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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
Abstract of Title
A summary or
condensation of the essential parts of all recorded instruments which affect
a particular piece of real estate, arranged in the order in which they were
recorded.
Acceleration Clause
A clause in a contract by which the time for payment of a debt is advanced,
usually making the obligation immediately due and payable, because of the
breach of some condition, such as failure to pay an installment when due.
Acceptance
The indication or manifestation by the offeree that the offeree is willing to
be bound by the terms of the offer.
ACRE
43,560 square feet of land.
Acknowledgment
A declaration made by a person to a notary public, or other public official
authorized to take acknowledgments, that the instrument was executed by the
person and that it is a free and voluntary act.
Ad Valorem
Latin meaning "according to value". Normally used to describe a tax
based on the assessed value of real property.
Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate changes over time based on an index
and a margin. Rate changes are made at prescribed
times and within prescribed limits (caps) as defined in
the mortgage contract.
Adjustment Period or Interval
On an adjustable rate mortgage, the time between changes in the interest
rate and/or monthly payment, typically one, three or five years, depending on
the index.
Adverse Possession
The right of an occupant of land to acquire a superior title to the real
estate against the record owner, where such possession has been actual,
notorious, hostile, visible and continuous for the required statutory period
(in Colorado, 18 years). The purpose behind this concept is to promote
the productive use of land and to give title to the one putting the land to
use.
Affidavit
A statement or declaration reduced to writing, and sworn to or affirmed before
some officer who has authority to administer an oath or affirmation.
Agency
A legal relationship resulting from an agreement or contract, either
expressed or implied, written or oral, whereby one person, called the agent,
is employed by another, called the principal, to do certain acts in dealing
with a third party.
Agent
Any person, partnership, association, or corporation authorized or employed
by another, called the principal, to act for, on behalf of, and subject to
the control of the latter.
AITD - See All Inclusive Trust Deed
Alienation
The transfer of real property by one person to another.
All Inclusive Trust
Deed (AITD) - See Wraparound Mortgage
Amenities
In real estate, amenities refer to such circumstances, in regard to location,
outlook, or access to a park, lake, highway, view or the like which enhance
the pleasantness or desirability of real estate and which contribute to the
pleasure and enjoyment of the occupants.
Amortization
The gradual repayment of a mortgage by installments. As you pay
back the loan, an increasing amount of each payment is applied to principal
and a lesser amount is applied to interest. Amortization is also a process of
spreading a cost that is incurred upfront over the term of the loan or life
of the asset. (see our Amortization Calculator)
Annual Percentage
Rate (A.P.R.)
The actual cost
of a mortgage loan expressed as a yearly rate. The APR will be higher
than the interest rate stated on the application and note because it includes
fees such as: interest, discount points, origination fee, mortgage insurance
and other related fees. The truth in lending act requires lenders to
disclose an APR to assist the borrower in measuring the actual cost of a
loan.
Application
A form used by mortgage lenders to document necessary information concerning
the mortgage loan applicant(s).
Appraisal
In real estate, an estimate of the quality or value of property; the process
by which conclusions of the value of property are obtained; also refers to
the report setting forth the estimate of value together with the basis for
such conclusions. For VA appraisal - See Certificate of
Reasonable Value
Appraised Value
The fair market
value an appraiser assigns to a particular property, based on analysis of the
property in question, and the market conditions in the area, and recent sales
data of comparable homes in the area.
Appreciation
An increase in value due to changes in market conditions or other causes.
Appreciation rate - Appreciation rate is the yearly
percentage rate that an asset increases in value.
Appurtenance
That which belongs to something else; something adapted to the use of the
real property to which it is connected or belongs, and which was intended to
be a permanent addition to the land, and which passes as an incident to said
land, as a house, barn, garage, right of way.
APR - See
Annual Percentage Rate
ARM - See Adjustable Rate Mortgage or go to our Loan Types Section to read more about ARM Loans
Assessed Value
The value that
a taxing authority, such as a county assessor places on real property as a
base for computing property taxes. Generally assessed at 80% of value.
Assessment
A local tax levied against a property to cover the proportionate cost of an
improvement, such as a street or sewer.
Assignee
The party to whom a legal right has been assigned or transferred.
Assignment
A transfer to another of a legal right.
Assignor
The party who
assigns or transfers a legal right.
Assumption
The agreement between buyer and seller where the buyer takes over the
payments on an existing mortgage from the seller. Assuming a loan can usually
save the buyer money since this is an existing mortgage debt, unlike a new
mortgage where closing cost and new, probably higher, market-rate interest
charges will apply.
Attachment
A type of
encumbrance, permitted only under special circumstances, which is placed
against the real estate of a defendant in a pending law suit for money
damages.
Attorney's Opinion
In real estate,
the written opinion of an attorney-at-law regarding the marketability of
title to real property based upon an examination of the abstract of title or
the records in the county clerk and recorder's office.
Available Cash
The amount of liquid assets (i.e. checking, savings, mutual funds, etc)
immediately available to pay closing costs and down payment.
Average Interest
Rate
The actual average interest rate for a combination of debts based upon a
total weighted interest rate calculation. Utilizing each loan balance
and interest rate, the calculator determines an average interest rate for
multiple debts.
B
Balance Sheet
A statement showing a company's financial position at the end of an
accounting period by listing an entity's assets, liabilities and owner's
equity.
Balloon Mortgage Click here to read more
about Balloon Loans
When credit is advanced by note or contract and payment is required in
regular equal installments and the note or contract will mature before the
note or contract is paid in full, a payment which may be larger than the
regular payment will fall due.
Balloon Payment
The final lump
sum payment made at the maturity date of a balloon mortgage called a
"balloon payment".
Bargain and Sale
Deed
Any deed that
recites a consideration and purports to convey the real estate. A
bargain and sale deed with a covenant against the grantor's acts is one in
which the grantor warrants that they have done nothing to harm or cloud the
title.
