Real estate terms can be some of the most confusing for anyone who doesn't use them daily. Below are some of the most used terms in the Anchorage area real estate industry.
Abstract of title
A summary of recorded transactions concerning a particular property.
Condition in a mortgage that gives the lender the right to require immediate repayment of the loan balance if regular mortgage payments are not made or for breach of other conditions of the mortgage.
Interest earned but not yet paid.
An interest rate that changes periodically according to an index.
Adjustable-rate mortgage (ARM)
A mortgage with an interest rate that adjusts periodically based on a preselected index, causing interest rates and payments to rise and fall with the market.
The time between changes in the interest rate and monthly payments on an ARM.
One that acts for or represents another.
Agreement of sale
Also known as a "sales contract," a written document in which a purchaser agrees to buy property under certain given conditions, and the seller agrees to sell under certain given conditions.
Alaska Housing Finance Corporation (AHFC)
A State of Alaska-sponsored organization that exists to provide affordable loans to public housing programs, energy efficiency and weatherization programs, senior housing program and professional development opportunities for Alaskans. ahfc.us
A monthly repayment schedule in which a loan is repaid in fixed payments of principal and interest.
Annual percentage rate (APR)
The annual cost of a loan, expressed as a yearly rate. APR takes into account interest, discount points, lender fees and mortgage insurance, so it will be slightly higher than the interest rate on the loan.
Often referred to as a 1003, an initial statement of personal and financial information required to approve your loan.
A fee charged by a lender to cover initial costs of processing a loan application, often including charges for property appraisal and a credit report.
A written estimate of a property's current market value, based on recent sales information for similar properties, the current condition of the property and how the neighborhood might affect future property value.
A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date.
See Annual Percentage Rate.
See Adjustable-Rate Mortgage.
Some ARM products feature "assumability" to a qualified applicant. The assumability of an ARM loan may make it more attractive to an applicant who envisions selling their home at a later date. By incorporating an assumable mortgage product, they may be able to make their home more attractive to potential buyers.
An additional disclosure specific to adjustable-rate mortgages that must be prepared and presented to the consumer within three days of application whenever an adjustable-rate mortgage transaction is contemplated (Note: home equity lines have their own unique disclosure).
The Consumer Handbook to Adjustable-Rate Mortgages ("CHARM" booklet) must be presented to the consumer within three days of applying for an ARM loan (in addition to the ARM disclosure referenced above).
A local tax levied against properties that have benefited from civil improvements such as road or sidewalk construction, a sewer or street lights.
Anything of monetary value that a person owns. Assets include real property, personal property and enforceable claims against others (including bank accounts, stocks, mutual funds and so on).
The transfer of property rights from one person to another.
A feature of a loan allowing it to be transferred to the new purchaser of a home. Assumable mortgages can help attract buyers because assumption of a loan requires lower fees and/or qualifying standards than a new loan.
Agreement between buyer and seller for the buyer to take over the payments on an existing mortgage.
A document showing the financial situation-assets, liabilities and net worth of a person at a specific point in time.
See cashier's check.
Proclamation by a court of an individual's (or organization's) state of insolvency, or inability, to pay debts. Petition may be brought by an individual or his creditors, with a goal of orderly and equitable settlement of obligations.
A unit of measure: 1/100th of one percent. For example, the difference between a 9.0 percent loan and a 9.5 percent loan is 50 basis points.
The legal owner of a piece of property.
A gift of personal property by will.
Bill of sale
A document that transfers ownership of personal goods from one person to another.
A payment plan under which one pays one-half of a monthly payment every two weeks, saving interest substantially over the life of the loan.
In good faith.
A document representing a right to certain payments on underlying collateral.
An individual who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.
An individual who assists in arranging funding or negotiating contracts for a client, but does not loan money himself.
A situation in which the seller contributes money that allows the lender to give the buyer a lower rate and payment, usually in exchange for an increase in sales price. With a refinance, this could be paid by the borrower.
An agent hired by a buyer to locate a property for purchase and to represent the buyer in negotiations with the seller's broker for the best possible deal for the buyer.
Market conditions that favor buyers. With more sellers than buyers in the market, buyers have ample choice of properties and can negotiate lower prices.
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.
Limits on changes in ARM interest rates or monthly payments, either in an adjustment period or over the life of the loan.
