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Balloon Loan/mortgage - A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty-year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

Balloon Payment - The final payment of a mortgage which is larger than the regular payment; it usually extinguishes the debt.
 
Bankruptcy - By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities.  Bankruptcies are of various types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts.  A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

Basis - Original cost of property plus value of any improvements put on by the seller minus the depreciation taken by the seller.

Beneficiary - The lender named on the mortgage note.  One entitled to the proceeds of property held in trust; also proceeds of wills, insurance policies, or trusts.

Bill of Sale - A written document that transfers title to personal property.  For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

Binder - Preliminary agreement of sale, usually accompanied by earnest money (term also used with property insurance).
 
Biweekly Mortgage - A mortgage in which you make payments every two weeks instead of once a month.  The basic result is that instead of making twelve monthly payments during the year, you make thirteen.  The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty-year mortgage.  Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty-year mortgage.  They charge a set-up fee and a transfer fee for every payment.  Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle.  You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

Blanket Mortgage - A mortgage covering more than one property of the mortgage.

Bond - A debt instrument in the capital markets.  The US government, corporations and municipalities use bonds to raise money.  Bonds can also be backed by real estate loans and the payments from mortgages.

Bond Market - Usually refers to the daily buying and selling of thirty-year treasury bonds.  Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing.  The same factors that affect the Treasury bond market also affect mortgage rates.  That is why a rate changes daily, and in a volatile market can and do change during the day as well.

Bridge Financing/Loan - A form of an interim loan, generally made between a short-term loan and a long-term loan when the borrower needs additional time before obtaining permanent financing.  Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property.  The bridge loan becomes the source of their funds for the down payment.  One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value.  In addition, sellers often prefer to accept offers from buyers who have already sold their property.

Broker - Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker."  Some agents are brokers as well, either working for himself or herself or under another broker.  In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors.  As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

Building Code - Government regulations specifying minimum construction 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 leased, by building codes, or by zoning ordinances.

Buy down - Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years.  After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate.  In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment.  These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property.  A "lender funded buydown" is when the lender pays the initial lump sum.  They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate.  One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount.  Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

Buyer's Broker - Agent who takes the buyer as a client, and is obligated to represent their interest above all others, and owes specific fiduciary duties to the buyer.

Call Option - Similar to the acceleration clause.

Capital - Accumulated wealth.  A portion of wealth that is set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of their remaining permanently in the business.

Capital Gain - Taxable profit on the sale of an appreciated asset.

Caps - Caps are used on adjustable rate mortgages (ARM's) to limit the interest rate and/or the payment.  Most ARMs have a periodic cap that is around 2% per year and a life cap of around 5%-6% over the life of the loan.  "Payment only" caps sometimes create negative amortization where the principal balance of the loan increases rather than decreases over time.  Limitations may apply to how much the loan may adjust over a six-month period, an annual period, and over the life of the loan, and are referred to as "caps."  Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment that can change once a year.  There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.

Cash-Out Refinance - When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."

Caveat Emptor - A legal term meaning "let buyer beware".

Certificate of Deposit - A time deposit held in a bank that pays a certain amount of interest to the depositor.

Certificate of Deposit Index - One of the indexes used for determining interest rate changes on some adjustable rate mortgages.  It is an average of what banks are paying on certificates of deposit.

Certificate of Eligibility - A certificate obtained by a veteran from a Veteran's Administration office that states that the veteran is eligible for a VA insured loan.

Certificate of Occupancy - Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

Certificate of Reasonable Value (CRV) - Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

Certificate of Title - A certification 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 that an examination of the public 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.

Certified Copy - A true copy, attested to be true by the officer holding the original.

Cestui Que Trust - One having an equitable interest in property with the legal title being vested to the trustee.

Chain of Title - An analysis of the transfers of title to a piece of property over the years.

Chattel - Personal property.

Clear Title - A title that is free of liens or legal questions as to ownership of the property.

Client - Person who employs the agent.  Typically the seller is a client.  The buyer can be a client (buyer's broker) or customer (seller's broker).

Closing - This has different meanings in different states.  In some states a real estate transaction is not consider "closed" until the documents recorded at the local recorders office.  In others, the "closing" is a meeting where all of the documents are signed and money changes hands.

Closing Agent - A neutral third party that facilitates the closing of a real estate transaction.  The closing agent can be an escrow company, title company or attorney.

Closing Costs - Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items."  Non-recurring closing costs are any item that is paid just once as a result of buying the property or obtaining a loan, like points and appraisal fees.  "Pre-paids" are prorated items which recur over time, such as property taxes and homeowners insurance.  A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.

Closing Statement - Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.

Closing Day - The day on which the formalities of a real estate sale are concluded.  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 - Any conditions revealed by a title search that adversely affects the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.

