Arizona Real Estate Glossary Index
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A historical summary of all the recorded transactions that affect
the title to the property. An attorney or a title company will review an
abstract of title to determine if there are any problems affecting the
title to the property. All such problems must be cleared before the
buyer can be issued a clear and insurable title.
Acceleration Clause
A loan provision giving the lender the power to declare all sums
owing lender immediately due and payable upon the violation of a
specific loan provision, such as the sale of the property, or the
failure to make loan payments on time.
Agreement of Sale
A written signed agreement between the seller and the purchaser in
which the purchaser agrees to buy certain real estate and the seller
agrees to sell upon terms of the agreement. Also known as contract of
purchase, purchase agreement, offer and acceptance, earnest money
contract or sales agreement.
Acknowledgment
Formal declaration before a public official (typically a Notary
Public) that one has signed a document. Required before recording real
estate legal documents, such as a deeds of trust.
Acre
A measure of land equal to 43,560 square feet.
Adjustable Rate Mortgage (ARM)
Also known as a variable rate mortgage. A mortgage in which the
interest rate changes (usually upward) over time.
Adjustment Period
This is the length of time for which the interest rate is fixed on
an adjustable. Therefore if the adjustment period is six months, then
the interest rate will remain fixed for six months, after which it will
adjust.
Amortization
A gradual paying off of a debt by periodic installments which pay
principal and interest.
Annual Percentage Rate - APR
The effective rate of interest for a loan per year. This rate is
typically higher than the note rate because it takes into account
closing costs. This is one way to compare loan programs offered by
different lenders. Caution : the APR is sometimes computed differently
by different lenders and can be misleading.
Appraisal
An opinion or estimate of the value of a property at a given date.
Arm's length transaction
A transaction among parties each of who acts in his or her own best
interest.
Example : A transaction between a father and his son would
NOT be an an Arm's length transaction
Assessment
A local tax levied against a property for a specific purpose such as
street lights.
Assumable Mortgage
A mortgage loan which allows a new home buyer to take over the
obligation of making loan payments with no change in the terms of the
loan. Assumable loans do not have a due-on-sale clause. The lender has
to be notified and agree to the assumption. The lender may require the
buyer to qualify for the loan and may charge an assumption fee. The
seller should obtain a written release from the lender stating clearly
that he/she is no longer liable to make mortgage payments.
One who is authorized to act for another under a power of attorney
which may be general or limited in scope.
Example : John wants to sell his house but has to be out of the
country for 4 months. John gives authorization to Mary to sign the grant
deed to sell the property to a buyer. Mary becomes John's Attorney In
Fact.
Usually a short-term fixed-rate loan which involves small payments
for a certain period of time and one large payment for the remaining
amount of the principal at a time specified in the contract.
Example : A balloon mortgage for $25,000 has interest only payments
for 5 years at 12% ($250 per month), with the full principal of $25,000
due and payable after 5 years.
Bankruptcy
The financial inability to pay one's debts when due. The debtor
surrenders his assets to the bankruptcy court. An individual typically
files for Chapter 7 (all debts wiped out) or Chapter 13 (establishes a
payment plan to pay off debts). A bankruptcy stays on an individual's
credit report for 7 years.
Beneficiary
The person who receives or is to receive the benefits resulting from
certain acts.
Example : The lender is named as the beneficiary on a mortgage loan.
Example : John has a life insurance policy for $100,000 with Jane as
his beneficiary. Should John die - Jane will receive the benefits i.e.
$100,000.
Binder
Definition #1: A title insurance binder is the written
commitment of a title insurance company to insure title to the property
subject to the conditions and exclusions shown on the binder.
Definition #2: Preliminary agreement, normally secured with
earnest money, between a buyer and a seller as an offer to purchase real
estate.
Bi-weekly Mortgage
A mortgage which requires 1/2 the normal monthly payment every two
weeks. Over the course of the year, 26 half payments are made which is
equivalent to 13 full mortgage payments. As a result of this extra
payment the loan amortizes much faster than a loan with normal monthly
payments.
