Glossary of Terms
Adjustable Rate Mortgage (ARM):
A mortgage in which the interest rate is adjusted periodically in accordance with a market indicator, to more closely coincide with the current rates. Also sometimes known as renegotiable rate mortgage, the variable rate mortgage, or the graduated rate mortgage.
Amortization:
Reduction of the principal of a debt in regular, periodic installments.
Annual Percentage Rate (APR):
An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account point and other credit cost. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.
Caps:
Consumer safeguards that limit the amount the interest rate on an adjustable rate mortgage can change at each adjustment or over the life of the loan.
Conditions, Covenants & Restrictions (CC&R's):
A document that controls the use, requirements and restrictions of a property.
Certificate of Reasonable Value(CRV):
An appraisal issued by the Veterans Administration showing the property's current market value.
Closing (also called "settlement"):
The completion of a real estate transfer, where the title passes from seller to buyer, or a mortgage lien is given to secure debt.
Condominium:
A statutory form of real estate development of separately-owned units and jointly-owned common elements in a multi-unit project.
Conventional Mortgage:
A mortgage securing a loan made by investors without governmental underwriting, i.e., a loan which is not FHA insured or VA guaranteed.
Deed:
Written instrument which, when properly executed and delivered, conveys title.
Discount Point:
An additional charge made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent.
Earnest Money:
A deposit of funds made by a buyer of real estate as evidence of good faith.
Easement:
A non-possessory right to use all or part of the land owned by another for a specific purpose.
Equity:
The difference between the fair market value and current indebtedness, also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property.
Escrow:
An account held into which the home buyer pays money for tax or insurance payments. Escrow can also be a neutral third party to hold funds through the closing of a transaction.
Federal Housing Administration Loan(FHA Loan):
A loan insured by the Federal Housing Administration, open to all qualified home purchasers.
Federal National Mortgage Association(FNMA):
Also known as "Fannie Mae." A U.S. government sponsored corporation dealing in the purchase of first mortgages for the secondary market.
Fee Simple Deed:
The absolute ownership of a parcel of land. The highest degree or ownership that a person can have in real estate, which gives the owner unqualified ownership and full power of disposition.
Joint Tenancy:
An equal undivided ownership of property by two or more persons. Upon death of any owner, the survivors take the decedent's interest in the property.
Lien:
A claim upon a piece of property for the payment or satisfaction of a debt or obligation.
Loan-To-Value Ratio:
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
Mortgage:
A conditioned pledge of property to a creditor as security for the payment of a debt.
Negative Amortization:
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
Personal Property:
Any property which is not real property, e.g., money, savings accounts, appliances, cars,boats, etc. (can be generally defined as "moveable").
Points (also called "commission or discount" points):
Each point is equal to 1% of the loan amount (e.g., two points on a $100,000 mortgage would cost $2000).
Principal, Interest, Taxes and Insurance (IPTI):
Also called monthly housing expense.
Private Mortgage Insurance (PMI):
In the event that a buyer does not have a 20% down payment, lenders will allow a smaller down payment--as low as 5% in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee, depending on the loan's structure.
Real Estate (also called "real property"):
Land and anything permanently affixed to the land (generally immovable), such as building, fences and those things attached to the buildings, such as plumbing and heating fixtures, or other such items that would be personal property if not attached.
REALTOR:
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of REALTORs.
Subdivision:
A tract of land surveyed and divided into lots for purposes of sale.
Tenancy in Common:
An undivided ownership in real estate by two or more persons, without right of survivorship - interests need not be equal.
Title Insurance Policy:
A contract of title insurance under which the insurer, in keeping with the terms of the policy, agrees to indemnify the insured against loss arising from claims against the insured interest.
Trust Account:
A non-interest bearing account separate and apart and physically segregated from the broker's own, in which the broker is required b law to deposit all funds collected for clients.
Veterans Administration Loan (VA Loan):
Hosing loan to veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans Administration, enabling veterans to buy a residence with little or no down payment.
Warranty:
In a broad sense, n agreement or undertaking by a seller to be responsible for present or future losses of the purchaser occasioned by deficiency or defect in the quality, condition or quantity of the item sold. In a stricter sense, the provision or provisions in a deed, lease or other instrument conveying or transferring an estate or interest in real estate under which the seller becomes liable to the purchaser for defect in or encumbrances on the title.
The Home Selling Process:
FSBO vs. Listing with an Agent
Selecting the Right Agent to List Your Home
Preparing Your House for Market
Open House Preparation Checklist
Escrow for Sellers & Buyers
Escrow Flowchart
The Title Company's Role
Lender Assistance to the Seller
Disclosures in Real Property Transactions
The Appraisal
Inspection & Home Warranty
Federal & State Withholding Regulations
Capital Gains
Closing Costs
Moving Checklist
Glossary of Terms