CMA - Comparative Market Analysis

Code of Ethics - Standards subscribed to by members of the National Association of Realtors.

Co-Borrower - An additional individual who is both obligated on the loan and is on title to the property.

Co-Maker - Are equally responsible for repayment as the borrower.

Collateral - In a home loan, the property is the collateral.  The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.

Collection - When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

Commercial Property - Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments.

Commission - Fee paid to a broker or other entity for services rendered.  Real estate brokers and mortgage brokers receive a commission for the services they provide; a real estate broker secures a buyer for a property that is for sale and a mortgage broker secures a mortgage loan for the buyer to finance the purchase of a property.  Commissions are generally paid as a percentage of the sales price in a real estate transaction or the loan amount in a mortgage transaction.

Commitment - A written promise to make or insure a loan for a specified amount and on specified items.

Common Area Assessments - In some areas they are called Homeowners Association Fees.  They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.

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 - Rules based on usage as demonstrated by decrees and judgments from the courts; an unwritten body of law based on general custom in England and used to an extent in some states.

Community Property - Property owned jointly by husband and wife.  In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances.

Comparables - Properties which are similar in value to a particular property are used as comparisons to determine the fair market value of a specified property.

Comparable Sales - Recent sales of similar properties in nearby areas are used to help determine the market value of a property.  Also referred to as "comps."

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.

Conditional Commitment - A lenders promise to issue a loan subject to certain conditions.  Generally, the lender will not fund the loan until the conditions have been met.

Conditional Offer - Purchase offer in which the buyer proposes to purchase property only after certain events (sale of another home, finding a loan commitment, etc.) occur.

Condominium - A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title.  Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.

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, daily cleaning services and is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.

Consideration - Anything of value given to induce another to enter into a contract.  Earnest money deposit on a sales contract is consideration.

Construction 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.

Contingency - 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.

Contract - An oral or written agreement to do or not to do a certain thing.

Contract of Purchase - An agreement between parties for the sale of real estate.  In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract.  In Texas it is known as an Earnest Money Contract.

Contract of Sale - A purchase transaction in which the buyer receives possession of the property, but the seller retains title.

Contract Sales Price - The full purchase price as stated in the contract.

Conventional Loan - A mortgage loan that is not guaranteed or insured by the government.  FHA and VA loans are not conventional loans.

Convertible ARMs - An adjustable-rate mortgage that has a provision allowing the borrower to convert the mortgage to a fixed rate term.  The conversion feature is outlined in the mortgage note and has certain restrictions.

Conventional Mortgage - A loan neither insured by the FHA nor guaranteed by the VA.

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 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.

Cost of Funds Index (COFI) - One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages.  It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

Cost Plus Contract - A building contract setting the builder's profit at a set percentage of actual cost of labor and materials.

Cost Basis - Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any depreciation claimed on tax returns over the years.

Counteroffer - A new offer made as a result of another offer, which cancels the original offer.

County - A division within a state, usually encompassing one or more cities or towns.

Covenant - An agreement written into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or non-users of the property.

Credit - An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit History - A record of an individual's repayment of debt.  Mortgage lenders as one of the underwriting criteria in determining credit risk review credit histories.

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.

Customer - Typically, the buyer (before buyer agency laws), as opposed to the principal (seller).

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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.

Fannie Mae (Federal National Mortgage Association/FNMA) - FNMA is one of the major secondary market investors that purchase loans from mortgage companies and other depository institutions.  The company
is 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 Home Board - The board that oversees the Federal Home Loan Bank systems.

Federal Home Loan Bank - Provides liquidity to supervised financial service companies, such as savings and loans and credit unions.  The bank system has several districts.

Federal Home Loan Board - The board which charters and forbids discrimination in the sale.

Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC) - A government sponsored agency that is also a publicly traded company on the New York Stock Exchange that purchases mortgage loans from mortgage bankers and financial depository institutions.  FHLMC is a major secondary market investor.

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 National Mortgage Association(Fannie Mae) - FNMA is one of the major secondary market investors that purchase loans from mortgage companies and other depository institutions.  The company
is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.

Federal Reserve Bank - The regulatory agency for certain commercial banks and bank holding companies.  Sets monetary policy for the country and provides liquidity for supervised financial institutions.

Federal Tax Lien - A lien attached to property for nonpayment of a federal tax.

Federal Tax Return - The U.S. government's method to identify individual and company's annual tax responsibility.  The tax returns identify the income and taxes.

Fee Simple - Highest possible degree of land ownership.  The estate allows owners to have unrestricted powers to dispose of property, and which can be left by will or inherited.

Fee Simple Estate - An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed.  It is of perpetual duration.  When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA Mortgage - A mortgage that is insured by the Federal Housing Administration (FHA).  Along with VA loans, an FHA loan will often be referred to as a government loan.