A refinance for more than the balance of the original mortgage, with the extra money is taken out of the equity in the property.
Cashier's check (or bank check)
A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank's account instead of the customer's.
See Covenants, Conditions and Restrictions.
The maximum allowable interest rate of an adjustable-rate mortgage.
Certificate of eligibility
Document issued by the Veterans' Administration to qualified veterans that entitles them to VA guaranteed loans. This certificate can be obtained through local VA office by submitting form DD-214 (Separation Papers) and VA form 1880 (request for Certificate of Eligibility).
Certificate of occupancy
Document issued by local government agency stating that a property meets the requirements of health and building codes.
Certificate of reasonable value (CRV)
A property appraisal performed by a VA-approved appraiser that establishes the limit on the principal of the VA loan.
Certificate of title
Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.
Certificate of veteran status
Document given to veterans or reservists who have served 90 days of continuous active duty (including training time) which enables them to obtain lower down payments on certain FHA-insured loans. Obtainable through local VA office by submitting form DD-214 (Separation Paper) with form 26-8261A (request for Certificate of Veteran Status).
A check drawn on the issuer's account for funds that have been segregated by the bank, guaranteeing payment.
See Consumer Financial Protection Bureau.
Chain of title
The chronological order of conveyance of a property from the original owner to the present owner.
A marketable title, free of clouds and disputes.
Closing (or settlement)
Meeting between the buyer, seller and lender or their agents at which property and funds legally change hands.
Fees incurred in a real estate or mortgage transaction and paid by borrower and/or seller during a mortgage loan closing. These typically include a loan origination fee, discount points, attorney's fees, title insurance, appraisal, survey and any items that must be prepaid, such as taxes and insurance escrow payments. The cost of closing is usually about 3 to 6 percent of the mortgage amount.
A financial disclosure statement that lists the funds received and expected at the closing.
The computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment.
A form that itemizes the closing costs associated with purchasing a home.
Cloud on title
An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title.
See Combined loan-to-value.
See Cost of funds index.
Assets that back a mortgage loan.
Combined loan-to-value (CLTV)
The ratio of the total mortgage liens against the subject property to the lesser of either the appraised value or the sales price.
Money paid to a real estate licensee (there are no agents in Alaska) or broker by the seller (usually 6 to 7 percent of a home's sale price).
A formal offer by a lender to make a loan under certain terms or conditions to a borrower.
A form of property ownership in which the homeowner holds title to an individual dwelling unit and an interest in common areas and facilities of a multi-unit project.
A mortgage loan under the maximum amount of loans that FNMA and FHLMC are legally allowed to buy. Maximum loan amount varies by county.
Consumer Financial Protection Bureau (CFPB)
A federal agency that enforces laws that protect consumers of financial products and services such as mortgages, credit cards and deposit accounts.
A condition that must be satisfied before a contract is legally binding before a sale can close.
Contract of sale
The agreement between the buyer and seller on the purchase price, terms and conditions of a sale.
A mortgage not insured by the FHA or guaranteed by the VA.
A provision in some ARMs allowing you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate is set at current rates, and there may be a charge for the conversion feature.
Many "short-term" ARM products feature a conversion option. This option allows a consumer, subject to certain restrictions, to convert the loan from an adjustable to a fixed-rate mortgage.
ARMs with the option of conversion to a fixed loan during a given time period.
The transfer of a deed or possibly a lease or mortgage.
Cook Inlet Housing Authority (CIHA)
An organization based in Anchorage that ensures elders, individuals and families in the 45,168 square mile area of Cook Inlet region has access to quality, affordable housing. cookinlethousing.org
Cost of funds index (COFI)
An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.
Covenants, conditions and restrictions (CC&Rs)
A document defining the use, requirements and restrictions of a property.
A report detailing the credit history of a prospective borrower, used when determining creditworthiness.
The possibility that the borrower may default on financial obligations.
See Certificate of reasonable value.
The ratio, expressed as a percentage, that results when a borrower's monthly payment obligation on long-term debts is divided by monthly income.
A legal document that transfers a property from one owner to another. The deed contains a description of the property, and is signed, witnessed and delivered to the buyer at closing.
Deed of trust
Agreement to pledge property as security for a loan, used in many states in place of a mortgage. In this arrangement, the borrower transfers legal title to a trustee who holds the property in trust as security for the repayment of the debt. The deed of trust becomes void if the debt is repaid, but if the borrower defaults on the loan, the trustee may sell the property to pay the debt.
