ABA Number: Originated by the American Bankers Association, it is the number
(usually found on the bottom of the check), which identifies the bank in which a
customer has their account
Abstract of Title: A written history of the recorded documents relating to a
parcel of land, from which an attorney may give an opinion as to the condition
of title. It covers the period from the original source of title to the present
and summarizes all subsequent instruments of public record by setting forth
their material parts.
Acknowledgement: A written declaration by a person executing an instrument,
given before an officer authorized to give an oath (usually a notary public),
stating that the execution is of his/her own choice.
Adjustable Rate Mortgage (ARM): A mortgage that permits the lender to adjust its
interest rate periodically on the basis of the movement in a specified index.
Adverse Action: Notice to a potential customer, which denies credit.
Age of Majority: Age variances within states for classification of minors and
responsible parties.
Amenities: Those settings or improvements to property, which increase the
desirability or enjoyment rather than the necessities of the residents. For
example, a pool, a view, etc.
American Land Title Association (ALTA): A national association of title
insurance companies, abstractors, and attorneys specializing in real property
law. The association speaks for the title insurance and abstracting industry and
establishes standard procedures and title policy forms.
Amortization: Loan payment by equal periodic payments calculated to retire the
principal at the end of a fixed period and to pay accrued interest on the
outstanding balance.
Amortization Schedule: A schedule showing each payment of a loan to be amortized
and breaking down the payment into the amount applied to principal and the
amount applied to interest.
Annual Percentage Rate (APR): The yearly finance charge percentage of a loan, as
expressed by the actual rate paid; A term used in the Truth-in-Lending Act to
represent the percentage relationship of the total finance charge to the amount
of the loan.
Appraisal: A written statement prepared independently and impartially by a
qualified appraiser. This statement sets forth an opinion as to the market value
of an adequately described property on a specific date, and supported by the
presentation and analysis of relevant market information.
Appraised Value: An opinion of value reached by an appraiser based on knowledge,
experience, and a study of pertinent data.
Appraiser: One who is trained and educated in the methods of determining the
value of property through analysis of various factors which determine said
value.
Appreciation: An increased value of property due to either a positive
improvement of the area or the elimination of negative factors.
APR (Annual Percentage Rate): See Annual Percentage Rate.
“As Is” Condition: Premises accepted by a buyer or tenant in the condition
existing at the time of the sale or lease, including all physical defects.
Assessed Valuation: The value a taxing authority places on real or personal
property for taxation purposes.
Assessment: The value placed on property for taxation purposes. May also refer
to a levy against property for a special purpose, such as a sewer assessment.
Assets: Property owned that is useful and or has value and could be converted to
cash.
Assignee: The person or corporation to whom an agreement or contract is
assigned. One to whom real property, or an interest in real property, is
transferred or set over.
Assignor: One who transfers, assigns, or sets over real property or an interest
therein to another.
Assignment: A transfer to another of any property, real or personal, or of any
rights or estates in said property. Common assignments are of leases, mortgages,
deeds of trust, but the general term encompasses all transfers of title.
Assumption: A method of selling real estate wherein the property purchaser
agrees to take over the primary liability for payment of an existing mortgage.
Attached Home: A single-family housing unit built adjacent to another single
-family housing unit with one or more common walls separating the two units.
Frequently found in townhouses, row houses, and zero lot line planned unit
developments.
Attorney-in-Fact: One who holds a power of attorney from another to execute
documents on behalf of the grantor of the power. It is terminated upon the
death, relocation, or court-decided incompetence of the grantor.
Bankrupt: A person, firm, or corporation who – through a court proceeding – is
relieved from the payment of all debts after the surrender of all assets to a
court-appointed trustee for the protection of creditors. Bankruptcy may be
declared under one of several chapters of the Federal Bankruptcy Code:
Chapter 7 – which covers liquidation of a debtor’s assets;
Chapter 11 – which covers reorganization of bankrupt businesses;
Chapter 13 – which covers workouts of debts by individuals.
