Mortgage and Real Estate Glossary

Abstract (of Title)

A title document that summarizes all the recorded transactions that affect the title of the property. Any liens or claims that would affect the lenders security position or interest must be cleared before the buyer can be issued a clear and insurable title.

Application

A form used by lenders and mortgage brokers to collect important date regarding your ability to qualify for a mortgage or home loan and the proposed property to be used for security. 

Appraisal

A written of market value completed by a qualified Appraiser, that states an opinion on the value of a property based on its characteristics and the selling prices of similar or comparable properties in the area.

Appraiser

A person qualified by education, training, and experience to estimate the value of real property. They must meet the requirements of the state licensing or registration requirements. There are different appraiser designations based on experience and areas of expertise. 

Appreciation

This is the value increase on a home or property due to the market conditions. The opposite is depreciation.

Adjustment Period

Typically stated by the length of time for which the interest rate is fixed on an adjustable rate mortgage (ARM). For example a 5/1 ARM will have a fixed period for five years, then will adjust yearly thereafter or fixed for only 1 year increments at a time. 

Amendment

A change to correct or alter part of an agreement while leaving the principal or essence of the agreement in force. Often used to change terms of a sales contract in a purchase transaction. 

Amortization

The payment of a debt in regular periodic installments of principal and interest in order to pay off a debt by its maturity date or end of the loan term. 

Amortization Schedule

A schedule or list of each payment and breaking down the payment into amounts applied to principal and interest during the life of the loan.

Assessed Value

The value determined by local government assessors and used to calculate annual property or real estate taxes. 

Assignment

The transfer of a mortgage from one person to another.

Assumable Mortgage

A type of mortgage that may be transferred to a new homebuyer. This allows the new home buyer to take over at the same interest rate and payments as the current owners. This is desirable when rates are higher than the current mortgage. Mostly found on FHA loans. However the seller should obtain a written release from the lender stating clearly that he/she is no longer liable to make mortgage payments.

Balloon Mortgage

A type of short-term loan that has high-risk due to the need to pay off a high loan balance at the end of the loan term. 

Borrower (mortgagor, trustor)

The consumer(s) who applies for and closes on a mortgage or home loan secured by real estate and responsible for the repayment of the mortgage.

Bridge Loan

A short-term balloon mortgage loan used to against a property pending sale to quickly receive cash to purchase another property. While not popular, a bridge loan can be risky, especially if the property does not sell and the loan balance comes due. 

Buy Down

When discount points are paid in order to lower the initial interest rate on a home loan or mortgage. Often sellers will pay points to help buyers receive more appealing rates. 

Buyer's Agent

The real estate agent that works on behalf of or represents the homebuyer in a purchase transaction. 

Cash-out Refinance

A mortgage or home loan in which the borrower extracts money through the home’s equity by replacing the current mortgage or home loan with a new larger mortgage.  

Closing

The act of signing all documents associated with the exchange and payment of required monies and fees.

Closing Agent

Is responsible for mediating the closing, documenting the process and assuring all associated paperwork is completed. This is often an attorney, escrow company employee or title company employee. 

Closing Costs

The fees payable in connection with a mortgage loan or real estate transaction. Both the buyer and seller incur costs a real estate closing. A wide variety of fees may be included, such as appraisal fees, credit report fees, title or attorney's fees, origination fees, property taxes and more. 

Closing Disclosure

A five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).  The lender is required to give you the Closing Disclosure at least three business days before you close or consummate the mortgage or home loan. 

Closing Statement (HUD-1)

A statement of itemized costs incurred to close on a loan or to purchase a home. These are often presented to help show the reconciliation of cash between buyer and seller.

Co-Borrower

A borrower who applies jointly with another borrower and takes on the same responsibility for repayment of the mortgage or home loan. 

Collateral

An asset, such as a home (or car, boat RV etc.) that acts as security to ensure the repayment of a loan. The borrower(s) risk losing the collateral if the loan is not repaid according to the terms of the loan contract.

Combined loan-to-value (CLTV)

The unpaid principal balances of all the mortgages combined (first, second, third etc.) divided by the lower of the property's appraised value or purchase price. 

Commitment Letter

A written document from the lender stating the terms and the conditions under which it agrees to lend money to the borrower(s).  

Common Areas

Those portions of a building, land, and amenities owned or managed by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, parking areas, and common areas of the bundling or buildings. 

Community Property

A form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as the sole and separate property of either spouse.