Fiduciary - A person in a position of trust or responsibility with specific duties to act in the best interest of a client.  Real estate brokers and mortgage brokers are fiduciaries.

Financial Depositor Institutions - Banks, savings and loans or credit unions.

Firm Commitment - A lender’s agreement to make a loan to a specific borrower on a specific property.

First Mortgage - The mortgage that is in first place among any loans recorded against a property.  Usually refers to the date in which loans are recorded, but there are exceptions.

Fixed-Rate Mortgage - A mortgage in which the interests rate does not change during the entire term of the loan.

Fixture - Personal property affixed to structures or land, usually in such manner that they cannot be independently moved without damage to themselves or the property housing, supporting, or pertinent to them.  Varies under state laws.

Flood Insurance - Insurance that compensates for physical property damage resulting from flooding.  It is required for properties located in federally designated flood areas.

Foreclosure - A proceeding in or out of court to extinguish all rights, title and interest of the owner(s) of a property in order to sell the property and satisfy a lien against it.  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 - See Federal Home Loan Mortgage Corporation.

FSBO – For Sale by Owner

Full Disclosure - Revealing all known facts that may affect the decision of a buyer or tenant.

Functional Obsolescence - Impairment of functional capacity or efficiency. For example, homes without indoor plumbing (while they may contain working outdoor plumbing facilities) are considered functionally obsolete.

General Lien - A lien such as a tax lien or judgment lien, which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property.

General Warranty Deed - A deed that conveys not only all the grantor's interests in and title to the property to the grantee.  It also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

GLAAG – Gross Living Area Above Ground.

Government Loan/Mortgage - A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS).  Mortgages that are not government loans are classified as conventional loans.

Government National Mortgage Association (GNMA/Ginnie Mae) - A government owned agency that acts as a secondary market conduit for FHA and VA loans.  GNMA guarantees the timely principal and interest payments to investors.

Grandfather Clause - The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible.

Ground Rent - Rent paid for vacant land.  If the property is improved, ground rent is the portion attributable to the land only.

Grantee - The buyer, who receives a deed.

Grantor - The seller, who gives a deed.

Hazard Insurance - Insurance on a property against damages caused by fire, wind storms, vandalism and similar risks.

Heirs and Assigns - One who might inherit or succeed to an interest in a property under the rules of law applicable when a property owner dies.

Holographic Will - Will written in the testator's handwriting and not witnessed.

Home Equity Conversion Mortgage (HECM) - Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you.  It enables older homeowners to convert the equity they have in their homes into cash, usually in the form of monthly payments.  Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home.  In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

Home Equity Line of Credit - A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.

Home Inspection - A thorough inspection by a professional that evaluates the structural and mechanical condition of a property.  A satisfactory home inspection is often included as a contingency by the purchaser.

Homeowners Association - An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.  A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project.  In a condominium project, it has no ownership interest in the common elements.  In a PUD project, it holds title to the common elements.

Homeowner's Insurance - An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

Homeowner's or Maintenance Fees - Payments made by property owner(s) of a condominium or a unit in PUD to the homeowners' association for expenses incurred in upkeep of the common areas.

Homeowner's Policy - Policy which expands the insurance for a homeowner.  It may include theft, liability, earthquake, etc.

Homeowner's Warranty - A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period.  The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.

Homestead - Tract of land occupied as a family home.

Housing and Urban Development (HUD) - The federal government agency that oversees FHA.

HUD Median Income - Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

HUD-1 Settlement Statement - A document that provides an itemized listing of the funds that were paid at closing. (required by HUD)  Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts.  Each type of expense goes on a specific numbered line on the sheet.  The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing.  It is called a HUD1 because the Department of Housing and Urban Development (HUD) print the form.   The HUD1 statement is also known as the "closing statement" or "settlement sheet."  The closing agent generally prepares the document and buyer receives it shortly after the loan is closed.

Impound Account - Account held by a lender for payment of taxes, insurance or other related expenses.  Also known as an escrow account.

Improvement - Valuable additions to property which raise the value.

Incidental Recording, Delivery, Wire, etc., Fees - Other costs that are incurred when a real estate loan is closed.

Index - A published rate or benchmark measure of current interest rate levels used to calculate periodic changes in rates charged on adjustable rate mortgages.

Installment Sale - A tax term used to describe a sale which is usually accomplished by use of a land contract.

Insured Mortgage - A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the mortgaged property to satisfy the balance owing plus cost of foreclosure.

Interest Payment Notification (1098) - A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year.

Interest Rate - The percentage of an amount of money which is paid for its use for a specified time.

In Testate - Someone who has died without leaving a valid will.

Investment Property - A property that is not occupied by the owner and in most cases produces income or is held for gains from appreciation.

