Abstract (Of Title)
A summary of the history of a given piece of land- including who owned it in the past. The title company reviews the abstract of title to determine if there are any defects that have to be cleared before it can be sold with a clear and insurable title.
The clause allows the lender to demand payment in full of any unpaid balance of a loan. This occurs if the borrower has breached the contract in some way or hasn’t made the regular mortgage payments.
An offeree’s consent to enter into a contract and be bound by the terms of the offer.
Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
An Adjustable-Rate Mortgage (ARM) is type of loan where the interest rate goes up or down based on market interest rate fluctuations. An ARM loan can’t change more than two percentage points a given year, or go six points above the starting rate of the loan.
The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
A person appointed by a probate court to administer the estate of a person who died intestate.
A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.
Agreement Of Sale
The purchase agreement is a contract in which a seller agrees to sell and the buyer agrees to buy a given property. An agreement of sale contract contains very specific terms and conditions that are spelled out in writing and signed by both parties.
A feature of real property that enhances its attractiveness and increases the occupant’s or user’s satisfaction although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.
A payment plan that allows a debt to be paid off over time in regular installments such as with mortgage or car payments.
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
To repay a mortgage with regular payments that cover both principal and interest.
Annual Mortgagor Statement
A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
Annual Percentage Rate
Annual Percentage Rate (APR) is the cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.
A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.
An estimate of the market value of a piece of property by an impartial expert. Typically an appraisal includes references to comparable properties to support the assigned value.
An estimate of the value of a piece of property offered as security for a home loan. It should be noted, the appraisal is done for the purpose of supporting the loan and may not be an accurate reflection of actual market value.
A person qualified by education, training, and experience to estimate the value of real property and personal property.
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
The valuation placed on property by a public tax assessor for purposes of taxation.
Not to be confused with property tax, which relies on the value of the land, assessments are costs that are charged for public improvements that benefit the land. In the case of a home sale, any pending assessments must be addressed in the purchase agreement at the time of closing.
The public record of taxable property.
A public official who establishes the value of a property for taxation purposes.
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
The transfer of a mortgage from one person to another.
A mortgage that can be taken over (“assumed”) by the buyer when a home is sold.
The transfer of the seller’s existing mortgage to the buyer. See assumable mortgage.
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Assumption Of Mortgage
When a buyer agrees to be personally liable for payment of an existing mortgage, they are said to have assumed the loan. The lender has to agree to an assumption of mortgage. If approved, the original loan holder is released from any liability should there be any foreclosure.
One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
A financial statement that shows assets, liabilities, and net worth as of a specific date.
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
The final lump sum payment that is made at the maturity date of a balloon mortgage.
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.
Income before taxes are deducted.
The person designated to receive the income from a trust, estate, or a deed of trust.
To transfer personal property through a will.
An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.
Bill Of Sale
A written document that transfers title to personal property.
Binder Or “Offer To Purchase”
A good faith agreement , secured by earnest money, of an offer to purchase a property.
Biweekly Payment Mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower’s bank account. The result for the borrower is a substantial savings in interest.
Blanket Insurance Policy
A single policy that covers more than one piece of property (or more than one person).
The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.
In good faith, without fraud.
An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
A violation of any legal obligation.
A form of second trust that is collateralized by the borrower’s present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as “swing loan.”
A short term loan, usually taken out by buyers who are waiting for their own home to sell, or when a normal mortgage is not enough to cover the asking price or down payment.
A person who has taken education beyond the agent level as required by state laws and has passed a broker’s license exam. Brokers can work alone or they can hire agents to work for them.
A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.
A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. “Rent” is an example of an expense category. “Salary” is a typical income category.
Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.
Building Line Or Setback
Legal restrictions, usually set by deeds, leases, building codes or zoning ordinances, that limit where construction can extend beyond the ends or sides of a lot. Building lines and setbacks prevent property owners from creating crowded conditions. They establish boundaries and put limitations on the what the owner can do with a property. Because of this, setbacks can affect the value of the land.
An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.
The buyer’s agent is a real estate agent that represents the buyer during the purchase of a home or property. In traditional real estate, a seller’s agent represents the seller and splits a commision, (usually 6%) with the buyer’s agent. (Paid by the seller.)
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.
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. See lifetime payment cap, lifetime rate cap, periodic payment cap, and periodic rate cap.
(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.
