Acceleration Clause-A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.
Addendum-An addition or change to a purchase and sales contract
Adjustable Rate Mortgage-A mortgage where the interest rate and payments can adjust up(ward) or down(ward) at different times during the term of the mortgage and is usually tied to a specified financial index.
Amortization-The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
Amortization Schedule-A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.
Appraisal-An appraiser’s estimate of the fair market value of a property and is required by most lenders.
Appraiser-A licensed, independent party who provides an estimate of the fair market value of a property.
Appreciation-The increase in the value of a property due to changes in market conditions, inflation, or other causes.
Assessed Value-The valuation placed on property by a public tax assessor for purposes of taxation.
Asset-Items of Value owned by an individual.
Borrower-Someone who borrows money from a lender. Typically for a mortgage.
Buyer’s Market-When supply is greater than demand, buyers typically are able to buy a property at a lower purchase price.
Clear Title– A title that is free of liens or legal questions as to ownership of the property.
Closing-The time when all documents are signed and ownership of the property transfers from seller to buyer.
Closing Agent-The person or company who handles all the necessary documents and processes the physical closing of a real estate transaction.
Closing Costs-A term covering various costs that occur at closing with the transfer of ownership to a property, and/or obtaining a mortgage.
Collateral-Assests pledged as a security for a loan. In the event that a borrower defaults on the terms of a loan, the collateral is issued to the lender.
Comparative Market Analysis-Also known as CMA, this is a report, usually prepared by real estate agents, detailing the value of a property based on a comparison of other homes currently on the market and closed homes within the same area.
Condominium-Multi-family units in a building of one or more stories all part of a condominium association. The units are individually owned, with each owner receiving a recorded deed to the individual unit purchased. Commonly referred as low-rise, mid-rise, or high-rise.
Condominium Association-Is generally a not for profit association of a condominium whose members are the condo owners. The association collects fees from the condominium owners to maintain the common elements and pay for common expenses of the condominium. The condominium association also sets rules and regulations for the betterment of the condominium.
Contingency-A common term for items that must be completed prior to a purchase and sale contract becoming binding. Anything that the Purchase and Sales Contract is dependent upon that could void the contract if not met.
Contract (Purchase & Sale)-Known as the Contract or Purchase and Sale agreement. This document contains the terms agreed to, by both the buyer and seller, for the purchase/sale of a property.
Contract Offer-A document outlining the terms and conditions to which someone is willing to purchase a property.
Conventional Mortgage-Any mortgage loan that is not insured or guaranteed by a government agency.
Credit Report-A report that contains information about your credit history. This report shows your current and past credit balances and your history of payments.
Debt-The amount of money owed to a lender.
Debt to Income Ratio-A ratio as a percentage calculated by dividing your gross monthly housing debt (principal, interest, taxes, insurance and association dues-if applicable) by your gross monthly income. This ratio will allow lenders to determine how much of a loan you can afford.
Deed-The official document showing ownership or conveying title to a property.
Documentary Stamps/Taxes-A fee charged by most states to transfer the property from one owner to another.
Down Payment-The amount of money a buyer uses to put towards the purchase price.
Duplex/Triplex-Multi-family housing terms that define the number of units contained in a multi-family building. A duplex consist of two attached homes, a triplex consists of three attached homes.
Easement-A right of way giving persons other than the owner access to or over a property.
Encroachment-Where an item in whole or part crosses over a property line into a neighboring property without permission.
Encumbrance-Anything that hinders title to a property. Such as a mortgage, lien, easement, or a restriction that limits the title.
Equity-A dollar amount, calculated by subtracting the amount owed on a property from the property’s fair market value.
Escrow Account-An account set up to hold the down payment money until the property closes or the transaction is terminated.
Escrow Agent-The person or company, usually an attorney, title company, or real estate broker who holds the down payment money until the property closes or the transaction is terminated.
Estoppel-A letter certifying the exact balance and terms owed by Seller as of the date of closing. Such as mortgage payoff, outstanding association dues, etc.
Fair Housing Act- Landmark federal law passed in 1965 and amended in 1988 that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin. The 1988 amendment expanded the protections to include family status and disability.
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.
FICO/Credit Score-A score a lender will utilize to determine your credit worthiness. This score is determined by your past credit history. FICO stands for Fair Isaac Corporation.
Fixed Rate Mortgage-A mortgage where the interest rate and payments remain constant for the term of the mortgage. Most commonly known as a 15 year or 30 year fixed rate mortgage.
Flood Insurance-Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Floor Plan-A common term for the interior layout of a home.
Foreclosure-The legal process reserved by a lender to terminate the borrower’s interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Any excess proceeds may be used to satisfy other liens or be returned to the borrower.
Free and clear-A term used to describe property where the owner of the property has no borrowed money that encumbers or places a lien against the property.
