A summary; an abridgment. Before the use of photostatic copying
public records were kept by abstracts of recorded documents.
Abstract of Title
A compilation of the recorded documents relating to a parcel
of land, from which an attorney may give an option as to the
condition of title. Still in use in some states, but giving way
to the use of title insurance.
Acre
A measure, usually of land, equal to 160 sq. rods (43,560
sq. ft.) in any shape.
Action
to Quiet Title
A court action to establish ownership to real property. Although
technically not an action to remove a cloud on a 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, but changes
during the life of the loan in line with movements in an index
rate. You may also see ARM's referred to as AML's
or VRM's.
Agency
An Agency relationship is one in which one person is empowered
to act on behalf of another, subject to the control and consent
of the person being represented.
Agent
The person who is acting on behalf of the principal or client.
Agreement of Sale
In some states it is synonymous with a purchase agreement
(Purchase Agreement). In other states, it is synonymous with
a land contract (Land Contract).
Alienation
Clause
A clause calling for a debt under a mortgage or deed of trust
to be due in its entirety upon transfer of ownership of the secured
property.
Amortize
To reduce a debt by regular payments of both principal and
interest, as opposed to interest only payment.
Annual
Percentage Rate(APR)
A measure of the cost of credit, expressed as a yearly rate.
It includes interest as well as other charges. Because all lenders
follow the same rules to ensure the accuracy of the annual percentage
rate, it provides consumers with a good basis for comparing the
cost of loans, including mortgage plans.
Appraised
Value
An option of the value of a property at a given time, based
on facts regarding the location, improvements, etc., of the property
and surroundings.
Arrears
Payment made after its 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.
Assumability
When a home is sold, the seller may be able to transfer the
mortgage to the new buyer. This means the mortgage is assumable.
Lenders generally require credit review of the new borrower and
may charge a fee for the assumption. Some mortgages contain a
due-on-sale clause, which means that the mortgage may not be
transferable to the new buyer. Instead, the lender may make you
pay the entire balance that is due when you sell the home. Assumability
can help you attract buyers if you sell your home.
Assumption
of Mortgage
Agreement by a buyer to assume the liability under an existing
note secured by a mortgage or deed of trust.
Balloon
Note
A note calling for periodic payments which are insufficient
to fully amortize the face amount of the note prior to maturity,
so that a principal sum known as a "Balloon" is due
at maturity.
Balloon Payment
The final payment of a mortgage which is larger than the
regular payment; it usually extinguishes the debt.
Binder
A report issued by a title insurance company setting forth
the condition of title and setting forth conditions, which, if
satisfied, will cause a policy of title insurance to be issued.
Blanket Mortgage
A mortgage covering more than one property of the mortgage.
Bridge Financing
A form of interim loan, generally made between a short term
loan and a long term loan, when the borrower needs to have more
time before taking on long term financing.
British
Thermal Unit(B.T.U.)
Unit of heat required to raise one pound of water one degree
Fahrenheit.
Buydown
With a buydown, the seller pays an amount to the lender so
that the lender can give you a lower rate and lower payments,
usually for an early period of a loan. The seller may increase
the sales price to cover the cost of the buydown.
Cap
A limit on how much the interest rate or monthly payment
of an ARM can change, either at each adjustment
or during the life of the mortgage. Payment CAP's don't limit
the amount of interest the lender is earning so the may cause
negative amortization.
Certificate
of Eligibility
A certificate obtained by a veteran from a Veteran's Administration
office which states that the veteran is eligible for a V.A. insured
loan.
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, legal title
being vested in trustee.
Chain
of Title
The chronological order of conveyancing of a parcel of land,
from the original owner to the present owner.
Chattel
Personal property.
Closing
Statement
The statement which lists the financial settlement between
buyer and seller, and also the costs each must pay. A separate
statement for buyer and seller is sometimes prepared.
Cloud on Title
An invalid encumbrance on real property, which if valid,
would affect the rights of the owner.
Co-Maker
Equally responsible for repayment as the borrower.
Commitment
A written promise to make or insure a loan for a specified
amount and on specified items.