Failure to meet legal obligations in a contract, including failure to make payments on a loan. A mortgage is generally considered to be in default when a payment is 30 or more days past due.
Interest added to the balance of a loan when monthly payments are not sufficient to cover it. (See Negative amortization.)
Failure to make payments on time.
Cash paid when a formal sales contract is signed. The deposit is usually held by a third party until the sale is complete.
When the value of property declines.
Discount points (or Points)
Money paid to a lender at closing in exchange for lower interest rates. Each point is equal to 1 percent of the loan amount.
Money paid for a house from one's own funds at closing. The down payment will be the difference between the purchase price and mortgage amount.
Provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance upon sale of the property.
Deposit made by a buyer in evidence of good faith when the purchase agreement is signed.
See Equal Credit Opportunity Act.
Effective interest rate
The cost of a mortgage expressed as a yearly rate, usually higher than the interest rate on the mortgage since this figure includes up-front costs.
A legal right or interest in a property that affects title and lessens the property value. Encumbrances can take the form of claims, liens, unpaid taxes and so on. These will usually have to be taken care of before a buyer may purchase a property.
Equal Credit Opportunity Act (ECOA)
Federal law requiring 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 percentage of property value held by the owner; the difference between the current market value of a property and the outstanding mortgage balance.
A loan based on the borrower's equity in his home.
The neutral third party that holds money and/or documents until the escrow instructions are fulfilled and escrow can be a title company or an attorney, depending on state regulations.
Account held by a lender containing funds collected as part of mortgage payments for annual expenses such as taxes and insurance, so that the homeowner does not have to pay a large sum when these fall due.
Escrow Waiver is waiver of the requirement to fund an escrow account with lender and instead pay insurance and taxes separately. This waiver may require a fee and is not available with all loan programs.
See Federal National Mortgage Association.
See Fair Housing Act
Fair Housing Act (FHAct)
Prohibits discrimination in real estate transactions because of race, color, religion, sex, handicap, familial status (families with children), or national origin. It applies to mortgage lending as well as other aspects of real estate transcations, including sales and rentals, real estate brokerage, and appraisals.
Farmer's Home Administration (FMHA)
An agency within the U.S. Department of Agricultur that provides financing for homes and farms in small towns and rural areas.
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
Quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.
Federal Housing Administration (FHA)
A government agency, division of the Department of Housing and Urban Development, that insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.
Federal National Mortgage Association (FNMA or Fannie Mae)
A quasi government agency created by Congress that buys and sells residential loans.
The central bank of the United States and major regulatory agency for many commercial banks.
Absolute ownership of real property.
See Federal Housing Administration.
A loan insured by the FHA open to all qualified home purchasers.
See Federal Home Loan Mortgage Corporation.
A mortgage that is in first lien position, taking priority over all other liens. In the case of foreclosure, the first mortgage will be repaid before any other mortgages.
An interest rate that is fixed for the term of the loan.
A mortgage with an interest rate that doesn't change for the life of the loan, guaranteeing fixed payments.
A form of hazard insurance required by lenders to cover properties in flood zones.
See Farmer's Home Administration.
See Federal National Mortgage Association.
Grace period given when a lender postpones foreclosure to give the borrower time to catch up on overdue payments.
Foreclosure (or repossession)
Legal process by which the lender forces the sale of a property because the borrower has not met the mortgage terms.
See Federal Home Loan Mortgage Corporation.
See Government National Mortgage Association.
See Government National Mortgage Association.
Government National Mortgage Association (GNMA or Ginnie Mae)
A government agency that provides funds for VA and FHA loans.
See Graduated Payment mortgage.
Graduated Payment Mortgage (GPM)
A mortgage with initial low payments (with potential negative amortization) that increase regularly for several years and then level off.
Period of time during which a loan payment may be made after its due date without incurring a late penalty.
Total income before taxes or expenses are deducted.
Gross monthly income
The total amount earned by a borrower each month.
To assume liability for another's debts in the event of default.
A promise by one party to pay a debt or perform an obligation contracted by another in case of that person's default.
Protects the insured against loss due to fire or other natural disaster in exchange for a premium paid to the insurer.