Comparables (Comps)

Is really an abbreviation for "comparable properties." These properties are used for comparative purposes in the appraisal process. These are properties like the property being appraised. They should be reasonably the same size, in the same location, with like amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Condominium

A real estate project in which each unit owner has title to a unit in a building and an undivided interest in the common areas of the project. Each owner may sell or encumber his own unit.

Conforming Mortgage

A loan characterized by meeting the requirements of Government Sponsored Enterprises (GSEs) such as Freddie Mac and Fannie Mae including such things as loan size, debt ratio and property type. 

Construction Loan

A short-term loan for the construction of a new home that will be replaced with a permanent loan or mortgage when the property is complete. 

Consumer Financial Protection Bureau (The CFPB)

This is a federal agency that makes and enforces rules to protect consumers.

Consumer Reporting Agency (or Credit Bureau)

An organization that prepares reports that are used by lenders to determine a borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Contingency

It is a condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies the home must appraise for the purchase price that the contract is not binding until the purchaser obtains a satisfactory appraisal. 

They are common clauses that are added to real estate contracts that provide buyer or seller rights during various stages of a transaction. 

Conventional mortgage

A loan that is not insured or guaranteed by the U.S. Government like FHA or VA loans. These are typically 30-year fixed-rate loans and may be conforming or non-conforming in nature. 

Convey

To transfer title to a property.

Conveyance

A document or action to transfer title to land. This usually includes instruments like a mortgage or deed of trust that creates an interest in the land.

Cooperative (co-op)

A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Cost of Funds Index (COFI)

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco

Credit

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit History

A record of an individual's debt history including open and paid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Report

A report issued documenting the credit history and current status of a borrower's credit standing, by an independent agency that contains certain information concerning a mortgage applicant’s credit history and current credit standing. Used by a lender in determining a loan applicant's creditworthiness.

Date of Possession

The actual date upon which the buyer will receive the keys and be able to move into a home or property, usually the closing date or disbursement date. 

Debt

An amount of money a borrower owes to another called a creditor. 

Debt Ratio

The amount of reoccurring monthly debt divided by gross monthly income. The front-end ratio is your total housing debt dived by your gross monthly income and the back-end ratio which is all debt divided by your gross monthly income. A general standard is 28/36 which mean approximately 28% of gross monthly income should be used for your housing costs (principal, interest, taxes, insurance & association dues) with all debt including your to be approximately 36% of gross monthly income. 

Deed

An official and document that conveys title to real property. There are different types of deeds such as warranty deeds, quitclaim deeds and sheriff’s deeds to name a few. Each type of deed establishes property ownership but some may convey have more “rights” than others.

Deed of Trust

In some states this type of security instrument is used in place of a mortgage. A deed of trust may be held by a third party, similar to a mortgage.

Default

Failure of the borrower to make the required payments on a loan. The failure to meet legal obligations in the contract. 

Depreciation

The decline in the value of a property. Depreciation can be driven by poor economic factors or property wear and tear. It is the opposite of appreciation. 

Discount Points

It is an upfront fee that is part of the price of a loan. Discount Points are paid in order to lower their overall interest rate and mortgage payment. Points are calculated in relation to the loan amount. Each point equals one percent of the loan amount. For example, one point on a $100,000 loan would be one percent of the loan amount, or $1,000. Two points would be two percent of the loan amount, or $2,000.

Down Payment

The difference between the sales price and the mortgage amount in a purchase transaction. The portion of the sales price paid to the seller by the homebuyer to close the sales transaction. Generally, the mortgage plus the earnest money equal the purchase price.

Earnest Money

The sum of money put up by the buyer when an offer on a home or property is made. The purpose of earnest money is as a token of good faith, a symbol that the buyer is seriously pursuing purchase and becomes part of the down payment. 

Effective Age

The age of the structure as determined by its condition rather than actual age.

Encumbrance

Anything affecting or clouding the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

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. This law also requires the lender to provide a copy of the appraisal to borrowers three days prior to closing or consummation unless other the borrower agrees to receive the appraisal at closing. 

Equity

It is the amount determined by the difference in the fair market value of a home and what is owed on the mortgage or home loan. 

Escrow account

A separate account held in trust on a borrower’s behalf, by a mortgage lender, out of which required property tax and insurance costs are paid. Sometimes called an “impound” or “escrow” account. 

Escrow payment

The portion of a mortgagor's monthly payment that is held by the lender or servicer of the mortgage or home loan to pay for taxes, hazard insurance, mortgage and insurance as they become due. Also known as "impounds".