Beneficiary: One in whose favor a trust operates or on whose behalf the income
from a trust estate or trust deed is drawn; the lender on the security of a
note; one who receives funds from a life insurance policy.
Binder: A report issued by a title insurance company setting forth the condition
of title to certain property as of a certain date. It also sets forth
conditions, which, if satisfied, will cause a policy of title insurance to be
issued. Also called a commitment.
Blanket Insurance Policy: A single policy that covers more than one piece of
property, or more than one person, or more than one type of risk.
Borrower: An individual who receives funds in the form of a loan with the
obligation of repaying the loan in full with interest, if applicable.
Bridge Loan: A loan based on the amount of equity in the customer’s current home
to be used for down payment or closings costs on a new primary residence
Buydown: A payment to the lender from the seller, buyer, third party, or some
combination of these, causing the lender to reduce the interest rate during the
early years of a loan. The buydown is usually for the first 1 to 5 years of the
loan.
Cap (Interest Rate): The maximum allowable interest rate increase for an
adjustable rate mortgage.
Cash Flow: In investment property, the actual cash the investor will receive
after deduction of operating expenses and debt service (Loan payment) from
his/her gross income.
Cashier’s Check: A check drawn by a bank on itself rather than on an account of
a depositor. A cashier’s check is generally acceptable to close a sale without
waiting for the check to clear.
Cash Out: A refinance where the amount of money received from the new loan
exceeds the total of the money needed to repay the old debt and closing costs.
Certificate of Completion: A document issued by the appraiser stating that a
newly constructed residence is completed in accordance with the terms,
conditions, approved plans, and according to specifications.
Certificate of Occupancy: A certificate issued by a local government agency to
an owner, builder or renovator stating that the building is in proper condition
to be occupied.
Certified Check: A personal check drawn by an individual, which is certified
(guaranteed) to be good. The bank holds the funds to pay the certified check and
will not pay any other checks drawn on the account if such payment would impede
payment of the certified check. The bank also will not honor a stop payment of a
certified check.
Certified Copy: A true copy, attested to be true by the officer holding the
original.
Charge-Off: Any debt, which has an existing balance and is classified as
“uncollectible” which has been charged against the business’ profits.
Clear Title: Title not encumbered or burdened with defects.
Closing: The final procedure in which documents are executed and/or recorded,
and the sale (or loan) is completed.
Closing Costs: Expenses incidental to a sale of real estate, such as loan fees,
title fees, appraisal fees, etc.
Closing Date: The date the loan documents are executed.
Closing Statement: The statement, which lists the financial settlement between
buyer and seller, and also the costs each must pay. A separate statement for
buyer and seller is sometimes prepared.
CLTV (Combined Loan-to-Value): See Combined Loan-to-Value.
Collateral: Property pledged as a security for a debt, such as the real estate
as security for a mortgage.
Combined Loan-to-Value (CLTV): The relationship between the unpaid principal
balances of all mortgages and the lesser of the property’s appraised value or
sales price.
Commitment: An agreement, often in writing, between a lender and a customer to
loan money at a future date subject to compliance with stated conditions.
Common Area: Land or improvements on land designated for common use and enjoyed
by all occupants, tenants, or owners.
Community Property: A form of ownership under which property acquired during a
marriage is presumed to be owned jointly unless acquired as separate property of
either spouse.
Community Reinvestment Act (CRA): An act of Congress, which requires financial
institutions to reinvest by means of lending, in communities from which they
accept deposits. In practice, this has resulted in the offering of loan programs
with less stringent requirements than standard programs, for customers in
certain income brackets and/or geographical areas.
Comparables: An abbreviation for comparable properties used in the appraisal
process. Refers to facilities of reasonably the same size and location with
similar amenities. Also, properties that have been recently sold and have
characteristics similar to property under consideration, thereby indicating the
approximate fair market value of the subject property.
