Real Estate Terms
Adjustable Rate Mortgage:
A mortgage that allows the lender to adjust the interest rate of your
loan either monthly or annually based upon a specified index plus a
margin. For example if the
index chosen is the prime rate which is 8.00% and the margin on your
note is 2.50 your adjusted interest rate would be 10.50%. Amortization:
The monthly repayment of the principal amount of a mortgage over the
term of the mortgage. An amortization schedule will show you the length
of your loan, the monthly payment, the amount of the payment which is
interest and principal. Appraisal:
A written estimate of the value of a property based on its condition,
the condition of the area and comparing sales prices in that area in the
recent past. Assumable Mortgage: A
mortgage in which the lender will allow, under certain conditions, the
mortgagor/owner sell the property and allow the new owner assume the
responsibilities of the note and mortgage. Assessed Value:
The value given to land and improvements by the local government (city,
town or county), which is used to determine the annual property taxes. Balloon Mortgage:
A mortgage where the payment is based upon a number of years (term) that
is longer than the due date of the mortgage and has a substantial amount
of principal due upon maturity of the loan. Bridge Loan:
An equity or second mortgage placed on presently owned real estate that
is used to finance the down payment of newly purchased real estate or
the building of a new home while owning the present. Cap:
A maximum interest rate that can be charged on an adjustable rate
mortgage. Closing:
The actual time when the passing of escrow and transfer of real estate
takes place. At the closing
all fees and expenses of the transfer are assessed and prorated. Closing Agent: The person that conducts the closing and disburses the closing
escrow and funds, usually an attorney or agent of the title company.
Convey:
When real property is transferred from one owner to another. Conventional Loan:
A fixed-rate, fixed-term loan. Condominium: A
multi-unit development in which an owner owns one unit plus a percentage
of the common areas and pays a maintenance fee to a condominium
association made up of all unit owners for maintenance, insurance,
management, repairs and improvements to the property. Deed:
A legal document by which title to real property is transferred and
conveyed from one person to another. There are two main types of deed, a warranty deed and
quitclaim deed. A warranty
deed is one in which the seller warrants that he/she owns 100% of the
property and has the right to transfer that property.
A quitclaim deed is one in which the seller transfers his/her
rights to a property without warranting that he/she is the fee simple
owner or 100% owner. Down Payment or Deposit:
An amount of money which is given by a buyer in a sale to bind the
purchase and sales agreement the remainder being due at the closing and
equals the purchase price of a property. The down payment or deposit is usually held by a real estate
broker or attorney until the closing occurs. Disclosed Dual Agent:
A real estate broker and the agents under his or her supervision who
represent both parties in a real estate transaction after obtaining the
written, informed consent of both parties. Equity:
The value that the owner has in real estate after the liens and
mortgages are subtracted from the value of the property. Escrow: Money
or other valuables left in trust with a third party, usually the broker,
attorney, or title company, until closing. Also funds left in trust
until a certain event occurs such as a payoff or municipal fee being
received by the closing agent or until a pending repair is completed. Exclusive Right- To-Sell:
A written agreement between the real estate broker and the owner whereby
the owner promises to pay a fee or commission to the broker if his or
her property is sold during the listing period.
The commission is usually based upon a percentage of the ultimate
sales price. Fannie Mae:
An acronym for the Federal National Mortgage Association, which buys and
sells FHA and VA mortgages. Freddie Mac:
An acronym for the Federal Home Loan Mortgage Corporation which buys and
sells FHA, VA, and, conventional loans from the members of the Federal
Reserve System and Federal Home Loan Bank System. FHA Mortgage: A
mortgage loan insured by the Federal Housing Administration and the
Department of Housing and Urban Development (HUD). Fixture: Personal
property that is permanently attached to real property such as light
fixtures. Fixed- Rate Mortgage: A
loan that has only one stated interest rate. Home Inspection: An
inspection of the physical structure and systems of a home. ISDS: An acronym in Rhode Island
for septic system. Loan Application Fee:
The charge paid by the borrower to the lender when applying for a
mortgage. Loan Origination Fee:
The charge paid by the borrower to the lender for processing a mortgage,
also called points because the origination fee is usually a percentage
of the loan amount. Mortgage:
A lien on real estate given by the buyer to a lender as security for
money borrowed on a Note. Mortgage Insurance or PMI: An
insurance policy that provides protection for the lender in the case of
default, it is usually charged to the borrower within the monthly
mortgage payment. Mortgage insurance is usually charged when the amount
of the mortgage is over 80% of the appraised value of the property.
Also may guarantee repayment of the loan in the event of the
death or disability of the borrower. Points:
A point is 1 percent of the amount of the mortgage loan. Prepayment Penalty: Penalty
for the payment of a mortgage before it becomes due.
It is usually limited in duration and penalty by state law. Purchase and Sales Agreement:
A written, signed contract in which the seller agrees to sell and the
buyer agrees to buy a particular property for a certain price under
specific terms and conditions. Real Estate Agent:
A person licensed by your state as a broker or agent to act on
behalf of another in a real estate transaction.
A listing agent usually represents the seller. Settlement Statement:
A form
which is used to list all fees, payments, prorations, adjustments,
escrows and calculates the bottom line amount due from/to borrower and
seller. Survey: A
map or plat that indicates the boundaries, measurements, and
improvements to a piece of property. Survey Deletion:
When a title insurance
company does not require a survey prior to sale but relies upon an
Owners/survey affidavit of boundary lines. Title: Indicates
evidence and quality of ownership in real estate. Title Insurance: Protection for lenders and homeowners against financial loss resulting from legal defects in the title, such as liens which are not uncovered by a title exam.
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