Estate

The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Fair Credit Reporting Act

A federal consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record. 

Fair-market-value

Is considered the price a buyer is willing to pay in the current market.

Fannie Mae

A secondary mortgage institution that is a government sponsored enterprise (GSE) and together they are responsible for setting annual conforming loan limits and assuring that most Americans are able to finance a home.

FHA

Federal Housing Administration.  An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders.

FHA Loan or Mortgage 

Is a mortgage that is insured by the Federal Housing Administration (FHA). 

Fixed rate mortgage

A mortgage in which the interest rate will remain the same during the entire term or life of the loan.

Flood Certification

This is determination where a property falls in a flood zone, the borrower may be required to purchase standalone flood insurance before a mortgage and/or home loan is approved.

Flood insurance

Insurance required by a lender against flood damage for properties located in areas designated by the federal government as special flood hazard areas.

Forbearance

Under a forbearance plan, loan payments are postponed but interest continues to accrue. Borrowers than resume the full payment at the end of the forbearance period and pay back additional amounts to get current.  This is a loss mitigation tool lenders use to help borrowers retain their home.

Foreclosure

The repossession of a home and/or property by a lender in the event of borrower default or the inability to meet mortgage agreements.

Freddie Mac

A secondary mortgage institution that is a government sponsored enterprise (GSE) and together they are responsible for setting annual conforming loan limits and assuring that most Americans are able to finance a home.

Gift

Defined as voluntary transfer of property by a donor. In a mortgage or home loan it usually represents the voluntary transfer of money, without expectation of repayment to a buyer to help purchase a new home.

Gift Letter

A letter by the donor of the gift to the lender stating the amount of the gift, the relationship between donor and borrower and that no repayment is expected.

Good Faith Estimate

An itemized list of anticipated loan costs and closing fees passed from a lender to a potential borrower within three days of certain applications. This form has recently been replaced by the Loan Estimate for most residential mortgage transactions except reverse mortgages.

Grantee

The person(s) or entity to whom the grant or exchange of title is made. Usually the homebuyer. 

Grantor

The person(s) or entity who grants the property or property rights.

Grant Deed

A type of deed used to transfer real estate property which contains warranties against prior conveyances or encumbrances.

Homeowner's Insurance

This is insurance that protects the home for both lender and borrower. Homeowner’s insurance typically covers the cost of replacing or repairing the home due to damage from fire, wind and storms. Most mortgage lenders require borrowers to carry a term of insurance.

Home equity line of credit

A type of credit line secured by a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is usually interest only. 

Home equity loan

A loan normally secured by a second deed of trust on house. It is usually closed-end and requires principal and interest payments. 

House flipping

Purchasing a property at a reduced market rate for the purpose of a quick turnaround. Most house flippers must do some renovation or home fix-up in order to turn a profit on a home.

Impound account

A separate account held in trust on a borrower’s behalf, by a mortgage lender, out of which required property tax and insurance costs are paid. Sometimes called an escrow account. 

Interest rate

An amount calculated as a percentage that is used to indicate the rate charged for use of money in a loan. 

Interest Rate Cap

In and adjustable rate mortgage or variable rate mortgage this is the maximum the interest rate can change in any one period but usually describe the maximum interest rate for the life of the loan. 

Investment property

Real estate bought for investment purposes, to rent out for income as opposed to occupying the property. 

Joint Tenancy

A type of property ownership in which two or more tenants/owners have an undivided interest in a property. The interests must be equal and begin at the same time.

Judgement

The decision of the court. Judgements for money, when recorded become a lien on the real property of the defendant.

Jumbo mortgage

A type of non-conforming loan in which the loan amount is higher than that of the conforming loan limit. 

Land Contract

An installment contract for the sale or transfer of title in land in which the seller retains title until the loan is paid in full.

Lease-Back

An agreement between buyer and seller that subsequent to the sale of the home to the new buyer the seller may remain or lease the home for a period of time, usually not to exceed 60 days. Both the lease and sale are agreed to at the same time and documented in the sales contract.

Lien

A claim or charge against property, either voluntary or involuntary. Property is said to be encumbered by a lien must be removed to clear title.

Lender

The bank, mortgage company, or mortgage broker offering the loan.

LIBOR

LIBOR stands for London Inter-Bank Offered Rate. This is a favorable interest rate offered for U.S. dollar deposits between a group of London banks. It is an international index that follows world economic conditions. It is a popular ARM index like the Treasury bill. This index is being phased out for use in adjustable rate loans. 