Base rate or Base
Point
The interest
rate that is used as a benchmark to set the interest rate for
borrowers. A base rate is sometimes called an index
rate. For example, if you obtain a one-year adjustable-rate
mortgage, your loan rate will be reset once a year to a rate that equals the
loan rate plus a margin. Interest rates on credit cards are frequently
tied to a change in the prime rate.
Beneficiary
The person who
receives or is to receive the benefits resulting from certain acts; one
receiving benefits, profits or advantage; one for whose benefit a trust is
created.
Bill of Sale
A written
instrument by which one person transfers or conveys right, title or interest
in personal property to another.
Binder
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.
Blanket Mortgage
A single mortgage which covers more than one piece of property.
Borrower (Mortgagor)
An individual (also known as mortgagor) who receives funds in the form of a
loan with an obligation to repay the principal with interest. Each
additional borrower contributes income and credit history to the
qualification process of a loan and whose names appear on all closing
documents. Each additional borrower is liable for the debt and
condition of the property.
Broker - See Mortgage
Broker
Building Code
Regulations
established by local governments setting forth the structural requirements of
buildings.
Buy-Down
When the lender and/or the home builder subsidized the mortgage by lowering
the interest rate during the first few years of the loan. While the
payments are initially low, they will increase when the subsidy
expires. These are sometimes used to qualify borrowers for a loan
amount that they would not otherwise qualify for but will be able to pay in
subsequent years as their income increases.
Buyer's Agent
A broker or
salesperson who is engaged by and represents the buyer in a real estate
transaction.
C
Cap
A consumer
safeguard limiting adjustments to ARM
interest rate or mortgage payment's.
- A periodic cap
limits how much the rate can increase at each adjustment
period.
- A lifetime cap limits
how much the rate can increase during the term of the loan.
- A payment cap,
limits how much the monthly payment may increase. See Payment Cap for detailed provisions of this type
of cap.
Carryback Loan
A loan in which
a seller agrees to finance a buyer in order to complete a property sale.
Cash Needed
The total dollar amount required for payment of closing costs and down
payment.
Cash Out Refinance
A mortgage loan that allows the borrower to pay off an existing debt and
obtain excess money from the equity of their home for payment of closing costs and additional funds for personal needs (i.e., college tuition, home
improvement, remodel home, purchase automobile and etc).
Cash Reserve
Sufficient cash remaining after closing to make the first two mortgage
payments and two months of long-term debts.
Caveat Emptor
"Let the
purchaser beware." The buyer is duty-bound to examine the property
he or she is purchasing and he or she assumes conditions which are readily
known upon view. The seller is under no obligation to disclose defects
but may not actively conceal a known defect or lie if asked.
CC&R's
Covenants, conditions, and restrictions. The basic rules establishing
the rights and obligations of owners of real property within a subdivision or
other tract of land in relation to other owners within the same subdivision
or tract and in relation to an association of owners organized for the
purpose of operating and maintaining property commonly owned by the individual
owners.
Certificate of
Eligibility (COE)
The document given to qualified veterans which entitles them to VA guaranteed
loans for homes, business, and mobile homes. Certificates of Eligibility may
be obtained by sending DD-214 (Separation Paper) to the local VA office with
VA form 1880 (request for Certificate of Eligibility). Now verified
through email to streamline the process.
Certificate of
Reasonable Value
Commonly
referred to as a "CRV". Veterans Administration's certified
appraisal of value of real property.
Certificate of Taxes
Due
A written
statement or guaranty of the condition of the taxes on a certain property,
made by the County Treasurer of the county wherein the property is
located. Any loss resulting to any person from an error in a tax
certificate shall be paid by the county which such treasurer represents.
Certificate of Title
- See Title Insurance or go here to read
about title insurance
A written opinion by an attorney setting forth the status of title to the
property as shown on the public records. The certificate does not
certify as to matters not of record and affords no protection unless the
author was negligent.
Certificate of Veteran
Status
The document given to veterans or reservists who have served 90 days of
continuous active duty (including training time). It may be obtained by
sending DD 214 to the local VA office with form 26-8261a (request for
certificate of veteran status). This document enables veterans to
obtain lower down payments on certain FHA insured loans.
Chain of Title
The series of transactions from GRANTOR to GRANTEE as evidenced in the land
records.
Chapter 7
Provision of
the 1978 Bankruptcy Reform Act that covers liquidations under a court
appointed trustee.
Chapter 11
Provision of
the 1978 Bankruptcy Reform Act that covers reorganizations where the debtor
remains in control of the business and its operations.
Chattel
Any item of
property other than real estate, usually referred to as personal property; an
item of movable property.
Clear Title
A title that is free of liens or any legal question as to the ownership of
the property.
Closing
The final meeting where the sale and transfer of property and/or loan settlement
is fully executed. This meeting generally requires the borrower(s),
seller(s), lender (or their agent) to be present. The closing includes
the delivery of a deed, signing of notes, and the collection and disbursement
of funds necessary to complete the sale and loan transaction. Also
known as Settlement.
closing costs
closing costs
are the total expenses that the buyer pays at the time a real estate
transaction is completed. closing costs generally range between 3 and 6
percent of the home purchase price. With conventional
loans, the following "closing costs" cannot be paid by the Seller
for the Buyer: Pre-paid interest, Hazard insurance impounds, or Property tax
impounds.
- Loan Origination and/or
Discount Points: Expressed in points, it's a fee which is equal to 1% of the
loan amount. The points will vary with the interest rate the lender
charges: the lower the interest rate, the higher the points.
- Processing Fee: A fee charged by the
lender for processing the loan application.
- Administration or Document
Fee: A fee
charged by the lender for preparing the loan document.
- Underwriting Fee: A fee charged by the
lender for underwriting the loan.
- Appraisal: The fee charged by an
appraiser for evaluation of the property.
- Credit Report Fee: A fee charged by a credit
reporting agency
- Tax Service Fee: A one-time fee for a
service which notifies the lender when the borrowers' taxes are
delinquent.
