A feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (such as location, woods, water) or man-made (such as a swimming pool or garden).
Amortization
repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)
Balloon Mortgage
A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.
Mortgage
A lien on the property that secures the promise to repay a loan.
VA
Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.
Title insurance
Insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers.
Debt-to-Income ratio
A comparison of gross income to housing and non-housing expenses. With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.
Depreciation
Lowering in the value of the estate or the property.
Exclusive Listing
A written agreement that licenses a specific real estate broker or company to sell your house, over a period of time.
Fixed-rate mortgage
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Lock in period
It is a specified time period for which a lender promises a fixed interest to the borrower.
Notice of Default
A legal document sent to the borrower when there is a payment default and legal prosecution can follow.
Promissory Note
A written commitment for paying a specified amount of money, within specified time period.
Refinance
the process of paying up for an existing loan by taking a new one on new conditions.
Transfer Tax
A state or government tax applicable when the property is transferred from one owner to the other.
Acceleration Clause
A provision that gives a lender the right to collect the balance of a loan if a borrower misses a payment
Acceptance
The seller's written approval of a buyer's offer.
Addendum
An addition or change to a contract.
Adverse Possession
The acquisition of title to property through possession without the owner's consent for a certain period of time
Alternative mortgage
Any home loan that does not conform to a standard fixed-rate mortgage.
Annual
Any kind of plant that must be planted every year.
Application
The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.
Appraisal
An opinion of the value of a property at a given point in time.
Appraised value
An opinion of the current market value of a property.
ARM
Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a Cap.
Assessment
The estimated value of a piece of real estate or a levy placed on property in addition to taxes.
Backup Offer
A secondary bid for a property that the seller will accept if the first offer fails.
Balloon Loan
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.
Bankruptcy
a federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.
Bargain sale
The sale of a piece of property for less than market value.
Bond
An agreement that insures one party against loss by acts or defaults of another party.
Borrower
a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.
Bridge Loan
A short-term loan for borrowers who need more time to find permanent financing.
Broker
A person licensed by the state to deal in real estate.
Building permit
A permit issued by a local government agency that allows the construction of home or renovation of a house.
Cancellation Clause
A clause that details the conditions under which each party may terminate the agreement.
Cap
A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.
Capitalization Rate
The percentage rate of return estimated from the net income of a piece of property.
Cash Flow
The amount of cash a rental property investor receives after deducting operating expenses and loan payments from gross income.
Cash Reserves
A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.
Certificate of Title
A written opinion on the status of a piece of property based on an examination of the public record
Closing
The final procedure in which documents are signed and recorded, and the property is transferred.
Closing Costs
Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.
Commission
The negotiable percentage of the sales price of a home that is paid to the agents of the buyer and seller.
Credit History
History of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan.
Credit Rating
The degree of credit worthiness assigned to a person based on credit history and financial status.
Deed of trust
A document that gives a lender the right to foreclose on a piece of property if the borrower defaults on the loan.
Default
The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms.
Deposit
Money given by the buyer with an offer to purchase property. Also called earnest money.
Down payment
The amount of money a buyer agrees to give the seller when a sales agreement is signed. Complete financing is later secured with a lender.
Easement
A right given to a third party to use a portion of the property for certain purposes, such as power lines or water mains.
Ell
An extension or wing of a house that is at right angles to the main structure.
EEM
Energy Efficient Mortgage; an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase.
Escrow
A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met.. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.
Eviction
A legal procedure to remove a tenant for reasons including failure to pay rent.
Fair Housing Act
A law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.
Fannie Mae
The official name of the Federal National Mortgage Association, it is a congressionally chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market.
Federal Reserve Board
A group of economists and other experts who set the nation's monetary policy. Its chief tool to control inflation is the power to control interest rates.
FHA loans
Mortgages that are insured by the Federal Housing Administration. The FHA's 203(b) loan program provides low-rate mortgages to buyers who make a down payment as small as 3 percent. The agency also operates loan plans for investors and purchasers of rural property.
Foreclosure
The legal process reserved by a lender to terminate the borrower's interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Any excess proceeds may be used to satisfy other liens or be returned to the borrower.
Freddie Mac
Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers.
Good Faith Estimate
an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.
Group home
A single-family residence used as a living space for unrelated, developmentally disabled or mentally disabled people.