Conditions and Restrictions: A common term used to designate restrictions on the
use of land and providing penalties for failure to comply
Condominium: A structure of two or more units, the interior space of which are
individually owned; the balance of the property (both land and building) is
owned in common by the owners of the individual units. The size of each unit is
measured from the interior surfaces (exclusive of paint or other finishes) of
the exterior walls, floors, and ceiling. The balance of the property is called
the common area.
Condominium Declarations: The basic condominium document that must be registered
by the originating property owner prior to the conveyance of the first unit
sold. The declaration thoroughly describes the entire condominium entity,
including each unit and all common areas, and specifies essential elements of
ownership that permanently govern its operations. Also known as a Master Deed.
Construction Loan: A short-term interim loan for financing the construction
costs. The lender advances funds to the builder at periodic intervals as the
work progresses.
Contingency: The dependence upon a stated event, which must occur before a
contract is binding. For example, the sale of a house, contingent upon the buyer
obtaining financing.
Contract for Deed: Written agreement between buyer and seller where buyer
receives possession of property, but not title to it. Also known in some states
as a Land Contract
Conventional Loan: A mortgage or deed of trust not obtained under a government
insured program, such as FHA, or VA.
Co-op: A form of multiple ownership of real estate in which a corporation or
business trust entity holds title to a property and grants the occupancy rights
to particular apartments or units to shareholders by means of leases or similar
arrangements.
Corporation: A state-chartered business that is owned by shareholders. These
shareholders have invested money into the business and in return received shares
of stock.
Cost Approach to Value: Valuation method in which the replacement value of
improvements, depreciation, and the land value are computed to determine
property value.
Credit Life Insurance: A type of insurance often bought by mortgagors because it
will pay off the mortgage debt if the mortgagor dies while the policy is in
force.
Credit Report: A report on the past ability of a loan applicant to pay
installment payments.
Debt: Borrowed money, the repayment of which may be either secured or unsecured,
with various possible repayment schedules.
Debt-to-Income Ratio: Monthly debt or payments divided by gross monthly income..
Deed of Trust: An instrument used in many states in place of a mortgage.
Property is transferred to a trustee by the customer (trustor) in favor of the
lender (beneficiary), and reconveyed upon payment in full.
Deed in Lieu: A deed given by a mortgagor to a mortgagee to satisfy a debt and
avoid foreclosure.
Department of Housing and Urban Development (HUD): Established by the Housing
and Urban Development Act of 1965 to supersede the Housing and Home Finance
Agency. It is responsible for the implementation and administration of
government housing and urban development programs.
Depreciation: Decrease in value to real property improvements caused by
deterioration or obsolescence.
Detached House: A free standing, single-family dwelling.
Disbursements: Payments made during the course of an escrow or at closing.
Discount Point: Amount payable to the lending institution by the customer or
seller to increase the lender’s effective yield. One point is equal to one
percent of the loan.
Document Tax Stamps: Stamps, similar to postage stamps, affixed to a Mortgage or
Deed of Trust, showing the amount of transfer tax paid. Most states now “stamp”
the document rather than actually affixing a stamp.
Dower: A common law interest of a wife in the property of her deceased husband.
Down Payment: The difference between the sales price of real estate and the loan
amount.
Earnest Money: A sum of money given to bind a sale of real estate or assure
payment or an advance of funds in the processing of the loan; a deposit.
Easement: A right to the limited use or enjoyment of land held by another. An
easement is an interest in land to enable sewer or other utility lines to be
laid, or to allow for access to the property.
ECOA (Equal Credit Opportunity Act): See Equal Credit Opportunity Act.
Economic Life: The estimated period of time during which a property can be
utilized profitably.
Effective Age: Age of a structure as estimated by its condition rather than
actual age. Takes into account rehabilitation and maintenance.
Egress: To go out. It is used with the word ingress (to go in) to describe the
right of access to land.
Encroachment: An improvement that illegally violates another’s property.
Encumbrance: Anything that affects or limits the fee simple title to property,
such as a mortgage, lease, easement or restriction.
