Real Estate Glossary
Definitions A-G
Definitions H-N
Definitions O-Z
Other Definitions
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original principal balance
The total amount of principal owed on a mortgage before any payments are made.
- origination fee
A fee charged by a lender for processing a loan application, expressed as a percentage of the mortgage amount.
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owner financing
A home-financing technique in which buyer borrows from the seller instead of, or in addition to, a bank. Sometimes done when a buyer cannot qualify for a bank loan for the full amount. also called seller financing or purchase-money mortgage..
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partial payment [top]
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.
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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.
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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.
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periodic rate cap [top]
In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease from one adjustment period to the next.
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personal property
All property other than land and buildings attached to land. Cars, bank accounts, wages, securities, a small business, furniture, insurance policies, jewelry, patents, pets and season baseball tickets are all examples of personal property. Personal property may also be called personal effects, movable property, goods and chattel, and personalty
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PITI
Acronym for principal, interest, taxes, and insurance, the four components of a mortgage payment.
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PITI reserves [top]
A cash amount that a homebuyer must have on hand after making a down payment and paying all closing costs. The reserves required by the lender must equal the amount a homebuyer would pay for principal, interest, taxes and insurance for a specified number of months
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planned unit development (PUD)
A planned combination of diverse land uses, such as housing, recreation and
shopping, in one contained development or subdivision. PUD zoning provisions permit large lots to be developed in a more flexible manner than allowed by the underlying zoning. PUD ordinances may allow developers to mix land uses, such as residential and commercial, on a large parcel and to develop the parcel at greater densities, and with more design flexibility, than otherwise allowed by the underlying zoning district. PUD provisions often require developers to compensate for the impacts of their projects by setting aside significant and usable open space, providing infrastructure needed to service the development, or offering other community facilities and services
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point
A point is 1 percent of the amount of the mortgage.
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power of attorney
A legal document giving one person (called an "agent" or "attorney-in-fact") the power to act for another person (the principal). The agent can have broad legal authority or limited authority to make legal decisions about the principal's property and finance. The power of attorney is frequently used in the event of a principal's illness or disability, or when the principal can't be present to sign necessary legal documents for financial transactions
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pre-approval [top]
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
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prepayment
Any amount paid to reduce the principal balance of a loan before the due
date. 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.
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prepayment penalty [top]
A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity.
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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.
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prime rate [top]
The interest rate charged by commercial banks to their best or most creditworthy customers, most often large corporations
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principal
The amount borrowed or remaining unpaid. The part of the monthly payment that
reduces the remaining balance of a mortgage.
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principal balance
The amount of money that is borrowed or the amount that remains unpaid on a loan.
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principal, interest, taxes, and insurance (PITI) [top]
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.
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private mortgage insurance (MI)
PMI. Mortgage insurance provided by nongovernment insurers that protects a lender against loss if the borrower defaults.
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promissory note
A written pledge agreed to by a borrower to repay a loan at a specified time. Also known simply as Note
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public auction [top]
A public sale in which property or items of merchandise are sold to the highest bidder. Bids are taken verbally or simultaneously through mail or telegrams, and the property is sold to the highest bidder.
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Planned Unit Development (PUD)
A type of residential, commercial, or industrial land development that provides more planning flexibility than traditional zoning and lot layout. Buildings are often clustered on smaller lots, permitting the preservation of natural features in common areas or open park-like areas. The development maintains the same or slightly greater density than is permitted by conventional zoning methods. Individual properties are owned in fee with the common areas owned jointly or deeded to the local government
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purchase agreement
A written contract signed by the buyer and seller stating the terms and
conditions under which a property will be sold.
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purchase money transaction
The acquisition of property through the payment of money or its equivalent.
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qualifying ratios [top]
Calculations used by lenders to determine the largest mortgage that a home buyer can afford.
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quitclaim deed
A document by which the owner of real estate conveys to another the owner's legal right to, interest in and title to a property, but which contains no warranty or statement regarding claims, if any, that others might have in the property
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rate lock
A commitment by a lender guaranteeing a specified interest rate for a specified period of time. also called lock-in
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real estate agent [top]
A person licensed to negotiate and transact the sale of real estate.
