ABSTRACT: A written history of public records on a property (see also Title Report) ADJUSTABLE RATE MORTGAGE (ARM): A loan that has an interest rate which changes periodically based on the sum total of an index plus a margin. ADJUSTMENT INTERVAL: A specified period between changes in the interest rate or monthly payment amount of an Adjustable Rate Mortgage (ARM). AGREEMENT OF SALE: A written contract (Agreement) that states the terms and conditions under which a property will be sold. AMORTIZATION: Repayment of a mortgage with equal payments over regularly specified time intervals which would reduce principal after interest has been paid. ANNUAL PERCENTAGE RATE (APR): The actual cost of borrowing money expressed in the form of an annual rate to make it easy for one to compare costs of borrowing. (includes but not limited to points, interest, discount points) (see Truth-In Lending Act). APPLICATION FEE: Money paid to the lender for processing a loan application which may include the expense of a property appraisal, credit report, lock-in fee or closing costs incurred. APPRAISAL: A report made by a qualified appraiser that provides the value of a property at a given date as compared to recent market sales. APPRAISAL FEE: Fee charged by a certified appraiser to give an opinion of current market value. ASSUMABLE MORTGAGE: In a purchase transaction, the buyer (Obligor) may assume the existing mortgage against the subject property. Terms of assumption may require that the buyer “qualify” for the mortgage before the assumption can be granted.
BALLOON MORTGAGE: A form of promissory note which calls for minimum amounts of principal to be paid at the beginning of the loan and results in a large lump sum payment at the end of the term or due date. BLANKET MORTGAGE: A single mortgage that covers two or more properties. (also known as cross-collateralization). BORROWER (MORTGAGOR): An individual who applies for and receives a loan, and is obligated to repay it under certain terms. BROKER: An individual who unites buyers and sellers and negotiates the contract for a client. BUYER’S MARKET: A market condition that favors buyers. If there are more sellers than buyers in the market, the seller may be forced to make major price concessions. BUY-DOWN: Money advanced by an individual (e.g., builder, seller, buyer, developer) to obtain a lower interest rate on a mortgage.
CAP (PAYMENT): Payment caps limit the change in monthly payments based on a maximum percentage change in payment. Typically used in negative amortizing loans. (see Negative Amortization) CAP (INTEREST RATE): Periodic caps limit the periodic adjustments, and life caps limit the maximum interest rate allowable on an adjustable rate mortgage. CASH OUT: Money received when you refinance as a result of the new loan being larger than the current balance of your mortgage. To determine whether or not a refinance is a “cash out” loan, subtract your current loan amount and the costs of refinancing from the new loan. CERTIFICATE OF TITLE: An opinion of the status of title to a property written by an attorney or title company. CERTIFICATE OF VETERAN STATUS: FHA form filled out to establish a borrower’s eligibility for an FHA Vet loan. To qualify, you must submit Form DD 214 (Separation Paper) with Form 26-8261a (request for certificate of veteran status) at your local VA office. CLOSING (OR SETTLEMENT): The conclusion of your real estate transaction which includes the , signing of your legal documents and the disbursement of funds to the seller (in a purchase transaction) or to the current mortgage holder (in a refinance transaction). CLOSING COSTS: Costs for services, including title fees, settlement fees, abstract fees, title examination fees, recording fees, lender fees, pest inspection fees, attorney’s fees, taxes and surveying fees that are incurred in order to close the transaction. COLLATERAL: Marketable real or personal property which a borrower pledges as security for a loan. COMMISSION: Money that a broker or real estate agent receives for negotiating a loan or real estate transaction. CONFORMING LOAN: A mortgage loan that meets all conditions to be qualified for purchase by federal agencies such as FNMA and FHLMC. CONTRACT OF SALE: Agreement on the purchase price, terms and conditions of a sale, between a buyer and seller. CONVENTIONAL LOAN: A loan that is not created under any government housing program and is therefore not liable to the restrictions of any of those programs. CONVERTIBLE ARMs: An Adjustable Rate Mortgage that has the option to convert to a fixed rate during a given timeframe. CONVERSION CLAUSE: An additional provision in some Adjustable Rate Mortgages wherein the obligor is allowed to convert the adjustable mortgage to a fixed rate. A nominal fee may be charged at the time of conversion. COFI: An acronym for Cost of Funds Index. COST OF FUNDS INDEX: The index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.