Equal Credit Opportunity Act (ECOA): A federal law that requires lenders and
other creditors to make credit equally available without discrimination based on
race, color, religion, national origin, age, sex marital status, or receipt of
income from public assistance programs.
Equity: The difference between the value of a mortgaged property and the total
dollar amount of all mortgages and other liens against the mortgaged property.
Escrow: A situation in which a third party – acting as the agent for the buyer
and seller – carries out instructions of both and assumes the responsibilities
of handling all the paperwork and disbursement of funds.
Escrow Account: The segregated trust account in which escrow funds are held. An
account under the custody of a bank or other third party. Funds or other
securities are placed in this account by one or both parties to a real estate
transaction and used in accordance with a written contract.
Escrow Agent: The person or organization having a fiduciary responsibility to
both the buyer and seller (or lender and customer) to see that the terms of the
purchase/sale (or loan) are carried out.
Escrow Instructions: Instructions which are signed by both buyer and seller, and
which enable an escrow agent to carry out the procedures necessary to transfer
real property, a business, or other assignable interest.
Escrow Officer: An escrow agent. In some states, one who has – through
experience and education – gained a certain degree of expertise in escrow
matters.
Fair Credit Reporting Act (FCRA): A federal law giving one the right to see
his/her credit report so that errors may be corrected. A lender refusing credit
based on a credit report must inform the buyer which company issued the report.
The buyer may see the report without charge if refused credit, or for a charge
if just curious.
Fair Housing Act: Prohibits discrimination by lenders with respect to the
financing of a house based on race, color, religion, national origin, familial
status, sex and handicap.
Fair Market Value: Price at which property is transferred between a willing
buyer and a willing seller, each of whom has a reasonable knowledge of all
pertinent facts and neither being under any compulsion to buy or sell.
Federal Deposit Insurance Corporation (FDIC): The regulatory agency that directs
compliance for state banking systems.
Federal Home Loan Mortgage Corporation (FHLMC): Also known as Freddie Mac. A
semi-governmental purchaser of mortgage loans in the secondary market.
Federal Housing Administration (FHA): A federal agency, which insures first
mortgages, enabling lenders to loan a very high percentage of the sales price.
Federal National Mortgage Association (FNMA): Also know as Fannie Mae. A private
corporation dealing in the purchase of first mortgages.
Federal Tax Lien: A lien attached to property for nonpayment of a federal tax
(estate, income, etc.). A federal tax lien differs from other liens in that it
is not automatically wiped out by foreclosing on a mortgage or trust deed
recorded before the tax lien (except by judicial foreclosure).
Fee Simple: The greatest possible interest a person can have in real estate,
including the right to dispose of the property or pass it on to one’s heirs.
Fee Simple Estate: The absolute ownership of land, which gives the owner all the
rights and privileges; makes owner accountable for all responsibilities relative
to the property.
FHA (Federal Housing Administration): See Federal Housing Administration.
Fidelity Insurance: A type of insurance that a condominium or Planned Unit
Development owners’ association or a co-op corporation obtains. The insurance
protects against economic loss from dishonest acts of anyone who either handles
(or is responsible for) funds that the association or corporation holds or
administers.
First Mortgage: A mortgage that is the primary lien against a property.
Fixed Rate Mortgage: A mortgage on which the interest rate is set for the term
of the loan.
Flood Insurance: Insurance indemnifying against loss by flood damage. Required
by lenders in areas designated (federally) as potential flood areas. The
insurance is private but federally subsidized.
Flood Insurance Protection Act: An act established in 1974 which requires
lenders to disclose to customers whether their property is in a special flood
hazard area and whether federally subsidized flood insurance or disaster relief
is available.
Flood Plain: Those lands subject to flooding when a stream or river is at flood
stage.
Floor Plan: Scale architectural drawing showing details of floor design and
layout.
FNMA (Federal National Mortgage Association): See Federal National Mortgage
Association.