Joint and Several Liability - A liability which allows the creditor to sue any one of the debtors or sue all together.

Joint Tenancy - An undivided interest in property taken by two or more joint tenants.  The interests must equal, accruing under the same conveyance and beginning at the same time.  A form of ownership or taking title to property, which means each party, owns the whole property and that ownership is not separate.  Upon death of a joint tenant, the interest passes to the surviving joint tenants rather than to the heirs of the deceased.

Judgment - The decision of a court of law.  In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.

Judicial Foreclosure - A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.  Other states use non-judicial foreclosure.

Jumbo Loan - A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently at $388,700.00 (as of 11/05)  Also called a nonconforming loan.  Freddie Mac and Fannie Mae loans are referred to as conforming loans.

Junior Mortgage - A mortgage subordinate to another mortgage.

Land - In a legal sense, the solid part of the surface of the earth.  As distinguished from water; any ground, soil or earth whatsoever regarded as the subject of ownership and everything annexed to it, whether by nature, e.g., trees and everything in or on it, such as minerals and running water, or annexed to it by man; e.g., buildings, fences, etc.  In an economic sense, land consists of all those elements in the wealth of a nation, which is supposed to be furnished by nature as distinguished from those improvements, which owe their value to the labor and organizing power of man.

Land Contract - Installment plan for buying a house.  It is used as an alternative to obtaining a loan from a traditional, source such as a mortgage banker or savings and loan.

Late Charge - The penalty a borrower must pay when a payment is not made in a stated number of days.  On a first trust deed or mortgage, this is usually fifteen days.

Latent Defect - Hidden structural defect.

Lease - A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

Lease Option - An alternative financing option that allows homebuyers to lease a home with an option to buy.  Each month's rent payment may consist of not only the rent, but also an additional amount that can be applied toward the down payment on an already specified price.  The option may run for the length of the lease or only for a portion of the lease period.

Leasehold Estate - A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Legal Description - An expanded and unique description of a property that is used on legal documents.   A property description recognized by law that is sufficient to locate and identify the property without oral testimony.  Recorded documents generally require a legal description.

Lender - A general term encompassing all mortgages, and beneficiaries under deeds of trust.  A term which can refer to the institution making the loan or to the individual representing the firm.  For example, loan officers are often referred to as "lenders."

Lender's Instructions - A document that lenders prepare for the closing agent that outlines the requirements for loan closing.

Lessee - One who possesses the right to use or occupy a property under lease agreement.

Lessor - One who holds title to and conveys the right to use and occupy a property under lease agreement.

Letter of Intent - A formal method of stating that a prospective developer, buyer or lessee is interested in property.

Liabilities - A person's financial obligations.  Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability Insurance - Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.  It is usually part of a homeowner’s insurance policy.

Lien - An encumbrance against property for the payment of debt; a lien may be a mechanic's lien, unpaid taxes or judgment.  A legal claim against a property that must be paid off when the property is sold.  A mortgage or first trust deed is considered a lien.

Life cap  - For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the mortgage.

Life Estate - An estate in real property for the life of a living person.  The estate then reverts back to the grantor or to a third party.

Limited Partnership - A partnership consisting of one or more general partners, who conduct the business and are responsible for losses, and one or more special partners, who contributes capital and are liable only to the amount contributed.

Line of Credit - An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid Asset - A cash asset or an asset that is easily converted into cash.

Lis Pen dens - A public notice that litigation is pending on a property.

Listing - A record of property for sale by a broker who has been authorized by the owner to sell.  Also used to denote the property so listed.

Listing Agreement - Agreement between a property owner and a real estate broker, authorizing the broker to find a buyer for the property.  If the sale is consummated, the listing broker will be paid a fee.

Loan - A sum of borrowed money (principal) that is generally repaid with interest.

Loan Discount/Premium Fees - Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to the yield requirement of the investor.  Loan discount denotes an investor yield requirement higher than the note rate. Loan premium denotes an investor yield requirement lower than the note rate.

Loan Lock - Guarantee from a lender that a borrower will receive the interest rate in effect at the time of loan application.

Loan Officer - The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution, help borrowers through the loan selection, processing, and closing of a mortgage loan.  Loan officers can be paid a commission or salary for their services and can work for mortgage brokers, mortgage bankers, or depository institutions.  Also referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others.

Loan Origination - How a lender refers to the process of obtaining new loans.

Loan Origination Fees - The cost to obtain a loan that is paid to the originating lender or broker.

Loan Package - The information regarding a borrower and property necessary which is the basis for a lender's credit decision to extend or deny credit.

Loan Ratio - The amount of a loan to the value or selling price of real property.

Loan Servicing - After you obtain a loan, the company you make the payments to is "servicing" your loan.  They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.