Homeowner’s Association-Is generally a not for profit association whose members are the homeowners. The association collects fees from homeowners within a community to maintain the common elements and pay for the common expenses of a community. The homeowners association also sets rules and regulations for the betterment of a community.
Home Equity Loan-A loan that allows owners to borrow against the equity in their homes.
Homeowner’s Insurance-An insurance policy you purchase to protect your home against damage from fire, storms and other hazards, as well as theft and liability. Also known as hazard insurance.
HUD 1-Known as the closing or settlement statement, this standardized document compiles all the buyer’s and seller’s expenses and credits for the transaction to close. HUD stands for Housing Urban Development.
Impact Fees- Fees collected from developers of new homes to pay for schools, parks and other facilities.
Inspection Period-Also known as the Due Diligence Period, a period of time, upon signing a purchase and sale contract, when you can conduct various inspections on the property you are purchasing. Within the specified time period, a purchaser can usually cancel the purchase and sale contract or require the seller to make repairs if the property is in need of repair, depending upon the terms in your Purchase & Sale contract.
Insurance Agent-A licensed person or company that represents various insurance companies, and can typically offer many insurance options.
Interest Rate-The amount charged, expressed as a percentage of the amount borrowed, by a lender to a borrower for the use of money. (example – 6%)
Lender-A financial institution or individual who provides money in the form of a mortgage.
Lenders/Mortgage title insurance policy-Insurance that protects the lender against claims over the property’s ownership. The buyer typically pays this at the property’s closing.
Lien-A right given to another to secure a debt. A lien is a defect or “cloud” on the title and must be resolved before ownership of the home can be transferred.
Loan to Value Ratio-A ratio as a percentage calculated by dividing the amount of your loan by the value of your property. Example: $320,000 loan ÷ $400,000 value = 80% LTV
Low-Rise, Mid-Rise, High-Rise-A low-rise is a vertical building typically 4 stories or less; a mid-rise is a vertical building typically 5-10 stories tall; a high-rise is a vertical building typically 11 or more stories.
Mortgage-A legal document specifying a certain amount of money to purchase a home at a certain interest rate, and using the property as collateral.
Mortgage Application-The official documentation that is filled out with the buyers information when trying to obtain a mortgage. This documentation is then submitted to a lender.
Mortgage Broker-A mortgage professional who is licensed to accept mortgage applications and facilitates transactions between borrowers and lenders typically providing many mortgage options and rates.
Note-The debt instrument you execute at closing promising to pay back the money you borrowed from the lender.
Owner Financing-A mortgage in which the Seller of a property agrees to finance part or all of the purchase price.
Owner’s Title Insurance Policy-Insurance that protects the property owner against claims over the property’s title. The buyer typically pays this at the property’s closing.
Points-A closing cost typically paid by the borrower at closing that a lender charges to obtain a loan. A borrower can also pay additional points to reduce the interest rate a lender is charging. A point is equal to one percent.
Pre-Approval Letter-A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain.
Private Mortgage Insurance-Also known as PMI, this is an insurance policy the lender obtains and is paid for by the borrower when the borrower’s down payment on a purchase does not meet a minimum amount the lender requires (usually 20%).
Real Estate Agent-A licensed real estate professional typically used to assist in showing , buying or selling, contract preparation and closing of a property.
Real Estate Taxes-An amount of money charged by the local municipality (usually the county and/or city) where the property you own is located. This fee typically covers all the services the municipality provides, schools, parks, libraries, police, fire, etc.
Recording-The process of registering the mortgage and deed in the records of the municipality and/or state where the real estate transaction occurred.
Refinance-The process through which someone applies for and receives a new mortgage and pays off an existing mortgage on the same property.
Seller’s Market-When demand is greater than supply, sellers will be able to get a higher price for their property.
Single Family Home-A free standing residential home with property surrounding the home, containing one or more stories.
Square Footage-A common term for the measurement or size of a home, measured in square feet. Example: 3,000 sq. ft. There are two types of square footage: Living area square feet is the area which is air-conditioned and/or heated. Total square feet is the total area under roof, such as the house, garage, covered patio, etc.
Survey-A legal document that outlines the boundaries of a property. It also shows any and all improvements, easements, encroachments if any, as well as the positioning of a structure on the property.
Title Company-The company that issues the owner’s and lender’s title insurance policies.
Town Home-Typically a two or three story residential home attached on one or two sides with a common wall separating them.
Villa-Typically a one story smaller, residential home, on a smaller lot that may or may not be attached on one or both sides.
Walk Through-The process where the buyer and seller walk through the home together prior to closing to determine what items, if any, are in need of repair or have been fixed.
Zero Lot Line Home-A detached, residential home where one side of the house is situated on or abutting the side property line.