Foreclosure: A proceeding in or out of court, to extinguish all rights, title,
and interest, of the owner of property in order to sell the property to satisfy
a lien against it.
Free and Clear: Real property against which there are no liens, especially
mortgages.
Fully Indexed Rate: The index at time of application or at time of closing,
whichever is less, plus the margin on the Note, including any margin increments
required by the nature of the loan.
Functional Obsolescence: The loss over time in the desirability, layout or
function of an element of a property.
Funding Date: The date the loan proceeds are disbursed, as outlined on the HUD-1
Settlement Statement.
General Partnership: Type of business whereby each partner is personally liable
for the debts of the business as a whole. Personal liability exists even after
the partnership itself has been dissolved (as long as business debts are
outstanding).
Gift Letter: A letter from the donor (giver) stating that a gift of money has
been made to the buyer in order to purchase specific property.
Government National Mortgage Association (GNMA): Also known as Ginnie Mae. A
federal association working with FHA, which offers special assistance in
obtaining a mortgage and purchases mortgages in a secondary capacity.
Grace Period: A period of time past the due date for a payment during which time
a payment may be made and not considered delinquent.
Grantee: The person to whom an interest in real property is conveyed.
Grantor: The person conveying an interest in real property.
Gross Income: Total income before any expenses are deducted.
Gross LTV: The loan amount divided by the lower of the appraised value or sales
price.
Ground Rent: The amount of money that is paid for the use of land when title to
a property is held as a leasehold estate, rather than as fee simple.
Hazard Insurance: Real estate insurance protecting against loss caused by fire,
some natural causes, vandalism, etc., depending upon the terms of the policy.
High-Rise: Building with four or more stories, usually served by an elevator.
Home Equity Line of Credit (HELOC): A mortgage loan, usually in a subordinate
position, that allows the borrower to obtain multiple advances of the loan
proceeds at his/her own discretion up to an amount that represents a specified
percentage of the borrower’s equity in a property.
Homeowner’s Association: An organization of homeowners residing within a
particular development whose major purpose is to maintain and provide community
facilities and services for the common enjoyment of the residents.
Housing Ratio: The proportion of house payment to total monthly income.
HUD: See Department of Housing and Urban Development.
Impound: That portion of a mortgagor’s monthly payment held by the lender or
servicer to pay for taxes, hazard insurance, flood insurance and/or mortgage
insurance as they become due. Also known as reserves.
Improvements: Those additions to raw land that normally increase the land’s
value, such as buildings, streets and sewers.
Income Approach to Value: A method of measuring the value of a property based on
the market rent or income that the property can be expected to earn.
Index: The externally determined interest rate, which is used to determine the
base interest rate to be charged on an adjustable rate note. The index is
usually the effective market interest rate on the U.S. Treasury obligation of
equal maturity.
In-file Credit Report: An credit report, normally computer-generated, of credit
and legal information obtained from a credit repository.
Ingress: To go in; to enter. Used with egress to describe the right of access to
land.
Installment Debt: Borrowed money that is repaid in several successive payments,
usually at regular intervals, for a specific amount and for a specified term.
Insured Closing Protection Letter: A document issued by a title insurance
company in connection with a to-be-issued title insurance policy. It protects a
mortgagee who is forwarding funds to a title insurance company’s agent or
approved attorney against an embezzlement of funds or a failure to follow
specific closing instructions.
Inter Vivos Trust: A trust during the life of the settlor rather than upon
death.
Joint Tenancy: An undivided interest in property, taken by two or more joint
tenants. The interest must be equal, occurring under the same conveyance, and
beginning at the same time. Upon the death of a joint tenant, the interest
passes to the surviving joint tenants, rather than to the heirs of the deceased.
Late Charge: A penalty for failure to pay a loan payment on time.
Lease: A written agreement between the property owner and a tenant that
stipulates the conditions under which the tenant may possess the real estate for
a specified period of time and rent.
Leasehold Estate: A way of holding title to a property wherein the mortgagor
does not actually own the property but rather has a recorded long -term lease on
it.
