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A Glossary of Common Real Estate and Mortgage Terms

A - E|F - P|Q - Z

F | G | H | I | J | L | M | N | O | P

Fannie Mae (Federal National Mortgage Association/FNMA) - FNMA is one of the major secondary market investors that purchases loans from mortgage companies and other depository institutions. The company is a private corporation and its stock is traded on the New York Stock Exchange. back to top

Federal Home Board - The board which oversees the Federal Home Loan Bank systems. back to top

Federal Home Loan Bank - Provides liquidity to supervised financial service companies, such as savings and loans and credit unions. The bank system has several districts. back to top

Federal Home Loan Board - The board which charters and forbids discrimination in the sale. back to top

Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC) - A government sponsored agency that is also a publicly traded company on the New York Stock Exchange that purchases mortgage loans from mortgage bankers and financial depository institutions. FHLMC is a major secondary market investor. back to top

Federal Housing Administration - A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price. back to top

Federal National Mortgage Association - See Fannie Mae. back to top

Federal Reserve Bank - The regulatory agency for certain commercial banks and bank holding companies. Sets monetary policy for the country and provides liquidity for supervised financial institutions. back to top

Federal Tax Lien - A lien attached to property for nonpayment of a federal tax. back to top

Federal Tax Return - The U.S. government's method to identify individual and company's annual tax responsibility. The tax returns identify the income and taxes. back to top

Fee Simple - Highest possible degree of ownership of land. The estate allows owners to have unrestricted powers to dispose of property, and which can be left by will or inherited. back to top

Fiduciary - A person in a position of trust or responsibility with specific duties to act in the best interest of a client. Real estate brokers and mortgage brokers are fiduciaries. back to top

Financial Depositor Institutions - Banks, savings and loans or credit unions. back to top

First Mortgage - Mortgage holding priority over the claims of subsequent lenders against the same property. back to top

Fixture - Personal property affixed to structures or land, usually in such manner that they cannot be independently moved without damage to themselves or the property housing, supporting, or pertinent to them. Varies under state laws. back to top

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

Freddie Mac - See Federal Home Loan Mortgage Corporation. back to top

Full Disclosure - Revealing all known facts which may affect the decision of a buyer or tenant. back to top

Functional Obsolescence - Impairment of functional capacity or efficiency. For example, homes without indoor plumbing (while they may contain working outdoor plumbing facilities) are considered functionally obsolete. back to top

G

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. back to top

General Warranty Deed - A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable. back to top

Government National Mortgage Association (GNMA/Ginnie Mae) - A government owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA guarantees the timely principal and interest payments to investors. back to top

Grandfather Clause - The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible. back to top

Ground Rent - Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only. back to top

Grantee - The buyer, who receives a deed. back to top

Grantor - The seller, who gives a deed. back to top

H

Hazard Insurance - Insurance on a property against damages caused by fire, wind storms, and similar risks. back to top

Heirs and Assigns - One who might inherit or succeed to an interest in a property under the rules of law applicable when a property owner dies. back to top

Holographic Will - Will written in the testator's handwriting and not witnessed. back to top

Homeowners Association - An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area. back to top

Homeowner's Policy - Policy which expands the insurance for a homeowner. It may include theft, liability, earthquake, etc. back to top

Homeowner's or Maintenance Fees - Payments made by property owner (s) of a condominium or a unit in PUD to the homeowners' association for expenses incurred in upkeep of the common areas. back to top

Homestead - Tract of land occupied as a family home. back to top

Housing and Urban Development (HUD) - The federal government agency that oversees FHA. back to top

HUD 1 - A closing document required by HUD that outlines the settlement cost of a loan. The closing agent generally prepares the document and buyer receives it shortly after the loan is closed. back to top

I

Impound Account - Account held by a lender for payment of taxes, insurance or other related expenses. Also known as an escrow account. back to top

Improvement - Valuable additions to property which raise the value of the property. back to top

Incidental Recording, Delivery, Wire, etc., Fees - Other costs that are incurred when a real estate loan is closed. back to top