Growing-equity mortgage
A fixed rate mortgage that increases payments over a specific period of time. The extra funds are applied to the principal
Home equity loan
A loan that allows owners to borrow against the equity in their homes.
Home inspection
An examination of a home's construction, condition and internal systems by an inspector or contractor prior to purchase.
Homeowner's insurance
an insurance policy that combines protection against damage to a dwelling and it's contents with protection against claims of negligence or inappropriate action that results in someone's injury or property damage.
HUD
The U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.
Individual Retirement Account
Tax-deferred savings accounts that allow people to accrue retirement funds.
Index
A measurement used by lenders to determine changes to the interest rate charged on an adjustable rate mortgage.
Interest
A fee charged for the use of money.
Interest rate caps
A limit on the amount that can be charged to the monthly payment of an adjustable-rate mortgage during an adjustment period.
Joint Liability
The responsibility of two or more people to fulfill the terms of a home loan or debt.
Judgment
A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.
Junior mortgage
A loan that subordinate to the primary loan.
Late payment
A payment a lender receives after the due date has passed.
Lease
A binding agreement that contains the terms and conditions of a renter's occupancy.
Lien
A legal claim against property that must be satisfied when the property is sold.
Listing
A piece of property placed on the market by a listing agent.
Loan application
The first step toward submitting a home loan requires the borrower to itemize basic financial information.
Loss mitigation
a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan
Mortgage banker
A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.
Mortgage broker
A company that matches lenders with prospective borrowers who meet the lender's criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.
Mortgage insurance
Required by lenders in some loans to protect them from a possible default . Most conventional loans with less than a 20 percent down payments require private mortgage insurance, or PMI.
Multiple offers
Multiple purchase offers occur in hot markets or hot neighborhoods.
Note
The legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.
Note rate
The interest rate specified in a mortgage note.
Offer
Indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.
Open house
A marketing tool in which a listing agent opens a house for view.
Origination fee
A fee charged by most lenders--also called points--for processing a loan. A point is 1 percent of the total loan amount.
Partial Claim
a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.
PITI (Principal, Interest, Taxes, Insura
When a buyer applies for a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower's actual monthly mortgage-related expenses.
Pre-approve
Lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.
Pre-qualify
A lender informally determines the maximum amount an individual is eligible to borrow.
Principal
The amount of money that the borrower owes on a mortgage.
Property tax
Property taxes are calculated at about 1.25 percent of the current market value.
Qualifying ratios
Lenders compute qualifying ratios to determine how much a potential buyer can borrow.
Quit-claim deed
A document that releases a party from any interest in a piece of real estate.
Radon
A ground-generated radioactive gas that seeps into some homes through sump pumps cracks in the foundation and other inlets. A leading cause of lung cancer, radon is found in mostly the northern half of the country.
Real estate agent
An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.
Realtor
A designation for an agent or broker who is a member of the National Association of Realtors.
Refinancing
Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (such as a lower interest rate).
Rehabilitation mortgage
A mortgage that provides for the costs of repairing and improving a resale home or building.
RESPA
Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships
Settlement
Another name for closing
Special assessment
When a homeowners' association needs or wants extra funds, it levies a special assessment upon the owners.
Survey
A property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.
Sweat equity
The non-cash value put into a piece of property by the owner, such as do-it-yourself home improvements.
Tax lien
An impediment placed against a property, such as back taxes.
Title
The actual legal document conferring ownership of a piece of real estate.
Trustee
A legally empowered person who holds or controls a piece of property for another person.
Truth-in-Lending
A federal law obligating a lender to give fuII written disclosure of aII fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.
Two-step mortgage
An adjustable mortgage with two interest rates, one for the first five or seven years of the loan, and the other for the remainder of the loan term.
Underwriting
The process that lenders go through to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan.
Variable interest rate
A loan rate that moves up and down based on factors including changes in the rate paid on bank certificates of deposit or Treasury bills.
Variable rate
An interest rate that changes with fluctuations in such indexes as the U.S. Treasury bill index.
Wild deed
An improperly recorded deed.
Wraparound mortgage
A loan to a buyer for the remaining balance on a seller's first mortgage and an additional amount requested by the seller. Payments on both loans are made to the lender who holds the wraparound loan.
