Abstract

A summary; an abridgment. Before the use of photo static copying, public records were kept by abstracts of recorded documents.

 

Abstract of Title

 

A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an opinion as to the condition of title. Still in use in some states, but giving way to the use of title insurance.

Acre

A measure, usually of land, equal to 160 sq. rods (43,560 sq. ft.) in any shape.

Action to Quiet Title

A court action to establish ownership to real property. Although technically not an action to remove a cloud on a title, the two actions are usually referred to as "Quiet Title" actions.

Adjustable Rate Mortgage(ARM)

A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. This is also referred to as an AML's or VRM's.

Agency

Any relationship in which one party acts for or represents another under the authority of the latter. Agency involving real property should be in writing, such as listing, trust, powers of attorney, etc.

Agent

One who is authorized to act for or represent another. Authority may be either written or implied.

Agreement of Sale

This is different depending depending on the area of country. In some states it is synonymous with a purchase agreement (Purchase Agreement). In other states, it is synonymous with a land contract (Land Contract).

Alienation Clause

A clause that calls for debt under a mortgage or deed of trust to be due, in its entirety, upon transfer of ownership of the property.

Amortize

To reduce a debt by regular payments of both principal and interest, as opposed to interest only payment.

Annual Percentage Rate(APR)

A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.

 

Appraised Value

 

An opinion of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.

 

Arrears

 

Payment made after its due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.

 

Assumption of Mortgage

 

Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor from liability.

 

Balloon Note

 

A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "Balloon" is due at maturity.

 

Balloon Payment

 

The final payment of a mortgage which is usually used to pay off the debt and is much larger than a regular payment. Typically associated with 5/25 and 7/23 mortgage programs or owner carry back mortgages.

Binder

A report issued by a title insurance company setting forth the condition of title to certain property as of a certain date, and setting forth conditions, which, if satisfied, will cause a policy of title insurance to be issued.

Blanket Mortgage

A mortgage covering more than one property. Also known as a general mortgage.

Bridge Financing

A form of interim loan, generally made between a short term loan and a long term loan, when the borrower needs to have more time before taking on long term financing.

British Thermal Unit(B.T.U.)

Unit of heat required to raise one pound of water one degree Fahrenheit. Usually used to express the capacity of typical heating and cooling systems.

Buydown

A payment to the lender to reduce the interest rate on a mortgage.

Cap

The maximum increase that an Adjustable Rate Mortgage (ARM). can change, either at each adjustment or during the life of the mortgage. Example: If the original loan was made at 10% with a 5% cap the interest on the loan may not exceed 15% regardless of market conditions.

Certificate of Eligibility

A certificate obtained by a veteran from a Veteran's Administration office which states that the veteran is eligible for a V.A. insured loan.

Certified Copy

A true copy, attested to be true by the officer holding the original.

Cestui que trust

One having an equitable interest in property, legal title being vested in a trustee.

Chain of Title

The chronological order of conveyancing of a parcel of land, from the original owner (usually the government) to the present owner.

Chattel

Personal property.

Closing Cost

Expenses incurred in the closing of a real estate or mortgage transaction. Usually includes things like loan fees, title fees, appraisal fees, processing fees, etc.

Closing Statement

The statement which lists the financial settlement between buyer and seller, and also the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

Cloud on Title

An invalid encumbrance on real property, which if valid, would affect the rights of the owner. For example: A sells lot 1, tract 1, to B. The deed is mistakenly drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous deed.

Co-Maker

A surety under a loan. The co-maker is equally responsible for repayment as the borrower.

Commitment

A written promise to make or insure a loan for a specified amount and on specified items.

Comparables

Properties used as comparisons to determine the value of a specified property.

Condominium

A structure of two or more units, the interior space of which are individually owned; the balance of the property is owned in common by the owner of the individual units.

Construction Loan

Short term financing of real estate construction. Generally followed by the long term financing called a "take out" loan, issued upon completion of improvements.

Contingency

The dependence upon a stated event which must occur before a contract is binding.

Contract of Sale

Depending on area of country it may be a Land Contract or a Purchase Agreement.

Conventional Mortgage

A mortgage or deed of trust not obtained under a government insured program (such as FHA or VA).

Cost-Plus Contract

A building contract setting the builder's profit at a set percentage of actual cost of labor and materials.

County

A division within a state, usually encompassing one or more cities or towns.

Declaration of Restrictions

A set of restrictions filed by a subdivider to cover an entire tract or subdivision.

