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DEFINITION OF REAL ESTATE TERMS

Acceptance: the date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract.
Adjustable Rate Mortgage: a mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change. Amortized Loan: a loan that is paid in equal installments during its term. Payments on this type loan typically are applied to interest and principal.
Appraisal: a professional estimate of value based on recent sales of similar properties that are located nearby the property. This is a more detailed process that is similar to a Comparative Market Analysis (CMA). CMA’s are completed by real estate agents and appraisals are completed by Licensed Appraisers.
Appreciation: an increase in the value of a property due to changes in market conditions or other causes. This is the opposite of depreciation.
APR (Annual Percentage Rate): The total cost of borrowing money which includes the stated interest rate and all other fees charged by the lender. Comparing APRs between different lenders can reveal who is providing their services at the lowest cost. The APR is the truest measure of the cost of credit.
Assumable Mortgage: purchaser takes ownership to real estate and assumes responsibility to pay an existing mortgage. S/he assumes responsibility as the guarantor for the unpaid balance of the mortgage.
Bill of Sale: document used to transfer title (ownership) of PERSONAL property (such as a refrigerator or range) that is not permanently attached to the property.
Comparative Market Analysis (CMA): See Appraisal (above)
Cloud on Title: a condition that means the title to property has some type of problem that inhibits easy transfer to a new owner. Title companies discover this situation when they undertake the pre-purchase title search and they work to resolve this type of problem.
Condominium: The ownership of a specific unit in a multi-unit building plus an undivided interest in the ownership of the common elements which are owned jointly with the other condominium unit owners.
Consideration: anything of value to induce another to enter into a contract, i.e., money, services, a promise. Cooperative: A residential multi-unit building whose title is held by a trust or corporation that is owned by and operated for the benefit of persons living within the building. Each “owner” owns a “share” of the trust or corporation and has a proprietary lease on their specific unit. Financing of a coop is different than for a condominium.
Deed: a written instrument which, when properly executed and delivered, conveys title to real property.
Deed in lieu of foreclosure: A process whereby the borrower, who is in default on a loan, returns the property to the lender instead of going through foreclosure. This tends to have more favorable effects on the borrowers credit report than a foreclosure.
Discount Points: a loan fee charged by a lender of FHA, VA or conventional loans to increase the yield on the investment. One point = 1% of the loan amount. Easement: the right to use the land of another.
Encumbrance: anything that burdens (limits) the title to property, such as a lien, easement, or restriction of any kind. Encroachment: a building or some type of structure, such a fence or garage, which extends beyond the land of the owner and illegally intrudes on the land of an adjoining owner or a street or alley.
Escrow Payment: that portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, homeowners insurance and other items as they become due.
Fannie Mae: nickname for the Federal National Mortgage Association (FNMA). It is a quasi-government agency established to purchase mortgages from primary lenders such as banks and mortgage loan organizations. Standards set by FNMA influence underwriting practices by lenders.
Federal Housing Administration (FHA): an agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is insuring residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money.
FHA Insured Mortgage: a mortgage under which the Federal Housing Administration insures loans made by lenders who meet its regulations.
Fixed Rate Mortgage: a loan that sets the interest rate at a specific and unchanging rate for the duration of the loan. The rate is fixed at one level for the life of the loan.
Foreclosure: procedure whereby property pledged as security for a debt is taken by the lender and sold to pay the debt. This happens when the borrower fails to pay payments according to the agreement in the mortgage.
Freddie Mac: nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
Good Faith Estimate: an estimate of the costs a borrower is likely to incur in applying for and receiving the loan. This must be provided to the borrower within 3 days of the lender receiving the loan application.
Joint Tenants with Rights of Survivorship: ownership by 2 or more people with any owners share passing to the remaining owners upon their death.
Lease Purchase Agreement: buyer makes a deposit for future purchases of a property with the right to lease property in the interim.
Lease with Option: a contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date.
Loan to Value Ratio (LTV): the ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.
Market Value: the most probable price property would sell for in an “arms-length” transaction under normal conditions on the open market.
Mechanics Lien: a lien placed against a property by a contractor, laborer, or material provider who have performed work or furnished materials in the erection or repair of a building. These liens must be satisfied to sell, refinance, or mortgage a property.
Mortgage: a legal document that pledges a property to the lender as security for payment of a debt.
Mortgage Insurance Premium (MIP): the amount paid by a borrower for mortgage insurance. This insurance protects the lender from possible loss in the event of a borrower’s default on a loan.
Note: a written promise to pay a certain amount of money.
Origination Fee: a fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan.
Private Mortgage Insurance (PMI): see Mortgage Insurance Premium.
Second Mortgage / Second Deed of Trust / Junior Mortgage / Junior Lien: an additional loan imposed on a property with a first mortgage. Typically this loan has a higher interest rate and shorter term than the “first” mortgage. Settlement Statement (HUD-1): a financial statement provided to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.
Severalty Ownership: ownership by one person only. Sole ownership.
Special Assessment: a fee charged against a property owner to cover the cost of improvements such as new balconies, a new roof or sidewalks, etc. This charge is over and above the monthly assessments.
Tenancy In Common: ownership by two or more persons who hold an undivided interest without right of survivorship. (In event of the death of one owner, his/her share will pass to his/her heirs.
Title Insurance: an insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title.