Home equity loan
A loan secured by equity in a property. These are sought for a variety of purposes, including home improvements, major purchases or expenses and debt consolidation. Interest paid is usually tax-deductible.
A type of insurance that covers repairs to specified parts of a house for a specific period of time.
Housing and Urban Development (HUD)
A U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.
Local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings.
Housing expense-to-income ratio
The ratio, expressed as a percentage, that results when a borrower's housing expenses are divided by his/her monthly income.
See Housing and Urban Development.
Impound (or reserves)
A portion of a borrower's monthly payments held by the lender to pay for taxes, insurance and other items as they become due.
Savings account for accumulating that portion of a borrowers monthly payments designated for future payments of taxes and insurance. (Required by certain lenders or with certain types of financing.)
A published rate used by lenders to calculate interest adjustments on ARMs (Index + Margin = Interest Rate). Some indexes are more volatile than others.
Established at loan origination, the index is a widely published financial indicator that, combined with the Margin, works to establish the effective rate of an adjustable-rate mortgage ("Index + Margin = Rate").
The rate charged during the first interval of an ARM.
Condition of a person who is unable to pay his debts as they fall due.
Charge paid for borrowing money, calculated as a percentage of the amount borrowed.
The periodic charge, expressed as a percentage, for use of credit.
Interest rate cap
A safeguard built into ARMs to prevent drastic changes in interest rates.
Interest rate change date
Dates upon which the rate of interest is subject to change. Initial change date and subsequent change dates may feature different terms.
Liability shared among two or more people, each of whom is liable for the full debt.
The ownership of property by two or more persons with the survivor taking the share of the deceased.
A mortgage 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.
Penalty paid by a borrower when a payment is made after the due date.
The bank, mortgage company or mortgage broker offering a loan.
LIBOR (London Interbank Offered Rate)
The interest rate charged among banks for short-term Eurodollar loans, and a common index for ARMs.
A claim by one person on the property of another for payment of a debt.
Life cap (Interest)
A pre-determined amount that establishes the maximum interest rate life of loan. This can be expressed as a percentage above the start rate or as a rate of interest independent of the start rate.
The collection of mortgage payments from borrowers and related responsibilities (such as handling escrows for property tax and insurance, foreclosing on defaulted loans and remitting payments to investors).
A document required by lenders prior to loan approval containing detailed information about the borrower and property.
Loan application fee
A fee a prospective buyer pays a lender when applying for a mortgage.
This document sets out the costs associated with a mortgage, including the interest rate, lender fees, title charges, pre-paid interest and insurance. The government requires that your lender give you a Loan Estimate within three days of receiving your loan application. The Loan Estimate is only an estimate; some fees can change before closing. Lender fees and the interest rate (if you have locked your rate) may not increase, and certain other costs may not increase by more than 10 percent.
Loan origination fee
A fee a lender charges to process a mortgage, usually expressed as a percentage of the loan (or points), which pays for the work in evaluating and processing the loan.
See Loan administration.
Loan to value ratio (LTV)
The percentage of the property value borrowed. (Loan amount/property value=LTV)
Lock or lock-in
A lender's guarantee of an interest rate for a set period of time, usually between loan application and loan closing. This protects borrowers against rate increases during that time.
See Loan to Value Ratio.
The number of percentage points added to an index to calculate the interest rate on an ARM at each adjustment.
A title free and clear of liens, clouds or other defects that would prevent the sale of the property.
The average rate charged by lenders for a loan.
The highest price that a buyer would pay for a property and the lowest price a seller would accept.
Monthly housing expense
Total monthly expense of principal, interest, taxes and insurance.
A document that creates a lien on a property as security for the payment of a debt.
A professional that originates mortgage loans, funding them with his own money.
A specialist that arranges financing for borrowers, but places loans with lenders rather than funding them with their own money.
The lender in a mortgage loan transaction.
MIP (Mortgage insurance premium)
Insurance purchased by borrower to insure against default on a FHA loans.
A loan for which real estate serves as collateral to provide for repayment in case of default.
A legal document that obligates a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage.
The borrower in a mortgage loan transaction.
An increase in principal balance that occurs when monthly payments are not large enough to pay all interest due on a loan, usually caused when payment caps prevent sufficient payment increases. Unpaid deferred interest is added to the loan balance, causing the borrower to owe more than the loan's original amount.
Net effective income
Gross income minus estimated federal income tax.
A statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.
A conventional loan that can not be sold to Fannie and Freddie Mac. Often, these loans are larger than the conforming loan amount.
Debt, such as taxes, that cannot be forgiven in a bankruptcy liquidation.
Legal document stating the terms of a debt and a promise to repay it.
Notice of default
Written notice to a borrower that a default has occurred and that legal action may be taken.
Office of Comptroller Currency
The federal financial regulatory body that oversees the nation's federally chartered banks and savings institutions.
A fee that a lender charges, usually expressed as a percentage of the loan (or points) for evaluating and processing the loan.
A purchase in which the seller provides all or part of the financing.
Limit on the amount by which a borrower's ARM payments may increase, regardless of rise in interest rates. This may result in negative amortization.
Payment cap (ARM)
A pre-determined amount that establishes the maximum by which the payment can increase, irrespective of increases to the interest rate.
Payment change date
Dates upon which the payment amount is subject to change. Products featuring "negative amortization" typically will include a payment change date which differs from the interest rate change date in frequency.
Per diem interest
Interest calculated per day. Depending on the day of the month on which closing takes place, you'll have to pay interest from the date of closing to the end of the month.
Periodic interest cap
An interest cap that restricts how much adjustable-rate mortgage rates may increase or decrease on pre-determined change dates.
A long-term mortgage of 10 years or more.
Also called "monthly housing expenses," principal, interest, taxes and insurance are the components of a monthly mortgage payment.
See Private Mortgage Insurance.
Points (or Discount points)
Interest prepaid to the lender at closing. Each point is equal to 1 percent of the loan amount. Paying more points at closing generally reduces a loan's interest rate and monthly payments..
Power of attorney
Legal document authorizing one person to act on behalf of another.
Taxes, insurance and assessments paid in advance of their due dates, including at closing.
Charged to a borrower at closing to cover interest on the loan between the closing date and the end of that month.
A full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property or refinances the existing loan.
Some ARM loans contain a provision against pre-payment without penalty. Terms of pre-payment penalty clauses vary from product to product, investor to investor, and state to state. Many states and even local municipalities have, or are contemplating, enacting legislation against pre-payment penalties.
The process of determining how much money a prospective homebuyer may borrow, prior to application for a loan.
Primary mortgage market
Includes banks, savings and loans, credit unions, and mortgage bankers who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to lenders such as FNMA in the secondary mortgage market.
Lowest commercial interest rate charged by a bank on short-term loans to its most credit-worthy customers.
The amount of debt, not counting interest, left on a loan.
Private Mortgage Insurance (PMI)
Insurance purchased by a buyer on a conventional loan when a down payment is less than 20 percent of the purchase price to protect the lender against default.
Profit and loss statement
A financial statement showing revenue, expenses and profits over a period of time.
A government tax based on the market value of a property.
A contract signed by buyer and seller stating the terms and conditions of a home sale.
Adjustable-rate mortgages often employ a "qualifying fate" that differs from the "start rate." The qualifying rate may be a pre-determined percentage of interest (i.e. "8 percent"), expressed as the "highest possible rate of interest at the beginning of the 2nd year", based on the start rate (i.e. "start rate + 2 percent), expressed as the "Fully Indexed Accrual Rate" ("FIAR") or another amount.
A comparison of a borrower's expenses (housing or total debt) to his income.
Real Estate Agent
A real estate professional who represents either buyers or sellers in a real estate transaction. There are no real estate agents in Alaska. They are called real estate licensees.
Real estate broker
A person who has achieved a certain level of competency in transacting real estate and licensed as such by the State of Alaska.
Real Estate Settlement Procedures Act
A law that governs acceptable practices and fees in real estate transactions.
Land and everything that is permanently affixed to it.
The right of the person with title to a property to recover it from the debtor in case of a bankruptcy.
The transfer of property back to the owner when a mortgage is fully repaid.
The act of entering documents concerning title to a property into public records.
Money paid to an agent for entering the sale of a property into the public records.
The process of paying off one loan with the proceeds from a new loan secured by the same property.
Rent with option to buy
See Lease-purchase mortgage loan.
Repossession (or foreclosure)
Legal process by which the lender forces the sale of a property because the borrower has not met the mortgage terms.
The cancellation of a contract, permitted by law within three days of signing a mortgage not used to purchase a home.
