Abstract of Title
An abstract of title is the condensed history of title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate. In the United States, the abstract of title furnishes the raw data for the preparation of a policy of title insurance for the parcel of land in question
A provision that allows a lender to demand payment of the total outstanding balance or demand additional collateral under certain circumstances, such as failure to make payments, bankruptcy, nonpayment of taxes on mortgaged property, or the breaking of loan covenants.
Actual Notice (physical possession)
Conveying facts to a person with the intention to apprise that person of a proceeding in which his or her interests are involved, or informing a person of some fact that he or she has a right to know and which the informer has a legal duty to communicate.
Adjustable Rate Mortgage (ARM)
A mortgage that changes interest rate periodically based upon the changes in a specified index.
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).
Ad Valorem Taxes
(Latin: by value) is a tax based on the value of real estate or personal property.
A means of acquiring title to real estate where an occupant has been in actual, open, notorious and continuous occupancy of property for a period of time specified by law.
American Land Title Association, the national trade association and voice of the abstract and title insurance industry based in Washington, DC.
The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.
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.
Annual percentage rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
This document provides evidence that it is the borrower who chooses the insurance company which meets the requirements of the lender to protect the mortgaged property.
A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security.
A written analysis of the estimated value of a property prepared by a qualified appraiser.
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 state of being behind in the payment of an obligation; paid at the end of a period for which due. Property taxes are paid in arrears. (the opposite of paid in advance).
A provision in a contract that binds all parties to be bond by the decision of a third party to resolve any disputes.
The value assigned to a parcel of real estate by the county property appraiser for tax purposes.
Anything of monetary values 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 of Mortgage
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.
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.
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.
There are 100 basis Points in 1%. 1/2% or 1/2 point or .5% are all equivalent to 50 Basis Points.
Income before taxes are deducted.
The person designated to receive the income from a trust, estate, or a deed of trust.
A period of two years.
A preliminary agreement secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Bi-weekly payment mortgages
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 saving in interest.
The single mortgage that covers more than one parcel of real estate.
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 person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
Bundle of Rights
The owners rights to use the physical components of Real property are broken down to surface rights (land and water), subsurface rights (minerals and gas), and air rights. It is entirely possible for a seller to retain any set or subset of these rights. The Bundle of Rights, generally more then one, is reference to multiple rights being conveyed.
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.
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.
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.
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 statement provided by an abstract company, title company, or attorney stating that the current owner legally holds the title to real estate.
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).
Chattel Mortgage (CM)
Is the legal term for a type of loan that puts a lien on personal property. Legal ownership of the chattel is transferred to purchaser at the time of purchase, and the mortgage is removed once the loan has been repaid.
A title that is free of liens or legal questions as to ownership of the property.
A meeting at which the buyer signing the mortgage documents and paying closing costs finalizes a sale of a property. Also called “settlement.”
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. Closing cost items are included as numbered items on the HUD-1 statement.
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney’s fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing cost percentage will vary according to the area of the country. Closing statement Also referred to as the HUD1. The final statement of costs incurred to close on a loan or to purchase a home.
Cloud on Title
Any conditions revealed by a title search that adversely affects the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.
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.
Combined Loan-To-Value ratio (CLTV)
A risk ratio calculated by summing multiple loans together and dividing by the total value of the property.
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.
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.”
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.
Community Home Improvement Mortgage Loan
An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.
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 abbreviation for “comparable properties”; used for comparative purposes in the appraisal process. Comparable are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparable helps the appraiser determine the approximate fair market value of the subject property.
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.
Fannie Mae and Freddie Mac each year set criteria on what constitutes a conforming loan. Criteria include debt-to-income ratio limits and documentation requirements. The maximum loan amount is set based on the October-to-October changes in mean home price, above which a mortgage is considered a jumbo loan.
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.
The recording of a document in the public records designed to give adequate legal notice.
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.
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
The seller keeps legal title until the contract terms are fulfilled.
A mortgage that is not insured or guaranteed by the federal government.
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.
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.
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 indexes (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.
A clause in a mortgage that obligates or restricts the borrower and that, if violated can result in foreclosure.
A written instrument that serves to transfer an interest in real property from one party to another.
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.
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. See merged credit report.
An organization that gathers record updates, and stores financial and public record information about the payment records of individuals who are being considered for credit.
