Terms:
Interest Rate
The monthly effective rate paid (or received if you are a creditor) on borrowed money. Expressed as a percentage of the sum borrowed.
MLS- IDX
IDX, or broker reciprocity, is a listing sharing arrangement between brokers within a Mulitple Listing Service.
Market Value
An asset's market value is the price it would fetch in the market, if it were sold in the current marketplace.
Title Insurance
A type of insurance which guarantees the ownership and quality of title to land.
Appraisal
An educated estimate of the value of a property on a certain date given by a person, usually after an inspection of the property.
As is
Implied in most Agreements of Purchase and Sale, suggests the buyer is accepting the property in it present state and relinquishes and responsibility from the buyer.
Bankruptcy
a) A person who has done any of the acts that by law entitle his creditors to have his estate administered for their benefit; b) a person judicially declared subject to having his estate administered under the bankrupt laws for the benefit of his creditors; c) a person who becomes insolvent.
Bid
To offer (a price) whether for payment or acceptance.
Property Tax
A tax levied on real or personal property
Interest Rate
The percentage usually on an annual basis that is paid for the use of money borrowed from another
Home Loan
a) Money lent at interest; b) something lent usually for the borrower's temporary use.
Credit Risk
An estimate of the amount of credit that can be extended to a company or person without undue risk.
Credit Union
A cooperative organization that makes loans to its members at low interest rates.
Prime Rate
The lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers.
ARM
A mortgage whose interest rate is raised or lowered at periodic intervals according to the prevailing interest rates in the market.
Home Equity Loan
A loan or credit line that is secured by the equity the borrower has in a home.
Mortgage
A temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.
Real Estate Terminology:
For your convenience we have provided you with a loose translation of terms you may hear in the course of a transaction.
Acceleration Clause: This is a clause in a mortgage which allows the lender to demand payment for an outstanding balance most commonly associated with borrower default or transference of title without lender knowledge.
Amortization Schedule: This is a scheduling table which indicates how much of each mortgage payment is applied to the principle balance and how much towards the interest over the course of the loan. This will show the gradual decrease of the loan amount until it is paid off / amortized within its schedule.
APR or Annual Percentage Rate: Is a term based on a government formula providing a rate intended to reflect the true annual cost of borrowing expressed as a percentage. This is not the rate on your loan.
Appraisal Value: This is a term used to justify the price or value of a property based on comparable nearby properties recently sold. This is primarily used to determine fair market value.
Appreciated Value: This term describes the increase in the value of a property based on market conditions, inflation and various other factors.
ARM or Adjustable Rate Mortgage: Is a term used to describe a mortgage in which the interest rate adjusts according to the fluctuation of the index it is tied to.
Assessed Value: This is the valuation placed on a property by a public assessor for the purpose of taxation.
Assignment: A term used by lenders describing ownership of a loan from on mortgage company on individual to another.
Broker: A broker is a person acting as an agent who overseeing two parties in a transaction and commissions a fee for doing so.
Cash-Out Refinance: This is when a borrower refinances his mortgage for a larger amount than the original note, taking cash out for personal use.
Chain Of Title: The history of title transfers on a property.
Clear Title: Is a term used to indicate that the title to a property is free and clear of any liens or legal actions against the property.
Closing: Is a term most commonly used to describe the time in a transaction where all documents are signed and all cost associated with the transaction are settled (also known as “Closing Costs”). This can also be used to indicate that all documents have been recorded at the recorders office and the deal is “closed.”
Cloud On Title: Is a term used do describe any conditions which can adversely affect a properties title, these are normally revealed when performing a title search.
Co-Borrower: A person who is equally obligated to a loan and appears on title.
Collateral: Something (usually the property or money) a borrower leverages against a loan or deed of trust.
COFI or Cost Of Funds Index: Is one of the Index Funds used to determine the interest rate in certain adjustable rate mortgages.
Commission: This describes fees that are commonly charged by many entities in real estate transactions as payment for the work performed. These entities may include realtors, loan officers, brokers, escrow representatives, lawyers and others.
COMPS or Comparable Sales: An analysis of recently sold properties in surrounding areas, similar or “comparable” to a desired property, which helps in the process of determining market value.
Contingency: Is a condition that must be met before a contract becomes legally binding. An example of such a contingency would be: when a buyer is waiting for a satisfactory home inspection prior to the contract taking effect.
Contract: An agreement (written or verbal) between parties in which an outline of legally binding terms is described.
Co-Op or Cooperative: Describes a type of cooperative ownership of a property with multiple housing units on it.
Credit History: Describes an individual’s debt repayment history. This is used by many lending institutions as a criteria in determining credit extension and lending risks.
Credit Report: This is a report containing the history of your credit obtained through specific bureaus. This is commonly used by lending institutions to assess applicants.
Debt: Describes money owed or an outstanding balance to another party.
Deed: Is a legal document which conveys title to a property.
Default: Is a failure to “make good” on an agreement within the allotted time frame. This usually refers a past due payment or none payment in a loan, putting it in “default.”
Delinquency: Usually refers to a payment which is late or past the due date, making it “delinquent.”
Deposit: Refers to moneys given in advance to secure an item of purchase or as “good faith” against an agreement.
Depreciation: Describes the loss of value or decrease in equity of an asset, in Real Estate this is associated with the value of a property. This means that if current value is X, and when revalued is less than X, the asset has depreciated.