Blanket Mortgage
A mortgage covering more than one piece of property.
Example : A developer subdivides a tract of land into lots and
obtains a blanket mortgage on the whole tract.
Bond
1. A debt instrument in the capital markets. The U.S. government,
corporations and municipalities use bonds to raise money. Bonds can also
be backed by mortgages. The best known bond is the 30-year treasury bond
issued by the U.S. government.
2. A sum of money given to a court to guarantee against a loss. For
example if there is a lien on a property, the owner may remove the lien
by posting a bond.
Borrower (Mortgagor)
One who applies for a loan secured by real estate and is responsible
for repaying the loan (mortgage).
Bridge Loan
An interim loan typically used when the buyer is unable to sell
his/her house but needs money to close the transaction on the house
he/she is buying. The bridge loan is made on the buyers current
residence to finance the buyers new residence. The loan is paid off when
the buyers current residence is sold.
Broker
Buydown
Obtaining a lower interest rate (buying down the rate) by paying
additional points to the lender. The lower rate may apply for the full
duration of the loan or for just the first few years. A buydown may be
used to qualify a borrower who would otherwise not qualify . This is
because a buydown results in lower payments which are easier to qualify
for.
Example : A very popular buydown is the 2-1 buydown. If the interest
rate on the note is 9%, the buydown results in the rate being 7% (9%-2%)
for the first year, 8% (9%-1%) for the second year, and 9% thereafter.
Buyers Broker
An agent hired by a buyer to locate a property for purchase. The
broker represents the buyer and negotiates with the sellers broker for
the best possible deal for the buyer.
Buyers Market
Market conditions that favor buyers i.e. there are more sellers than
buyers in the market. As a result buyers have ample choice of properties
and may negotiate lower prices. Buyers markets may be caused by an
economic slump or overbuilding.
Bylaws
A set of regulations by which an organization conducts its business.
Example : A condominium association prepares bylaws that state the
minimum number of owners to conduct a meeting to decide policies.
Profit earned from the sale of real estate. A seller may defer taxes
on the capital gain of his/her primary residence by buying a higher
priced residence within 2 years.
Cash Flow
The amount of cash derived over a certain period of time from an
income-producing property. The cash flow should be large enough to pay
the expenses of the income producing property (mortgage payment,
maintenance, utilities, etc.).
Caveat Emptor
A legal term meaning "let buyer beware". The buyer must examine the
property and buy at his/her own risk.
Example : A property may be offered in an "as is" condition with no
expressed or implied guarantee of quality or condition.
CC&Rs - Covenants, Conditions
& Restrictions
The basic rules establishing the rights and obligations of owners of
real property within a condominium, townhouse, Planned Unit Development
(PUD), subdivision or other tract of land. An association is organized
for the purpose of operating and maintaining property commonly owned by
the individual owners. The association is normally made up of property
owners.
Certificate of Eligibility
The document issued by the
Veterans Administration to those that qualify for a VA
loan which may be used to buy a house with 0 down. Certificates of
eligibility may be obtained by sending the form DD-214 to the local VA
office along with VA form 1880.
Certificate of Reasonable Value (CRV)
An appraisal performed by an VA approved appraiser which establishes
the property's current market value. This value establishes the ceiling
on the maximum VA mortgage loan principal.
Certificate of Occupancy
Document issued by a local governmental agency that states a
property meets the local building standards for occupancy and is in
compliance with public health and building codes. This document is
normally required by a lender prior to closing the loan.
Certificate of Title
An opinion rendered by an attorney as to the status of title to a
property, according to the public records. This certificate does not
offer the
same level of protection as title insurance.
Chain of Title
The chronological order of conveyance of a parcel of land from the
original owner to the present owner.
Example : An abstractor can research title to property going back to
the date that the property was granted to the United States.
A marketable title, free of clouds and disputed interests. Most
lenders require a clear title prior to closing.
Closing
1. The act of transferring ownership of a property from seller to
buyer in accordance with a sales contract.