See Real Estate Settlement Procedures Act.
Rural Development Home Loans
USDA Rural Development Guaranteed Housing Loan Program offers home loans to help low-income individuals purchase homes in rural Alaska. In Alaska this usually means off the rail belt. These loans are usually fix-rate 30-year mortgages and require no down payment. Income limits for borrowers vary by area.
A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
The payment of a debt that satisfies an obligation.
Secondary mortgage market
The market into which primary mortgage lenders sell the mortgages they make to obtain funds to originate more new loans. This includes investors such as Fannie Mae and Freddie Mac.
A subordinate mortgage made in addition to a first mortgage.
An agent hired by a seller to represent him/her in negotiations to sell property.
Market conditions that favor sellers. With more buyers than sellers in the market, sellers have the negotiating power as demand exceeds supply.
Servicing (or Loan administration)
The collection of mortgage payments from borrowers and related responsibilities (such as handling escrows for property tax and insurance, foreclosing on defaulted loans and remitting payments to investors).
Settlement (or Closing)
A meeting between the buyer, seller and lender (or their agents) where property and funds legally change hands.
Settlement cost (HUD guide)
A booklet given to consumers after applying for a loan that provides an overview of the lending process.
See Closing costs.
Interest that is computed only on the principal balance.
A pre-determined rate of interest that will be applied to the loan until the date of the first interest rate change.
Subsidized second mortgage
Alternative financing option for low- and moderate-income households that also includes a down payment and a first mortgage, with funds for the second mortgage provided by city, county or state housing agencies, foundations or nonprofit corporations. Payment on the second mortgage is often deferred and carries low interest rates (if any). Part of the debt may be forgiven for each year the family remains in the home.
A measurement of land, prepared by a licensed surveyor, showing a property's boundaries, elevations, improvements and relationship to surrounding tracts.
Value added to a property by improvements made by the owner.
Money paid to and held by a lender for annual tax payments. See Impound Account.
Claim against a property for unpaid taxes.
Public sale of property by a government authority as a result of nonpayment of taxes.
The number of years until a loan is due to be paid in full.
A document that gives evidence of ownership of a property, as well as rights of ownership and possession.
A company that insures the title to a property.
Insurance that protects the lender (lender's policy) or buyer (owner's policy) against loss due to disputes over property ownership.
Examination of municipal records to ensure that the seller is the legal owner of a property and that there are no liens other claims against the property.
Tax paid when a title passes from one owner to another.
An account maintained by a broker or escrow company to handle all money collected for clients.
Someone given legal responsibility to hold property in the best interest of another.
A federal law requiring written disclosure of the terms of a mortgage (including APR and other charges) by a lender to a borrower after application.
The process of verifying data and evaluating a loan application. The underwriter gives the final loan approval.
A home loan available to veterans with little or no down payment and guaranteed by the U.S. Veterans' Administration.
Variable rate mortgage
See Adjustable-rate mortgage.
An interest rate that changes periodically in relation to an index.
Verification of deposit (VOD)
A document signed by the borrower's bank or other financial institution that verifies the borrower's account balance and history.
Verification of employment (VOE)
A document signed by the borrower's employer that verifies the borrower's position and salary.
See Verification of deposit.
See Verification of employment.
Voluntary relinquishment or surrender of some right or privilege.
A final inspection of a home to check for problems that may need to be corrected before closing.
Mortgage firms often borrow funds from a warehouse lender on a short-term basis in order to originate loans that will later be sold to investors in the secondary mortgage market. Lenders may charge a warehouse fee to cover an expense charged by the warehouse lender.
Local laws that establish building codes and usage regulations for properties in a specified area. This creation of districts specifies different types of property uses, such as commercial or residential.
An authorized person who manages or transacts business for another. Laws governing real estate—especially relating to agents—vary considerably from state to state. While some standardization has been achieved, it is best to check the particulars in each state.
An agent who represents the buyer in a real estate transaction. A buyer agent may be paid by the buyer, seller, or listing agent at closing, provided all parties consent.
An agent representing both parties in a transaction. In almost every state, dual agency is illegal and unethical without the written consent of both the buyer and the seller.
The agent who represents the seller.
The agent who obtains a buyer. A selling agent may represent the buyer, or may be a subagent of the seller.
A salesperson who works for an agent.
Features that enhance the value or desirability of a property.