A number derived from a statistical analysis of a person’s credit history, and is used to represent the likelihood that the person will pay their debts. A credit score is primarily based on credit report information, typically from the three major credit bureaus.
An amount owed to another.
Cash required over a given period for the repayment of interest and principal on a debt.
The legal document conveying title to a property.
Deed-in-lieu of Foreclosure
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Deed of Trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.
Any restriction on the use of the property may be included in a deed provided it does not discriminate against race, color, religion, sex, national origin, age, the handicap or public policy.
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
A provision in a mortgage that specifies the terms and conditions to be met in order to avoid default and thereby “defeat” the mortgage and/or foreclosure.
A personal judgment against any person liable for the debt secured by a mortgage or deed of trust and being the amount remaining due to the mortgagee or beneficiary after foreclosure.
Failure to make mortgage payments when mortgage payments are due.
A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
A decline in the value of property; the opposite of appreciation.
Direct Endorsement underwriter (DE)
Discount Points (Effect on Yield)
Amounts paid to the lender based on the loan amount to buy the interest rate down. Each point is one percent of the loan amount; for example, two points on a $100,000 mortgage is $2,000
When funds are withdrawn by depositors, thereby disengaging depositors from the intermediary.
Documentary Tax Stamps
Taxes related to the transfer or encumbrance of real property. Taxes are levied on the Deed, Note and Mortgage.
The part of the purchase prices of a property that the buyer pays in cash and does not finance with a mortgage.
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.
Earnest money deposit
A deposit made by the potential homebuyer to show that he or she is serious about buying the house.
A right of way giving persons other than the owner access to or over a property, such as a utility easement.
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 government’s power to take land from an owner through condemnation to be used for a public purpose.
Is the unauthorized use of another’s property. It is an infringement or intrusion on the property without the owner’s consent, such as a fence.
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
A person who signs ownership interest over to another party. Contrast with co-maker.
Equal Credit Opportunity Act (ECOA)
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.
Equitable Ownership (without title)
Ownership of real estate by a person who does not have legal title.
A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
A reversion of property to the state, usually occurs when a owner dies without a will or known heirs.
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
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.
Estate in Entirety
Estoppel Letter (Certificate)
An estoppel letter is a legal document from the note payor stating the balance and terms of the note you are buying. It can also be a letter from a homeowner’s association or condominium stating the current balance of an account or lien placed on real property.
The lawful expulsion of an occupant from real property.
Examinations of title
The report on the title of a property from the public records or an abstract of the title.
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
The highest price that a buyer, willing but not compelled to buy would pay, and the lowest a seller, willing but not compelled to sell, would accept.
A congressionally chartered shareholder-owned company that is the nation’s largest supplier of home mortgage funds.
Fannie Mae’s Community Home Buyer’s Program
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 homebuyer education sessions.
Federal Housing Administration (FHA)
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.
Federal Trade Commission
Fee Simple Absolute
The greatest possible ownership rights a person can have in real estate.
Felony (first degree)(third degree)
Federal Emergency Management Agency
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 mortgage that is the primary mortgage lien against a property.
Fixed-rate mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan.
Flood Certificate Fee
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Freddie Mac (FHLMC)
This entity is authorized by Congress to buy and sell existing mortgages and works primarily with savings associations (S&L’s). Savings associations are regulated by the OTS (Office of Thrift Supervision).
Fully Amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balances, at the interest accrual rate, over the amortization term.
Ginnie Mae (GNMA)
This entity is backed by the full faith and credit of the U.S. Treasury and is also the guarantor of GNMA mortgage backed securities, also known as guarantee or pass-through certificates serviced by commercial banks, S&L’s and mortgage bankers.
Good faith estimate
An estimate of charges which a borrower is likely to incur in connection with a settlement.
Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
Highest and Best Use
A principle of value that focuses on the most profitable legal use to which a property can be put to use.
Homeowners Protection Act
Is a tax exemption given to a resident’s primary home that reduces the assessed value for tax calculation purposes and thus reduces the property taxes paid.
The ratio of the monthly housing payment in total (PITI – Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front-end ratio.
The U.S. Department of Housing and Urban Development. The U.S. government agency that administers FHA, GNMA and other housing programs.
HUD-1 (Settlement Statement)
To pledge a thing without delivering the title or possession of it to the pledgee.
A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used indexes include the 1-Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).
Ingress and Egress (legal access)
Joint and Several Liability
An encumbrance against property for money due, either voluntary or involuntary.