- Flood Certificate Fee: A one-time fee for
searching records for required flood zoning and flood insurance.
- Escrow Fee: A charged by the
title/escrow company for their services guaranteeing the transfer of
funds.
- Title Insurance Premium: A fee charged by the title
company for a lender's policy and an owner's policy to protect from
possible loss due to defects in title.
- Notary Fees: Fees charged by the
title/escrow company for notarizing the legal documents at closing.
- Title Document Fee: Fees charged by the
title/escrow company for researching public records, preparation of a
preliminary and final title report and providing title insurance.
- Recording Fees: Title/escrow company fee
for recording the Deed of Trust with County Recorder's office.
- Express Mail & Courier
Fees:
Charges incurred by title companies for using express mail & courier
services. All title and escrow documents use special delivery
services for promptness and safety.
Cloud on the Title
An outstanding
claim or encumbrance which, if valid, would affect or impair the title of the
owner of the property.
CLTV - See Loan-to-Value
(LTV)
Co-borrower
Borrower(s) who contribute income and credit history to the qualification
process of a loan and whose name(s) appear(s) on all closing documents. The
co-borrower is also liable for the debt and condition of property.
COE - See Certificate of Eligibility
Cognovit Note
Note containing
a confession of judgment by the borrower.
Collateral Security
Often called
simply "collateral." In banking phraseology, it means some security
additional to the personal obligation of the borrower, as a chattel mortgage
or trust deed.
Colorado Senior
Property Tax Exemption click for details
Commercial (see Commercial
Glossary)
Commingling
Mixing money
belonging to others with personal or business funds. Illegal
commingling is using the money of one beneficiary for the benefit of another
or failing to maintain such money in identified escrow accounts.
Commitment
A promise by a lender to make a loan on specific terms or conditions to a
borrower or builder. A promise by an investor to purchase mortgages from
a lender with specific terms or conditions. An agreement, often in
writing, between a lender and a borrower to loan money at a future date,
subject to the completion of paperwork or compliance with stated conditions.
Common Interest
Community
Means real
estate described in a declaration with respect to which a person, by virtue
of such person's ownership of a unit, is obligated to pay for real estate
taxes, insurance premiums, maintenance or improvement of other real estate
described in a declaration. Ownership of a unit does not include
holding a leasehold interest in a unit of less than forty years, including
renewal options. The period of the leasehold interest, including
renewal options, is measured from the date the initial term commences.
A common interest community is not a condominium unless the undivided
interests in the common elements are vested in the unit owners.
Common Law
The principles
and rules of law, originating from usage and custom, sanctioned by the courts
and which are not dependent upon legislative expression or enactment for
their authority. Also that body of law, based on custom and usage, developed
and formulated by the old English courts.
Community Property
Property, real
or personal, which by statute belongs equally to husband and wife; more
specifically, property acquired by the husband and wife, or either, during
marriage, by their industry and not by gift, said property belonging equally
to husband and wife. Community property laws exist only in nine states:
Ariz., Calif., Idaho, La., Nev., N.M., Okla., Tex., and Wash.
Condemnation
In real
property law, the process by which property of a private owner is taken for
public use, with compensation to the owner, under the right of eminent
domain.
Condominium
A structure of two or more units where the interior space is individually
owned, and the balance of the land (structure and land) are commonly owned by
the owners of each individual unit.
Condominium
Ownership
"Condominium"
means a common interest community in which portions of the real estate are
designated for separate ownership, and the remainder of which is designated
for common ownership solely by the owners of the separate ownership portions
(pools, tennis court, weight room, etc).
Conforming loan
Single-family home loans with a maximum loan amount of $359,650
that is typically higher than FHA and VA loans with lower interest rates.
Consideration
One of the
essential elements of a contract. A promise or an act of legal value
bargained for and received in return for a promise.
Construction Loan
A short term interim loan for financing the cost of construction. The
lender advances funds to the builder at periodic intervals as the work
progresses.
Construction
Mortgage. A
short-term mortgage used to finance the building of a structure.
Constructive Notice. Often called "legal
notice", the conclusive presumption that all persons have knowledge of
the contents of a recorded instrument.
Contingency
A condition that must be met before a contract is legally binding.
Contract
An agreement,
enforceable at law, between two or more competent persons, having for its
object a legal purpose, wherein the parties agree to act in a certain manner.
Contract sale or
deed
A contract between a purchaser and a seller of real estate to convey title
after certain conditions have been met. It is a form of installment
sale.
Controller
The chief
accounting executive of an organization whose principal functions are (1)
financial reporting, (2) tax administration, (3) management audits, (4)
planning controls and developing accounting systems and procedures.
Conventional Mortgage
A mortgage
securing a loan made by private investors without governmental participation
(not F.H.A. insured or V.A. guaranteed). Conventional
Loans
Conversion
An unauthorized
assumption and exercise of the right of ownership over goods or personal
chattels belonging to another, to the alteration of their condition or the
exclusion of the owner's rights.
Convertible ARM
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage
under specified conditions.
Conveyance
An instrument
in writing by which some estate, interest, or title in real estate is
transferred from one person to another, such as a deed or mortgage.
Cooperative
A structure of two or more units in which the right to occupy a unit is
obtained by the purchase of stock in the corporation that owns the building
or units.
Covenant
A written
agreement or restriction on the use of land or promising certain acts.
Homeowner Associations often enforce restrictive covenants governing
architectural controls and maintenance responsibilities. However, land
could be subject to restrictive covenants even if there is no homeowner's
association.
Credit Report
A report obtained from a credit bureau agency or company that discloses a
borrower's credit history and current credit status.
CRV - See Certificate
of Reasonable Value
Cul-de-Sac
A passage way
with one outlet. Streets in newer subdivisions are sometimes built in
cul-de-sac fashion.