Loan-to-Value Ratio (LTV) - The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).

Lock-In - An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

Lock-in Period - The time period during which the lender has guaranteed an interest rate to a borrower.

Margin - The number of percentage points the lender adds to the index rate to calculate the adjustable rate mortgage (ARM) interest rate at each adjustment.  The difference between the interest rate and the index on an adjustable rate mortgage.  The margin remains stable over the life of the loan.  It is the index that moves up and down.

Market Value - The most likely price a given property will bring if widely exposed on the market, assuming fully informed buyer and seller.

Marketable Title - A title that is free and clear of objectionable liens, clouds or other title defects.  A title which enables an owner to sell his property freely to others and which others will accept without objection.

Marketing - The management process through which efforts to conceive, develop and deliver goods and services are integrated to satisfy the needs and wants of selected customers as a means of achieving company objectives.

Market Price - The price paid for a property; the amount of money that must be given or which can be obtained at the market in exchange under the immediate conditions existing at a certain date.  This is different from market value.

Market Value - The highest price estimated in terms of money that a buyer would be warranted in paying and a seller justified in accepting.  Provided both parties were fully informed, acted intelligently and voluntarily and, further that all the rights and benefits inherent in or attributable to the property were included in the transfer.

Maturity - The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

Mechanics Lien - A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land.

Merged Credit Report - A credit report that reports the raw data pulled from two or more of the major credit repositories.  Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.

Misrepresentation - False statement made, or concealment of knowledge from another party with the intent to provoke action from that party.

Modification - Occasionally, a lender will agree to modify the terms of your mortgage without requiring you to refinance.  If any changes are made, it is called a modification.

Mortgage - A lien or claim against real property given as security for a loan.  It is a two party agreement as opposed to the three-party agreement of a deed of trust.

Mortgage Banker - Financial intermediaries that originate mortgage loans through loan officers or independent mortgage brokers, and then sells the mortgages into the secondary mortgage market.

Mortgage Broker - A professional that helps consumers through the loan selection, processing and closing of a mortgage loan.  Most mortgage brokers have access to a wide range of mortgage products through many mortgage lenders.  Mortgage brokers are paid a fee by the borrower when a suitable mortgage is found and closed.

Mortgage Commitment - A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance (MI) - Insurance that covers the lender against some of the losses incurred as a result of default on a home loan.  Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers.  Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent.  Mortgages above 80% LTV that call them "No MI" are usually a made at a higher interest rate.  Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves.  Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

Mortgage Insurance Premium (MIP) - The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

Mortgage Life and Disability Insurance - A type of term life insurance often bought by borrowers.  The amount of coverage decreases as the principal balance declines.  Some policies also cover the borrower in the event of disability.  In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.  In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability.  Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometimes forty-five days.

Mortgage Note - The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps for ARMs, the name of the lender and the borrower, and any other material item required by the lender.

Mortgage Warehousing - A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans that are sold to an investor shortly thereafter.  The mortgage notes are used as collateral for this interim financing.

Mortgagee - A legal document that pledges a property to the lender as security for payment of a debt.  Instead of mortgages, some states use First Trust Deeds.

Mortgagor - The borrower of money or the giver of the mortgage document.

Multidwelling Units - Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

Multiple Listing Service - A means of making possible the orderly dissemination and correlation of listing information to its members so that REALTORS may better serve the buying and selling public.

National Association of Realtors - The National Association of Realtors dedicated to the protection and the preservation of the free enterprise system and the right of the individual to own real property as guaranteed by the Constitution of the United States of America.  Each member of the National Association of Realtors must adhere to a strict Code of Ethics and Standards of Practice designed to provide assurances to the public of the Realtors integrity and professionalism.

Negative Amortization - Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment.  If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate.  In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest."  The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.

Net Listing - An arrangement whereby the Broker receives as commission all monies received above a minimum sales price agreed to by the owners and the Broker.

No Cash-out Refinance - A refinance transaction that is not intended to put cash in the hand of the borrower.  Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage.  Often referred to as a "rate and term refinance."

No-cost Loan - Many lenders offer loans that you can obtain at "no cost."  You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others.  These are fees and costs that may be associated with buying a home or obtaining a loan, but not charged directly by the lender.  Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

Non-conforming Loan - Loans that are above the loan limits set by FNMA and FHLMC.  Also known as jumbo loans.

Nonconforming Use - A property that does not conform to the zoning of an area.

Note - A written promise to repay a certain sum of money on specified terms.  A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note Rate - The interest rate stated on a mortgage note.

Notice of Default - A formal written notice to a borrower that default has occurred and that legal action may be taken.

Obsolescence - Impairment of desirability and usefulness brought about by changes in the art, design or process or from external influencing circumstances that make a property less desirable and valuable for a continuity or use.