The cost of an improvement made to extend the useful life of a property or to add to its value.
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
Latin for “let the buyer beware.” This puts the burden onto the buyer to make certain that they are fully satisfied with the item before purchasing it.
Certificate Of Deposit
A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.
Certificate Of Deposit Index
An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. See “adjustable rate mortgage”
Certificate Of Eligibility
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.
Certificate Of Title
A certificate issued by a title company and states that the seller has a clear, marketable and insurable title on the property. It does not cover hidden defects that the title company could not discover by examining the records. It should be noted that title insurance policy offers considerably more protection than a certificate of title.
Chain Of Title
The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
The term chattels refers to personal property. There are two kinds: real chattels are buildings and fixtures; personal chattels are items such as clothing, furniture and the like.
A title that is free of liens or legal questions as to ownership of the property.
Closing, also known as settlement, is where the property legally changes hands. The contract is signed by both parties, funds are distributed, the deed is signed by the seller, and all closing costs are paid. The buyer also takes possession of the keys to the home.
Closing Cost Item
A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney’s fees. Many closing cost items are included as numbered items on the HUD-1 statement.
There are a number of expenses which buyers and sellers usually incur when a home is sold. In addition to price of the property, there are other expenses that must be paid on closing day. Closing costs usually include:BUYER’S EXPENSES
Documentary Stamps on Notes
Recording Deed and Mortgage Fees
Appraisal and Inspection Fees
Survey ChargeSELLER’S EXPENSES
Documentary Stamps on Deed
Real Estate Commission (usually 6 %split between the seller’s and buyer’s agent)
Cost of Abstract
Documentary Stamps on Notes
Recording Deed and Mortgage Fees
Appraisal and Inspection Fees
Survey ChargeSELLER’S EXPENSES
Documentary Stamps on Deed
Real Estate Commission (usually 6 %split between the seller’s and buyer’s agent)
Cost of Abstract
The day on which the legal formalities of a real estate sale are concluded. Generally, the certificate of title, deed and abstract, are prepared for closing by the title company. The cost is then charged to the buyer (unless negotiated to be paid by the seller in the contract) and all contracts are signed. All funds are disbursed and the property legally changes hands.
See “HUD-1 Statement”
See “comparative market analysis”
Cloud (On Title)
The term cloud on a title means that there is already an outstanding claim or encumbrance which adversely affects the marketability of title.
Community Land Trust Mortgage Option (CLT) is an alternative financing option that enables low- and moderate-income home buyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.
A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.
A provision in a hazard insurance policy that states the amount of coverage that must be maintained — as a percentage of the total value of the property — for the insured to collect the full amount of a loss.
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
A person who signs a promissory note along with the borrower. A co-maker’s signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
Traditional real estate agents charge a commission for listing a property on the MLS (Multiple Listing Service) and for brokering the sale. The commission is usually 6% to 7% of the sales price. This amount is then split between the buyer’s and seller’s agent, if there is one. If not, the entire commission is paid to the seller’s agent. A typical home listed for $250,0000 will cost $15,000 in real estate agent commissions- unless the owner does a FSBO (for sale by owner) or lists with a discounted broker for an upfront flat fee.
A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a “loan commitment”.
Common Area Assessments
Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners’ association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project’s homeowners’ association (or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
An unwritten body of law based on general custom in England and used to an extent in the United States.
In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.
An alternative financing option for low- and moderate-income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate at all). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.
An abbreviation for “comparable properties”; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
Comparative Market Analysis
Comparative Market Analysis (CMA) is an estimate of a home’s current market value based on the sale prices of other, comparable homes in a given radius. An accurate CMA can be extremely helpful in setting a realistic market value.
Interest paid on the original principal balance and on the accrued and unpaid interest.
When a government entity takes legal possession of private property (under the power of eminent domain), against the will of the owner, it is known as condemnation. The term is also used when a government agency determines that a particular building is unfit and therefore unsafe for use.
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
An oral or written agreement to do or not to do a certain thing.
Contract For Deed
A contract for a deed means that a buyer is allowed to take possession of a property even though the seller maintains the legal title to the property until the balance is paid off. In such cases, the buyer makes regular monthly payments as agreed upon by the terms of the contract.
Contract Of Purchase
The purchase agreement is a contract in which a seller agrees to sell and the buyer agrees to buy a given property. An agreement of sale contract contains very specific terms and conditions that are spelled out in writing and signed by both parties.