Cumulative
Loan-to-Value (CLTV) - See Loan-to-Value (LTV)
Curtesy
A common law
estate in land given to the husband upon his wife's death, consisting of a
life estate in all the property owned by the wife during the marriage,
provided a child was born alive from their marriage. Abolished in
Colorado.
D
DE - See Direct Endorsement
Declaration
Any recorded
instrument however denominated that defines boundaries and the general common
elements and limited common elements and establishes the basic rights and
obligations of the owners. In addition, it provides for the creation of
an owners association including the board of directors that has the authority
to collect common expenses and otherwise act for the benefit of all owners.
Debt Consolidation
Loan
A type of loan that allows the borrower to payoff all or a portion of
existing debt (including the existing mortgage loan) from loan proceeds.
Debt ratio or
Debt-to-Income Ratio
The ratio, expressed as a percentage, is calculated by dividing the monthly
payment of long-term debts by gross monthly income.
Dedication
An
appropriation of land to some public use, made by the owner, and accepted for
such use by or on behalf of the public, as streets in a platted subdivision.
Deed
A legal instrument in writing, duly executed and delivered, whereby the owner
of real property (grantor) conveys to another (grantee) some right, title or interest
in or to real estate.
Deed of Trust
An instrument used in many states in place of a mortgage. The property
is transferred to a trustee by the borrower (trustor), in favor of the lender
(beneficiary) and re-conveyed upon payment in full.
Deed Restriction
A provision in
a deed controlling or limiting the use of the land.
Default
he non-performance of a duty; the omission or failure to perform a legal
duty; failure to meet an obligation when due (payments on a mortgage).
Defeasible Fee
Sometimes called
a base fee or qualified fee; a fee interest in land that is capable of being
defeated or terminated upon the happening of a specified event.
Deferred Interest
When a mortgage is written with a monthly payment that is less than required
to satisfy the note rate, the unpaid interest is deferred by adding it to the
loan balance. See Negative
Amortization
Deficiency Judgment
The difference
between the indebtedness sued upon and the sale price of the mortgaged property
at foreclosure, where the sale price is less than the indebtedness.
Delinquency
Failure to make payments on time. This can lead to foreclosure.
Delivery
The final, unconditional and absolute transfer of a Deed to the Grantee so
that the Grantor may not revoke it. A Deed, signed but held by the
Grantor, does not pass title.
Department of
Housing and Urban Development (HUD)
Regulates Fannie Mae, Freddie Mac, and Ginny Mae.
Department of
Veterans Affairs (VA) - See VA Loan
The Department of Veterans Affairs (VA) was established on March 15, 1989,
succeeding the Veterans Administration. It is responsible for providing
federal benefits to veterans and their dependents. Headed by the
Secretary of Veterans Affairs, VA is the second largest of the 15 Cabinet
departments and operates nationwide programs for health care, financial
assistance, and burial benefits, as of March 2003.
Deposit - See Earnest
Money
Depreciation
The loss in value due to deterioration through ordinary wear and tear, action
of the elements, functional or economic obsolescence. (opposite of
"appreciation")
Devise
A gift of real
property by the last will and testament of the donor.
Direct Endorsement (DE)
A HUD program that enables an eligible single-family lender to conduct the
processing and closing of FHA single family loan applications without HUD's
prior review.
Discount Points - See Points
An amount payable to the lender paid by the borrower or seller to increase
the lender's effective yield and reduce the interest rate. also
known as discount fee
Diversion
Illegal or
unauthorized use of entrusted funds.
Documentary Fee
A Colorado
state law requiring a fee of one cent for each one hundred dollars of
consideration paid by the person recording an instrument of conveyance to the county clerk and recorder.
Dower
A spouse's interest in the property of a deceased spouse.
Down Payment
Money deposited towards the purchase of a home paid to make up the difference
between the purchase price and the mortgage amount not finance with a
mortgage. The larger the down payment, the less you need to
borrow. Most lenders require the down payment to be paid from the
buyer's own funds. Gifts from related parties are sometimes acceptable,
and must be disclosed to the lender. However, FHA allows gifts from any
source.
Dual agent
A broker or
salesperson who, with the written informed consent of all parties to a
contemplated real estate transaction, is engaged as a limited agent for both
the seller and buyer or both the landlord and tenant.
Due-On-Sale Clause
A provision in
a mortgage or trust deed which allows the lender to call a promissory note
immediately due and payable in full upon the sale or transfer of a secured
property. Allows the lender to raise the interest rate or demand other
changes in terms upon assumption of the loan.
Duress
Forcing action
or inaction against a person's will.
E
Earnest Money
Down payment made by a purchaser of real estate as evidence of good faith.
Easement
A right or
interest in the real property of another. The right to use another's
land for a specific purpose, as a right of way.
Economic Life
The period of
time over which a property may be profitably used. It is reduced to a
percent in the capitalization process. Example: 100% divided by 50
years equals 2% anticipated depreciation per year.
Effective interest
rate
The effective interest rate is the mortgage cost on a yearly basis expressed
as a percentage includes charges paid when closing the loan including
compounded interest. Higher closing costs or more frequent compounding result
in a higher effective interest rate.
Effective Interest
Rate - see:
Annual Percentage Rate
Eminent Domain
The right of a
government to take private property for public use upon the payment of just
compensation. The legal proceeding by which the government exercises
this right is called "condemnation proceedings".
Encroachment
The illegal
intrusion of a structure, part of a building, or obstruction over or upon a
highway, sidewalk or the property of another.
Encumbrance
A claim, lien, charge, or liability attached to and binding upon real property,
such as a judgment, mortgage, mechanics' lien, lien for unpaid taxes, right
of way.
Endorsement
Writing one's
name, either with or without additional words, on a negotiable instrument or
on an attachment thereto.
Equal Credit Opportunity Act (ECOA)
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.
Equifax Credit Services
A credit reporting agency that provides a detailed report itemizing an
individual's credit history and current credit status.
Equity
In real estate, the interest or value of the real estate over and above the
amount of the indebtedness thereon.