Comparables
Properties used as comparisons to determine the value of
a specified property.
Condominium
A structure of two or more units, the interior space of which
are individually owned.
Construction
Loan
Short term financing of real estate construction. Generally
followed by the long term financing called a "take out"
loan, issued upon completion of improvements.
Contingency
The dependence upon a stated event which must occur before
a contract is binding.
Contract
of Sale
Depending on area of country it may be a Land Contract or
a Purchase Agreement.
Closing Cost
Expenses incurred in the closing of a real estate or mortgage
transaction.
Conventional Mortgage
A loan neither insure by the FHA nor guaranteed by the VA.
Conversion Clause
A provision in some ARMs that allows you
to change the ARM to a fixed-rate
loan at some point during the term. Usually
the conversion is allowed at the end of the first adjustment
period. At the time of the conversion, the new fixed rate is
generally set at one of the rate then prevailing for fixed-rate
mortgages. The conversion feature may be available at extra cost.
Cost Plus Contract
A building contract setting the builder's profit at a set
percentage of actual cost of labor and materials.
Contract
Sales Price
The full purchase price as stated in the contract.
County
A division within a state, usually encompassing one or more
cities or towns.
Certificate
of Reasonable Value(CRV)
An appraisal of property for the purpose of insurance by
the Veteran's Administration.
Declaration
of Restrictions
A set of restrictions filed by a subdivider to cover an entire
tract or subdivision.
Defective
Title
Title to a negotiable instrument obtained by fraud. Title
to real property which lacks some of the elements necessary to
transfer good title.
Depreciation
Decrease in value to real property improvements caused by
deterioration or obsolescence.
Devise
Real estate left by will.
Devisee
One to whom real estate is given by will.
Devisor
A testator who leaves real estate.
Direct
Reduction Mortgage
An amortized mortgage. One on which principal and interest
being computed on the remaining balance.
Disbursements
Payments made during the course of an escrow or at closing.
Discount
Is an ARM with an initial discount, the
lender gives up a number of percentage points of interest to
give you a lower rate and lower payments for part of the mortgage
term. After the discount period, the ARM rate will probably go
up depending on the index rate.
Documentary Tax Stamps
Stamps, affixed to a deed, showing the amount of transfer
tax.
Dragnet Clause
A clause in a mortgage or deed or trust which places the
real estate as security for existing debts between the parties.
Easement
A right created by grant, reservation, agreement, prescription,
or necessary implication, which one has in the land of another.
Eminent Domain
A Government right to acquire private property for public
use by condemnation, and the payment of just compensation.
Encroachment
Construction onto the property of another, wall, fence, etc.
Encumbrance
A claim, line charge, attached to and binding real property.
Equity
The difference between the market value of the property and
the homeowners mortgage debt.
Escrow
Delivery of a deed by a grantor to a third party for delivery
to the grantee upon the happening of a contingent event.
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 know as "impounds" in some
states.
Escrow Reimbursement
An assumptions or wrap loan transactions, the buyer reimburses
the seller for the current balance of his escrow (or impounded)
funds.
Federal Home Board
The board which charters and regulates federal savings and
loan associations, as well as controlling the system of Federal
Home Loan Banks.
Federal Tax
Lien
A lien attached to property for nonpayment of a federal tax.
Fee Simple
An estate under which the owner is entitled to unrestricted
powers to dispose of the property, and which can be left by will
or inherited.
Federal Home
Loan Board
The board which charters and forbids discrimination in the
sale.
Federal Housing
Administration
A federal Agency which insures first mortgages, enabling
lenders to loan a very high percentage of the sale price.
Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A federal Agency
purchasing first mortgages, both conventional and federally insured,
from members of the Federal Reserve System, and the Federal Home
Loan Bank System.
Foreclosure
A proceeding in or out of court, to extinguish all rights,
title, and interest, of the owner(s) of property in order to
sell the property to satisfy a lien against it.
Full
Disclosure
Revealing all the known facts which may affect the decision
of a buyer or tenant.
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.