Offer - A promise by one party to do a specified deed as the other party in turn performs a specific deed.

Office of Comptroller Currency - A federal government regulatory agency that oversees some commercial banks.

Office of Thrift Supervision - A federal government regulatory agency that oversees savings and loans.

Open End Mortgage - A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions.

Open Listing - An authorization given by a property owner to a real estate Broker wherein said Broker is given the nonexclusive right to secure a purchaser.  Open listings may be given to any number of Brokers without liability to compensate any except the one who first secures a buyer ready, willing and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer.

Original Principal Balance - The total amount of principal owed on a mortgage before any payments are made.

Origination Fee - On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points."  One point equals one percent of the loan amounts.  On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.

Owner of Record - The individual (s) named on a deed that has been recorded at the local municipality.

Owner Financing - A property purchase transaction in which the property seller provides all or part of the financing.

Owners Policy - Title insurance for the owner of property, rather than a lien holder.

Ownership - The right to possess and use property to the exclusion of others.

Package Mortgage - Mortgage covering both real and personal property.

Paper - A mortgage, deed of trust or land contract that is given instead of cash.

Parole Evidence - The legal rule that prevents previous oral or written negotiations to a signed contract from changing the contract.

Partial Payment - A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.  Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.

Partial Release - A release of a portion of property covered by a mortgage.

Payment Change Date - The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM).  Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

Periodic Payment Cap - For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one-adjustment period.

Periodic Rate Cap - For an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one-adjustment period, regardless of how high or low the index might be.

Permanent Mortgage - A mortgage on completed construction on the same property under one mortgage or trust deed.

Perorations - The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing.

Personal Property - Any property that is not real property.

Personality - Property which is movable.  All property is either personality, realty or mixed.
 
Physical Depreciation - A term that is frequently used when physical deterioration is intended.  In a broad concept it may relate to those elements contributing to depreciation that are existent or inherent in the physical property itself, as distinguished from other and external circumstances that may influence its utilization.  Qualification and explanation will be needed.

PITI - This stands for principal, interest, taxes and insurance.  If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well.  If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.

PITI Reserves - A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home.  The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Planned Unit Development (PUD) - A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.

Plat - A map or chart of a lot, subdivision or community, showing boundary lines, buildings and easements.

PMI - Abbreviation for private mortgage insurance: insurance issued by a company, which insures the lender against loss in the event that the borrower defaults on the mortgage.

Point - A point is 1 percent of the principal amount of the mortgage.

Points - Origination fees charged by the originating lender or broker and/or discount fee charge by lenders to increase the overall yield.

Portfolio Loan - Loans held as an investment by a bank, savings and loan or credit union.

Power of Attorney - A written instrument authorizing a person to act as the agent of the person granting it, and a general power authorizing the agent to act generally in behalf of the principle.  A special power limits the agent to a particular or specific act as; a landowner may grant an agent special power of attorney to convey a single and specific parcel of property.  Under the provisions of a general power of attorney, the agent having the power may convey any or all property of the principal granting the general power of attorney.   A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval - A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved.  A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others.  A pre-approval applies only to the borrower.  Once a property is chosen, it must also meet the underwriting guidelines of the lender.  Contrast with pre-qualification

Prepaid Interest - Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on the 15th of the month and the first payment is due 45 days later, the lender will charge 15 days of prepaid interest.

Prepaid Items of Expense - Perorations of prepaid items of expense, which are credited to the seller in the closing statement.

Prepayment - Any amount paid to reduce the principal balance of a loan before the due date.  Examples are  payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure.  In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty - A fee that may be charged to a borrower who pays off a loan before it is due. 

Pre-qualification - This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings.  The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

Primary Mortgage Market - The process of obtaining a real estate loan, including the consumer's completion of a loan application form, validation of the credit and property information, loan underwriting by the lender and closing of the mortgage loan.

Primary Residence - Considered the permanent location of residency.

Principal Balance - The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges.

Principal, Interest, Taxes, and Insurance (PITI) - The four components of a monthly mortgage payment on impounded loans.  Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money.  Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

Private Mortgage Insurance (PMI) - Insurance which covers the portion of a mortgage loan above 80% thereby reducing the lenders risk to principal loss in the event of a borrowers default.  The insurance coverage allows lenders to make higher loan-to-value ratios (95% LTV).

Processing, Underwriting and Document Fees - Charges for the lender's services associated with making the loan.

Promissory Note - A written promise to repay a specified amount over a specified period of time.

Property - The rights of ownership.  The rights to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights.  Property is generally classified into two groups, personal property and real property.

Property Tax - A tax levied by the local municipality or county on real and personal property.

Prorate - To divide in proportionate shares, such as taxes, insurance, rent, or other items.