2. The time when a closing takes place.
Closing Costs
Expenses incurred by the buyer and seller in a real estate or
mortgage transaction. There are two types of costs : recurring and non
recurring.
Non-recurring costs are one time transactional costs which include
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Discount and origination points
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Lender fees - underwriting, processing, document preparations,
flood certificate, tax service, wire transfer, courier, etc.
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Title insurance fees
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Escrow, attorney or closing agent fees
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Recording fees
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Inspection and appraisal fees
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Real estate brokerage commissions
Recurring fees are costs associated with owning the property and
they recur month after month. These costs may include hazard insurance,
interest, property taxes, mortgage insurance (PMI), and association
fees. A pro-rated amount of these fees may have to be paid at closing
including
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Pre-paid interest - interest charges from the date of closing to
the end of the month
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Property taxes if due
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Hazard insurance, fire insurance or homeowner's insurance has to
be paid for one year
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Mortgage insurance (PMI) - may be required if the loan amount is
more than 80% of the value of the property. In the past a whole year
of PMI had to be paid up front, however in recent years many PMI
companies only require 1-2 months up front. Mortgage insurance
premiums are normally paid every month with the loan payment
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Impound account may need money to be set up for future
payments
Cloud on Title
An outstanding claim or encumbrance that, if valid, would affect or
impair the owner's title. Compare with
clear title.
Commitment
A written document provided by a lender to agreeing to make a loan
on specific terms to a borrower or builder.
Condemnation
1. Taking private property for a public use with compensation to the
owner under eminent domain. Used by governments to acquire land for
streets, schools, freeways, etc and by utilities to acquire necessary
property.
2. Declaring a structure unfit for use because of violations in
housing codes or other reasons.
Conditional Commitment
A written document provided by a lender agreeing to make a loan
provided certain conditions are met prior to closing.
Condominium
Individual ownership of a dwelling unit and an individual interest
in the common areas and facilities which serve the multi-unit project.
Construction loan
A short term loan to pay for the construction of buildings or homes.
These loans typically provide periodic disbursements to the builder as
each stage of the building is completed. When construction is completed
a
take out or
permanent loan is used to pay off the construction loan.
Consideration
Anything of value given to induce another to enter into a contract.
Earnest money deposit on a sales contract is consideration.
Contingency
Conditions which must be satisfied before the buyer can close the
purchase of a property. Contingencies are generally outlined in the
purchase contract between the buyer and seller.
Example : The buyer has 14 days to remove the property contingency
under the sales contract. In this case the buyer has 14 days to inspect
the property and request the seller to perform repairs. If the buyer is
not satisfied with the condition of the property or if the buyer and the
seller cannot agree on repairs, the buyer may back out of the contract
with no penalty. After 14 days the buyer no longer has the right to back
out with no penalty as a result of a problem with the condition of the
property.
Contract
An agreement between competent parties to do or not do certain
things for consideration. To have a valid contract for the sale of real
estate there must be :
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an offer
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an acceptance
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competent parties
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consideration
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legal purpose
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written documentation
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description of the property
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signatures by principals or their attorney-in-fact
Contract sale or deed
A real estate installment selling arrangement where the buyer may
occupy the property but the seller retains the title until the agreed
upon sales price has been paid. Also known as an installment land
contract.
Example : John sells Mary a house. Mary has to put $10,000 and pay
$1,000 per month for 24 months, after which time she will receive title
to the property.
Conventional Loan
Any mortgage loan other than a VA or an FHA loan. A convention loan
may be conforming or non-conforming.
Conveyance
The transfer of title of real from one party to another.
Co-op - cooperative
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.
Convertible ARMs
Some variable loans come with options to convert them to a fixed
loan based on a pre-determined formula, during a given time period. For
example the 1-year tbill adjustable may be converted to a fixed during
the first five years on the adjustment date. The means that you could
convert during the 13th, 25th, 37th, 49th and 61th months of the loan.