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Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
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real property
All immovable property such as land and the buildings or other objects permanently affixed to the land
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Realtor® [top]
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.
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recorder
The public official who keeps records of transactions that affect real property. Sometimes known as a "Registrar of Deeds" or "County Clerk."
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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.
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refinance transaction [top]
The process of paying off one loan with the proceeds from a new loan using the same property as security.
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remaining balance
The amount of principal that has not yet been repaid.
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remaining term
The length of time remaining until a mortgage is repaid at the agreed rates. The original amortization term minus the number of payments that have been applied.
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rent loss insurance
Insurance that protects a landlord against loss of rent or rental value due to any event that renders the leased premises unavailable for use and as a result of
which the tenant is excused from paying rent.
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repayment plan [top]
When a borrower falls behind in mortgage payments, many lenders will negotiate a repayment plan rather than go to court.
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replacement reserve fund
Money that is set aside from homeowners' assessments to replace common property, such as furniture in a planned development's community room.
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revolving debt
A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. Often referred to as "revolver."
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right of first refusal [top]
In general, the right of a person or company to purchase something before the offering is made available to others.
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right of ingress or egress
The right to enter or leave designated premises.
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right of survivorship
Ownership of property by two or more people in which the survivors automatically gain ownership of a decedent's interest. In the case of more than one survivor, the decendent's share is divided among the survivors. In addition, each owner can sell or gift his/her share as he/she wants, without the other owners' permission.
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sale-leaseback [top]
An arrangement in which a seller deeds property to a buyer for cash or other consideration, and the buyer simultaneously leases the property back to the seller, usually on a long-term basis.
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second mortgage
A mortgage on real estate which has already been pledged as collateral for an earlier mortgage. The second mortgage carries rights which are subordinate to those of the first.
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secondary market
The buying and selling of existing mortgages, usually as part of a "pool" of mortgages.
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secured loan
A loan that is backed by collateral.
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security [top]
The property that will be pledged as collateral for a loan.
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seller carry-back
An agreement in which the seller provides financing for a home purchase.
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servicer
An organization that collects principal and interest payments from borrowers and
manages borrowers’ escrow accounts.
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servicing [top]
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
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settlement statement
See HUD1 Settlement Statement
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subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
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subordinate financing [top]
Borrowing which, in the event of the debtor's bankruptcy, has a lesser claim to the assets of the debtor than other classes of debt. Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
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survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
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sweat equity
Work, especially manual labor, performed in return for a share in ownership of a home. Contribution to the construction or refurbishment of a property in the form of labor or services rather than cash.
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tenancy in common
A way two or more people can own property together. Each can leave his or her interest upon death to beneficiaries of his choosing instead of to the other owners, as is required with joint tenancy. In some states, two people are presumed to own property as tenants in common unless they've agreed otherwise in writing
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third-party origination [top]
In a third-party origination transaction, the lender has another institution originate all or part of a mortgage.
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title
A legal document evidencing a person's right to or ownership of a property.
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title company
A company involved in examining and insuring title claims, usually for real estate, on behalf of its customers.
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title insurance [top]
Insurance to protect a lender or owner against loss in the event of a property ownership dispute.
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title search
The process of examining all relevant records to confirm that the seller is the legal owner of a property and that there are no liens or other claims outstanding.
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transfer of ownership
Any means by which the ownership of a property changes hands. This includes the purchase of a property, 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.
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transfer tax
The state or local tax payable upon the transfer of a title.
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Treasury index [top]
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.
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Truth-in-Lending
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.
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two-step mortgage [top]
An adjustable mortgage with two interest rates, one for the first five or seven years of the loan, and the other for the remainder of the loan term.
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two- to four-family
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.
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trustee
An individual or agent (such as an attorney or bank trust department) to whom property is entrusted to manage and promises to wisely administer it for the use and benefit of the beneficiary or beneficiaries.
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VA mortgage [top]
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
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vested
Generally used to describe any right or title to something that is not dependent upon the occurrence or failure to occur of some specified future event (condition precedent). Although sometimes used to refer to an immediate possessory interest in property, the more technically proper definition also comprehends interests that will become rights to actual possession of the property at some later time
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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.
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