Index - A published rate or benchmark measure of current interest rate levels used to calculate periodic changes in rates charged on adjustable rate mortgages.back to top

Installment Sale - A tax term used to describe a sale which is usually accomplished by use of a land contract. back to top

Insured Mortgage - A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the mortgaged property to satisfy the balance owing plus cost of foreclosure.back to top

Interest Payment Notification (1098) - A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year. back to top

Interest Rate - The percentage of an amount of money which is paid for its use for a specified time. back to top

In testate - Someone who has died without leaving a valid will. back to top

Investment Property - A property that is not occupied by the owner and in most cases produces income or is held for gains from appreciation. back to top

J

Joint and Several Liability - A liability which allows the creditor to sue any one of the debtors or sue all together. back to top

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. back to top

Judgment - The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant. back to top

Junior Mortgage - A mortgage subordinate to another mortgage. back to top

L

Land - In a legal sense, the solid part of the surface of the earth, as distinguished from water; any ground, soil or earth whatsoever regarded as the subject of ownership and everything annexed to it, whether by nature, e.g., trees and everything in or on it, such as minerals and running water, or annexed to it by man; e.g., buildings, fences, etc. In an economic sense, land consists of all those elements in the wealth of a nation which is supposed to be furnished by nature as distinguished from those improvements which owe their value to the labor and organizing power of man. back to top

Land Contract - Installment plan for buying a house. It is used as an alternative to obtaining a loan from a traditional, source such as a mortgage banker or savings and loan. back to top

Late Charge - A penalty for failure to pay an installment on time. back to top

Latent Defect - Hidden structural defect. back to top

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. back to top

Legal Description - An expanded and unique description of a property that is used on legal documents, such as deeds and deeds of trust. Recorded documents generally require a legal description. back to top

Lender - A general term encompassing all mortgages, and beneficiaries under deeds of trust. back to top

Lender's Instructions - A document that lenders prepare for the closing agent that outlines the requirements for loan closing. back to top

Lessee - One who possesses the right to use or occupy a property under lease agreement. back to top

Lessor - One who holds title to and conveys the right to use and occupy a property under lease agreement. back to top

Letter of Intent - A formal method of stating that a prospective developer, buyer or lessee is interested in property. back to top

Lien - An encumbrance against property for the payment of debt; a lien may be a mechanic's lien, mortgage, unpaid taxes or judgment. back to top

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

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, who contributes capital and are liable only to the amount contributed. back to top

Lis Pen dens - A public notice that litigation is pending on a property. back to top

Listing - A record of property for sale by a broker who has been authorized by the owner to sell. Also used to denote the property so listed. back to top

Listing Agreement - Agreement between a property owner and a real estate broker, authorizing the broker to find a buyer for the property. If the sale is consummated, the listing broker will be paid a fee. back to top

Loan Discount/Premium Fees - Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to the yield requirement of the investor. Loan discount denotes an investor yield requirement higher than the note rate. Loan premium denotes an investor yield requirement lower than the note rate. back to top

Loan Lock - Guarantee from a lender that a borrower will receive the interest rate in effect at the time of loan application. back to top

Loan Officer - A person that helps borrowers through the loan selection, processing, and closing of a mortgage loan. Loan officers can be paid a commission or salary for their services and can work for mortgage brokers, mortgage bankers, or depository institutions. back to top

Loan Origination Fees - The cost to obtain a loan that is paid to the originating lender or broker. back to top

Loan Package - The information regarding a borrower and property necessary which is the basis for a lender's credit decision to extend or deny credit. back to top

Loan Ratio - The amount of a loan to the value or selling price of real property. back to top

Loan Servicing - The function of collecting loan payments, managing the property tax and insurance escrows, foreclosing on defaulted loans and remitting payments to the investor/beneficiary. back to top

Loan-to-Value Ratio - The ratio of the mortgage loan amount to the property's appraised value or selling price, whichever is less. back to top

M

Margin - The number of percentage points the lender adds to the index rate to calculate the adjustable rate mortgage (ARM) interest rate at each adjustment. back to top