Credit Report
A report detailing a borrowers credit history including payment
history on revolving accounts (eg. credit cards) and installment
accounts (e.g.. car loan). A credit report also includes information
found from public records including tax liens and judgements.
A written document by which title to real property is transferred
from one owner to another. The deed should contain an accurate
description of the property being conveyed, should be signed and
witnessed according to the laws of the State where the property is
located, and should be delivered to the buyer at closing.
Used in many states in lieu of a mortgage to secure the payment of a
note. In a deed of trust there are three parties - the borrower, the
trustee, and the lender, (or beneficiary). In such a transaction, the
borrower transfers the legal title for the property to the trustee who
holds the property in trust as security for the payment of the debt to
the lender or beneficiary. If the borrower pays the debt as agreed, the
deed of trust becomes void. If, however, he/she defaults in the payment
of the debt, the trustee may sell the property without a court
proceeding.
Deed Restriction
A clause in a deed that limits the use of land.
Example : A deed might require that a road cannot be built on the
land.
Default
Failure to meet legal obligations in a contract - such as the
failure to make the monthly mortgage payment.
Defective Title
Any recorded instrument that would prevent a grantor/seller from
giving a clear title.
Example : The seller has a contractor lien on the property that was
filed when he/she failed to pay the contractor for the kitchen remodel.
The seller may obtain clear title by paying the contractor and removing
the lien.
Deficiency Judgment
Personal claim against the debtor when the sale of foreclosed
property does not yield sufficient proceeds to pay off the mortgages,
accrued interest, legal fees, etc.
Depreciation
Decline in the value of a house due to wear and tear, obsolescence,
adverse changes in the neighborhood, or any other reason.
Fees paid to a lender to reduce the interest rate.
Documentary Tax Stamps
Stamps affixed to a deed showing the amount of transfer tax.
Dower
The rights of a widow or child to part of a deceased husband's or
fathers property.
Downpayment
The amount paid for the purchase of a property in addition to the
mortgage, but not including any closing costs.
Example : John buys a house for $100,000 and obtains a loan for
$80,000. His downpayment is $20,000.
Due on Sale Clause
A clause in the Deed of Trust or Mortgage that states that the
entire loan is due upon the sale of the property.
Dragnet Clause
A provision in a mortgage that pledges several properties as
collateral. A default in the mortgage could lead to foreclosure
proceedings on any of the properties in the dragnet.
A deposit made by a buyer of real estate towards the down payment to
evidence good faith. This money is typically held by the real estate
brokers or the escrow company.
The right to use the land of another for a specific purpose.
Easements may be temporary or permanent.
Example : The utility company may need an easement to run electric
lines.
Eminent Domain
The right of the government or a public utility to acquire property
for necessary public use by condemnation, with proper compensation to
the owner.
Encroachment
A building, a part of a building, or an obstruction (e.g.. a fence
or a wall) that physically intrudes upon or overlaps into the property
of another.
Encumbrance
A legal right or interest in land that affects a good or clear
title, and diminishes the land's value. It can take numerous forms, such
as zoning ordinances, easement rights, claims, mortgages, liens,
charges, a pending legal action, unpaid taxes, or restrictive covenants.
An encumbrance does not legally prevent transfer of the property to
another. A title search is all that is usually done to reveal the
existence of such encumbrances, and it is up to the buyer to determine
whether he wants to purchase with the encumbrance, or what can be done
to remove it.
Equity
Equity=Property Value - Loans/Liens Against the property.
Equity
is typically expressed as a percentage of the property value.
Equity Sharing
Joint ownership of a property between the owner/occupant and the
owner/investor, that results in tax advantages for both parties. Upon
sale of the property the joint owners split profits based on the
percentage they own.
Escrow
1. Neutral third party that handles all funds in a real estate
transaction. The buyer puts his deposit into escrow, the lender funds
the loan into escrow. Escrow pays the real estate brokers commission,
pays off any loans/liens against the property, pays real estate taxes
and any other fees associated with the transaction and sends the balance
of the money to the seller.
2. Escrow payment - see
impound account.