In a lien theory state, the buyer holds the deed to the property during the mortgage term The buyer promises to make all payments to the lender and the mortgage becomes a lien on the property, but title remains with the buyer. The lender’s lien is removed once the payment of all loan payments have been completed.
A form of ownership that lasts only for the owner’s lifetime. When the life estate owner dies title may revert by operation of law to the grantor. This is called a revisionary estate or estate in reversion. As an alternative a remainderman can be named and the grantor’s origional fee simple interest would revert to this “designated” remainderman. If the remainderman was left to an unnamed person such as an unborn child, that person would be called a “contingent” remainderman.
A provision of an ARM that limits the highest rate that can occur over the life of the loan.
A recorded document that gives constructive notice that a action affecting a property has been filed and may result in a lien. A Latin term that means “Action Pending”.
Loan To Value ratio (LTV)
The ratio of the amount of your loan to the appraised value of the home. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders.
A written agreement guaranteeing the homebuyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
Loss Payable Clause
A property insurance policy provision that authorizes the insurer to make a loss payment to a person (loss payee) other than the insured to the extent that the loss payee has an insurable interest in the property.
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period. A representative margin would be 2.75%.
A claim created by statutory law in most states, existing in favor of mechanics or other persons who have performed work or furnished materials in and for the erection or repair of a building. A Mechanic’s Lien attaches to the land as well as the building.
Metes and Bounds
A type of legal description (“Metes” means measurement and “Bounds” means boundaries).
The tax rate (expressed in mills) used to calculate property taxes owed. A mill is 1/1000 of a dollar.
A legal document that pledges a property to the lender as security for payment of a debt
An intermediary who sources mortgage loans on behalf of individuals or businesses.
mortgage disability insurance
A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.
Mortgage Insurance (MI)
Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by mortgage default. Usually required for loans with an LTV of 80.01% or higher.
Mortgage Insurance Premium (MIP)
The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.
An endorsement attached to a fire or other direct damage policy that covers mortgaged property, specifying that the loss reimbursement will be paid to the mortgagee as the mortgagee’s interest may appear; that the mortgagee’s rights of recovery will not be defeated by any act or neglect of the insured; and giving the mortgagee other rights, privileges, and duties.
Mortgagee’s Title Insurance
The mortgage borrower who gives the mortgage as a pledge to repay.
Is when the required monthly payments are less then the actual interest accruing on a loan. The shortage is then added to the principal increasing the loan balance.
The equity of the owners business or assets determined by subtracting all liabilities from the the current mortgage or appraised value.
Also called a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium. The current non-conforming loan limit is, 601 and above.
A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand.
Note endorsed with Recourse
The substitution of a new party and /or new terms to an existing obligation.
Office of Thrift Supervission (OTS)
The OTS is a department of the U.S. Treasury and is the primary regulator of all federal and many state-chartered thrift institutions.
A provision in a mortgage allowing the borrower to increase the loan amount as long as the total debt does not exceed the original mortgage loan amount, with the lender often reserving the right to adjust the interest rate to current market rates.
A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a percentage of the amount loaned, such as one percent.
A property purchase transaction in which the property seller provides all or part of the financing.
Owner’s Title Insurance
A loan covering both real and personal property.
Planned Unit Developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.
Plat Book (Plat Map)
Principal, interest, taxes and insurance–the components of a monthly mortgage payment.
Point of Beginning (POB)
The starting place in a land survey using the metes-and-bounds method of property description.
Charges levied by the mortgage lender and usually payable at closing. One point represents 1% of the face value of the mortgage loan.
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.
A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.
A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without a penalty.
A source for the purchase of a mortgage loan by a borrower.
Amount of debt, not including interest. The face value of a note or mortgage.
Principal and Interest (P&I)
Principle of Substitution
States that an educated or informed buyer would not pay more for a property than the cost of buying another that is basically the same.
Private Mortgage Insurance (PMI)
Insurance provided by nongovernment insurers that protects lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80%.
Profit and Loss Statement
Purchase Money Mortgage
Any new mortgage taken as part of the purchase price of real property by the seller.
The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.
Quit Claim Deed
A deed of release. An instrument by which the grantor relinquishes all right, title, or interest he may have in a property.
A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.
Compensation received from a wholesale lender, which can be used to cover closing costs, or as a refund to the borrower. Loans with rebates often carry higher interest rates than loans with “points” (see above).