Equity Loan
A loan based on the borrower's equity in his or her home.
Equity of Redemption
- See Redemption
Escrow
In real estate, it is the state or condition of a deed which is conditionally
held by a third party, called the escrow agent, pending the performance or
fulfillment of some act or condition.
Escrow Account
Any identified
checking, demand, passbook or statement account insured by an agency of the
United States government maintained in a Colorado Depository for money that
belongs to others.
Escrow Agreement
A written
agreement between two or more parties whereby the grantor, promisor or
obligor delivers certain instruments or property into the hands of a third
party, the escrow agent, to be held by said third party until the happening
of a contingency or performance of a condition, and then to be delivered to
the grantee, promisee or obligee.
Escrow Overage or
shortage
The difference, determined by escrow analysis, between escrow funds on
deposit and escrow funds required, to make a payment when it becomes due.
Estate
In real estate,
it refers to the degree, quantity, nature and extent of interest which a
person has in real property; such as a fee simple absolute estate, an estate
for years.
Estate at Sufferance
An estate in
land arising when the tenant wrongfully holds over after the expiration of
the tenant's term; the landlord has the choice of evicting the tenant as a
trespasser or accepting such tenant for a similar term and under the
conditions of the tenant's previous holding; often called a tenancy at
sufferance.
Estate at Will
An interest in
land terminable at the will of either the tenant or landlord; often called a
tenancy at will.
Estate for Years
An interest in
land for a fixed period of time, whether for a day or 99 years; often called
a tenancy for years.
Estate from Period
to Period
An interest in
land where there is no definite termination date but the rental period is
fixed at a certain sum per week, month or year; often called a periodic
tenancy.
Estimated Property
Value
The Purchase Price or Current Market value of a specific property.
Et al
Abbreviation
for et allus, meaning "and another".
Et ux
Abbreviation
for et uxor, meaning "and wife".
Eviction
Dispossession
by process of law; the act of depriving a person of the possession of lands,
in pursuance of the judgment of a court.
Exclusive Agency
Listing
A listing
whereby the owner appoints one real estate broker as sole agent for a
specified period of time. The owner may sell the property to a buyer
which the owner finds without paying the broker a commission.
Exclusive Right to
Sell Listing
A listing
whereby the owner appoints one real estate broker as sole and exclusive
broker for a specified period of time. No matter who sells the
property, including the owner , personally, the broker is entitled to a
commission.
Execution
A writ issued
by a court to the sheriff directing him to seize and sell property to satisfy
a debt.
Executor
The person
named in a will to carry out its provisions.
F
Fair Market Value
The 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. See Market Value
Fannie Mae
A common term
used in real estate finance taken from FNMA (Federal National
Mortgage Association). It provides a market for government secured
mortgages held by primary lenders and provides them with a ready market so as
to permit a greater turnover of money for loans.
Farmers Home
Administration (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to
obtain loans elsewhere.
Federal Emergency
Management Agency (FEMA)
Federal agency which, among other things, directs the activities of the
Federal Insurance Administration and establishes flood insurance rates and
terms of coverage, issues policies, processes claims and identifies and maps
flood-prone areas.
Federal Housing
Administration (FHA)
An agency of
the U.S. Department of Housing and Urban Development (HUD).
It insures residential mortgage loans made by private lenders. FHA also
sets standards for underwriting mortgages.
Federal Home Loan
Mortgage Corporation (FHLMC)
A quasi-governmental agency that purchases conventional mortgage from insured
depository institutions and HUD-approved mortgage bankers. FHLMC
buys existing approved mortgage loans and resells them to individual
investors or financial institutions. also called "Freddie Mac"
Federal National
Mortgage Association (FNMA)
A tax-paying corporation created by Congress to support the secondary market
in mortgages on residential properties. FNMA sells residential
mortgages to lenders (Conventional, FHA insured, and VA
guaranteed). FNMA also purchases pools of mortgages from lenders with
securities, also know as "Fannie Mae", the largest single
holder of home mortgages in the United States.
Fee Simple Absolute
Often called a
fee or fee simple; the most comprehensive ownership of real property known to
the law; the largest bundle of ownership rights possible in real estate.
Fee Tail
An estate or
interest in land which cannot be conveyed but which must descend to the heirs
of the holder. Abolished in Colorado.
Fees
Fees include mortgage points and expenses to underwrite and originate a
mortgage loan. See Closing Cost
FEMA - See Federal
Emergency Management Agency
FHA - See Federal
Housing Administration
F.H.A. Insured
Mortgage
A mortgage
under which the Federal Housing Administration insures loans made according
to its regulations by approved lenders.
FHA Mortgage
A mortgage that
is insured by the Federal Housing Administration.
FHLMC - See Federal
Home Loan Mortgage Corporation
FICO
Is a mathematical model named after its creator, the Fair Isaac Company
(FICO). Credit repositories (Bureaus) have adopted FICO as a tool for
lenders in evaluating the risk associated with lending money.
Fiduciary
Adjective -
Confidential, such as a confidential relationship. Fiduciary refers to the
relationship of an agent to a principal.
Fiduciary
Noun - A person
who is in a position of trust in relation to another party; or a person in a
confidential or trust position.
Finance Charge
The total amount of interest, prepaid finance charge and specific insurance
premiums (if applicable) that the borrower is expected to pay over the life
of the loan.
First Mortgage
A real estate loan with a lien (i.e., mortgage or deed of trust) on the
subject property that has priority over any subsequently lien or financial
encumbrances.
Fixed Interest Rate
An interest rate that does not change during the entire term or life of the
loan.
Fixed Monthly Debt
The amount of monthly payment required to be paid each month. Sometimes
referred to as "minimum monthly payment" for credit card or
revolving accounts.
Fixed-Rated Mortgage
A mortgage on which the interest rate is set for the term of the loan.
Fixture
An article of
personal property which has been installed in or attached to land or a
building thereon, in a permanent manner, so that it is now considered to be a
part of the real estate.