Escheat
The reversion of property to the state in the event that the owner
dies without leaving a will or legal heirs.
Executor
A person named in a will to carry out its provisions for the
disposition of the estate.
Purchases loans from lenders, securitizes them and sells FNMA
mortgage backed securities on wall street.
Farmer's Home Administration (FmHA)
An agency, within the U.S. Department of Agriculture, that
administers assistance programs for purchasers of homes and farms in
small towns and rural areas.
Purchase loans from members of the Federal Reserve and the Federal
Home Loan Bank Systems, securitizes them and sells FHLMC mortgage backed
securities on wall street.
Fee Simple (Fee Absolute or Fee Simple Absolute)
Absolute ownership of real property; owner is entitled to the entire
property with unconditional power of disposition during the owners life
and upon his death the property descends to the owner's designated
heirs.
Fiduciary
A person in a position of trust or responsibility with specific
duties to act in the best interest of a client. A real estate broker is
a fiduciary for his/her clients.
Finance Charge
Interest charged by a lender.
First Mortgage
A mortgage that has priority as a lien over all other mortgages. In
the case of a foreclosure the first mortgage will be satisfied before
other mortgages. See also
second mortgage.
Fixture
Improvements or personal property attached to the land so as to
become a part of the real estate. Fixtures are transferred to the buyer
upon sale of the property. To determine whether an item is a fixture
include :
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Intent (was it intended to be part of the property)
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How is it fixed ?
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Is the fixture essential to the property ?
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Relationship - was the fixture intended to be a part of the
tenant's business ?
Flood Insurance
An insurance policy that covers property damage due to natural
flooding. Flood insurance may be required on properties in a flood zone.
Foreclosure (Repossession)
A legal process by which the lender forces a sale of a property
because the borrower has not met the terms of the mortgage.
Free and clear
A property that has no liens.
A deed in which the grantor (seller) agrees to the protect the
grantee (buyer) against any other claim to title of the property. See
also
warranty deed.
A government agency part of
HUD that buys VA and FHA loans from lenders, securitizes
them and sells Ginnie Mae securities to investors.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
That party who is the seller or the giver.
Graduated Payment Mortgage (GPM)
A mortgage that has lower payments initially (with potential
negative amortization) which increase each year until the loan is fully
amortized.
Insurance on a property against fire and other risks. A homeowner's
policy may have
additional coverage for theft, liability, etc. that a
fire insurance policy may not cover.
Homeowners Association
An association of homeowners in a particular subdivision, planned
unit development (PUD), or condominium organized to manage the common
area of the development and to enforce the association rules and
regulations.
Homestead
Status provided to a homeowner's principal residence in some states
that protects the home against judgements up to specified amounts.
Homestead Exemption
Available in some states - this causes the assessed value of a
principal residence to be reduced by the amount of the exemption for the
purposes of calculating property tax.
Example : John's principal residence is assessed at $100,000 and the
homestead exemption is $7,000. His property taxes will be based on
$93,000.
Home Warranty Plan
Insurance that covers appliances, heating systems, etc. Typically
purchased at the time of closing.
A U.S. government agency established to implement certain federal
housing and community development programs.
Housing Code
A local government ordinance that sets minimum standards of safety
and sanitation for existing residential buildings.
A closing document required by HUD that outlines the settlement cost
of a loan. The closing agent prepares this document and sends it to the
buyer upon closing.
Hypothecate
To pledge a property as security without having to give up
possession of it.
Additions to raw land such as buildings, streets, etc. that add
value to the land.
That portion of a borrower's monthly payments held by the lender or
servicer to pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Also known as reserves.
Income Approach
A method used by an appraiser to estimate the value of a property
based on the income it generates.
Income Property
Real estate that generates rental income: apartment buildings,
office buildings and shopping centers.
Ingress and Egress
The right to go in and out over a piece of property but not the
right to park on it. See also
Easements.
A creditor can demand full repayment from any and all of those who
have borrowed. Each borrower is liable for the full debt, not just the
prorated share.