A contractor is someone who either builds or alters buildings, or portions thereof. In the construction industry, there are normally contractors for each phase of construction such as: pouring the foundation, heating, cooling, plumbing, electrical, roofing and road building.
A mortgage loan that is not guaranteed by the VA (Veteran’s Administration) or insured by HUD. Instead, it is subject to the conditions established by the various states, federal guidelines and the lending institution itself.
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
Cooperative Housing (co-op) is a group of housing units or apartments where the residents are stockholders in the corporation that owns the property. In a cooperative, the association or corporation owns the title to the property. A resident owns stock in the corporation and can occupy the dwelling for as long they continue to own the stock.
A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.
Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.
A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.
Arrangements under which an employer moves an employee to another area as part of the employer’s normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
Cost Of Funds Index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).
Conditions that affect the use of a given piece of land or property that are written into the title.
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
A record of an individual’s open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.
Credit Life Insurance
A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.
A person to whom money is owed.
A report, based on past history and current income, which concerns the ability of a loan applicant to pay installment payments in a timely manner.
Credit Reporting Agency
Credit Reporting Agency (or Credit Reporting Bureau) is an organization that prepares reports that are used by lenders to determine a potential borrower’s credit history. The agency obtains data for these reports from a credit repository as well as from other sources.
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
Certificate of Reasonable Value (CRV) is a document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
The Centralized Showing Service (CSS) is a 24/7/365 service that answers agent calls and sets up home showings. (The showings themselves are restricted to daytime hours). When an agent calls, CSS records the name of the agent and verifies their identity as only registered agents can access a home through the CSS.Once verified, CSS shares important information such as keybox combinations, gate access and alarm codes or special instructions. CSS is only for use by agents and not the general public. The CSS phone number should never be used on any flyers, yard signs or advertising materials intended for buyers.
Days On Market (DOM)
The total number of days the listing has been active on the market before an offer has been accepted.
An amount owed to another. See installment loan and revolving liability.
A legal document of title to real property is transferred from one owner to another.
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a “voluntary conveyance.”
Deed Of Trust
When the title is transferred to trustee who holds it as security for a loan while the equitable title remains with the borrower. (Equitable title refers to the right to obtain full ownership of the property.)
When a mortgage is not paid according to the terms of the loan agreement the property is subject to default. In the event of default, a lender can accelerate the payments or take possession of the property to settle the debt.
Failure to make mortgage payments when mortgage payments are due.
A deposit is a set amount, usually ten percent of the purchase price, given as proof of an intention to buy.
A decline in the value of a home due to changes in the property because of wear and tear or other factors such as age.
A fully licensed real estate broker who offers their services for a lower commission than traditional real estate agents. Many discount brokers charge a single flat fee rather than a percentage of the sale price.
A form of state tax that requires a stamp on deeds and mortgages whenever a real estate title is bought or sold.
A charge by an attorney for preparing legal documents for a real estate transaction.
The rights of a widow in the property of her husband at his death.
The amount of money to be paid by the buyer to the seller upon signing the agreement of sale.
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
This terminology is usually used for second mortgages. See due-on-sale provision.
A deposit given to the seller by the buyer that shows the buyer is serious about purchasing the property.
A right-of-way granted to a person (or company) authorizing them to enter the property to gain access to their own land or to perform a necessary function, such as when a city employee enters the property to read a meter.
An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective Gross Income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.
When one property owner encroaches on the right of another by building onto a neighboring piece of property. For example, installing a fence or a building a structure that is either completely or partially over the boundary line.
A legal right or interest in a property that affects the clear title, and thereby diminishes the land’s value. Encumbrances can take several forms, such as easement rights, claims, mortgages, unpaid taxes, liens, zoning ordinances, charges or other legal actions.
A person who signs ownership interest over to another party. Contrast with co-maker.
Equal Credit Opportunity Act
Equal Credit Opportunity Act (ECOA) is 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 of a homeowner’s unencumbered share in a given piece of real estate. To calculate equity, subtract the fair market value of the home from the remaining unpaid balance of the mortgage, minus any outstanding liens or debts against the property. Once the mortgage is paid in full, the homeowner is said to have 100% equity in the home.
Money paid by the buyer to the seller and held in trust by the escrow agent (such as a title company) until the contract has been signed and the funds are released.
The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.