Public Auction - A meeting in an announced public location to sell property to repay a mortgage that is in default.

(PUD) Planned Unit Development  - A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.

Purchase Agreement - A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Mortgage - A mortgage used to finance the purchase of real property.

Purchase Money Transaction - The acquisition of property through the payment of money or its equivalent. 

Qualifying Ratios - Calculations that are used in determining whether a borrower can qualify for a mortgage.  There are two ratios.  The "top" or "front" ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income.  The "back" or "bottom" ratio includes housing costs as will as all other monthly debt.

Quit Claim Deed - A deed operating as a release; intended to pass any title, interest or claim which the grantor may have in the property.

Rate Lock - A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

Real Estate - Land and anything permanently affixed to the land and those things attached to the building.

Real Estate Agent - A person licensed to negotiate and transact the sale of real estate.

Real Estate Broker - A middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis.  The broker does not have title to the property, but generally represents the owner.

Real Estate Settlement Procedures Act (RESPA) - A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Real Estate Tax - A pecuniary charge laid upon real property for public purposes.

Real Property -Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Realtor - A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Realtor Associate - Salesperson associated with a broker who is a member of the National Association of Realtors.

Realty - A synonym for real estate.

Recital - Setting forth in a deed or other writing some explanation for the transaction.

Recording - The act of writing or entering an instrument in a book or public record.  Usually, in the office of the county clerk and recorder.  Such recording constitutes notice to all persons of the rights or claims contained in the instrument.  This type of notice is called "constructive notice" or "legal notice."

Recourse - The right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment.

Redlining - The practice of refusing to provide loans or insurance in a certain neighborhood.

Refinancing - The repayment of a debt from the proceeds of a new loan, using the same property as security.

Reissue rate - A charge for a title insurance policy if a previous policy on the same property was issued within a specified period of time.  Reissue is less than the original charge.

REIT (Real Estate Investment Trusts) - A method in investing real estate in a group, with certain tax advantages.

Recession of Contract - Annulling a contract and placing the parties to it in a position as if there had not been a contract.

Recorder - The public official who keeps records of transactions that affect real property in the area.  Sometimes known as a "Registrar of Deeds" or "County Clerk."

Recording - The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

Refinance Transaction - The process of paying off one loan with the proceeds from a new loan using the same property as security.

Release - An instrument releasing property from the lien of the mortgage, judgment, etc.

Remaining Balance - The amount of principal that has not yet been repaid.

Remaining Term - The original amortization term minus the number of payments that have been applied. 

Rent Loss Insurance - Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

Repayment Plan - An arrangement made to repay delinquent installments or advances.

Replacement Reserve Fund - A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

RESPA (Real Estate Settlement Procedures Act) - A federal regulation that requires lenders and mortgage brokers to disclose to borrowers, in advance, the fees required to obtain a mortgage loan.

Restrictive Covenants - Private restrictions limiting the use of real property.  Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and be binding only between the original seller and buyer.

Revenue Stamps - Formerly, federal tax on a sale of real property.  Canceled and replaced by state tax stamps.

Reverse Mortgage - A special program for the elderly that provides income until death.  Payment requirements are arranged through the increase in the principal amount of the loan.

Revolving Debt - A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services.  The borrower is billed for the amount that is actually borrowed plus any interest due.

Right of First Refusal - A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of Ingress or Egress - The right to enter or leave designated premises.

Right of Survivorship - In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

Riparian - Pertaining to the banks of a river, stream, waterway, etc.

Sales Agreement - See agreement of sale.

Sale-leaseback - A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.

Satisfaction of Mortgage - Document issued by mortgagee when the mortgage is paid off.

Second Home - Commonly known as a vacation home.  This home is not rented and is occupied occasionally by the owners.

Secondary Financing - A loan secured by a mortgage or trust deed, which lien is junior to another mortgage or trust deed.

Secondary Market - The buying and selling of mortgage notes between sophisticated investors such as pension funds, commercial banks, savings and loans and Wall Street firms.

Secondary Market Investor - An entity, such as FNMA or FHLMC, that buys mortgage loans for investment or sells them again to another secondary market investor.  Secondary market investors do not service loans and do not collect payments from borrowers.

Second Mortgage - A mortgage that has a lien position subordinate to the first mortgage.

Secondary Mortgage Market - The buying and selling of first mortgages of trust deeds by banks, insurance companies, government agencies, and other mortgagers.

Secured Loan - A loan that is backed by collateral.

Security - Real or personal property pledged by a borrower as additional protection for the lender's interest.

Seller's Broker - Agent who takes the seller as a client, is legally obligated to a set of fiduciary duties and is required to put the seller's interests above all other's.

Seller Carry-Back - An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

Septic Tank - An underground tank in which sewage from the house is reduced to liquid by bacterial action and drained off.

