Adjustable Rate Mortgage (ARM): Also referred to as a Variable Rate Mortgage. A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.
Annual Percentage Rate (APR): An interest rate that reflects the cost of a mortgage as a yearly rate. This rate takes into account any points and fees and is based on the loan going to it’s full-term.
Assumption: An agreement between buyer and seller in which the buyer assumes responsibility for the seller’s existing mortgage. This agreement usually saves the buyer money because closing costs and the current interest rate, possibly higher, do not apply.
Buy-down: A method of lowering the buyer’s monthly payment for a short period of time. The lender or homebuilder subsidizes the mortgage by lowering the interest rate for the first few years of a loan.
Caps: A limit in the amount the interest rate or monthly payments for an adjustable rate mortgage that may change.
Closing: Also referred to as settlement. The meeting at the conclusion of a real estate sale in which the property and funds are exchanged between the two parties involved.
Debt-to-Income Ratio: The ratio, expressed as a percentage, which results from dividing a borrower’s monthly payment obligation on long-term debts by the borrower’s gross monthly income.
Discount Points:
Prepaid interest assessed at closing by the lender. A point is equal to 1 percent of the loan amount.
Down Payment: Cash paid by the buyer at closing that makes up the difference between purchase price and the mortgage amount.
Earnest Money : Money given by a buyer to a seller as a deposit to commit the buyer to the future transaction. Earnest money is subtracted from closing costs.
Equity : The value an owner has in real estate over and above the obligation against the property. Equity is fair market value minus the current indebtedness.
Escrow: Funds given to a third party which will be held to cover payments such as tax or insurance payments and earnest money deposits.
Execute: To sign a legal instrument. A deed is said to be executed when it is signed, sealed, witnessed and delivered.
Federally-insured loan: A mortgage loan that originates in a federally-insured government program like the Federal Hosuing Authority (FHA)
Fixed Rate Mortgage: A mortgage in which the interest rate remains constant throughout the life of the loan.
Loan-to-Value Ratio: The ratio between the amount of the mortgage loan and the appraised value of the property.
Market Value: The price that a property could possibly bring in the marketplace.
Mortgage Insurance: Insurance that protects lenders against loss if a borrower defaults. This is required when the loan-to-value ratio is greater than 80 percent.
Origination Fee: A fee charged by a lender for processing a loan application; usually computed as a percentage of the loan.
PITI: Refers to Principal, Interest, Taxes, and Insurance.
Recording: The noting in a public office of the details of a legal document, such as a deed or mortgage, affecting the title to real estate.
Underwriting: The decision-making process of granting a loan to a potential homebuyer.
Variable Rate Mortgage: Also referred to as Adjustable Rate Mortgage. A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.
FORECLOSURE TERMS
Foreclosure: A legal proceeding following a default by a borrower in which real estate secured by a mortgage of deed of trust is sold to satisfy the underlying debt.
Junior mortgage: A mortgage lower in lien priority than another. For example, a second mortgage or home equity line.
Notice of Default: (NOD, ND) A publicly recorded notice that a property owner has missed scheduled loan payments for a loan secured by a property.
Trustee's Sale: (NOT, NT) A document announcing the public sale of a property to recover a debt owned by the owner of the property. The notice is mailed to parties affected by the sale of a property, advertised in local publication and recorded in public records. Among other information, it provides the date, time and location of the sale.
Lis Pendens: (LP,LIS)A publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property.
Release of Lis Pendens: (RL) Release of the above.
REO/Tenancy by Entireties: (TE) This is the end of the process. Real Estate Owned by the lender, this status indicates the property is now owned by the lender, bank or investor as a result of a foreclosure.
Beneficiary: Second party to a Trust Deed, the maker of the loan secured by the property and documented with a Trust Deed.
Deficiency Judgment: A judgment given when the security pledged for a loan does not satisfy the debt upon its default.
Deed in Lieu of Foreclosure: A deed to real property accepted by a lender from a defaulting borrower to avoid the necessarily of foreclosure proceedings by the lender.
Forbearance: Where lenders will let borrowers cease payments due to a job loss or emergency and make up past payments at the end of the loan. Others will allow graduated payments, drop the interest rate, and change the loan to an adjustable rate, from mortgage insurance payments.
Right of Redemption: The period after the foreclosure during which the homeowner can redeem the property.
Short Sale: A term used to describe a real property sale where the total sales proceeds are less than the total balance due against the property, including the costs of sales.
Trust Deed: A contract by which property is made security for the payment of debt or obligation without a secure performance of an obligation.
Trustee Deed: Document conveying ownership of property to highest bidder at a Trustee Sale.
Trustee Sale: The file number for the property in default.
Trustor: One of three parties to a Trust Deed; the borrower or maker of a promissory note.
More Terms
Absolute Auction
Auction with no minimum bid amount. The highest bidder wins.
Abstract (of title)
A history of all transaction shown in the public records affecting a particular track of land
Acceleration clause
A provision in a promissory note that specifies conditions under which the lender may advance the time when the entire debt which is secured by the mortgage becomes due
Affidavit: A written statement made under oath before a notary public or other judicial officer
Agreement: A legally binding contract made between two or more persons
Appraisal: A report from an independent third party detailing the estimated value of real estate
Balloon Note/ Balloon payment:A promissory note with amortization payments scheduled for a long term, usually 30 years, but maturing in a shorter term, often five to seven years. It requires a substantial final balloon payment for the remaining principal.
Bankruptcy;A federal court proceeding under the US Bankruptcy laws where an insolvent debtor either has its estate liquidated and debt discharged, or is allowed to reorganize its affairs under the protection of the bankruptcy court.
Chain of title: The history of successive ownership and transfer in the title to a tract of land
Clear titleReal property ownership free of liens, defects and encumbrances or claims
Closing Costs: Expenses involved in closing a real estate transaction over and above the price of the land
Clouded title: A land title having an irregularity, possible claim or encumbrance that, if valid, would adversely affect or impair it
Contract sale: Agreement by one person to buy and another person to sell a specified parcel of land at a specified price
Conveyance:The transfer of title or property from one person to another
Deed: An instrument for conveying real estate
Deed of Trust: A form of security instrument for mortgage loans
Encumbrance: Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burden upon the property
Equity: The market value of real property, less the amount of existing liens