Ginnie
Mac (GNMA)
Government National Mortgage Association. A federal association
working with FHA which offers special assistance in obtaining
mortgages, and purchases mortgages in a secondary capacity.
Grandfather Clause
The clause in a law permitting the continuation of a use,
business, etc., which, when was permissible but, because of a
change in the law is now not permissible.
Ground
Rent
Rent paid for vacant land. If the property is improved, ground
rent is the portion attributable to the land only.
Heir
and Assigns
Words usually found in a deed, showing the interest the grantee
is receiving.
Home Owner
Association
An association of people who own homes in a given area for
the purpose of improving or maintaining the quality of the area.
Impound Account
Account held by a lender for payment of taxes, insurance,
or other
Index
The index if the measure of interest rate changes that the
lender uses to decide how much the interest rate on an ARM
will change over time. You should ask your lender how the index
for any ARM you are considering has change in recent years, and
where it is reported.
Independent
Contractor
The term is most important as used to describe the relationship
of broker and salesperson, employee or independent contractor.
If employee, the broker must withhold income tax and pay social
security, provide workmen's compensation, and may be liable for
some negligent acts of the salesperson while on the job. All
of this is avoided by the broker if salesperson is an indepent
contractor.
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 in the event
of default and failure of the mortgaged property to satisfy the
balance owing plus costs of foreclosure.
Interest
Rate
The percentage of an amount of money which is paid for its
use for a specified time.
Joint
and Several
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.
Judgement
The decision of a court of law. Money judgments, when recorded,
become a lien on real property of the defendant.
Late
Charge
A penalty for failure to pay an installment on time.
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.
Lender
A general term encompassing all mortgages, and beneficiaries
under deeds of trust.
Letter
of Intent
A formal method of stating that a prospective developer,
buyer or lessee, is interested in property.
Liber
A latin word for book.
Lien
An encumbrance against property for money, either voluntary
or involuntary.
Life Estate
An estate in real property for the life of a living person.
The estate then reverts back to the grantor or on 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, contributing capital and liable
only to the amount contributed.
Lis
Pendens
A legal notice recorded to show pending litigation relating
to real property and giving notice that anyone acquiring an interest
in said property subsequent to the date of the notice may be
bound by the outcome of the litigation.
Loan
Package
The information given to the lender regarding the borrower
and the property necessary to decide to give or not to give the
loan.
Loan Ratio
The amount of a loan to the value or selling price of real
property.
Loan-to-Value Ratio
The ratio of the mortgage loan amount to the properties appraised
value (or the selling price whichever is less).
Margin
The number of percentage points the lender adds to the index rate to calculate the ARM
interest rate at each adjustment.
Marketable
Title
Title which can be readily marketed to a reasonably prudent
purchaser aware of the facts and their legal meaning concerning
liens and encumberances.
Mechanics
Lien
A lien created by statue for the purpose of securing priority
of payment for the price of value of work performed and materials
furnished in construction of repair of improvements to land,
and which attached to the land as well as the improvements.
Mortgage Broker
One who for a fee, brings together a borrower and lender,
and handles the necessary applications for the borrower to obtain
a loan against real property by giving a mortgage or deed of
trust as security. Also known as a loan broker.
Mortgage
Guaranty Insurance Corporation (MGIC)
A private corporation which, for a fee, insures mortgage
loans similar to FHA and VA insurance, although not insuring
as great a percentage of the loan.
Mortgage
or Deed of Trust
Written pledge of real property given by the mortgagor
to secure a debt. Should be recorded in the County Recorders
Office.
Mortgagee
The lender of money or the receiver of the mortgage
document.
Mortgagor
The borrower of money or the giver of the mortgage
document.
Mortgage Insurance
Insurance required for loans with a loan
above 80.01%.
Mortgage
Warehousing
A system whereby a mortgage company will hold loans which
would ordinarily be sold, in order to sell later at a lower discount.
These are used as collateral security with a bank to borrow new
money to loan.
Negative Amortization
Amortization means that monthly payments are large enough
to pay the interest and reduce the principal on your mortgage.
Negative amortization 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.