FmHA - See Farmers Home
Administration
FNMA - See Federal
National Mortgage Association
Forbearance
The act of
refraining from taking legal action despite the fact that the mortgage is in
arrears. It is usually granted only when a mortgagor makes satisfactory
arrangements to pay the amount owed at a future date.
Foreclosure
A termination
of the rights of the mortgagor in the property covered by the mortgage; a
court process instituted by a mortgagee or lien creditor to defeat any
interest or equity of redemption which the mortgagor or debtor-owner may have
in the property.
Freddie Mac - See Federal
Home Loan Mortgage Corporation
Funding
Payment of loan
money by a lender to a borrower so that he or she can purchase real estate;
or, the payment of money by investors to lenders in return for mortgages sold
to them by the lender.
G
General Warranty Deed - See Warranty
Deed
G.I. Guaranteed
Mortgage
Government
guaranteed and insured mortgage available to United States of America
Veterans and their spouses, and those currently serving in the
military. Entitlements include low-or no-down payment fixed 15 and 30
year loans by the Veterans Administration through HUD. also See VA Loan
Gift Funds
Transfer of funds to assist with payment of closing costs and/or down
payment. Investors typically require that gift funds may only be received
from the borrower's parents and/or grandparents with no intent for repayment.
Ginne Mae - See Government
National Mortgage Association
Good Faith Estimate
A document delivered with Truth-In-Lending Disclosure
Statement to borrower as an estimate comprising, closing costs, interest
rate, term, loan amount, and monthly payment, within 3 days of receiving
borrowers mortgage application per the Real Estate Settlement Procedures Act
(RESPA).
Government National
Mortgage Association (GNMA)
Guarantees
mortgage-backed securities issued by private financial intermediaries.
Also known as "Ginnie Mae", provides sources of funds for
residential mortgages, insured or guaranteed by FHA or VA
GPM - See Graduated Payment
Mortgage Below
Graduated Payment
Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a
specified period of time and then level off.
Grace Period
A period of time during which a loan payment may be paid after its due date
without incurring a late payment penalty. 15 days for FHA/VA, and 20
days for Conventional (unless otherwise specified. Late payments
reported on credit reports.
Graduated Payment
Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a
specified period of time and then level off. This type of mortgage has negative
amortization built into it.
Grantee
A person to
whom real estate is conveyed; the buyer.
Grantor
A person who
conveys real estate; the seller.
Gross Monthly Income
The total monthly income earned before taxes and any other deductions.
GSE
Government
Sponsored Enterprise such as Fannie Mae or Freddie Mac.
Guaranty
A promise by one party to pay a debt or perform an obligation contracted by
another if the original party fails to pay or perform according to a
contract.
H
Hazard Insurance
A form of insurance in which the insurance company protects the insured from
specified losses, such as fire, hail damage, etc.
HOA - See Home Owners
Association
Home Equity Line of
Credit (HELOC)
A revolving line of credit secured on the equity in the mortgagor's house,
usable for any purpose.
Home Equity Loan
A type of loan that allows homeowners to acquire a loan in addition to their
original mortgage/lien using a portion or all of the equity in their home
(primary residence). A home equity loan is a generally a second
mortgage on the subject property and may be used for any personal needs
(i.e., college education, debt consolidation, home improvement, etc).
Home Mortgage
A legal document that pledges the property to the lender as security for
payment of a debt.
Home Owners
Association (HOA)
A nonprofit
organization that manages the common areas and services of a planned unit
development or condominium project. In a condominium project it has no
ownership interest in the common areas; in a planned unit development it
holds title to common areas.
Homeowner's
Insurance Also
called property insurance
A policy that combines liability coverage and hazard insurance to protect the
homeowner from weather-related damage, as well as potential liability from
events that occur on the property. Lenders require homeowners insurance
coverage to protect the collateral that secures their loan. Some
homeowners insurance policies do not cover catastrophic events such as
tornadoes, hurricanes or floods. These kinds of events generally
require a separate insurance policy.
Homeowners
Protection Act
The Homeowners Protection Act of 1999 requires home lenders to cancel a
requirement for private mortgage insurance (PMI) if the borrower has equity
of at least 22% in their home (This is equal to a loan-to-value ratio of
below 78%). The law allows the borrower to request dropping PMI when
equity reaches 20% of home value. A current appraisal may be required
to ascertain the home value. For more information, see the Web site of
the U.S. Dept. of Housing and Urban Development (www.hud.gov.)
Homeowner's Warranty
A type of insurance that covers repairs to specified parts of a house for a
specific period of time.
Homestead Exemption
Often called
"homestead" or "homestead right"; a right given by
statute to a householder or head of a family to designate real estate as
their homestead and said homestead is exempt, up to a stated amount, from
execution by creditors.
Housing Expense - See PITI
Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's housing
expenses are divided by his/her gross monthly income.
HUD - see Department
of Housing and Urban Development
HUD I Settlement
Statement
A form utilized at loan closing to itemize the costs associated with
purchasing the home. Used universally by mandate of HUD, the Department
of Housing and Urban Development.
Hybrid Financing
The joining together of two forms of finance, such as combining a convertible
loan with a participation loan, under which the lender has the right at loan
maturity to convert the debt to a 50 percent ownership in the property.
I
Impound
Impounds are payments made in advance for homeowner's insurance premiums and
real estate taxes. These payments are made to an escrow account at loan
closing, and periodically replenish the escrow account. An escrow agent
pays the local tax authority and insurer from this account. Analyzers
calculate impounds for two months. Local lending requirements on
funding the escrow account vary.
Indemnify
To insure; to secure against loss.
Index
A published interest rate against which lenders measure the difference
between the current interest rate on an adjustable rate mortgage and that
earned by other investments, which is then used to adjust the interest rate.