Funds collected by the servicer and set aside in an escrow account to pay the borrower’s property taxes, mortgage insurance, and hazard insurance.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
The portion of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as “impounds” or “reserves” in some states.
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
The lawful expulsion of an occupant from real property.
Examination Of Title
The report on the title of a property from the public records or an abstract of the title.
Exclusive Agency Listing
An “exclusive agency” listing is much like an open listing except that the broker will represent the owner. The owner can still sell the property themselves, in which case, they do not pay a commission. Because of this, these types of listings are not popular with brokers and they may do little more than to list the MLS rather than spending any time or money on actually marketing the home.
Exclusive Right To Sell
An exclusive right to sell means that your agent has the right to market your home and guarantees them a commission regardless of who sells the home. For instance, even if you locate the buyer, the agent is still entitled to their fee.
Any item that is specifically excluded from the sale, for instance, a garden shed or children’s’ swing set or above ground pool.
A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. “Executrix” is the feminine form.
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.
Fair Market Value
Fair market value refers to an estimated value of a given property based upon what a knowledgeable buyer would probably be willing to pay. An estimate of fair market value is subjective and will vary based on the time, circumstances and perceived desirability of the property in question.
A New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation’s largest source of financing for home mortgages.Over the past 31 years, Fannie Mae has provided nearly $2.8 trillion of mortgage financing for over 34 million families.
Fannie Mae-Approved Lender
Fannie Mae-approved lenders can offer the widest range of mortgage products available to meet your needs and can help you find the lowest cost mortgage.
Fannie Mae Loan Limit
See “loan limit”.
Fannie Mae Mortgage
Fannie Mae works to reduce down payment requirements and cut closing costs when developing mortgage products so more dreams of homeownership can come true. Fannie Mae provides technology tools for Fannie Mae-approved lenders to use when providing mortgages to home buyers. These tools can help borrowers get their mortgages quicker and cheaper.
Fannie Mae Properties
Fannie Mae owns, manages, and has available for sale, single-family detached homes, two- to four-unit properties, condominiums, and townhouses in a variety of neighborhoods. The number, type, and sales price may vary substantially. The homes vary in age and may require repairs. Fannie Mae homes are sold through local real estate brokers whose contact information is provided in the “Fannie Mae Properties for Sale” search results on homepath.com.
FNMA’s Buyer’s ProgramSM
The Fannie Mae’s Community Home Buyer’s ProgramSM is an income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family’s buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
A financing option for a fixed-rate mortgage that offers home buyers a 3 percent down payment loan with a term between 15 and 30 years. The mortgage features a loan-to-value (LTV) percentage of 97 percent, and is designed to expand homeownership opportunities for people with modest incomes. Borrowers must take a pre-purchase home-buyer education session to qualify for a Fannie 97 mortgage.
The greatest possible interest a person can have in real estate.
Fee Simple Estate
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
Federal Housing Administration (FHA) is an agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
FHA Coinsured Mortgage
A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor’s default.
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
A lender’s agreement to make a loan to a specific borrower on a specific property.
A mortgage that is the primary lien against a property.
The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.
A Fixed-Rate Mortgage (FRM) is loan with a fixed rate of interest which remains unchanged over the entire payment timeline-often a period of 15-30 years.
Personal property that becomes real property when attached in a permanent manner to real estate.
Flat Interest Rate
A flat rate interest is also sometimes called “simple” interest. It is an interest rate that is a fixed percentage of the original loan amount that lasts for the entire period of the loan.
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
A legal term that indicating that the lender is enforcing their right to the repayment of a debt by taking control of the property.
The loss of money, property, rights, or privileges due to a breach of legal obligation.
For Sale By Owner
A For Sale by Owner (FSBO) occurs when a homeowner decides to avoid paying hefty commissions to a real estate agent and sells their home themselves. Many FSBO’s however, still want to list on the MLS, which only a real estate agent can access. In such cases they often turn to a discounted or flat fee broker. Besides listing on the MLS, where four of five homes are bought and sold in the US, many discount brokers also offer other services as a ‘la carte options such as: setting the price, marketing, and contract negotiations.
An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.
Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans — monies must be repaid to avoid serious penalty charges.
The term freehold means that the land owner has complete and absolute ownership and use of the land indefinitely. This is in contrast to a leasehold property which allows use for only a specified time of 99, 60, 30 years or some other specified period of time- after which someone else can take legal possession of it.