The process of paying off one loan with the proceeds from a new loan using the same property as security.
Regulation Z (Truth in Lending)
A provision in a Mortgage that gives the owner of the property the privilege of paying off a portion of the mortgage indebtedness, thus freeing a portion of the property from the mortgage.
Residential mortgage credit report (RMCR)
A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.
Real Estate Settlement Procedures Act. A law that protects consumers by adopting the universal HUD-1 and provides guidelines for proper disclosure of settlement and closing fees.
A Special type of loan made to homeowners 62 years of age or older to enable them to convert the equity in their home to cash.
Right of Redemption
The right of a borrower, to stop a foreclosure sale, by paying off the entire indebtedness.
Right of Rescission
Federal law gives you a cooling-off period when you get a home equity loan or line of credit, or when you refinance with another lender. The borrower has three business days following signing of the loan documents to rescind or cancel the transaction without any penalty.
Right of Survivorship
A legal concept whereby the surviving owners of real property held jointly are entitled to the interest held by one or more of the deceased owners.
Satisfaction of Mortgage
A document that should be recorded, which states that a mortgage has been paid in full, thus releasing the lien.
Secondary Mortgage Market
A market in which existing mortgages and mortgage-backed securities are traded.
Earning one’s livelihood directly from one’s own trade or business rather than as an employee of another.
Sellers Carry Back
An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.
Lines on a plot drawing that delineate how close to the edges of the property a structure may be built. A structure may not extend past the setback lines, thus may be no closer to the perimeter of the property than the setback lines. Setback lines are defined in building codes, deed restrictions, and zoning regulations.
A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes.
the issuance of both an owner’s and lender’s title insurance policies at the same time.
a promise by a lender to lend a specified amount of money at specified terms at a future date. The borrower has the right to cancel the loan. In the secondary mortgage market, the term refers to a promise to purchase a loan or loans under specified terms, with the seller retaining the option to cancel.
Statute of Frauds
An act that requires that certain real estate instruments and contracts affecting title to real property be in writing in order to be enforceable.
Statute of Limitations
An act that prescribes specific time restrictions for enforcement of rights by action of law.
Subject to the Mortgage
A buyer makes regular periodic payments on the mortgage but does not assume responsibility for the mortgage.
A provision in a mortgage in which the lender voluntarily permits a prior or subsequent mortgage to take priority over the lender’s otherwise superior mortgage; the act of yielding priority.
A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography.
Implies a value to be given in exchange for the borrowers labor in a property.
The distributions of all funds held in escrow, to the appropriate parties present at the closing table.
The assessed value less exemptions resulting in an amount to which the property Ad valorem tax is applied.
Tenancy by Entirety
A tenancy created between a husband and wife, recognized as a single entity, with right to survivorship.
An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.
A non-amortizing mortgage that calls for repayment of the principal in full at the end of the specified term.
The evidence one has of right to possession of land.
Insurance against loss resulting from defects of title to a specifically described parcel of real property.
An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.
The lender holds title to the property, as security only, until all loan payments have been made. During that time the borrower has the right to possession of the property, and the lender delivers the deed back to the borrower only after the loan obligation has been satisfied
Total debt ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.
A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.
Charging a rate of interest higher then that allowed by law.
Veteran’s Administration (VA)
A government agency-guaranteeing mortgage loans with no down payment to qualified veterans.
A claim imposed against real property with the consent of the owner.
Is the method by which most mortgage bankers fund the loans at closing. Warehousing involve short-term borrowing of funds from warehouse banks using permanent mortgage loans as collateral. The money borrowed from this line of credit is used to produce mortgage loans. Once the loans are sold to an investor on the secondary market, the mortgage banker replenishes the warehouse line, enabling it to use the funds to create more loans.
A type of deed that provides the strongest and most comprehensive promises of further assurance possible for a seller to convey to a buyer.
WDO Inspection and Clearance Letter
Wood Destroying Organism
A financing technique in which the payment of the existing mortgage is continued (by the seller) and a new higher interest rate mortgage, which is larger than the existing mortgage, is paid by the buyer.
A loan made to a borrower will produce an anticipated return on investment or yield.
Yield-Spread Premium (YSP)
Is the cash rebate paid to a mortgage broker based on selling an interest rate above the wholesale par rate that the borrower qualifies for.