Legal Description: A method of geographically identifying a parcel of land in a
manner acceptable to a court of law.
Liability Insurance: Insurance coverage that offers protection against claims
alleging that a property owner’s negligence or inappropriate action resulted in
bodily injury or property damage to another party.
Lien: A legal hold or claim of one person on the property of another as security
for a debt or charge. The right given by law to satisfy debt.
Life of Loan Cap: The maximum interest rate that can ever by charged on the
loan.
Limited Partnership: Type of business where the partners have “limited”
decision-making abilityand they are compensated by the fact that their liability
is also “limited” to the amount of money they invested into the partnership.
Line of Credit: An agreement by a commercial bank or other financial institution
to extend credit up to a certain amount for a certain time.
Living Trust: A trust, which is in effect during the life of the settlor, rather
than upon his/her death.
Loan-to-Value (LTV): Ratio of the amount of a mortgage loan to the property
value, which is the lesser of the sales price, or appraised value of the
property. Example: An $80,000.00 loan for a property with a value of $100,000.00
has a 80.00% LTV. This ratio is expressed in terms of the percentage a lending
institution is willing to finance.
Loss Payable Clause: An insurance policy provision for payment of a claim to
someone – other than the insured – who holds an insurable interest in the
covered property.
Manufactured Home: Factory-built or prefabricated housing, including mobile
homes.
Margin: The amount to be added to the index to determine the interest rate to be
charged in the future. The margin is set by Capital Markets and can be modified
only under the conditions set by Capital Markets. The margin on the loan must
include any margin increments required by the loan parameters.
Market Value: The highest price a willing buyer would pay and a willing seller
accept, both being fully informed, and the property exposed for a reasonable
period of time. The market value may be different from the price a property can
actually be sold for at a given time.
Mechanic’s Lien: A charge or encumbrance in favor of contractors, trades people
and others who have performed work or furnished material in the construction of
a building or other improvement.
Metes and Bounds: A description in a deed of the land location in which the
boundaries are defined by directions and distances.
Mobile Home: A manufactured home built on a chassis with wheels (which may or
may not be removed later).
Modular Home; A manufactured home never intended to be mobile. This type of
manufactured home is built in sections at a factory and placed on a permanent
foundation at the building site.
Mortgage Insurance (MI): Insurance coverage issued by an independent insurer on
conventional loans to protect the mortgagee against losses incurred due to
foreclosure on a property whenthe customer has failed to make his/her mortgage
payments. Also known as Private Mortgage Insurance (PMI).
Mortgagee: The lender in a mortgage transaction.
Mortgagee Clause: A special clause that may be attached to an insurance policy
stipulating that the lender receive the necessary portion of the insurance
proceeds in the event of a loss to satisfy the unpaid amount of a loan.
Mortgagor: The customer or owner in a mortgage transaction who pledges property
as security for a debt.
Negative Amortization: A gradual increase in the mortgage debt that occurs when
the monthly installment is not sufficient for full application to both principal
and interest. This interest shortage is added to the unpaid principal balance to
create “negative” amortization.
Negative Cash Flow: When the income from an investment property does not equal
the usual expenses. The owner must come up with cash each month to meet these
expenses.
Net Income: The difference between effective gross income and expenses,
including taxes and insurance. The term is qualified as net income before
depreciation and debt.
Net Operating Income: The income from investment property available to cover the
principal, interest, taxes and insurance payments and provide a cash flow to the
owner. It is calculated as the gross monthly income from the property less the
operating expenses – utilities, repairs, reserves for replacement, a vacancy
factor, etc. The monthly payment is not considered as operating expense.
Net Worth: The value of all assets, including cash, less total liabilities. It
is often used as an underwriting guideline to indicate credit worthiness and
financial strength.
Partnership: Type of business whereby two or more persons act as co-owners of
the business for the purpose of sharing not only the profits and losses of that
business, but management responsibilities as well.
