Abstract (Of Title)
A summary of the public
records relating to the
title to a particular piece
of land. An attorney or
title insurance company
reviews an abstract of title
to determine whether there
are any title defects which
must be cleared before a
buyer can purchase clear,
marketable, and insurable
title.
Acceleration Clause
Condition in a mortgage
that may require the balance
of the loan to become due
immediately, if regular
mortgage payments are not
made or for breach of other
conditions of the mortgage.
Acceptance
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.
Adjustable Mortgage Loan
Any mortgage that does
not have a fixed interest
rate and a fixed payment for
the term of the loan, or
does not amortize to zero at
the end of the set term,
when required payments are
made on time.
Adjustable Rate Mortgage
A mortgage in which the
interest rate is adjusted
periodically according to
the movement in a
pre-selected index.
Adjusted basis
The original cost of a
property plus the value of
any capital expenditures for
improvements to the property
minus any depreciation taken
Adjustment date
The date on which the
interest rate changes for an
adjustable-rate mortgage
(ARM).
Adjustment Interval
For an adjustable rate
mortgage, the time between
changes in the interest rate
charged. The most common
adjustment intervals are
one, three or five years.
Adjustment period
The period that elapses
between the adjustment dates
for an adjustable-rate
mortgage (ARM).
Administrator
A person appointed by a
probate court to administer
the estate of a person who
died intestate.
Agreement of Sale
Known by various names,
such as contract of
purchase, purchase
agreement, or sales
agreement according to
location or jurisdiction. A
contract in which a seller
agrees to sell and a buyer
agrees to buy, under certain
specific terms and
conditions spelled out in
writing and signed by both
parties.
Amenity
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.
Amortization
A payment plan, which
enables the borrower to
reduce his debt gradually
through monthly payments of
principal.
Amortization schedule
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.
Amortization term
The amount of time
required to amortize the
mortgage loan. The
amortization term is
expressed as a number of
months.
Amortize
Reduce a debt by regular
payments of both principal
and interest.
Amortization Schedule
A timetable for payment
of a mortgage showing the
amount of each payment
applied to interest and
principal and the remaining
balance.
Annual Percentage Rate (APR)
The total yearly cost of
a mortgage stated as a
percentage of the loan
amount: includes the base
interest rate, primary
mortgage insurance, and loan
origination fee (points)
Annuity
An amount paid yearly or
at other regular intervals,
often on a guaranteed dollar
basis.
Application
A form used to apply for
a mortgage loan and to
record pertinent information
concerning a prospective
mortgagor and the proposed
security.
Application Fee
The fee charged by the
lender to the borrower for
applying for a loan.
Appraised value
An opinion of a
property's fair market
value, based on an
appraiser's knowledge,
experience, and analysis of
the property.
Appraiser
A person qualified by
education, training, and
experience to estimate the
value of real property and
personal property.
Appraisal
A professional opinion of
the market value of a
property.
Appreciation
An increase in the value
of a house due to changes in
market conditions or other
causes.
Assessed Value
The valuation placed upon
property by a public tax
assessor for purposes of
taxation.
Assessment
The process of placing a
value on property for the
strict purpose of taxation.
May also refer to a levy
against property for a
special purpose, such as a
sewer assessment.
Assessor
A public official who
establishes the value of a
property for taxation
purposes.
Asset
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).
Assignment
The transfer of a
mortgage from one person to
another.
Assumable Loan
These loans may be passed
on from a seller of a home
to the buyer. The buyer
"assumes" all outstanding
payments.
Assumption clause
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.
Assumption fee
The fee paid to a lender
(usually by the purchaser of
real property) resulting
from the assumption of an
existing mortgage.
Assumption of Mortgage
An obligation undertaken
by the purchaser of property
to be personally liable for
payment of an existing
mortgage. In an assumption,
the purchaser is substituted
for the original mortgagor
in the mortgage instrument
and the original mortgagor
is to be released from
further liability in the
assumption, the mortgagee's
consent is usually required.
Attorney-in-fact
One who holds a power of
attorney from another to
execute documents on behalf
of the grantor of the power.