To pay a debt in periodic amounts until the total amount, including any interest, is paid.
A qualified party's opinion of the value of a property. This may include examples of sales of similar properties.
An increase in value.
A process where disputes are mortgage to cover processing costs. settled by referring them to a fair and neutral third party (arbitrator). The disputing parties agree in advance to agree with the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision.
ARM (Adjustable Rate Mortgage)
A financing technique in which the lender can raise or lower the mortgage interest rate according to a set index, such as six-month Treasury bills
Assessment / Assesed Value
An official valuation of property for tax purposes. Payments made by condominium or cooperative owners for their share of building maintenance expenses.
A mortgage with monthly payments often based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). The mort-gage may contain an option to “reset” the interest rate to the current market rate and to extend the due date if certain conditions are met.
Legally declared unable to pay your debts. Bankruptcy can severely impact your credit and your ability to borrow money.
An independent business person who sets real estate office policies, hires employees, determines their compensation, and supervises their activities.
CLO (Computerized Loan Origination)
A computer network of major lenders that allows agents to initiate mortgage applications in their office. HUD has approved the procedure as long as 1) full disclosure is made of the fee; 2) multiple lenders are displayed on the computer screen to give borrowers a basis for comparison; 3) the fee charged is a dollar amount rather than a percentage of the loan.
The point at which real estate formally changes ownership. Closing costs are fees paid for services associated with a home's closing such as title insurance, surveying fees, recording fees, deeds, and affidavits.
CMA (Competitive Market Analysis)
A method of determining the value of a property by comparing the prices paid for similar properties.
Code of Ethics
A written standard of ethical conduct embraced by the NATIONAL ASSOCIATION OF REALTORS®, a trade organization of more than 700,000 members representing all branches of the real estate industry.
Compensation paid to a real estate agent (usually by the seller) for services rendered in connection with the sale, exchange, or lease of property.
Individual ownership of a portion of a building, with common areas shared by all owners. Maintenance fees called "assessments" are paid to the condominium association to maintain, repair, or improve the property.
A fixed-rate, fixed term loan that is not insured by the government.
An arrangement in which a corporation made up of residents owns a building. The buyer owns a proprietary lease, rather than real property, and a corresponding number of shares in the corporation.
A new offer as to price, terms, and conditions, made in response to a prior, unacceptable offer. A counter offer terminates an original offer.
CRS (Certified Residential Specialist)
A professional designation awarded to experienced agents who complete an advanced course of study in residential real estate and demonstrate proficiency in sales and production. CRS Designees are members of the Residential Sales Council, a not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS®.
A legal document transferring ownership of a property from one party to another.
Deed in Lieu of Foreclosure
The voluntary surrender of property by an owner or borrower to a lien holder (such as a bank) that eliminates the need to continue foreclosure action by the lien holder. The lien holder can refuse to accept the Deed in Lieu and file a Notice of Non Acceptance with the County Recorder.
Revealing what previously was private knowledge. Any statement of fact that is required by law.
A percentage of the purchase price the buyer pays in cash.
A buyer's partial payment to the seller as a show of good faith in completing the transaction.
The difference between the current market value of a property and the claims—such as the unpaid portion of a mortgage—that exist against it.
The closing of a real estate transaction through a neutral third party who holds funds and/or documents for delivery after specific conditions have been met.
A written agreement in which the seller appoints only one agent to market the property for a specific period of time. If the owner sells the property himself, he is not required to pay a commission.
Exclusive Right of Sale Listing
A written agreement between an agent and a property owner stating that the owner will pay a commission to the agent if the property is sold during a specific time period—whether or not the agent is responsible for the sale.
Fannie Mae (Federal National Mortgage Association)
Fannie Mae purchases home mortgages, thus serving as a source of funds for mortgage lenders. It is a privately owned corporation whose shares are traded on the New York Stock Exchange, but it is subject to the strict supervision of the secretary of the U.S. Department of Housing and Urban Development (HUD).
Federal Fair Housing Law
Refers to Title VIII of the Civil Rights Act, and stipulates that discrimination based on race, color, sex, familial status, handicap, religion, or national origin is illegal in connection with the sale or rental of most dwellings.
FHA (Federal Housing Administration)
A federal agency established to improve housing standards and conditions. The FHA provides mortgage insurance to approved lending institutions.