DEED: A legal document for conveying real estate. DEED OF TRUST: A form of security instrument for mortgage loans. DEFAULT: A failure to meet legal or contractual obligations. DISCOUNT POINT(S): The amount of money the borrower or seller must pay the lender to receive a mortgage at a stated interest rate.
EASEMENT: A non-possessory right to use all or part of the land owned by another for a specific purpose. EMINENT DOMAIN: The power of a government to take privately owned property for public purposes under condemnation proceedings, subject to payment of its fair market value. ENCROACHMENT: Any building, improvement, or structure, such as a wall, fence, or driveway, located on one property that intrudes upon the property of another. ENCUMBRANCE: Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burden upon the property. ENDORSEMENT: A form issued by the insurer at the request of the insured which changes terms or items in an issued title insurance policy or commitment. ESCHEAT: The reversion of property to the state when an owner dies or disappears, leaving no legal heirs, devisees or claimants. ESCROW: Closing a real estate transaction when all required documents and funds are placed with a third party for processing and disbursement. EXCEPTION: A provision added to Schedule B of a title insurance binder or policy to limit the liability of the insurer for a specific title defect or an outstanding lien or encumbrance.
FEE SIMPLE: Refers to complete ownership of real property or an absolute estate limited to a person and his or her heirs and assigns. FIXED RATE MORTGAGE: A mortgage having a rate of interest that remains the same for the life of the mortgage. FIXTURES: Personal property that is attached to real property. FLOOD INSURANCE: Typically not covered under standard hazard insurance, flood insurance compensates for physical damage to a property due to flooding. FORECLOSURE: A legal proceeding following a default by a borrower in which real estate secured by a mortgage or deed of trust is sold to satisfy the underlying debt.
GENERAL WARRANTY DEED: A deed containing a covenant by the seller to protect the buyer against being dispossessed due to adverse claims against the land. GOOD FAITH ESTIMATE: A written estimate describing settlement costs the borrower is likely to have to pay at closing. The Real Estate Settlement Procedures Act (RESPA) requires the lender to provide this disclosure to the borrower within three days of receiving a loan application. GRANTEE: Buyer of property. GRANTOR: Seller of property.
HAZARD INSURANCE: Insurance protection against damage to a property from fire, windstorms and other common hazards. HOMESTEAD (exemption): A person’s dwelling and that part of the land close to the dwelling. Many states by statute give homesteads special privileges, such as exemptions from remedies of creditors.
INDEMNIFY: To protect, hold harmless against loss. INDEMNITOR: The party obligated in an indemnity agreement to protect or repay another for a loss. INDEMNITY AGREEMENT: An agreement by the maker of the document to protect or repay another party to the agreement up to the limit stated for any loss due to the contingency stated in the agreement. INDEX: An alphabetical listing in the public records of the parties to documents recorded in the land records which. These documents are also filed under unique book and page numbers. INSURABLE TITLE: A land title that a title insurance company is willing to insure. INSURED CLOSING SERVICE: An agreement by the title insurer to indemnify the insured for any loss in settlement funds caused by (1) the failure of the company’s policy- issuing agents or approved attorneys to conform to closing instructions of the insured, or (2) fraud or dishonesty of the issuing agent or approved attorney.
JOINT TENANCY: A form of ownership of property which givens each person equal interest in the property including right of survivorship.
LEASE: A written instrument creating a right of possession to land for a set term, usually in exchange for periodic rent payments. LEASEHOLD: The right to possession and use of land for a fixed period of time created in a lease. LEGAL DESCRIPresidential Title, Inc.ON: A description of real property that is sufficient to locate and identify it. LESSEE: A tenant holding a leasehold interest. LESSOR: A landlord or one who gives a leasehold interest to a lessee. LIEN: A legal claim by a person for the property of another as security for payment of a debt. LIS PENDENS: A legal notice of pending litigation relating to property and a warning that anyone obtaining an interest subsequent to the date of the notice may be bound by the judgment. LOAN POLICY: A title insurance policy, insuring a mortgagee or beneficiary under a deed of trust, against loss caused by invalidity or unenforceability of a lien, or loss of priority of the mortgage or deed of trust. LOAN TO VALUE RATIO: The ratio of the amount of the loan divided by the fair market value of the land held as security for the loan. LOT: Any portion or parcel of real property, usually referring to a portion of a subdivision.