Index rate
An index is a
widely used published interest rate that lenders use to set the interest rate
on loans. 10-year U.S. Treasury securities are often used for 30-year
fixed-rate loans. ARM loans are
commonly based upon the, one-, three-, and five-year U.S. Treasury security
yields; the monthly average interest rate on loans closed by savings and loan
institutions; or the monthly average costs-of-funds incurred by savings and
loans. Lenders adjust the interest rate up or down on an adjustable
rate mortgage by measuring the difference between a current index rate to the
ARM interest rate, and adding a margin.
Initial interest
rate
The starting interest rate on an adjustable-rate mortgage loan, which is
often below market ARM rates. The intent of a low initial rate is to assist
homebuyers that may not otherwise qualify for a mortgage loan.
Installment Land
Contract
Often called a
land contract or an installment contract; an agreement for the purchase of
real estate upon an installment basis, the deed to the property is not given
to the purchaser until either all or a certain portion of the purchase price
is paid.
Installment Loans
A loan that has a fixed (or closed-end) term (i.e., 36 months) and fixed
unchanging monthly payments. When the loan is paid in full the borrower
cannot advance additional money unlike a revolving loan.
Insured Mortgage - See MIP
and PMI
A mortgage that is protected by the Federal Housing Administration (FHA) called MIP (mortgage insurance premium), or by private
mortgage insurance (PMI). If the borrower defaults
on the loan, the insurer must pay the lender the lesser of the loss incurred
or the insured amount.
Inter Alia
(Latin) meaning
"among other things".
Interest
The fee charged by the lender for borrowing money.
Interest-only
payments
Mortgage
payments that include only interest. No loan amortization occurs and,
thus, the homeowner does not accrue any equity (unless the home value
increases).
Interest Rate
The percentage of an amount of money that is borrowed and is paid for during
a specific period specified in the terms of the loan.
Interest rate cap
A limit on the amount the interest rate can increase. See Cap,
adjustment period
Interim Financing
A construction loam made during completion of a building or a
project. A permanent loan usually replaces this loan after completion.
Intestate
When a person
dies without leaving a will.
Investment Property
A property designated solely as a "rental" or "leased"
property.
Investor
The ultimate
owner of a loan. This can be the institution that originated the loan
(then the loan is held in their portfolio), another large lender or Fannie
Mae or Freddie Mac.
J
Joint Tenancy
A type of co-ownership of real property, held by two or more persons with all
co-owners being equally entitled to the use, enjoyment, control and
possession of the land and with the right of survivorship.
Judgment
The final
determination of the rights of the parties by a court in an action before it.
Jumbo Loan
A loan which is larger than the limits set by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. Jumbo loans
cannot be funded by these two agencies, and usually carry a higher interest
rate. A loan which is larger than $322,700.
K
L
Land
Real property; the surface of the earth and that which is affixed to it
permanently, that which is below it, and the space above it; synonymous with
"real property", "realty", and "real
estate". Sometimes used to mean only the unimproved surface of the
earth.
Landmark
In land surveys, any known conspicuous object or feature that
establishes a precise point of origin.
Lease
An agreement
under which a tenant receives the possession and use of real property for a
certain period of time and the landlord receives the payment of rent and/or
the performance or other conditions.
Leasehold
An estate or
right in real property held under a lease.
Legal Description
A description
recognized by law which is sufficient to locate and identify the property
without oral testimony.
Lender
The bank, mortgage company or broker assigned to review and process the loan
application and makes the home loan.
Lessee
The party who
possesses a right or estate in realty, holding under a lease; also commonly
referred to as the tenant.
Lessor
The party who
conveyed a right or estate in realty to the lessee under a lease; commonly
referred to as the landlord.
LIBOR
London Inter-Bank Offer Rate is the interest rate that the largest
international banks charge each other for loans.
Lien
A right given by law to a creditor to have a debt or charge satisfied out of
the real or personal property belonging to the debtor.
Life Estate
An estate or
interest in real property which is held for the duration of the life of some
certain person.
Lifetime Cap - see Cap
Limited agent
An agent whose
duties and obligations to a principal are only those set forth in Colorado
Revised Statutes 12-61-804, 12-61-805, or 12-61-806, with any additional
duties and obligations agreed to pursuant to section 12-61-803 (5).
Line of Credit
A loan with a maximum credit limit that allows the borrower(s) to disburse
funds up to the maximum credit line as needed. Funds may be disbursed
repeatedly as the principal balance is paid down up to the maximum credit
limit available. A line of credit functions similar to a credit card
and may be accessed by writing a check or a using a debit card.
Lis Pendens
A public
notice, filed against specific lands, that an action at law is pending that
may affect the title to the land.
Loan Amount
The total amount requested by the borrower to be financed. This amount
is the basis, of many loan fee calculations. For refinance loans, the
loan amount will include the balance of all loans the borrower requests to be
paid off, including the original mortgage, other personal debt and/or cash
out amount.
Loan Balance
The outstanding balance of a loan not paid in full, excluding any accrued
interest.
Loan Discount Points - See Points
Loan Origination
Fees - See Origination Fee and Points
Loan Product
The loan program that dictates the finance type, amortization term and other
pertinent loan functions (i.e., fixed or adjustable rate and 360 or 180
months).
Loan Qualification
Estimates
Lenders ease
their loan-underwriting guides when economic times are good. This
environment leads to more competition among lenders for qualified
borrowers. Thus, lenders become more aggressive in making loans.
When economic times are worse, lenders raise the amounts they are willing to
lend. Thus, lenders become more conservative.
Loan Term - See Term
Loan-to-Value (LTV)
LTV ratio, expressed as a percentage, is a qualifying measure in determining
finance possibilities and loan options. To calculate, divide the
mortgage base loan amount by the fair market value of the
property. Cumulative Loan-to-Value (CLTV) combines all mortgages (1st
and 2nd) into the equaltion by adding all the mortgages together before
dividing by the the fair market value to get the ratio.
Lock or Lock-In
A written agreement guaranteeing the home buyer a specified interest rate
provided the loan is closes with that buyer within a set period of
time. The lock-in also usually specifies the number of points to be
paid at closing as well.