The original mortgagor
should always obtain a
written release from further
liability if he desires to
be fully released under the
assumption. Failure to
obtain such a release
renders the original
mortgagor liable if the
person assuming the mortgage
fails to make the monthly
payments. An "Assumption of
Mortgage" is often confused
with "purchasing subject to
a mortgage." When one
purchases subject to a
mortgage, the purchaser
agrees to make the monthly
mortgage payments on an
existing mortgage, but the
original mortgagor remains
personally liable if the
purchaser fails to make the
monthly payments. Since the
original mortgagor remains
liable in the event of
default, the mortgagee's
consent is not required to a
sale subject to a mortgage.
Both "Assumption of
Mortgage" and "Purchasing
Subject to a Mortgage" are
used to finance the sale of
property. They may also be
used when a mortgagor is in
financial difficulty and
desires to sell the property
to avoid foreclosure.
Balance sheet
A financial statement
that shows assets,
liabilities, and net worth
as of a specific date.
Bankrupt
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.
Bankruptcy
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.
Before-tax income
Income before taxes are
deducted.
Beneficiary
The person designated to
receive the income from a
trust, estate, or a deed of
trust.
Bill of sale
A written document that
transfers title to personal
property.
Binder or "Offer to
Purchase"
A preliminary agreement,
secured by the payment of
earnest money, between a
buyer and seller as an offer
to purchase real estate. A
binder secures the right to
purchase real estate upon
agreed terms for a limited
period of time. If the buyer
changes his mind or is
unable to purchase, the
earnest money is forfeited
unless the binder expressly
provides that it is to be
refunded. Broker (See Real
Estate Broker)
Blanket insurance policy
A single policy that
covers more than one piece
of property (or more than
one person).
Bond
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.
Borrower
One who receives funds
with the expressed or
implied intention of
repaying the loan in full.
Bridge loan
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.
Broker
An individual in the
business of assisting in
arranging funding or
negotiating contracts for a
client but who does not loan
the money himself. Brokers
usually charge a fee or
receive a commission for
their services.
Building code
Local regulations that
control design,
construction, and materials
used in construction.
Building codes are based on
safety and health standards.
Building Line or Setback
Distances from the ends
and/or sides of the lot
beyond which construction
may not extend. The building
line may be established by a
filed plat of subdivision,
by restrictive covenants in
deeds or leases, by building
codes, or by zoning
ordinances.
Buy down
Money advanced by an
individual (seller, builder,
etc.) to reduce monthly
payments for a home mortgage
either during the entire
term or for an initial
period of years.
Call option
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.
Capital expenditure
The cost of an
improvement made to extend
the useful life of a
property or to add to its
value.
Capital improvement
Any structure or
component erected as a
permanent improvement to
real property that adds to
its value and useful life.
Cap
A provision of an ARM
limiting how much the
interest rate or mortgage
payments may increase.
Cash Out
A loan transaction in
which the borrower receives
funds at the time of
closing.
Cash-out refinance
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.
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
Eligibility A document
issued by the federal
government certifying a
veteran's eligibility for a
Department of Veterans
Affairs (VA) mortgage.
Certificate of Reasonable
Value (CRV) A document
issued by the Department of
Veterans Affairs (VA) that
establishes the maximum
value and loan amount for a
VA mortgage.
Certificate of Title
A certificate issued by a
title company or a written
opinion rendered by an
attorney that the seller has
good marketable and
insurable title to the
property, which he is
offering for sale. A
certificate of title offers
no protection against any
hidden defects in the title,
which an examination of the
records could not reveal.
The issuer of a certificate
of title is liable only for
damages due to negligence.
The protection offered a
homeowner under a
certificate of title is not
as great as that offered in
a title insurance policy.
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.
Change frequency
The frequency (in months)
of payment and/or interest
rate changes in an
adjustable-rate mortgage
(ARM).
Chattel
Another name for personal
property.
Claim
An amount requested of an
insurer, by a policyholder
or a claimant, for an
insured loss.
Clear title
A title that is free of
liens or legal questions as
to ownership of the property
Closing
The occasion where a sale
is finalized; the buyer
signs the mortgage, and
closing costs are paid. Also
called "settlement."
Closing Costs
Expenses (over and above
the price of the property)
incurred by buyers and
sellers in transferring
ownership of a property.
Also called "settlement
costs."
Closing cost item
A fee or amount that a
home buyer must pay at
closing for a single
service, tax, or product.