Servicer - An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts.  The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

Servicing - The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Set Back Ordinance - Regulates the distance from the lot line to the point where improvements may be constructed.

Settlement/Closing - This has different meanings in different states.  In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office.  In others, the "closing" is a meeting where all of the documents are signed and money changes hands.

Settlement Cost, a HUD Guide - This booklet gives an overview of the lending process and is required by HUD.  It is provided to consumers after the loan application is completed.

Settlement Statement - A statement prepared by broker, escrow or lender giving a complete breakdown of the cost associated with a real estate transaction.  Also see HUD-1.

Sheriff's Deed - A deed given at the sheriff's sale in foreclosure of a mortgage.

Single Family Detached Home - A residential home that is not attached physically to another home.

Special Assessments - A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, streetlights, etc.

Special Lien - A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets.  It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf.  In some localities it is called "particular" lien or "specific" lien. (See lien).

Special Warranty Deed - A deed in which the grantor conveys title to the grantee.  And agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property.  In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.

Specific Performance - Lawsuit requesting that a contract be exactly carried out, usually asking that the seller be ordered to convey the property as previously agreed.

Standard Uniform Application - An application developed by FNMA and FHLMC that is widely used in the mortgage industry.

State and Local Housing Programs - Unique-housing finance programs to assist first time homebuyers and low to moderate housing groups.  Each state and local group has different sets of criteria.

Statute of Frauds - The law requires that certain contracts, such as agreements of sale, to be in writing in order to be enforceable.

Statutory Lien - An involuntary lien, includes tax liens, judgment liens, mechanic liens, etc.

Subdivision - A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subordinate Financing - Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

Substitute of Trustee - A document that is recorded to change the trustee under the deed of trust.

Survey - Map or plat made by a licensed surveyor showing the precise legal boundaries of a property, charts of  its boundaries, the location of improvements, easements, rights of ways, encroachments, other physical features and relationship to the property surrounding it.  A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.

Survivorship - All rights of a joint tenant passes to the surviving joint tenant.

Sweat Equity - Equity created by the labor of the purchaser or borrower that increases the value of the property; contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.

Tax - Tax as applied to real estate is an enforced charge imposed on persons, property, or income to be used to support the State.  The governing body in turn utilizes the funds in the best interest of the general public.

Tax Lien - Lien for non-payment of taxes.

Tax Sale - Public sale of property at an auction by a governmental authority, due to non-payment of property taxes.

Tenancy - A holding, as of land, by any kind of title, occupancy of land, a house or the like under a lease or on payment of rent or tenure.

Tenancy at Sufferance - A tenancy which arises when a tenant holds over after expiration of his lease.

Tenancy at Will - A tenancy which may be terminated at the will of either the lessor or lessee.

Tenancy by the Entirety - A form of ownership by husband and wife whereby each owns the entire property.  In event of the death of one, the survivor owns the property without probate.

Tenancy in Common - As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.

Tenant - Any person in possession of real property with the permission of the owner.

Testate - Having made a will before death.

Third-Party Origination - A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Time is of the Essence - Legal phrase in a contract requiring punctual performance of all obligations.

Title - Often used interchangeably with the word ownership.  A legal document evidencing a person's right to or ownership of a property.

Title Company - A Company that specializes in examining and insuring titles to real estate.

Title, Escrow and Closing Agent Fees - These companies charge various fees for their services.

Title Insurance - Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.

Title Search - A review of the public records generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner.  That there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the records, which would adversely affect the marketability or value of title.

Transfer of Ownership - Any means by which the ownership of a property changes hands.  Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.

Transfer Tax - State or local tax payable when title passes from one owner to another.

Treasury Index - An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.  It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

Trustee - A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another.  The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. (See deed of trust).

Truth in Lending Statement (Regulation Z) - A federal government regulation that provides details of the cost of obtaining a mortgage loan.  Lenders must provide this shortly after the loan application has been completed.  A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges. 

Two-step Mortgage - An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

Two-to Four-family Property - A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

Usury - On a loan, claiming a rate of interest greater than permitted by law.

Valuation - The act or process of estimating value; the amount of estimated value.

Vested - Having the right to use a portion of a fund such as an individual retirement fund.  For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund.  However, taxes may be due on any funds that are actually withdrawn.

Veterans Administration (VA) - An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services.  The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

Warranty Deed - Most valuable type of deed in which the grantor makes formal assurance of title.

W2 Form - Income tax form that is provided by employers to employees that states the income and taxes paid in a calendar year.

Yield - The interest earned by an investor on his investment (or bank on the money it has lent).  Also called Return.

Zoning Ordinances - The acts of an authorized local government establishing building codes and setting forth regulations for property land usage.