An agreement between a mortgage holder and a borrower that specified a loan payment plan and halts the foreclosure action if borrower meets requirements and terms of the agreement. The payment plan generally includes provisions for repayment to the mortgage holder of all delinquent interest and fees and could include extending the life of the mortgage beyond it's original term.
The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower's loan.
Freddie Mac (Federal Home Loan Mortgage Corporation)
A federally chartered corporation established to purchase mortgages in the secondary, or resale, market. Freddie Mac's policies are designed to serve the needs of savings and loan associations. It is subject to oversight by the U.S. Department of Housing and Urban Development (HUD).
A pledge made by one person (the guarantor) to ensure that another person (the obligor) will fulfill an obligation to a third party (the obligee).
HUD (U.S. Department of Housing and Urban Development
A federal department active in a variety of national housing programs including urban renewal and public housing.
Additions intended to increase the value of a property.
An examination of a property by the buyer, agent, title insurance company, or other interested party.
A charge or claim by one party on the property of another as security for the payment of a debt.
A written agreement between a property owner and a real estate broker authorizing the broker to find a buyer.
Banks and lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a Loss Mitigation Department, generally operated by the bank or lender to deal specifically with delinquent accounts.
The price a property will command on the open market.
MLS (Multiple Listing Service)
A means by which agents are informed of the properties offered for sale by other agents.
A legal document pledging property as security for the payment of a loan.
An insurance plan that protects the lender if the borrower does not repay a loan. Mortgage insurance is required when a home buyer makes less than a 20% down payment at the time of purchase. Private mortgage insurance (PMI) covers conventional (fixed-year, fixed-rate) loans. The Federal Housing Administration charges a mortgage insurance premium (MIP) on FHA loans.
NATIONAL ASSOCIATION OF REALTORS®
A trade organization serving over 700,000 members from all branches of the real estate industry. Members subscribe to a strict Code of Ethics which governs their conduct.
Abbreviation for Notice Of Default.
Notice of Default
An official notice filed and recorded by a designated trustee at the request of a lender indicating lender has commenced foreclosure action.
A proposal to purchase property at a specified price and terms.
The common real estate practice of showing "For Sale" homes to the public during established hours.
A lender's charge for establishing and processing a new mortgage loan. It is generally computed as a percentage of the loan and may be tax deductible.
Owner of Record
The person named in the public record as the owner of a property or mortgage.
A one-time charge paid to the lender for issuing a loan. Each point equals one percent of the loan amount and is used to obtain revenue in addition to the interest rate.
The amount of money upon which interest is paid.
A buyer who has demonstrated the financial ability to afford the asking price of a home. Prequalifying with a lender can expedite the home buying transaction.
A registered trade name that may only be used by members of the NATIONAL ASSOCIATION OF REALTORS®, an organization with over 700,000 members who represent all branches of the real estate industry. REALTORS® subscribe to a strict Code of Ethics which governs their conduct.
Obtaining a new loan to pay off an existing loan. Refinancing is a popular practice when interest rates drop.
Residential Sales Council
A not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS®. The Council awards the Certified Residential Specialist (CRS) Designation, to experienced members who have completed an advanced course of study in residential real estate.
A single-family mortgage that is 90 days or more past due, or a multifamily mortgage that is two months or more past due.
Short refinance is the replacement of a mortgage, usually with a reduced mortgage, when the borrower is already in default. This is done to transition the borrower to a more affordable payment structure. The lender has to write off the difference between the old mortgage and the new mortgage, but in some cases this may be preferable to foreclosure.
To sell a home through negotiation with the bank or lender, who agrees to accept less than the full amount owed to satisfy the debt allowing the debt to be ‘paid off’, short. Short sales are subject to bank approval and are often used as options in lieu of foreclosure.
Lawful ownership of property.
An insurance policy that protects against losses arising from title defects such as forged or misfiled documents.
An examination of the public records to determine whether the current title is clear or defective.
Also known as a row house, generally refers to a type of dwelling having two floors, with the living area and kitchen on the first floor, and the bedrooms on the second. Town houses share a common wall between units.
VA (Veterans Administration)
A federal agency designed to help veterans enter the housing market.
A loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans are made to honorably discharged veterans or their unremarried widows or widowers. Such loans require a minimal or no down payment and offer lower interest rates.
A final inspection of a property before it changes ownership.