Lifetime cap

A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Loan Estimate

A federally mandated loan disclosure that provides consumers with important information about a mortgage or home loan. The information found on the disclosure includes interest rate, payments, estimated costs and much more. A lender must provide this disclosure within three business days of receiving your home loan or mortgage application. 

Loan Term

Describes in number of years how long it would take to pay off the mortgage, home loan or any loan. For example, a 30-year loan matures in 30 years or would take 360 scheduled payments to pay off the mortgage or debt. 

Loan to value ratio (LTV)

The amount or principal balance of the mortgage on a property divided by the lower of the property's appraised value or purchase price. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms and rates. 

Lock Period

The amount of time that a lender will guarantee a loan's interest rate before closing. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days.

Lock-In Agreement

A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points, if any to be paid at closing.

Loss Mitigation

A process used by mortgage lenders or mortgage servicers to work with borrowers who are delinquent on their home loans. This process provides different options, like forbearance and loan modifications to help the homeowner retain the home. 

Margin

The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.

Maturity

Typically describes the term in number of years of a home loan or mortgage. For example, a 15-year loan matures in 15 years, the period of time in which the debt must be paid off.

Mechanics Lien

A lien created by statute to secure payment for work performed and materials furnished in the construction or repair of the property.

Meets and Bounds

The description of land by boundary lines using terminal points, angles and distance to describe the property.

Mortgage

A legal document that pledges a property to the lender as security for payment of a debt. A voluntary lien filed against property to secure a debt, usually a home loan.  

Mortgagee

The person or company who holds or receives the mortgage as a pledge for repayment of the loan, usually the mortgage lender.

Mortgagor

The borrower who gives the mortgage as a pledge to repay.

Mortgage Broker

The entity that works with a homebuyer and mortgage lender handling paperwork and finding the best terms for the borrower. A broker does not make direct loans to buyers.  

Mortgage Calculators

A financial tool available to home buyers where various inputs can help home loan shoppers to determine mortgage payments, amortization assumptions and qualifying information. 

Mortgage Company

Either a mortgage brokerage, or a direct lender like a mortgage banker or other direct lenders. 

Mortgage insurance (MI)

An insurance policy that will repay a portion of the loan to the lender if the borrower does not make payments as agreed. Private Mortgage Insurance may be required when the borrower makes a down payment of less than a 20% on a home unless the mortgage is a government loan such as a FHA or VA loan where there are upfront mortgage insurance or guarantee fees. 

Mortgage Insurance Premium, Upfront MIP

Required fee added into a FHA loan as mortgage insurance. See Mortgage Insurance

Mortgage Loan Originator

This usually means the licensed or registered loan officer but can also be used to define an entity that originates home loans or mortgages like a mortgage broker, mortgage banker or other banks and credit unions. 

Mortgage Servicer

The company that has the responsibility to collect payments, make tax and insurance payments, and perform collection activities in case of default. This is often the lender or the lender may outsource these duties to another company called a sub-servicer.

National Association of Realtors (NAR)

An association of people engaged in the real estate industry and dedicated to improving the industry through education, legislation, licensing and a code of conduct.

Negative Amortization

This is when the balance of loan increases because the loan payment due (and made) are less than the interest owed. 

Non-Conforming Loan

This is a type of loan where the eligibility guidelines are made by the private lenders and do not conform to the standards or eligibility guidelines of Fannie Mae or Freddie Mac. 

Non-Conforming Use

A property that does not conform to the zoning laws of the area. This usually happens because zoning laws change after the property was built. 

Origination Fee

A fee, calculated as a percent of the value amount which is charged by a mortgage lender to cover certain processing expenses in originating the mortgage or home loan. 

Owner Financing

In a purchase transaction, this is where the seller provides all or part of the financing. This often is in the form of a second mortgage to help borrowers meet Loan-to-Value (LTV) requirements or to avoid paying private mortgage Insurance. 

Payment Cap

Certain adjustable rate mortgages have a cap on the maximum a payment amount could increase in a given period. These were often seen on the very risky negative amortization loans.

Per Diem

Means daily or per day. 

Periodic Cap 

Used for adjustable rate mortgages or variable rate mortgages and describes the maximum the interest rate can increase in any one specific period.

Piggyback Loan

A second mortgage that is "piggybacked" with a first mortgage and like owner financing is used to help borrowers meet Loan-to-Value (LTV) requirements or to avoid paying private mortgage Insurance. 