Fully Amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
General Warranty Deed
A deed that conveys not only the seller’s interest and title to the property to the buyer, but also warrants that if the title turns out to be defective (such as tax liens, claims and judgments), the buyer may hold the seller liable.
Government National Mortgage Association (GMNA) is a government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortgage.
That party in the deed who is the recipient or buyer.
That party in the deed who is the giver or seller.
The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.
A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.
Growing-Equity Mortgage (GEM) is a fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.
A mortgage that is guaranteed by a third party.
Also known as a government mortgage.
A hazard warranty protects the homeowner against damages from vandalism, fire, storms and other common hazards.
Home Equity Conversion Mortgage (HECM) is a special type of mortgage that enables older homeowners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.
Home Equity Line Of Credit
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in a property.
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.
Fannie Mae’s adjustable-rate conventional reverse mortgage, which allows older homeowners to borrow against the value of their homes and receive the proceeds according to the payment option they select. The amount available is based on the number of borrowers and their ages and the adjusted property value. Anyone 62 years or older who either owns his or her own home free and clear or has very low mortgage debt is eligible.
A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
A policy that protects both the property itself as well as the contents in case of loss or damage. The policy must be for at least the same amount of the loan or for 80% of the value of the improvements, whichever is greater.
Homeowner’s Warranty (HOW) A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.
HomeStyle® Mortgage Loan
A mortgage that enables eligible borrowers to obtain financing to remodel, repair, and upgrade their existing homes or homes that they are purchasing
Housing Expense Ratio
The percentage of gross monthly income that goes toward paying housing expenses.
The U.S. Department of Housing and Urban Development. The Office of Housing/Federal Housing Administration insures home mortgage loans issued by lenders and sets the minimum standards for homes.
HUD Median Income
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the “closing statement” or “settlement sheet.”
Inclusions are removable items that the seller has agreed to be included in the sale. Such items might include: curtains, lights, blinds, ceiling fans, dishwashers, clothes or other items.
Real estate developed or improved to produce income.
A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps that are associated with the mortgage.
In-File Credit Report
An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.
Initial Interest Rate
The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as “start rate” or “teaser.”
A detailed examination of the property in question for various reasons such as determining if the presence of termites or to see if certain repairs have been completed.
The regular periodic payment that a borrower agrees to make to a lender.
Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.
A property title that a title insurance company agrees to insure against defects and disputes.
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.
A charge paid to the lender in exchange for being allowed to borrow money.
Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.
Interest Only Loan
A loan on which interest is paid periodically.
The rate of interest in effect for the monthly payment due.
Interest Rate Buydown Plan
An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage. During the specified period, the mortgagor’s effective interest rate is “bought down” below the actual interest rate.
Interest Rate Ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
Interest Rate Floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
A list of all the items included in the sale of a property; usually furniture, furnishings and other removable items.
The purchase of an asset such as real estate for the purpose of producing a profit upon the resale of the asset.
The purchase of real estate property, not occupied by the owner, for the purpose of producing a profit upon the resale of the asset.
An IRA (Individual Retirement Account) is a retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.
Joint tenancy occurs when there is an equal holding of a given property by two or more persons. In the event of the death of one of the parties, their share passes to the survivors.
A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor’s real property as collateral for the judgment’s creditor.
A lien on the property of a debtor resulting from the decree of a court.
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
A loan that exceeds Fannie Mae’s mortgage amount limits. Also called a nonconforming loan.
A keybox is a type of padlock that contains a cavity inside where a key to the home can be placed. Only a someone with the appropriate mechanical, electronic key or combination can gain access to the keybox in order to remove the key and gain entry into the home. A keybox is an essential item for sellers as it allows authorized agents to show the home to potential buyers in the seller’s absence.
Taxes levied by a government authority and based on the assessed value of the property.
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
Lease-Purchase Mortgage Loan
An alternative financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month’s rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate.
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
Liabilities are outstanding debts that are owed. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party.
A claim made by one person and applied to the property of another, as a form of security for an unpaid debt.
Lifetime Payment Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage. See cap.
Lifetime Rate Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.
A form of title that applies to a property before it has been surveyed adequately.
Line Of Credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower. See home equity line of credit.
A cash asset or an asset that is easily converted into cash.