Discount Point: Commonly used in the lending industry and refers to percentage, one point is equal to one percent of the loan amount. Discount points refer to each point paid in addition to the one percent loan origination fee.
Down Payment: This is money paid by a buyer which is translated as cash / instant equity already paid off of the total purchase price.
Earnest Money Deposit: This is a deposit made by a potential buyer as a display of intent to purchase.
Easement: This is when access to or over a property is given to persons other than the owner.
Eminent Domain: This is when the government has the right to take private property from its owners for public use, this only after fair market value is paid.
Encroachment: An improvement which intrudes illegally on another’s property.
Encumbrance: Mortgages, leases, easements, restrictions, etc. that may limit or impede the fee simple title to a property.
Equity: Describes the difference between fair market value and the amount still owed on a property (if value > loan, than value – loan = equity).
Escrow: In real estate this refers to money deposited with a third party which is to be delivered upon fulfillment of a condition.
Escrow Account: This refers to an account that is held with a lender for the purpose of property tax and or insurance. Each month when you make payment an extra amount above the principle payment is collect and placed in the escrow account, the lender than pays money owed on due dates instead of you
Escrow Analysis: This is when the lender reviews the escrow account to determine whether the correct amount of money is collected for anticipated expenditures.
Escrow Disbursement: This is when funds paid to the escrow account are used to pay various expenses when due. These usually include, property tax, hazard insurance, mortgage insurance, or other such expenses.
Eviction: The lawful expulsion of an occupant from real property.
Exclusive Listing: This is a written contract between a seller and a licensed real estate agent, giving the agent exclusive rights to sell a property within an allotted time frame.
Fair Market Value: Is the amount a potential buyer is willing to pay, and the price a potential seller is willing to accept. Usually determined by comps and various other factors, such as improvements and or upgrades made which tend to reflect in the value.
FHA or Federal Housing Administration: An agency of the U.S. Department of Housing and Urban Development (HUD) which mainly deals with the insuring of residential mortgages made by private lenders.
FHA Mortgage: Commonly referred to as a government loan, this is a mortgage insured by the Federal Housing Administration.
Firm Commitment: This refers to an agreement on loan between a lender and a borrower on a specific property.
First Mortgage: This usually refers to the first or primary mortgage / lien recorded against a property.
Fixed Rate Mortgage: Is a mortgage in which the interest rate is “fixed” (does not change) for the term of the loan.
Flood Insurance: This insurance is usually required for properties located in federally designated flood zones, it compensates for physical property damage caused by flooding.
Foreclosure: This describes the legal process in which a borrower defaults on a property loan and they are deprived of their interest by the lender on said property, commonly involving a forced sale at public auction where the proceeds are applied to the loan debt.
Grantee: Is the person whom an interest in real property is conveyed.
Grantor: Is the person conveying an interest in real property.
Hazard Insurance: This is an insurance designated to cover physical damage to a property from fire, wind, or other such hazards.
HELOC or Home Equity Line Of Credit: This is line of credit / loan that a borrower obtains to withdraw cash against the equity of their home.
HOA or Home Owners Association: Is a non profit association which manages the common areas of a Planed Unit Development (PUD), commonly tied to a fee which a homeowner is required to pay each month.
Home Inspection: This is a detailed inspection performed by a contracted professional designated to determine the condition of a property.
Homeowners Insurance: An insurance policy that combines personal liability and hazard coverage for a dwelling and its contents.
Homeowners Warranty: A warranty that can be purchased as extra coverage to items used in / by a household, such as, air conditioning units, heating units, water heaters etc. if they should break.
Judgment: A decision made by a court of law, which helps a lender collect from a debtor in a manner determined by the courts.
Legal Description: Refers to a description of a parcel recognized by the law as sufficient data to locate / identify said parcel without oral testimony.
Lender: A term used to describe an entity lending money to a borrower.
Liabilities: Is a term used to describe short or long term outstanding debt / financial obligation an individual owes to others.
Lien: A legal claim against a property commonly held by lenders, but can also be government or other entities.
Line of Credit: Usually related to a sum of money extended by lender to a borrower for an allotted time frame.
Liquid Asset: Is an item “asset” that can be made “liquid” or converted into cash.
Loan: The sum of money lent / borrowed, to be repaid under agreed upon terms.
Loan Officer: Is a person working / representing a lending institution, helping the borrower obtain a loan.
Loan Origination: A term used by lenders referring to the process of obtaining a new loan.
Loan Servicing: This refers to the lender a borrower makes payments to and the things they do to manage “service” the loan, such as, sending statements, processing payments, handle payoffs, deal with escrow accounts and various other processes involving the loan.
Lock-In Rate: This refers to an agreement in which the lender guarantees a specific interest rate to a borrower before a loan is submitted.
Lock In Period: This refers to the timeframe “period” in which a lender will guarantee the pre determined interest rate for.
LTV or Loan To Value: This describes the percentage relationship between the loan amount and the value / sale price.
Margin: Is the difference the interest rate and the index on an adjustable rate mortgage.
Maturity: This is the date on which balance of a loan comes to term and must be paid in off.
Pre Qualification: Commonly refers to the process in which a loan officer gathers information about a potential borrower and determines what they may qualify for.
Mortgage: This is a legal document describing terms of payment of debt in which a property is used as security / collateral for payment of a loan.