Planned Unit Development (PUD)

A subdivision of 5 or more individual lots with one or more parcels owned in common with reciprocal rights in one or more other parcels. These developments often have association fees to help maintain the common elements. They are typically less than the association fee of a condominium complex.

Points

This term can mean either Discount Points or Origination Points but most often refers to an origination fee, which is a fee, calculated as a percent of the mortgage amount which is charged by a mortgage broker or mortgage lender to cover certain processing expenses in originating the mortgage or home loan.

Power of Attorney

A legal document that grants an individual the right to act on behalf of another. For example, if a borrower is unable to come to the closing it can direct an individual to sign loan documents manage mortgage and related decisions. This does not have to be limited to use in mortgage or home loans but for many areas of life. 

Pre-Paid Items

Usually refers to the items that must be paid in advance at closing and are often prorated upon sale such as real estate taxes and condominium association dues. It can also refer to any of number of fees associated with a mortgage and usually paid out of pocket before closing such as an appraisal fee or credit report fee.

Prepayment penalty

An additional charge imposed by a mortgage lender for paying off all or part of a mortgage loan in advance of schedule.

Pre-Approval

This is where an applicant goes through the underwriting process and the loan request is underwritten and fully credit approved. The borrower needs only to identify an acceptable property that meets all collateral conditions such as sufficient appraised value for the amount requested, no title issues, and passes all inspections.  

Pre-Qualification

The process in which a homebuyer may find out how much of a home loan he or she would be approved for with a lender by verbally providing income, asset and credit information. A mortgage loan originator may even request permission to pull credit to check your credit score to ensure you are eligible for the mortgage or home loan you are seeking. It is different than a pre-approval which is meant to be a commitment to lend from a mortgage lender.

Principal Balance

The amount currently owed on a home loan or mortgage or any loan. The balance of a loan. 

Private Mortgage Insurance (PMI)

Insurance homebuyers are required to purchase, typically when putting less than 20% down which is meant to protect the lender in the event of borrower default. See Mortgage Insurance. 

Processing Fees

This is a type of origination fee that the mortgage lender or mortgage broker charges for originating the mortgage or home loan and is paid at the closing as part of the closing costs. 

Property Taxes

These can include state, county, city, school taxes, and other local taxes charged to a homeowner based on the value of a homeowner's property.

Qualifying ratios

This refers to the debt ratios of a borrower. It is a formula that divides your fixed monthly expenses by your gross monthly income to determine how much a borrower can afford to borrow.  These include the front end ratio and backend ratio – see Debt Ratio. Fixed monthly expenses include such things as principal, interest, taxes, insurance along with other obligations such as student loans, car loans, or credit card payments. It does not include such items as utilities or car insurance. 

Quit Claim Deed

A deed that acts as a release or conveys any title or interest in a property the grantor may have in the property without any warranties. Commonly used for spouses or in family situations in which more than one individual has an interest in a mortgage or property title.

Rate 

Usually the expressed annual rate of interest or interest rate on a loan or mortgage.

Rate Cap

The limit on how much the interest rate can change on an adjustable rate mortgage or variable rate mortgage. See Interest Rate Cap and Periodic Cap. 

Rate Lock

An agreement between the lender and borrower whereby the lender agrees to hold a certain interest rate on a home loan or mortgage while the borrower moves through the mortgage and buying process. 

Real Estate Salesperson or Broker

A person that for a commission brings buyers and sellers together and assists in contract negotiations. Each must meet certain licensing requirements. A broker usually is an owner where a real estate sales person works for a broker.

Real Estate Settlement Procedures Act (RESPA)

This is a federal law that helps protect consumers. It prohibits hidden fees or kickbacks that can increase costs in a home loan or mortgage transaction on a prohibited basis. 

Real Estate Tax

See property tax.

REALTOR®

A real estate broker or sales person holding active membership in a local real estate board affiliated with the National Association of Realtors. These real estate agents agree to a specific code of ethics.

Rescind

The act of canceling a contract.

Rescission

Is the period of time in which a borrower may cancel a contract. With respect to mortgage refinancing, the law that gives the borrower or homeowner 3 days to cancel the once the loan papers are signed allowing them to review and insure they are comfortable with the terms. 

Refinance

The process of obtaining a new mortgage loan on a property already owned. Used to replace an existing mortgage or home loan to obtain a lower interest rate to lower monthly payments or take cash out. 

Repayment Schedule

The loan or mortgage payments required over the life of the loan based on the amount of the home loan, the interest rate and loan term. See also Amortization.