A real estate agent that represents the seller and lists the property on the MLS (Multiple Listing Service). Traditionally, the agent is paid 6% of the sale value of the home. Discounted brokers and flat fee brokers also list homes on the MLS. Instead of charging thousands to list, they charge only a one time flat fee.
A sum of borrowed money (principal) that is generally repaid with interest.
Loan Application Fee
A fee, paid to the lender at the time of application. The amount varies by lender.
See “commitment letter”.
Points are a form of prepaid interest; one point equals one percent of the loan. Discount points may be paid by either buyer or seller on conventional loans.
Fannie Mae operates exclusively in the secondary mortgage market, where we help to ensure that money for mortgages is available to home buyers in every state across the country. In keeping with Fannie Mae’s mission to help more low-, moderate-, and middle-income people buy homes, our loan limits are adjusted each year, in response to changes in housing affordability nationwide.
The process by which a mortgage lender brings into existence a mortgage secured by real property.
Loan-To-Value (LTV) percentage is the relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage of 80 percent.
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
The time period during which the lender has guaranteed an interest rate to a borrower. See lock-in.
Fees charged by a homeowner’s association (HOA) as set out on the HOA restrictions.
A title that is free and clear of clouds, liens, or other title defects. A title which allows the owner to sell his property to others freely.
For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.
A homeowners’ association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a “second-level” association that handles matters affecting the entire development, while the “first-level” associations handle matters affecting their particular portions of the project.
The last day of the term of a home loan contract. The home loan must either be paid in full or the home loan agreement has to renewed.
A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product.
Merged Credit Report
A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your credit.
See “Multiple Listing Service”.
The act of changing any of the terms of the mortgage.
Money Market Account
A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.
Money Market Fund
A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.
Monthly Fixed Installment
That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.
Monthly Payment Mortgage
A mortgage that requires payments to reduce the debt once a month.
A loan, issued by a lender and given to a buyer to be used to buy real property. The property then becomes the security for the loan. If the buyer defaults, the lender has a right to take control of the property to pay the debt.
A company that originates mortgages exclusively for resale in the secondary mortgage market.
An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.
A written notice, issued by a lender, advising that it will release mortgage funds in a specified amount to enable a buyer to purchase a property.
A contract that insures the lender against loss caused by a mortgagor’s default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of, or virtually all of, the mortgage loan.
Mortgage Insurance Premium
Mortgage Insurance Premium (MIP) is also known as home loan insurance, the premium payment is made by the borrower to the lender. It usually amounts to about one half of one percent of the loan. The money goes into the HUD insurance program that helps to protect lenders against default. Even though the buyer pays the premium, the lender is the beneficiary.
The mortgage lender is the party that advances funds to the buyer in order to purchase the home.
Mortgage Life Insurance
A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.
A written agreement where the borrower promises to repay the loan, secured by a lien or mortgage on the property.
A mortgage with a provision that allows the borrower to receive additional loan amounts in the future without refinancing the loan or paying additional financing charges.
The party lending the money in a mortgage agreement, typically a bank or other lending institution.
Mortgagee’s Title Policy
A policy that protects the lender; it is required by the lender to insure that the lender has a valid lien.
The party that borrowed the funds in a mortgage agreement, usually the homeowner.
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.
Fannie Mae provides financing for multifamily (buildings with five or more units) rental properties through a nationwide network of mortgage lenders.
Multiple Listing Service
Multiple Listing Service (MLS) is a cooperative system for listing and selling property. The MLS is a restricted system that only allows access to list through licensed real estate brokers. The massive database and software allow brokers to cooperate and share information. As of today, the vast bulk of US home sales are brokered through the MLS. Until recently, in order to list on the MLS, sellers had to pay a 6% or more commission to an agent. Flat fee listings however, require only a one-time, upfront fee. This gives sellers have access to the very same MLS and allows them to save thousands of dollars in the process.
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create “negative” amortization.
Net Cash Flow
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners’ association dues, leasehold payments, and subordinate financing payments.
The value of all of a person’s assets, including cash, minus all liabilities.
No Cash-Out Refinance
A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower’s use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).
An asset that cannot easily be converted into cash.
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
The interest rate stated on a mortgage note.
Notice Of Default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
Offer To Purchase
A formal agreement that offers to purchase a given piece of property for a specified amount. The offer may be with or without conditions.
The option period allows the buyer to pay a nominal fee in exchange for the right to terminate the contract.