Joint Tenancy
Ownership of a property by 2 or more people, each of whom has an
undivided interest with the right of survivorship.
Example : John and Mary own a house in joint tenancy. Each owns half
of the entire (undivided) property. If John dies, Mary will own the
entire property and vice versa.
Judgment Lien
The claim on the property of a debtor resulting from a judgment.
Jumbo Loan
Loan size that is larger than the limit established by
Fannie Mae or
Freddie Mac.
Junior Mortgage
A mortgage subordinate to another mortgage. In the case of a
foreclosure a senior mortgage will be paid prior to a junior mortgage.
A payment required by a mortgage in addition to normal principal and
interest. Sometimes known as a participation loan.
A real estate installment selling arrangement whereby the buyer may
use and occupy land, but no deed is given by seller until the sales
price has been paid.
Lease with Option to Purchase
A lease under which the lessee has the right to purchase the
property. The option may run for a portion or for the full length of the
lease
Legal Description
Legally acceptable identification of real estate by one of the
following:
-
the government rectangular survey
-
metes and bounds
-
recorded plat (lot and block number)
Lessee
A person to whom property is rented under a lease. (Tenant)
Lessor
A person who rents property to another under a lease. (Landlord)
Lien
A claim against the property for the payment of a debt, judgment,
mortgage or taxes.
Example : Unpaid contractors may file a mechanic's lien.
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.
Lis Pendens
Latin for "lawsuit pending." Recorded notice that litigation is
pending on a property. Most lenders will require the clearance of the
Lis Pendens prior to closing.
Loan Application
A document required by a lender prior to loan approval. The
application includes detailed information about the borrower and the
property.
Charge by a lender or broker connected with originating a loan. This
is different from discount points which are used to buy down the rate of
interest.
Loan to Value Ratio (LTV)
The loan amount divided by the value of the property.
Loan Servicing
The act of collecting loan payments, handling property tax and
insurance escrows, foreclosing on defaulted loans and remitting payments
to the investors.
A fixed number added to the index to compute the rate on an
adjustable rate mortgage.
Marketable Title
Title that is free of liens, clouds and other legal defects and
hence is readily acceptable by a buyer.
Market Value
The highest price that a buyer would pay and the lowest price a
seller would accept on a property. Market value may be different from
the price a property could actually be sold for at a given time.
Mechanics Lien
The right of an unpaid contractor or subcontractor to file a lien
against property to recover the amount due to him/her.
Mortgage
A written instrument that creates a lien upon real estate as
security for the payment of a specified debt.
Mortgage Backed Security (MBS)
A bond or other financial obligation secured by a pool of mortgage
loans.
Mortgage Banker
Specializes in originating and servicing loans. They generally sell
their loans to investors, but may continue to service them.
Arranges financing for a borrower by placing loans with lenders.
Mortgage brokers are paid a fee by the borrower or the lender when a
loan closes.
Mortgagee
The lender.
Mortgagor
The borrower.
Mortgage Insurance
Mortgage Note
A written agreement to repay a loan. The agreement is secured by a
mortgage, serves as proof of an indebtedness, and states the manner in
which it shall be paid. The note states the actual amount of the debt
that the mortgage secures and renders the mortgagor personally
responsible for repayment.
An increase in principal balance which occurs when the monthly
payments do not cover all of the interest cost. The interest cost which
is not covered by the payment is added to the unpaid principal balance.
Net Effective Income
The borrowers gross income minus federal income tax.
Non-conforming loan
Loans that do not comply with
Fannie Mae or
Freddie Mac guidelines.
Note
A written instrument that acknowledges a debt and promises to pay.
Notary Public
One authorized to take acknowledgments of certain types of
documents, such as deeds, contracts, and mortgages.
Notice of default
A letter sent to the defaulting party as a reminder of the default.
An expression of willingness to purchase a property at a specified
price.
Offeree
One who receives the offer. When the buyer makes an offer to the
seller the seller is an offeree.
Offeror
One who makes the offer. When the buyer makes an offer to the seller
the buyer is an offeror.