Party Wall: A wall built on a line between two adjoining properties and used by
both owners.
Payment to Income Ratio: The ratio of the monthly housing payment to total gross
monthly income.
Physical Depreciation: A loss in value that is caused by deterioration in the
physical condition of a property’s improvements.
PITI (Principal, Interest, Taxes and Insurance): See Principal, Interest, Taxes
and Insurance.
Planned Unit Development (PUD): A comprehensive development plan for a large
land area. It usually includes residences, roads, and recreational facilities. A
subdivision having areas owned in common and reserved for the use of some or all
of the owners of the separately owned lots.
Plans and Specifications: Architectural and engineering drawings and
specifications for construction of a building or project. They include a
description of materials to be used and the manner in which they are to be
applied.
Plat: A map representing a piece of land subdivided into lots with streets,
boundaries, easements, and dimensions shown thereon; A map showing how land is
subdivided or planned for home building.
PMI (Private Mortgage Insurance): See Mortgage Insurance.
Point: An amount equal to 1% of the principal amount of the loan.
Power of Attorney: A legal document authorizing one person to act on behalf of
another.
Prepayment Penalty: A penalty under a note, mortgage or deed of trust imposed
when the loan is paid before it is due.
Principal, Interest, Taxes and Insurance (PITI): The total of the principal,
interest, taxes and insurance on a loan.
Private Mortgage Insurance (PMI): See Mortgage Insurance.
Proprietary Lease: A lease that a co-op gives to a tenant-stockholder to cover
the unit that he/she will occupy. It is proprietary because the
tenant-stockholder is both a shareholder in the landlord’s co-op corporation and
a tenant under the lease.
PUD (Planned Unit Development): See Planned Unit Development.
Purchase Agreement: A written proposal by a buyer to purchase real estate that
becomes binding upon the acceptance of the seller.
Qualifying Ratios: Guidelines used by lenders to determine how
much of a loan a home buyer qualifies for. Often referred to as debt-to-income
ratio ( DTI ).
Real Estate Settlement Procedures Act (RESPA): A federal regulation that
requires lenders to provide home mortgage customers with information on known or
estimated settlement costs.
Redlining: The practice of restricting or denying mortgage loans for certain
areas in a discriminatory pattern.
Refinance: The replacement of the existing mortgage loan on a property with a
new one; the financing of a property by an owner who has no loan against it, but
does not transfer title.
Relocating Household: Two-income household relocating as a result of one wage
earner’s transfer or acceptance of new employment.
Remaining Economic Life: The number of years of useful life left to a building
from the date of appraisal.
Remaining Term: Original term less the number of payments that have been
applied.
Replacement Cost: The cost to replace a structure with one of equivalent value
and function. The current cost of producing similar, but not identical,
improvements possessing the same utility as the original items.
Rescission: The cancellation or annulment of a transaction or contract by the
operation of law or by mutual consent.
RESPA (Real Estate Settlement Procedures Act): See Real Estate Settlement
Procedures Act.
Revolving Debt: An arrangement for credit in which the customer receives
purchases or services on an ongoing basis prior to payment. Repayment is usually
at regular intervals, but not for a specified amount or term.
Right of First Refusal: A provision in an agreement that stipulates that the
owner of the property must offer the first opportunity to purchase or lease a
property to a specified person or company before offering it to others.
Row House: One of a series of houses connected by common sidewalls and forming a
continuous group. Also known as attached housing, but not considered a townhouse
or planned unit development.
S-Corporation: A small start-up business with a limited number of stockholders.
Also known as a Subchapter S.
Sales Contract: Written agreement between competent parties stating terms and
conditions of a sale.
Second Mortgage: A mortgage that has a lien position subordinate to the first
mortgage.
Secondary Financing: A loan secured by a second mortgage on a property.
Sometimes used to refer to any financing technique other than first mortgage
debt.
Second Home: A single-family property that the customer occupies for at least
two weeks out of the year in addition to his/her primary residence. Also knows
as a vacation home.
