also
known as the "start rate" or "teaser."
The amount of money, expressed as a
percentage of the principal, charged for the
use of the money borrowed.
- Interest Adjustment
If the closing (the date on which the buyer
takes possession of the property) occurs at
a time of the month other than the date on
which the mortgage payment is due, the
borrower will pay an amount to cover
interest from the "interest adjustment
For an adjustable-rate mortgage (ARM), the
maximum rate to which your loan can climb.
For an adjustable-rate mortgage (ARM), the
minimum interest rate to which your loan can
- Interim Financing
A construction loan made during completion
of a building or a project. A permanent loan
usually replaces this loan after completion
of the project.
A money source for a lender.
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- Jumbo Loan
A loan which is larger than the limits set
by the Federal National Mortgage Association
and the Federal Home Loan Mortgage
Corporation. Because jumbo loans cannot be
funded by these two agencies, they usually
carry a higher interest rate.
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The penalty that must be paid by the
borrower when a payment is late. This must
be spelled out; make sure you know when you
would incur such a charge.
A financing option for low- and
moderate-income home buyers, by which they
can lease a home, with an option to buy,
from a nonprofit organization. Each month's
rent payment consists of principal,
interest, taxes and insurance, plus an extra
amount that is sent to a savings account in
order to accumulate money for a down
A claim upon a piece of property for the
payment or satisfaction of a debt or
- Listing Price
The price at which the house is listed; the
- Loan-to-Value Ratio
The relationship between the amount of the
mortgage loan and the appraised value of the
property expressed as a percentage.
A written agreement from the lender to offer
a specified interest rate if the mortgage
goes to closing within a set period of time.
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The amount a lender adds to the index on an
adjustable rate mortgage to establish the
adjusted interest rate.
- Market Value
The highest price that a buyer would pay and
the lowest price a seller would accept on a
property. Market value may be different from
the price a property could actually be sold
for at a given time.
The date on which the principal balance of a
loan is due and payable.
The minimum amount that you must pay
A legal contract that is registered against
the title to a property in order to
guarantee that a loan will be repaid.
A company or loan officer at a bank that
originates mortgages for resale in the
secondary mortgage market.
A person or company that offers loans to
borrowers from numerous sources; they're
generally paid a commission for their
- Mortgage Insurance
Money paid to insure the mortgage when the
down payment is less than 20 percent. See
private mortgage insurance, FHA mortgage
- Mortgage Insurance Premium (MIP)
The one-half percent borrowers pay each
month on FHA insured mortgage loans. It is
insurance from FHA to the lender against
incurring a loss on account of the
borrower's default. On September 1, 1983,
the MIP was changed to a one-time charge to
The borrower or homeowner.
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- Negative Amortization
Something which occurs when your monthly
payments are not large enough to pay all the
interest due on the loan. This unpaid
interest is added to the unpaid balance of
the loan. The home buyer ends up owing more
than the original amount of the loan.
- Negotiable Rate Mortgage (RBM)
A loan in which the interest rate is
adjusted periodically. (See adjustable rate
- Net Effective Income
The borrower's gross income minus federal
A loan requiring very little loan
documentation. The borrower generally puts
down a sizable down payment, usually at
least 25%. These loans tend to be more
common among self-employed people (those who
have enough for the down payment) whose tax
returns might indicate earnings
substantially less than what would otherwise
be acceptable to the lender.
- Non Assumption Clause
A statement in a mortgage contract
forbidding the assumption of the mortgage
without the prior approval of the lender.
The signed obligation to pay a debt, as a
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- Origination Fee
The fee charged by a lender to prepare loan
documents, make credit checks, inspect and
sometimes appraise a property, usually
computed as a percentage of the face value
of the loan.
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- Permanent Loan
A long-term mortgage, usually ten years or
more. Also called an "end loan."
Principal, Interest, Taxes and Insurance.
Also called monthly housing expense.
Account Mortgage (PAM)
Money is placed in a pledged savings account
and this fund, plus earned interest, is
gradually used to reduce mortgage payments.
- Points (loan discount points)
Prepaid interest assessed at closing by the
lender. Each point is equal to 1 percent of
the loan amount (e.g., two points on a
$100,000 mortgage would cost $2,000).
- Power of Attorney
A legal document authorizing one person to
act on behalf of another.
- Prepaid Expenses
Money necessary to create an escrow account
or to adjust the seller's existing escrow
account. Can include taxes, hazard
insurance, private mortgage insurance and
A privilege in a mortgage which permits the
borrower to make payments in advance of
their due date.
- Prepayment Penalty
Money charged for an early repayment of
debt. Prepayment penalties are allowed in
some form (but not necessarily imposed) in
36 states and the District of Columbia.
- Primary Mortgage Market
Lenders making mortgage loans directly to
borrowers such as savings and loan
association, commercial banks, and mortgage
companies. These lenders sometimes sell
their mortgages into the secondary mortgage
markets such as to FNMA or GNMA, etc.
The amount of debt, not counting interest,
left on a loan.
- Private Mortgage Insurance (PMI)
In the event that you do not have a 20
percent down payment, lenders will allow a
smaller one - as low as 5 percent in some
cases. With the smaller down payment loans,
however, borrowers are usually required to
carry private mortgage insurance. Private
mortgage insurance will require an initial
premium payment of 1.0 percent to 5.0
percent of your mortgage amount and may
require an additional monthly fee depending
on you loan's structure.