Open House
A method of showing a home for sale to prospective buyers where the
home is left open for inspection by those who may be interested in
making a purchase.
Open End Mortgage
A mortgage permitting the mortgagor to borrow additional money under
the same mortgage, with certain conditions.
Origination Fee
Oral Contract
A verbal agreement. Verbal agreements for the sale or use of real
estate are normally unenforceable.
Owner of Record
The individual named on a deed that has been recorded at the county
recorders office.
Owner Occupant
A tenant of a residence who also owns the property.
Mortgage covering both real and personal property.
Paper
A mortgage, deed of trust or land contract provided in lieu of cash.
Partial Release
A provision in a mortgage that allows some of the property secured
to be freed from serving as collateral.
Participation Mortgage
A mortgage that allows the lender to share in part of the income or
resale proceeds.
Pass Through Certificates
Interests in a pool of mortgages sold by mortgage bankers to
investors. Money collected as monthly mortgage payments is distributed
to those who own certificates..
A mortgage for a long period of time. Often referred to as the
mortgage that pays off a construction loan on a completed property.
Permit
A document issued by a government regulatory authority that allows
the bearer to take some specific action.
An occupancy permit allows the owner of a building to occupy or rent
the building.
PITI
Abbreviation for principal, interest, taxes and insurance, which may
be combined in a single monthly mortgage payment.
Planned Unit Development (PUD)
A zoning classification that allows flexibility in the design of a
subdivision. PUDs include individually owned units as well as some
common space that is jointly owned.
Plat
A plan or map of a specific land area.
Plat Book
A public record containing maps of land, showing the division of the
land into streets, blocks, and lots and indicating the measurements of
the individual parcels.
Points
Fees paid to lenders. 1 point=1% of the loan amount. On a $100,000
loan 1 point is $1000. Points may be further classified into
origination points or
discount points.
Portfolio Loan
A loan that is held as an investment by a bank or savings and loan,
and NOT sold on the secondary market to investors.
Power of Attorney
A written document authorizing a person to act on the behalf of
another person. That person does not have to be an attorney. See Attorney-in-fact.
Prepaid Interest
Prepaid interest is the interest charged to borrowers at closing to
pay for the cost of borrowing for a balance of the month. For example,
if a loan closes on the 19th of the month and the first payment is due
on the 1st of the following month, the lender will charge 12 days of
prepaid interest.
Prepayment
Full or partial payment of the principal before the due date. This
might occur if the borrower makes extra payments, sells the property, or
refinances the existing loan.
Prepayment Penalty
Fees paid by the borrower if they pay the loan before its due date.
Primary Mortgage Market
Companies that originate and service mortgage loans (banks, savings
& loans, credit union, mortgage bankers, institutional lenders) make
up the primary mortgage market. See also
secondary mortgage market.
Prime Rate
The lowest commercial interest rate charge by a bank on short term
loans to their most credit worthy customers.
Principal
The outstanding balance on a loan.
In the event that you do not have a 20 percent down payment, lenders
will allow a smaller down payment - as low as 2 percent in some cases.
With the smaller down payment loans, however, borrowers are usually
required to carry private mortgage insurance. Private mortgage insurance
payments are normally made annual or monthly. An
impound account may be required.
Purchase Money Mortgage
A mortgage used to finance the purchase of a property.
Property Tax
A government levy based on the market value (as assessed by the
county assessor's office) of the property.
Public Sale
An auction of property with notice to the general public.
Purchase Agreement
A court action to settle a title dispute.
Quit Claim Deed
A deed which transfers whatever interest the maker of the deed may
have in the particular parcel of land. A quitclaim deed is often given
to clear the title when the grantor's interest in a property is
questionable. By accepting such a deed the buyer assumes all the risks.
Such a deed makes no warranties as to the title, but simply transfers to
the buyer whatever interest the grantor has.
A real estate professional who is a member of the National
Association of Realtors.
An individual who often owns a real estate company or is in a
management position, and who is licensed to represent a buyer or a
seller in a real estate transaction.