MARKETABLE TITLE: A title which a reasonable purchaser, well informed as to the facts and their legal meaning, would be willing to accept. MARKET VALUE: The average of the highest price that a buyer would pay and the lowest price a seller would accept. MECHANICS LIEN: A lien on real estate that secures the payment of debts due to persons who perform labor or services or furnish materials incident to the construction of buildings and improvements on the real estate. METES AND BOUNDS: A land description in which boundaries are described by courses, directions, distances and monuments. MORTGAGE: A conditioned pledge of property to a creditor as security for the payment of a debt. MORTGAGE BANKER: An individual or company that uses its own funds to make and/or service mortgage loans. MORTGAGE BROKER: An individual or company that arranges financing between the lender and the borrower. MORTGAGEE: The holder of a mortgage. MORTGAGOR: A person who gives a mortgage on his or her property to secure an obligation, usually the repayment of a debt. MORTGAGE INSURANCE: Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend at a higher loan-to-value ratio.
NEGATIVE AMORTIZATION: Increases in the principal amount of indebtedness caused by underpayment of the interest due in each installment. NOTE: A written promise to pay a sum of money, usually at a specified interest rate, at a stated time to a named payee.
OPEN-END MORTGAGE: A mortgage or deed of trust written to secure and permit advancing of funds in addition to the amount originally loaned. ORIGINATION FEE: A commission charged for the work involved in the evaluation, preparation and submission of a proposed mortgage loan. OWNER’S POLICY: A title insurance policy insuring an owner of real estate against loss occasioned by defects or unmarketability of the owner’s title.
PARCEL: A part or portion of land, commonly referred to as a lot. PARTITION: A division of land, usually by a legal proceeding, among the parties who were formerly co-owners. PERSONAL PROPERTY: Anything that can be owned but not designated by law as real property. PLAT: A map dividing a parcel of land into lots, as in a subdivision. POINTS: One percent of the amount of the loan. POWER OF ATTORNEY: A written instrument by which one person authorizes another, the attorney-in-fact, to act on his or her behalf. PREMIUM: The amount payable for an insurance policy. PREPAYMENT PENALTY: Penalty to the mortgagor for paying the mortgage before it becomes due. PRINCIPAL: A sum of money owed as a debt on which interest is payable. PURCHASE MONEY MORTGAGE (deed of trust): A mortgage given by a purchaser to a seller on a property to secure payment of a part of the purchase price.
QUIETING TITLE: The removal of a “cloud” on title by property action in a court. QUITCLAIM DEED: A transfer of whatever interest the transferor may have in the property being conveyed.
REAL ESTATE: Land and anything permanently affixed to the land, such as buildings, 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. RECORDING: The noting in a public office of the details of a legal document such as a deed or mortgage, affecting the title to real estate. REDEMPTION: The right of the owner in some states to reclaim title to property it if pays the debt to the mortgagee within a stipulated time after foreclosure. REFINANCING: The process of paying off one loan with the proceeds from a new loan that is secured by the same property. REISSUE RATED: A reduced rate of title insurance premium where the owner of the land has been previously insured by an owner’s policy by the insurer within a certain time. RELEASE: To relieve from debt or security or abandon a right, such as the release of a mortgage lien from a part or all of the land mortgaged. RESTRICTIVE COVENANTS: Limitations on the use of property imposed or created by deeds or other documents in the chain of title. REVERSE ANNUITY MORTGAGE: A mortgage given to a homeowner who wants to convert the equity in his or her house to an income-producing asset. The proceeds of the loan are paid out in periodic installments to the homeowner, thus giving the homeowner income until the proceeds paid out equal the face amount of the mortgage. RIGHT OF RESCISSION: Under the provisions of the Truth-In-Lending Act, the borrower has the right to cancel the loan (rescind the transaction), within three days of signing the closing (loan) documents, if the new loan is a refinance of an existing loan, and the subject property is the borrower’s principal dwelling. RIPARIAN RIGHTS: The rights of owners of lands bordering watercourses which relate to the water and its use.
