Joint Tenancy: A form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship. Return to index
Late Charge: The penalty a borrower must pay when a payment is made after the due date. Return to index
Leverage: The use of borrowed money to purchase property. Return to index
Lien: A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. Return to index
Lifetime Cap: A provision of an ARM that limits the highest rate that can occur over the life of the loan. Return to index
Loan Servicing: The collection of mortgage payments from borrowers and related responsibilities of a loan servicer. Return to index
Loan-to-Value Percentage (LTV): The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. Return to index
Lock-in: 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 to be paid at closing. Return to index
Marketable Title: A title that is free and clear of objectionable liens, clouds, or other title defects. A title that enables an owner to sell his property freely to others and which others will accept without objection. Return to index
Maturity: The date on which a mortgage or note becomes due. Return to index
Mortgage: The conveyance or pledge of property in security of a loan. Return to index
Mortgage Banker: A company that originates mortgages exclusively for resale in the secondary market. Return to index
Mortgage Broker: An individual or company that for a fee acts as an intermediary between borrowers and lenders. Return to index
Mortgage Commitment: A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house. Return to index
Mortgage Insurance Premium (MIP): The fee paid by a borrower to FHA or a private insurer for mortgage insurance. Return to index
Mortgage Insurance Rate: The rate of interest in effect for the monthly payment due. Return to index
Mortgage Margin: The set percentage the lender adds to the index value to determine the interest rate of an ARM. Return to index
Mortgage Note: A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the name in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment. Return to index
Mortgage (Open-End): A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure. Return to index
Mortgagee: The lender in a mortgage agreement. Return to index
Mortgagor: The borrower who pledges or conveys his property to the mortgagee as security for the loan. Return to index
Negative Amortization: When the payment made is less than the interest rate on the mortgage the principal increases and the borrower owes more than the original principal. Return to index
Notice of Default: A formal written notice to a borrower that a default has occurred and the legal action . Return to index
Origination Fee: A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount. Return to index
Owner Financing: A property purchase transaction in which the property seller provides all or part of the financing. Return to index
Payment Cap: A provision of some ARMs limiting the amount by which a borrower's payments may increase regardless of any interest rate increase; may result in negative amortization. See Adjustable-Rate Mortgage Return to index
PITI: Stands for principal, interest, taxes, and insurance — the components of a monthly mortgage payment. Return to index
Planned Unit Developments (PUDs): A planned unit development is a project or subdivision that consists of common property that is owned and maintained by an owners' association for the benefit and use of the individual PUD unit owners. Return to index
Plat: A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. Also known as a survey. Return to index
Points: Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are charged by a lender to raise the yield on his loan at a time when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited from paying points on Department of Veterans Affairs guaranteed loans (sellers can pay, however). On a conventional mortgage, or an FHA insured mortgage, points may be paid by either buyer or seller or split between them. Return to index
Premium: The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. Return to index
Prepayment: Payment of mortgage loan, or part of it, before due date. Mortgage agreements used to restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. Today, few loans have a prepayment penalty clause in them, however, confirm this fact with your lender at the time of loan application! The Federal Housing Administration does not permit such restrictions in FHA insured mortgages. Return to index
Prequalification: The process of determining how much money a prospective buyer will be eligible to borrow before a loan is applied for. Return to index
Principal: The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid. Return to index
Private Mortgage Insurance (PMI): Insurance provided by non-government insurers that protects lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80 percent. Return to index
Qualifying Ratios: Guidelines applied by the lenders to determine how large a loan to grant to a home buyer. Return to index
Quitclaim Deed: A deed that transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See deed.) Return to index
Real Estate Broker: A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner. Return to index
Real Estate Settlement Procedures Act (RESPA): A consumer protection law that requires lenders to give borrowers advance notice of closing costs. Return to index
Refinancing: The process of the same mortgagor paying off one loan with the proceeds from another loan. Return to index
Restrictive Covenants: Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This later discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.) Return to index
Second Mortgage: A mortgage that has a lien position subordinate to the first mortgage. Return to index
Secondary Mortgage Market: The buying and selling of existing mortgages. Return to index
Seller-Take-Back: An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage. Return to index
Seller-Take-Back: The computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment. Return to index
Special Assessments: A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc. Return to index
Special Lien: A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien.) Return to index
Special Warranty Deed: A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property that has, or which might in the future, impair the grantee's title. Return to index
Survey: A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description. Return to index
Tax: As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public. Return to index
Tenancy by Entirety: A type of joint ownership of property that provides right of survivorship and is available only to a husband and wife. Return to index
Tenancy in Common: A type of joint ownership in a property without right of survivorship. Return to index
Title: As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate. Return to index
Title Company: A company that specializes in examining and insuring titles to real estate. Return to index
Title Insurance: Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to either the mortgagor, as an "owner's title policy" or to the mortgagee, as a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy," if he desires the protection of title insurance. Return to index
Title Search or Examination: A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title. Return to index
Transfer Tax (or Grantor's Tax): State or local tax payable when title passes from one owner to another. Return to index
Truth-in-Lending: A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges. Return to index
Underwriting: The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's creditworthiness and the quality of the property itself. Return to index
VA Loan: A loan that is guaranteed by the Department of Veterans Affairs. Also referred to as a "government" mortgage. Return to index
Wrap-around Mortgage: A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgagee under the wrap-around collects a payment based on its face value and then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wrap-around gains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate than if refinancing. Return to index
Zoning Ordinances: The acts of an authorized local government establishing building codes and setting forth regulations for property land usage. Return to index