Real Estate Settlement Procedure Act (RESPA)
A law that states how mortgage lenders must treat those who apply
for real estate loans on property with 1-4 units.
Example : A lender is required to provide a good faith estimate of
closing costs within 3 days of an application being filed.
Refinancing
Repaying an existing loan from the proceeds of a new loan on the
same property.
Reconveyance
When a mortgage is paid off in full, the lender conveys the property
back to the owner.
Recording
The act of entering into a book of public records instruments
affecting title to the real property. A lender requires that a deed of
trust or a mortgage be recorded to evidence the debt against the
property.
Recision
The cancellation of a contract. When refinancing a mortgage on a
principal residence the law gives the homeowner three days to cancel the
contract
Recourse
The right of the holder of a note secured by a mortgage or deed of
trust to claim money from the borrower in default in addition to the
property pledged as a collateral.
Real Estate Investment Trusts (REIT)
A trust that uses investors money to purchase and manage real
estate. Investors realize some of the tax advantages in owning real
estate.
Right of survivorship
The right of a surviving joint tenant to acquire the interest of a
deceased joint owner.
Reverse Mortgage
A mortgage used by the elderly that provides income as long as they
live in exchange. Payments made cause the loan principal to increase.
Rollover Loan
A loan that is amortized over a long period of time (e.g. 30 years)
but the interest rate is fixed for a short period (e.g. 5 years). The
loan may be extended or rolled over, at the end of the shorter term,
based on the terms of the 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 binding only
between the original seller and buyer.
Depository institutions that specialize in originating, servicing
and holding mortgage loans primarily on owner occupied residential
property.
The market where banks, savings & loans and mortgage bankers can
sell mortgages to investors like
Fannie Mae or
Freddie Mac.
Also known as a vacation home. This home is different from an
investment property as it is not rented, but used occasionally by the
owners.
A subordinated lien, created by a mortgage loan, over the amount of
a first mortgage. Second mortgages generally carry a higher rate than a
first mortgage since they represent a higher risk for an investor.
Security
Property that serves as collateral for a debt.
Servicing
The act of billing, collecting payment, filing reports, managing
impound accounts and handling defaults on a mortgage.
Settlement Cost (HUD guide)
A booklet that provides an overview of the lending process and is
required to be given to consumers after the loan application is
completed.
Settlement Statement
Special Assessment
A special tax imposed on property, individual lots or all property
in the neighborhood to pay for improvements - street lights, sidewalks,
etc.
Special Warranty Deed
The grantor does not warrant against title defects arising from
conditions that existed before he/she owned the property. The seller
warrants that he/she has done nothing to impair title.
Shared Appreciation Mortgage
A residential loan with a fixed interest rate that is below market,
with the lender entitled to a specified share of appreciation of the
property over an agreed upon time interval.
Sheriff's Deed
A deed given at the sheriff's sale in the foreclosure of a mortgage.
Single Family Housing (SFR)
A type of residential structure designed to include one dwelling.
Example : Town houses, detached units.
Spec House
A single family dwelling constructed by a builder in anticipation of
finding a buyer.
Specific Performance
A legal action in which the court requires a party to a contract to
perform the terms of the contract when the party has refused to fulfill
its obligations.
Standard Uniform Loan Application (Form 1003)
A
standard loan application widely used in the mortgage industry.
Subdivision
A tract of land divided into lots suitable for home building
purposes.
Subordination
A loan in a lower priority, for example a second mortgage is
subordinate to a first.
Subject To (Purchasing subject
to a mortgage)
The buyer agrees to make payments on the existing mortgage, without
notifying the lender. The seller remains liable for making payments on
the loan if the buyer does not make the mortgage payment. The buyer is
not personally liable for mortgage payments, but must make payments to
keep the property. See also
Assumable Mortgage
Survey
Map made by a licensed surveyor who measures land and charts its
boundaries, improvements and relationship to the property surrounding
it.
Sweat Equity
Value added to a property due to improvements made personally by the
owner.
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