SALES AGREEMENT: Written agreement (contract) that states the terms and conditions under which a property will be sold, signed by both buyer and seller. SATISFACTION: An instrument releasing the lien of a mortgage. SECOND MORTGAGE: A mortgage placed on a property with rights subordinate to the existing first deed of trust. SECURITY: Protection against loss, usually with a lien created by a mortgage, pledge, or a deposit given by a borrower to its creditor. SIMULTANEOUS ISSUE: An owner’s policy and a mortgagee policy issued by a title insurer on the same interest at the same time. SPECIAL WARRANTY OF TITLE: A covenant by a seller of land to protect the buyer against being dispossessed because of any adverse claims to the land by the seller or anyone making claim through the seller. STANDARD COVERAGE POLICY: A form of title insurance which contains certain standard printed exceptions not included in the ALTA policies. SUBROGATION: The substitution of one person in place of another with reference to a claim, demand or right, so that the individual who is substituted succeeds to the rights of the other in relation to the debt or claim and its rights, remedies or securities. SURETY: A person who agrees to be responsible for a debt or obligation of another. SURVEY: A measurement of land which shows a property’s boundaries, elevations, improvements and relationship to surrounding tracts.
TAX DEED: The deed given to a purchaser at a public sale of land for nonpayment of taxes. It conveys to the purchaser only such title as the defaulting taxpayer had and does not convey good title to that extent unless statutory procedures for the sale were strictly followed. TAX LIEN: Claim against a real estate property for taxes that are unpaid. TAX SALE: Property is sold to the public by a government authority as a result of taxes that are unpaid. TENANCY BY THE ENTIRETY (or entireties): A survivorship estate in land permitted in many states that may only vest in a husband and wife. The couple must receive title in the same conveyance, beginning at the same time, and with undivided possession. If either the husband or wife dies during the estate, title vests in the survivor. In a tenancy by entireties, the husband and wife together are treated as one entity. TENANT IN COMMON: Ownership of an interest in land by two or more persons with distinct titles, but with unity of possession. TITLE: A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy and dispose of real estate or an inheritable right or interest therein. TITLE COVENANTS: Covenants customarily inserted in conveyances and in transfers of title to real estate for the purpose of giving protection to the purchaser against possible insufficiency of the title received. TITLE DEFECT: Any possible or patent claim or right outstanding in a chain or title that is adverse to the claim of ownership. 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. TITLE REPORT: A written history of public records on a property (See also Abstract). TITLE SEARCH: A review of all recorded documents in the land records relating to a particular piece of real property to determine the present condition of title. TRACT: A lot or parcel of land. TRANSFER TAX: A tax paid when a title is passed from one owner to the next. TRUST: A right of property held by one party (the trustee) for the benefit of another (the beneficiary) TRUTH-IN-LENDING: The Federal Truth in Lending Act, 15 U.S.C. Sec./1601, et seq., governs the disclosure of information related to certain consumer financial transactions and requires those in the lending business to make the disclosures to their individual borrowers.
UNDERWRITER: An insurance company that issues insurance policies to the public or to another insurer. UNDERWRITING: In mortgage lending, the process of establishing the risks, terms and conditions of a loan. UNIT: A space in a condominium, cooperative or planned community for separate ownership or occupancy. A unit’s physical boundaries are usually defined by statute and described in the declaration. USURY: A statutory crime of charging an unlawful rate of interest in exchange for a loan of money.
VARIABLE INTEREST RATE: An interest rate that fluctuates as the prevailing rate moves up or down. In mortgages, there are usually maximums as to the frequency and amount of fluctuation. VEST: To give an immediate, fixed right of present or future enjoyment in land. VETERANS ADMINISTRATION (VA) LOANS: Housing loans to veterans by banks, savings & loans or other lenders that are guaranteed by the Veterans Administration to help veterans buy a residence with little or no down payment.
WAIVER: The voluntary and intentional relinquishment of a known right, claim or privilege. WARRANTY: In a broad sense, an agreement 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 thing 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 defects in or encumbrances on the title. WARRANTY DEED: A deed in which the seller warrants or guarantees that good title is being conveyed.
ZONING: Land use laws or ordinances passed by local governments regulating the size, type, structure, nature and use of land or buildings.