LTV
See Loan-to-Value
M
Manufactured Home
A type of house
that is constructed in a factory, delivered to a property location and set on
a foundation.
Margin
For mortgage lending, margin is the amount a lender adds to the base rate of
an adjustable-rate mortgage or other variable-rate loan to set the loan rate
(see Index). For example, if a one-year ARM
loan has a margin of 200 basis points (2%) over the yield on 1-year Treasury
bills and the T-bill yield is 4.5%, the loan rate is set to 6.5%.
Marketable or
Merchantable Title
A title which is free from reasonable doubt of defect which can be readily
sold or mortgaged to a reasonably prudent purchaser or mortgagee; a title
free from material defects or grave doubts and reasonably free from possible
litigation.
Market Value
The price, in
terms of dollars, which a ready and able buyer, not forced to buy, would pay
and which a ready and willing seller, not forced to sell, would accept,
assuming further that both parties are fully informed, act reasonably, and
have sufficient time to consider the transaction with due care. see fair market value
Maturity
The termination or due date on which final payment of a loan must be paid in
full.
Maximum Loan Charges
- See Points
Maximum Monthly
Payment
The maximum payment a borrower may qualify for based on their income and
debt. The maximum payment is calculated by using a debt-to-income
ratio.
Mechanic's Lien
A lien created
by statute which exists against real property in favor of persons who have
performed work or furnished materials for the improvement of the real estate.
Metes and Bounds
A method of
describing or locating real property; metes are measures of length and bounds
are boundaries. This description starts with a well-marked point of
beginning and follows the boundaries of the land until it returns once more
to the point of beginning.
Mill
One-tenth of
one cent. A tax rate of one mill on the dollar is the same as a rate of
one-tenth of one percent of the assessed value of the property.
Mobile Home
A type of home that is 100% constructed in a factory, delivered to a property
location and set on a lot or foundation. A mobile home can generally be
moved off of the owner's original site.
Monthly Housing
Payment
Typically the total amount of principal, interest, taxes, and insurance
(PITI) paid each month on a mortgage loan. Many lenders and investors
limit the monthly housing payment to 28% of the gross monthly income.
Monthly Payment
The amount of principal and interest paid each month on a loan. The
monthly payment on a mortgage loan may also include an escrow payment for
taxes and insurance.
Monthly Payment Savings
The total monthly payment reduction a borrower may gain by refinancing their
mortgage loan.
Mortgage
A conditional conveyance of property as security for the payment of a debt or
the fulfillment of some obligation. Upon payment of the debt or
performance of the obligation the mortgage becomes void.
Mortgage Broker
Any entity, engaged in, assisting, arranging funding, or negotiating mortgage
financing, in behalf of a client, in consideration of, compensation in
the form of origination, either by lender or borrower. Why use a Mortgage Broker
Mortgage Insurance
A contract that insures the lender against loss caused by a mortgagor's
default on a mortgage. Mortgage Insurance is generally required on all First
Mortgage Loans that have a down payment of less than 20% of the purchase
price (or until 20% equity is accumulated in the property).
Types of Mortgage
Insurance:
- Mortgage Insurance Premium
(MIP)
MIP is
paid on government-insured FHA loans only
- Private Mortgage Insurance
(PMI)
PMI is
paid on non-government-insured loans (Conventional, non-conventional
etc...)
- VA funding fee
One time
funding fee in lieu of mortgage insurance
Click
here to read more about MI
Note: not to confused with Hazard Insurance that is a form of insurance
in which the insurance company protects the insured (homeowner) from
specified losses, such as fire, hail damage, etc.
Mortgage
Insurance Premium (MIP) SEE: Insurance for
Calculation
MIP is paid on
government-insured FHA loans only (VA loans require a funding fee in most
cases) and Conventional loans use PMI (Private Mortgage Insurance. FHA
loans also require an upfront premium. See below.
Mortgage interest
deduction
The mortgage interest tax deduction allows you to deduct the mortgage
interest expense you pay on mortgage and home equity debt, up to certain
limits of debt. The deduction lowers your tax bill by an amount equal
to the amount of interest times your tax rate. To take the mortgage
interest deduction, you must itemize the deduction using Schedule A of IRS
Form 1040.
Mortgage points - see Points
Mortgagee
The party to
whom the property is conveyed under a mortgage as security for the repayment
of a loan or fulfillment of some obligation.
Mortgagor
The party who, by a mortgage, conveys their interest in the property as
security for their obligation to repay a loan or fulfill some obligation.
Multi Family
A term generally to distinguish a house designed for use by more than one
family (duplex or fourplex).
Mutual Assent
One of the
essential elements of a contract, often called Meeting of the Minds; the
agreement of the parties to the contract, mutually consenting to be bound by
the exact terms thereof.
N
Negative
Amortization
Occurs when monthly payments are not large enough to pay all the interest due
on the loan. This unpaid interest is added to the unpaid balance of the
loan. This has the effect of increasing the loan amount. This
phenomenon in home lending occurs when a payment cap restricts the repayment,
to an amount less than the payment necessary to reduce the principal
balance.
Negotiable
Instrument
A written
instrument signed by a maker or drawer, containing an unconditional promise
to pay a certain sum of money, which can be passed freely from one person to
another.
Non Assumption
Clause
A statement in a mortgage contract forbidding the assumption of the mortgage
without the prior approval of the lender. (The signed obligation to pay a
debt, as a mortgage note)
Non Conforming Loan
New Home loans allowing the buyer to borrow over a certain amount set by the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation.
NOTE
A written agreement and promise from the borrower(s) to pay a definite sum of
money at a stated interest rate during a specified date and term. The note
contains a description of the collateral and conditions under which the loan
is to be repaid.
O
Obsolescence
Impairment of
desirability and usefulness of the property resulting from economic,
functional, physical, fashion, or other changes.
Offer
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