 

Deed of Trust

 

A document temporarily conveying ownership of the mortgaged property to the note holder; should a default occur, the note holder becomes the owner more quickly than if a mortgage had been used.

Defective Title

Title to a negotiable instrument obtained by fraud. Title to real property which lacks some of the elements necessary to transfer good title.

Depreciation

Decrease in value to real property improvements caused by deterioration or obsolescence.

Devise

Real estate left by will.

Devisee

One to whom real estate is given by will.

Devisor

A Testator who leaves real estate.

Direct Reduction Mortgage

An amortized mortgage. One on which principal and interest payments are paid at the same time with interest being computed on the remaining balance.

Discount

The difference between face value of an installment note and mortgage or deed of trust, and the present cash value.

Disbursements

Payments made during the course of an escrow or at closing.

Easement

A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another.

Eminent Domain

A Government right to acquire private property for public use by condemnation, and the payment of just compensation.

Encroachment

Generally construction onto the property of another, as of a wall, fence, building, etc.

Encumbrance

A claim, lien, charge, or liability attached to and binding real property.

Equity

The difference between the market value of the real property and any liens on the property..

Escrow

Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event.

Federal Home Loan Bank Board

The board which charters and regulates federal savings and loan associations, as well as controlling the system of Federal Home Loan Banks.

Federal Tax Lien

A lien attached to property for nonpayment of a federal tax.

Fee Simple

An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited.

Federal Housing Administration

A federal Agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

Foreclosure

A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.

Freddie Mac (FHLMC)

Federal Home Loan Mortgage Corporation. A federal Agency purchasing first mortgages, both conventional and federally insured, from members of the Federal Reserve System, and the Federal Home Loan Bank System.

Full Disclosure

In real estate, revealing all the known facts which may affect the decision of a buyer or tenant.

General Lien

A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property.

Ginnie Mac (GNMA)

Government National Mortgage Association. A federal association working with FHA which offers special assistance in obtaining mortgages, and purchases mortgages in a secondary capacity.

Grandfather Clause

The clause in a law permitting the continuation of a use, business, etc., which, when established, was permissible but, because of a change in the law, is now not permissible.

Ground Rent

Rent paid for vacant land. If the property is improved, ground rent is that portion attributable to the land only.

Heir and Assigns

Words usually found in a deed, showing the interest the grantee is receiving.

Home Owner Association

An association of people who own homes in a given area formed for the purpose of common ownership and maintenance of certain shared facilities.

Impound Account

An account where a portion of a mortgagor's monthly payment is held in trust by the lender to pay for taxes mortgage insurance, hazard insurance, lease payments, and other items as they become due.

Index

An index used to adjust the interest rate of an adjustable mortgage loan.

Installment Sale

A tax term used to describe a sale which is usually accomplished by use of a land contract.

Insured Mortgage

A mortgage insured against loss to the mortgagee in the event of default and a failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure.

Interest Rate

The percentage of an amount of money which is paid for its use for a specified time. Usually expressed as an annual percentage.

Joint Tenancy

An undivided interest in property, taken by two or more joint tenants. The interests must equal, accruing under the same conveyance, and beginning at the same time. Upon death of a joint tenant the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Judgment

The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Late Charge

A penalty for failure to pay an installment payment on time.

Lease with Option to Purchase

A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of the lease period.

Lender

Any person or entity advancing funds which are to be repaid. A general term encompassing all mortgagees, and beneficiaries under deeds of trust.

Letter of Intent

A formal method of stating that a prospective developer, buyer or lessee, is interested in property without legal obligation.

Liber

A Latin word for book.

Lien

An encumbrance against property for money, either voluntary or involuntary.

Life Estate

An estate in real property for the life of a living person. The estate then reverts back to the grantor or on to a third party.

Limited Partnership

A partnership consisting of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, contributing capital and liable only to the amount contributed.

Lis Pendens

A legal notice recorded to show pending litigation relating to real property and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.

Loan Package

The file of all items necessary for the lender to decide to give or not give a loan. These items would include the information on the prospective borrower, and information on the property.

Loan Ratio

The ratio, expressed as a percentage, of the amount of a loan to the value or selling price of real property.

 

Margin

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

Marketable Title

Title which can be readily marketed to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.

Mechanics Lien

A lien created by statute for the purpose of securing priority of payment for the price of value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.

Mortgage Broker

One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security. Also known as a loan broker.