This means that even after making many payments, you could owe
more than you did at the beginning of the loan. Negative amortization
can occur when an ARM has a payment cap that
results if monthly payments not high enough to cover the interest
due.
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.
Open End Mortgage
A mortgage permitting the mortgagor to borrow additional
money under the same mortgage, with certain conditions, usually,
as to the assets of the mortgage.
Origination
Fee
A fee or charge for work involved in the evaluation, preparation
and submission of a proposed mortgage loan.
Owners
Policy
Title insurance for the owner of property, rather than a
lienholder.
Package Mortgage
Mortgage covering both real and personal property.
Paper
A mortgage, deed of trust, or land contract, which is given
instead of cash.
Partial Release
A release of a portion of property covered by a mortgage.
Perc Test (Percolation)
The test to determine the capability of the soil to absorb
liquid, both for construction and septic systems.
Permanent
Mortgage
A mortgage on completed construction on the same property
under one mortgage or trust deed.
PMI Private
Mortgage Insurance
Insurance similar to FHA or VA insurance, insuring part of
the first mortgage or deed of trust, enabling a lender to make
a conventional loan of a higher percentage of the property value.
Points
A point is equal to one percent of the principal amount of
your mortgage. For example, if you get a mortgage for $100,000,
one point means you pay $1000 to the lender. Lenders frequently
charge points in both fixed-rate and adjustable-rate
mortgages in order to increase the yield of the mortgage and
to cover loan closing costs. These points are usually collected
at closing and may be paid by the borrower
or the home seller, or may be split between them.
Property
Tax
Generally, tax levied on both real and personal property.
Prorate
To divide in proportionate shares, such as taxes, insurance,
rent, or other items.
Purchase
Money Mortgage
A Mortgage given by the buyer to the seller as part of the
purchase consideration, as opposed to a hard money mortgage.
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.
Recital
Setting forth in a deed or other writing some explanation
for the transaction.
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.
Refinancing
The repayment of a debt from the proceeds of a new loan using
the same property as security.
Reissuerate
A charge for a title insurance policy if a previous policy
on the same property was issued within a specified period. Reissue
is less than the original charge.
REIT
(Real Estate Investment Trusts)
A method in investing in real estate in a group, with certain
tax advantages.
Release
An instrument releasing property from the lien of the mortgage,
judgment, etc.
Recision
of Contract
Annulling a contract and placing the parties to it in a positionas
if there had not been a contract.
RESPA
(Real Estate Settlement Procedures Act)
A federal statute requiring disclosure of certain costs in
the sale of residential improved property which is to be financed
by a federally insured lender.
Revenue
Stamps
Formerly federal tax on a sale of real property. Canceled
and replaced by state tax stamps.
Secondary
Financing
A loan secured by a mortgage or trust deed, which lien is
junior to another mortgage or trust deed.
Secondary
Mortgage
The buying and selling of first mortgages of trust deeds
by banks, insurance companies, government agencies, and other
mortgagees.
Security
Real or personal property pledged by a borrower, as additional
protection for the lender's interest.
Septic
System
A sewage system, whereby waste is drained through pipes and
a tile field into a septic tank.
Set
Back Ordinance
Regulates the distance from the lot line to the point where
improvements may be constructed.
Settlement
Statement
A statement prepared by broker, escrow, or lender, giving
a complete breakdown of costs involved in a real estate sale.
Sheriff's Deed
Deed given at sheriff's sale in foreclosure of mortgage.
Signed Sealed and Delivered
A phrase indicating that everything necessary to convey has
been done by the grantor.
Specific
Performance
An action to compel the performance of a contract, when money
damages for breach would not be satisfactory.
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.
Tax Lien
Lien for nonpayment of taxes.
Tax
Sale
Public sale of property at auction by governmental authority,
after a period of nonpayment of property taxes.
Tenancy
by the Entirety
A form of ownership by husband and wife whereby each owns
the entire property. In event of death of one, the survivor owns
the property without probate.
Title
Often used interchangeably with the work ownership. It indicates
the accumulation of all rights in property, the owner and others.
Title Insurance
An insurance policy which protects the insured(purchaser
and lender) against loss arising from defects in title