Closing Day
The day on which the
formalities of a real estate
sale are concluded. The
certificate of title,
abstract, and deed are
generally prepared for the
closing by an attorney and
this cost charged to the
buyer. The buyer signs the
mortgage, and closing costs
are paid. The final closing
merely confirms the original
agreement reached in the
agreement of sale.
Cloud (On Title)
An outstanding claim or
encumbrance, which adversely
affects the marketability of
title.
Co-Borrower
An additional borrower on
a loan. A co-borrower's
obligation on a loan are the
same as all other borrowers.
Coinsurance
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.
Coinsurance clause
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.
Collateral
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.
Collection
The efforts used to bring
a delinquent mortgage
current and to file the
necessary notices to proceed
with foreclosure when
necessary.
Co-maker
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.
Commission
Money paid to a real
estate agent or broker by
the seller as compensation
for finding a buyer and
completing the sale.
Commitment Letter
A formal offer by a
lender stating the terms
under which it agrees to
loan money to a home buyer.
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.
Common areas
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.
Common law
An unwritten body of law
based on general custom in
England and used to an
extent in the United States.
Community property
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.
Comparables
A abbreviation for
comparable properties used
for comparative purposes in
the appraisal process;
facilities of reasonably the
same size and location with
similar amenities;
properties which have been
recently sold, which have
characteristics similar to
property under
consideration, thereby
indicating the approximate
fair market value of the
subject property.
Compound interest
Interest paid on the
original principal balance
and on the accrued and
unpaid interest.
Condemnation
The taking of private
property for public use by a
government unit, against the
will of the owner, but with
payment of just compensation
under the government's power
of eminent domain.
Condemnation may also be a
determination by a
governmental agency that a
particular building is
unsafe or unfit for use.
Condominium
Individual ownership of a
dwelling unit and an
individual interest in the
common areas and facilities,
which serve the multi-unit
project.
Condominium conversion
Changing the ownership of
an existing building
(usually a rental project)
to the condominium form of
ownership.
Condominium hotel
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.
Construction Loan
A short-term loan for
funding the cost of
construction. The lender
advances funds to the
builder as the work
progresses.
Consumer reporting agency
(or bureau)
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.
Contingency
A condition that must be
met before a contract is
legally binding.
Contract
An oral or written
agreement to do or not to do
a certain thing.
Contractor
In the construction
industry, a contractor is
one who contracts to erect
buildings or portions of
them. There are also
contractors for each phase
of construction: heating,
electrical, plumbing, air
conditioning, road building,
bridge and dam erection, and
others.
Conventional Mortgage
Any mortgage that is not
insured or guaranteed by the
federal government.
Convertibility clause
A provision in some
adjustable-rate mortgages (ARMs)
that allows the borrower to
change the ARM to a
fixed-rate mortgage at
specified time.
Convertible Arm
An adjustable-rate
mortgage that can be
converted to a fixed-rate
mortgage under specified
conditions.
Coverage
The amount of protection,
usually expressed in a
percentage of the total
claim amount, an insured
receives under a
certificate.
Cooperative (co-op)
A type of multiple
ownership in which the
residents of a multiunit
housing complex own shares
in the cooperative
corporation that owns the
property, giving each
resident the right to occupy
a specific apartment or
unit.
Cooperative Corporation
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.
Cooperative Housing
An apartment building or
a group of dwellings owned
by a corporation, the
stockholders of which are
the residents of the
dwellings. It is operated
for their benefit by their
elected board of directors.
In a cooperative, the
corporation or association
owns title to the real
estate. A resident purchases
stock in the corporation,
which entitles him to occupy
a unit in the building or
property owned by the
cooperative. While the
resident does not own his
unit, he has an absolute
right to occupy his unit for
as long as he owns the
stock.
Cooperative mortgages
Mortgages related to a
cooperative project.
Cooperative project
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.
Corporate relocation
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.
Covenant
A clause in a mortgage
that obligates or restricts
the borrower and that, if
violated, can result in
foreclosure.
Commitment
A written letter of
agreement detailing the
terms and conditions by
which the lender will lend
and the borrower will borrow
funds to finance a home.
Credit history
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.
Creditor
A person to whom money is
owed.
Credit Report
A report of an
individual's credit history
prepared by a credit bureau
and used by a lender in
determining a loan
applicant's
creditworthiness.
Credit repository
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.
Cure
A loan that is removed
from a delinquency status
with no loss to the insurer.