Option To Buy
A legal agreement that gives the the buyer the right to purchase property at a set price, within a certain period of time. The option fee, typically one percent of the price, is forfeited if the buyer does not go through with the sale.
Original Principal Balance
The total amount of principal owed on a mortgage before any payments are made.
A fee the lender charges the borrower to originate the loan.
A property purchase transaction in which the property seller provides all or part of the financing.
Owner’s Title Policy
Title policy insures that the buyer has legal title to the property.
A type of that shows how lots are divided within a subdivision or community. A plat is drawn by a surveyor and lays out easements, improvements, buildings and boundary lines.
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.
Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.
Periodic Payment Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period.
Periodic Rate Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
Any property that is not real property.
Pronounced “pity”, this is an abbreviation for all of the lumped in charges that go into a monthly mortgage including: the principal, insurance and taxes.
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
Planned Unit Development
See “PUD” below.
A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.
Sometimes referred to as “discount points.” A point is the equivalent of one percent of the amount of the mortgage loan. There are two kinds of points, origination points and discount points.
Power Of Attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Prearranged Refinancing Agreement
A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.
A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor.
The payment of mortgage loan, or a portion thereof, before due date. Mortgage lenders frequently restrict the option of prepayment by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment.
Although the terms are often used interchangeably, a pre-approval letter is not the same as a pre-qualification letter. A pre-approval letter is issued by a lender and based on the credit history of the borrower. It details the amount they are willing to lend if certain conditions are met.
A fee that may be charged to a borrower who pays off a loan before it is due.
The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.
Not to be confused with a pre-approval letter, a pre-qualification letter only expresses the opinion that a lender might be willing to issue a loan if certain credit requirements are met. These letters are not a guarantee of a loan. In fact, they are often sent out before any paperwork or applications have even been submitted.
The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
The basic amount of the loan that was borrowed without the interest or other added fees. Most mortgage loans start out by paying the interest with very little of the payment being applied to the principle. As the loan payments continue, a higher percentage of the payment amount is applied to the principle.
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.
Principal, Interest, Taxes, and Insurance (PITI) are he four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
Private Mortgage Insurance (PMI) is mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
A written promise to repay a specified amount over a specified period of time.
A meeting in an announced public location to sell property to repay a mortgage that is in default.
Planned Unit Development
Planned Unit Development (PUD) is a project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.
Private Mortgage Insurance
Private Mortgage Insurance (PMI) is insurance paid by the borrower, but used to protect the lender in the event the borrower defaults on the loan.
The purchase agreement is a contract in which a seller agrees to sell and the buyer agrees to buy a given property. An agreement of sale contract contains very specific terms and conditions that are spelled out in writing and signed by both parties.
Purchase And Sale Agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Purchase Money Transaction
The acquisition of property through the payment of money or its equivalent.
Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
A deed which transfers the rights and interests of the owner (the grantor) to a recipient (the grantee). A quitclaim deed does not make any warranties to the title. It simply transfers the interests of the grantor to the grantee.
A radioactive gas found in some homes that in sufficient concentrations can cause health problems.
A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term.
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time. See lock-in.
Real Estate Agent
Anyone who earns a real estate license can be called a real estate agent, whether that license is as a sales professional, an associate broker or a broker. State requirements vary, but in all states you must take a minimum number of classes and pass a test to earn your license.
Real Estate Associate Broker
Someone who has taken additional education classes and earned a broker’s license but chooses to work under the management of a broker.In addition to these various types of real estate professionals, there are a host of additional certifications that agents can earn. Most require completion of a class (usually over a few days).
Real Estate Broker
An who has taken additional classes and met other qualifications in order to become a licensed real estate broker. A broker may work alone or hire agents to work under them. Brokers represent buyers and sellers (sometimes both) in the sale of real estate.
Real Estate Salesperson
Another name for a real estate agent.
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
Realtors are members of the National Association of Realtors, a professional association which requires the payment of dues and other fees. The term Realtor is a registered trademark. Realtors must maintain a real estate license and belong to both a local and state association.
A fee paid to the realtor as compensation for his/her services. Traditionally, real estate agents charge 6% of the sales price of the property, unlike discount real estate agents who work for a single, flat fee.
Charges and fees required by the county clerk to record documents in the public record.
The process of the same paying off one loan with the proceeds from another loan.
The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk.”