Reverse Mortgage / Reverse Annuity Mortgage

Mortgage products designed for homeowners over 62 years of age which allows them access to their home’s equity in cash.  These loans usually do not require a mortgage payment; the interest accrues increasing the mortgage’s principal balance overtime rather than making a payment and reducing the principal balance. These loans can be lump sum loans are can work like annuity and provide a monthly payment to the borrower. Since reverse mortgages are typically structured as loans, the payments are not considered income. Consult a tax advisor for all tax implications and tax rules. 

Sales Contract

A formal written contract made between a homebuyer and seller. The document includes property address, purchase price, required contingencies, the date of closing, the date of possession and more.

Second Mortgage

A mortgage that is subordinate to the first mortgage. It may also be called a home equity loan. 

Secondary Mortgage Market

A mortgage or real estate securities market where lenders sell the mortgages they make to obtain more funds to originate. 

Security Instrument 

The document granting an encumbrance such as a mortgage which pledges the property or other collateral as repayment of the mortgage or loan in case of default. 

Seller’s Agent

A real estate agent or broker that works on behalf of the home seller. This real estate agent is usually responsible for listing the property on the multiple listing service (MLS) notifying the public the home is for sale and expected sales price. 

Seller Carry-Back

A type of owner financing where by the seller provides part of the financing of a home loan purchase.  See Owner Financing and Piggyback Loan.

Settlor

One who creates a trust.

Short Sale

A loss mitigation tool used by lenders whereby lenders give borrowers’ permission to discount the home value to effect a quick sale, and paying down the mortgage. The funds are usually not sufficient to pay off the mortgage in full but helps avert foreclosure.

Sub-prime Loans

High-risk loans that are non-conforming in nature that makes it possible for homebuyers with poor credit or other risk concerns to qualify for a home loan or mortgage.

Survey

A formal drawing that establishes boundary lines of a property and where a property may be situated on that property which could affect the value of property. In many cases surveys are required to issue title insurance. 

Tenants by the Entirety

A form of ownership by husband and wife whereby each owns the entire property. In the event of death the surviving spouse owns the property without probate.

Tenants in Common

An undivided ownership in real estate property by two or more persons. The interest need not be equal. No rights of survivorship exist

Title

The legal right supported by evidence like a deed that one has right of possession to land or property. 

Title Company

A company that issues title insurance and often handles tasks associated with the closing of a mortgage or home loan and the transfer of property in a purchase transaction. 

Title Insurance

Insurance on the property’s title that protects both borrower and lender in the event of a title dispute. Known as owners or lender policies respectively. 

Title Search

The examination or research of public records to ensure the owner has valid claim or title to the property, to determine if there are any outstanding liens or claims against the property prior to a sales transaction.

Tract

A parcel of land typically used to describe a land found within a subdivision.

Trust

A fiduciary relationship whereby one e holds title to a property for the benefit of another.

Trust Deed

See Deed of Trust.

Trustee

One who holds title under the terms of a trust through a trust deed.

Trustor

One who creates the trust. Same as the Settlor.

Underwriting

This is the act of making a decision to make a loan to a potential borrower. It is an underwriters job to review credit, employment, assets and the collateral, assess the risk and make the decision to approve, counter or deny a loan. 

Unsecured

Refers to an debt obligation which has only a promise to pay with no security.

Usury

Interest charged in excess of the legal rate established by law.

VA Loan

A type of home loan guaranteed by the U.S. Veterans Administration establishing lending guidelines and enabling a veteran to buy a home with no money down. 

Verification of Deposit (VOD)

A document sent by the mortgage originator to a borrower’s bank or financial institution to get verification of an account balance and history.

Verification of Employment

A document sent by the mortgage originator to a borrower’s employer to verify the borrower’s employment history, job title, salary and probability of continued employment.

Vesting

How the property owners are titled to the real property.  There are many variations as to how title may be held.  There are significant tax and legal consequences on how you hold title. We strongly suggest contacting an attorney and/or CPA for advice on how you should be vested on the title to the property especially when there is co-ownership. Some examples of how title can be vested when co-owned include: Community Property, Community Property with Right of Survivorship, Joint Tenancy, Tenancy in Common, Tenancy by the Entirety and in Trust.

Warranty Deed

A type of deed used to convey title to a real property. Until widespread use of title insurances the warranties by the grantor were very important to the grantee. This type of deed provided the greatest level of security in ownership. 

Zoning

Refers to the laws that affect a property’s nature or use. Areas may be zoned to specify use of a property i.e. residential, commercial, and agricultural. Zoning laws are typically determined and enforced by the city or the county.