Mortgage

To hypothecate as security, real property for the payment of a debt. The borrower (mortgagor) retains possession and use of the property.

Mortgagee

The party lending the money and receiving the mortgage.

Mortgagor

The party who borrows the money and gives the mortgage.

Mortgage Insurance

Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. Usually required for loans with a loan ratio of above 80%.

Mortgage Warehousing

A system whereby a mortgage company will hold loans which would ordinarily be sold, in order to sell later at a better price. These are used as collateral security with a bank to borrow new money to loan.

Negative Amortization

A condition created when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases.

No Cost Loan

All non-recurring closing costs except transfer tax are paid by the lender. ( Not available in purchases in counties where buyer customarily pays all of title and escrow).

Nonconforming Use

A property which does not conform to the zoning of the area.

Note

A written promise to repay a certain sum of money on specified terms.

Open End Mortgage

A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage.

Orginination Fee

A fee or charge made by a lender for making a real estate loan. Usually a percentage of the amount loaned.

Package Mortgage

Mortgage covering both real and personal property.

Paper

A mortgage, deed of trust, or land contract, which is given instead of cash.

Partial Release

A release of a portion of property covered by a mortgage.

Perk Test (Percolation)

The test to determine the capability of the soil to absorb liquid, both for construction and septic systems.

Permanent Mortgage

A mortgage on completed construction for a long period of time.

PMI Private Mortgage Insurance

Insurance similar to FHA or VA insurance, insuring part of the first mortgage or deed of trust, enabling a lender to make a conventional loan of a higher percentage of the property value.

Points

A point is equal to one percent of the loan.

Property Tax

Generally, tax levied on both real and personal property with the amount of the tax dependent on the value of the property.

Prorate

To divide in proportionate shares, such as taxes, insurance, rent, or other items which the buyer and seller share as of the time of closing, or other agreed upon time.

Purchase Money Mortgage

A mortgage given by the buyer to the seller as part of the purchase consideration, as opposed to a hard money mortgage.

Real Estate

Land and anything permanently affixed to the land, and those things attached to the building.

Recital

Setting forth in a deed or other writing some explanation for the transaction.

Recourse

The right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment.

Refinancing

The repayment of a debt from the proceeds of a new loan using the same property as security.

Reissue Rate

A charge for a title insurance policy if a previous policy on the same property was issued within a specified period. Reissue is less than the original charge.

REIT (Real Estate Investment Trusts)

A method in investing in real estate in a group, with certain tax advantages.

Release

An instrument releasing property from the lien of the mortgage, judgment, etc.

Recision of Contract

Annulling a contract and placing the parties to it in a position as if there had not been a contract.

RESPA (Real Estate Settlement Procedures Act)

A federal statute requiring disclosure of certain costs in the sale of residential improved property which is to be financed by a federally insured lender.

Secondary Financing

A loan secured by a mortgage or trust deed, which lien is junior to another mortgage or trust deed.

Secondary Mortgage

The buying and selling of first mortgages of trust deeds by banks, insurance companies, government agencies, and other mortgagees.

Security

Real or personal property pledged by a borrower, as additional protection for the lender's interest.

Septic System

A sewage system, whereby waste is drained through pipes and a tile field into a septic tank.

Set Back Ordinance

Regulates the distance from the lot line to the point where improvements may be constructed.

Settlement Statement

A statement prepared by broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale.

Sheriff's Deed

Deed given at sheriff's sale in foreclosure of mortgage.

Signed Sealed and Delivered

A phrase indicating that everything necessary to convey has been done by the grantor.

Specific Performance

An action to compel the performance of a contract, when money damages for breach would not be satisfactory.

Statutory Lien

An involuntary lien, includes tax liens, judgment liens, mechanic liens, etc.

Substitute of Trustee

A document which is recorded to change the trustee under the deed of trust.

Tax Lien

Lien for nonpayment of taxes.

Tax Sale

Public sale of property at auction by governmental authority, after a period of nonpayment of property taxes.

Testator

One who dies leaving a testament or will.

Tenancy by the Entirety

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

Title

Often used interchangeably with the work ownership. It indicates the accumulation of all rights in property, the owner and others.

Title Insurance

An insurance policy which protects the insured(purchaser and lender) against loss arising from defects in title

Zero Cost Loan

A loan that pays for all non-recurring closing costs, except for transfer tax. Not applicable in a purchase transaction in a county where the buyer customarily pays title and escrow fees.