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
The process of paying off one loan with the proceeds from a new loan using the same property as security.
A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.
The amount of principal that has not yet been repaid. See principal balance.
The original amortization term minus the number of payments that have been applied.
Rent Loss Insurance
Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
Rent With Option To Buy
See lease-purchase mortgage loan.
An arrangement made to repay delinquent installments or advances. Lenders’ formal repayment plans are called “relief provisions.”
Replacement Reserve Fund
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project — particularly that which has a short life expectancy, such as carpeting, furniture, etc.
Real Estate Settlement Procedures Act (RESPA) is a HUD consumer protection act that requires lenders to disclose certain information at specified times during the loan process, such as fees and other charges. Additionally, the act prohibits kickbacks and is designed to help consumers be more informed.
Restrictions or prohibitions about what may take place on a piece of property usually within a subdivision.
Restrictive covenants can be either private (between the seller and the buyer) or “run with the land” (binding on all future owners of the land). Restrictions limit what can be done with a given parcel of land. For instance, a restrictive covenant may dictate that only a certain number or types of buildings may be erected on the land.
A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
Right Of First Refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
Right Of Ingress Or Egress
The right to enter or leave designated premises.
Right Of Survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
Rural Housing Service
Rural Housing Service (RHS) is an agency within the Department of Agriculture, which operates principally under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. Funds are borrowed from the U.S. Treasury.
A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
A mortgage that has a lien position subordinate to the first mortgage.
Secondary Mortgage Market
The buying and selling of existing mortgages.
A loan that is backed by collateral.
The property that will be pledged as collateral for a loan.
See Buyer’s agent.
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See owner financing.
An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
The final step of a sale in which the purchase price is paid and the buyer is legally entitled to take possession of the property.
See “HUD-1 Statement”.
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One- to four-unit properties including detached homes, townhomes, condominiums, and cooperatives.
A special tax levied on property for public benefits such as road construction, sewers, sidewalks, streetlights and the like.
Special Deposit Account
An account that is established for rehabilitation mortgages to hold the funds needed for the rehabilitation work so they can be disbursed from time to time as particular portions of the work are completed.
A special lien is a legal claim to something of value belonging to someone else. It is a form of compensation for work, materials, money or other expenditures on the behalf of the owner of the property that has not been discharged.
Special Warranty Deed
A deed in which the seller guarantees that he has done nothing during the time that he held the title to the property which might impair the title.
Standard Payment Calculation
The method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
See documentary stamps.
A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
Subsidized Second Mortgage
An alternative financing option known as the Community Seconds® mortgage for low- and moderate-income households. An investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.
A detailed and precise map or plat made by a licensed surveyor that shows the measurements of the land including its elevations, boundaries, improvements and its relationship to surrounding parcels of land.
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
Compulsory fees and or charges imposed by a government body, such as a county or state that are collected and used for the public good.
When the seller pays his or her portion of taxes from January first to the closing date.
Tenancy By The Entirety
A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.
Tenancy In Common
A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenacy.
The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy agreement.
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market. See mortgage broker.
A legal document indicating the rights of ownership and possession of particular property.
A title company checks the title to ensure the title is clear and then issues title insurance for a given piece of land. Additionally, a title company acts as an escrow agent.
Protects lenders and homeowners against the loss of their interest in property due to legal defects in the title.
Title Search Or Examination
A thorough examination of the records, usually done at the local courthouse, to ensure the buyer is purchasing a property from the legal owner. It also ensures that there are no liens or claims on the land as these types of issues affect the transferability of the land and its value.
Total Expense Ratio
Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.
Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.
Transfer Of Ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property “subject to” the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership.
State or local tax payable when title passes from one owner to another.
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury’s daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
Someone who is granted the legal responsibility of holding a particular property in the best interest of or “for the benefit of” another.
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
Two- To Four-Family Property
A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
A fiduciary who holds or controls property for the benefit of another.
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower’s creditworthiness and the quality of the property itself.
A loan that is not backed by collateral.
A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.
The person (owner) offering the property for sale.
Statement settling out the details of the property, made by the (owner) vendor.
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
Department Of Veterans Affairs
Department of Veterans Affairs (VA) is an agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.
A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario can include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that are used in the analysis. You can use a what-if scenario to explore different ways to improve your ability to afford a house.
A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.
Regulations established by local government authorities in regards to building codes, and setting forth regulations for property land usage.