On a $75,000 house with a 10 percent down
payment, this would mean either an initial
premium payment of $2,025 to $3,375, or an
initial premium of $675 to $1,130 combined
with a monthly payment of $25 to $30.
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A radioactive gas which seeps up from the
ground. It may be found in some homes, and
if it is in sufficient concentration, then
it can cause health problems. A radon test
is often part of the home inspection.
A real estate broker or an associate holding
active membership in a local real estate
board affiliated with the National
Association of Realtors.
The cancellation of a contract. With respect
to mortgage refinancing, the law that gives
the homeowner three days to cancel a
contract (in some cases) once it is signed,
if the transaction uses equity in the home
- Recording Fees
Money paid to the lender for recording a
home sale with the local authorities,
thereby making it part of the public
The illegal practice of refusing to make
mortgages or issue insurance policies in
specific areas for reasons other than the
economic qualifications of the applicant.
Obtaining a new mortgage loan on a property
already owned, often to replace existing
loans on the property.
The Real Estate Settlement Procedures Act.
RESPA is a federal law that allows consumers
to review information on known or estimated
settlement cost once after application and
once prior to or at a settlement. The law
requires lenders to furnish the information
after application only.
- Reverse Annuity Mortgage (RAM)
A form of mortgage in which the lender makes
periodic payments to the borrower using the
borrower's equity in the home as collateral.
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- Sale Price
The price at which the house actually sold.
By noting the difference between the sale
price and the listing price in houses that
have recently sold, comparable to the one
you're interested in, you can get an idea of
how much below the asking price you might be
able to offer.
- Satisfaction of Mortgage
The document issued by the mortgagee when
the mortgage loan is paid in full. Also
called a "release of mortgage."
- Second Mortgage
A mortgage made subsequent to another
mortgage and subordinate to the first one.
- Secondary Mortgage Market
The market in which primary mortgage lenders
sell the mortgages they make to obtain more
funds to originate more new loans. It
provides liquidity for the lenders.
- Security interest
An interest that a lender takes in the
borrower's property to assure repayment of a
All the steps and operations a lender
performs to keep a loan in good standing,
such as collection of payments, payment of
taxes, insurance, property inspections and
- Settlement/Settlement Costs
See closing/closing costs.
- Shared Appreciation Mortgage (SAM)
A mortgage in which a borrower receives a
below-market interest rate in return for
which the lender (or another investor such
as a family member or other partner)
receives a portion of the future
appreciation in the value of the property.
It may also apply to mortgage where the
borrowers shares the monthly principal and
interest payments with another party in
exchange for part of the appreciation.
- Simple Interest
Interest which is computed only on the
- Soft Market
A market where not much is selling, the sales price is likely to be
significantly lower than the asking (listing) price. So, the price
The effort to maneuver home buyers into, or
away from, a particular area of town because
they won't "fit in." Telling a white couple,
"You don't want to live in Mount Pleasant
because that's where all the Latinos are" is
an example. Or not telling a black family
that a house that would otherwise be perfect
for them is available in an all-white
neighborhood. Both of these are illegal.
A measurement of land, prepared by a
registered land surveyor, showing the
location of the land with reference to know
points, its dimensions, and the location and
dimensions of any buildings.
- Sweat Equity
Equity created by a purchaser performing
work on a property being purchased. The idea
is that you're improving the property
through all the work you're putting
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The lifespan of the contract to repay a
Don't confuse "term" with "amortization."
The term can be 6 months to 10 years. For
example, a mortgage that is amortized over
20 years might have a 5-year term. At the
end of 5 years the mortgage will mature.
However, because the loan is amortized over
20 years, there will still be money owed on
the loan. (This is sometimes referred to as
a "balloon" mortgage). The borrower can
either renew the loan, refinance it with
another lender, or pay it off completely.
See balloon payment mortgage.
A document that gives evidence of an
individual's ownership of property.
- Title Insurance
A policy, usually issued by a title
insurance company, which insures a home
buyer against errors in the title search.
The cost of the policy is us ally a function
of the value of the property, and is often
borne by the purchaser and/or seller.
- Title Search
An examination of municipal records to
determine the legal ownership of property.
Usually is performed by a title company.
A fee charged each time you draw on your
A federal law requiring disclosure of the
Annual Percentage Rate to home buyers
shortly after they apply for the loan.
- Two-Step Mortgage
Mortgage in which the borrower receives a
below-market interest rate for a specified
number of years (most often seven or 10),
and then receives a new interest rate
adjusted (within certain limits) to market
conditions at that time. The lender
sometimes has the option to call the loan
due with 30 days notice at the end of seven
or 10 years. also called "Super Seven" or
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The decision whether to make a loan to a
potential home buyer based on credit,
employment, assets, and other factors and
the matching of this risk to an appropriate
rate and term or loan amount.
Interest charged in excess of the legal rate
established by law.
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- VA Loan
A long-term, low-or no-down payment loan
guaranteed by the Department of Veterans
Affairs. Restricted to individuals qualified
by military service or other entitlements.
- VA Mortgage Funding Fee
A premium of up to 1-7/8 percent (depending
on the size of the down payment) paid on a
VA-backed loan. On a $75,000 fixed-rate
mortgage with no down payment, this would
amount to $1,406 either paid at closing or
added to the amount financed.