Security Instrument: The document (mortgage, deed of trust, deed to secure debt,
etc.) that creates a valid lien on real estate.
Seller Financing: Any of a variety of programs where the seller assists the
buyer by taking out a second mortgage, “buying down” payments in the early years
of the loan, or effectively lending some of the funds through a wrap agreement.
Setback Lines: Lines that delineate the required distances for the location of a
structure in relation to the perimeter of the property. They are defined in
building codes, deed restrictions and zoning requirements.
Small Residential Income Property Appraisal Report: Used to appraise 2-4 family
properties including those located in Planned Unit Developments.
Sole Proprietorship: Type of business whereby the individual owner has unlimited
liability for all debts of the business. There is no distinction made between
the owner’s personal assets and the assets used in the business.
Standard Metropolitan Statistical Area (SMSA): A term describing a central city
area and its surrounding suburbs and other small jurisdictions.
Subdivision: A housing development that is created by dividing a tract of land
into individual lots for sale or lease.
Subordinate Financing: Any mortgage or other lien that has priority lower than
that of the first mortgage.
Subordination: The act of a party acknowledging – by written recorded instrument
– that a debt is inferior to the interest of another in the same property.
Survey: A measurement of land, prepared by a registered land surveyor, showing
the location of the land with reference to known points, its dimensions, and the
location and dimensions of any improvements.
Tenancy by the Entirety: A form of ownership by husband and wife whereby each
owns the entire property. In the event of the death of one, the survivor owns
the property without probate.
Tenancy in Common: An undivided ownership in real estate by two or more persons.
The interests need not be equal, and, in the event of the death of one of the
owners, no right of survivorship in the other owners exists.
TIL (Truth-in-Lending): See Truth-in-Lending.
Title: The evidence one has of right to possession of land.
Title Insurance: Insurance against loss resulting from defects of title to a
specifically described parcel of real property.
Title Insurance Company: A company, which issues insurance regarding title to
real property.
Title Insurance Policy: A contract by which the insurer – usually a title
insurance company – agrees to pay the insured a specific amount for any loss
caused by defects in title to real estate, when the insured has an interest as
purchaser, mortgagee, or otherwise.
Title Search: A review of all recorded documents affecting a specific piece of
property to determine the present condition of title.
Total Debt Ratio: The portion of total installment obligations, including house
payment, to total monthly income.
Townhouse: A residential unit on a small lot, which has coincidental exterior
limits with other similar units. Title to the unit and lot is vested in the
individual buyer with a fractional interest in
common areas, if any. Also known as an attached home.
Transfer Tax: A state tax on the sale of real property, based on the sale price
or equity transferred.
Trust: A fiduciary relationship whereby legal title to a property is transferred
to a trustee with the intention that such property be administered by the
trustee for the benefit of another (beneficiary) who holds equitable title to
such property.
Trustee: One who holds legal title to property for the benefit of another, or
for the purpose of securing performance of an obligation.
Trustee Deed: The instrument given by a customer (trustor) to a trustee vesting
title to a property in the trustee as security for the customer’s fulfillment of
an obligation.
Truth-in-Lending: A federal law requiring accurate disclosure of all amounts to
be financed in connection with a loan and of an accurate annual percentage rate.
Underwriting: The analysis and the matching of risk to an appropriate rate and
term. Undivided Interest: A partial interest by two or more people in the same
property, whether the interest of each is equal or unequal.
Universal Commercial Code (UCC): A code (laws) which regulates the transfer of
personal property.
VA (Veterans’ Administration): See Veterans’ Administration.
Vacation Home: See Second Home.
Variable Rate Mortgage: A mortgage agreement that allows for adjustment of the
interest rate in keeping with a fluctuating market and terms agreed upon in the
Note.
Veterans’ Administration (VA): An independent agency of the federal government
created in 1930.
Zero Lot Line: A term
generally used to describe the positioning of a structure on a lot so that one
side rests directly on the lot line between two properties
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