Market Value - The most likely price a given property will bring if widely exposed on the market, assuming fully informed buyer and seller. back to top

Marketable Title - A title that is free and clear of objectionable liens, clouds or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection. back to top

Marketing - The management process through which efforts to conceive, develop and deliver goods and services are integrated to satisfy the needs and wants of selected customers as a means of achieving company objectives. back to top

Market Price - The price paid for a property; the amount of money that must be given or which can be obtained at the market in exchange under the immediate conditions existing at a certain date. To be distinguished from market value. back to top

Market Value - The highest price estimated in terms of money which a buyer would be warranted in paying and a seller justified in accepting, provided both parties were fully informed, acted intelligently and voluntarily and, further, that all the rights and benefits inherent in or attributable to the property were included in the transfer. back to top

Mechanics Lien - A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land. back to top

Misrepresentation - False statement made to or concealment of knowledge from another party with the intent to provoke action from that party. back to top

Mortgage - A lien or claim against real property given as security for a loan. It is a two party agreement as apposed to the three-party agreement of a deed of trust. back to top

Mortgage Broker - A professional that helps consumers through the loan selection, processing and closing of a mortgage loan. Most mortgage brokers have access to a wide range of mortgage products through many mortgage lenders. Mortgage brokers are paid a fee by the borrower when a suitable mortgage is found and closed. back to top

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. back to top

Mortgagee - The lender of money or the receiver of the mortgage document. back to top

Mortgage Insurance - Insurance required for a loan-to-value ratio above 80.01%. back to top

Mortgage Banker - Financial intermediaries that originate mortgage loans through loan officers or independent mortgage brokers and sell the mortgages into the secondary mortgage market. back to top

Mortgage Note - The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps for ARMs, the name of the lender and the borrower, and any other material item required by the lender. back to top

Mortgage Warehousing - A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans which are sold to an investor shortly thereafter. The mortgage notes are used as collateral for this interim financing. back to top

Mortgagor - The borrower of money or the giver of the mortgage document. back to top

Multiple Listing Service - A means of making possible the orderly dissemination and correlations of listing information to its members so that REALTORS may better serve the buying and selling public. back to top

N

NATIONAL ASSOCIATION OF REALTORS - The association of REALTORS dedicated to the protection and the preservation of the free enterprise system and the right of the individual to own real property as guaranteed by the Constitution of the United States of America. Each member of the NATIONAL ASSOCIATION OF REALTORS must adhere to a strict Code of Ethics and Standards of Practice designed to provide assurances to the public of the REALTORS integrity and professionalism. back to top

Negative Amortization - An increase in principal balance which occurs when the monthly payments do not cover all of the interest cost. The interest cost which is not covered by the payment is added to the unpaid principal balance. back to top

Net Listing - An arrangement whereby the Broker receives as commission all monies received above a minimum sales price agreed to by the owners and the Broker. back to top

Non-conforming Loan - Loans that are above the loan limits set by FNMA and FHLMC. Also known as jumbo loans. back to top

Nonconforming Use - A property which does not conform to the zoning of an area. back to top

Note - A written promise to repay a certain sum of money on specified terms. back to top

O

Obsolescence - Impairment of desirability and usefulness brought about by changes in the art, design or process or from external influencing circumstances that make a property less desirable and valuable for a continuity or use. back to top

Offer - A promise by one party to do a specified deed as the other party in turn performs a specific deed. back to top

Office of Comptroller Currency - A federal government regulatory agency that oversees some commercial banks. back to top

Office of Thrift Supervision - A federal government regulatory agency that oversees savings and loans. back to top

Open End Mortgage - A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions. back to top

Open Listing - An authorization given by a property owner to a real estate Broker wherein said Broker is given the nonexclusive right to secure a purchaser; open listings may be given to any number of Brokers without liability to compensate any except the one who first secures a buyer ready, willing and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer. back to top

Origination Fee - A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan. back to top

Owner of Record - The individual (s) named on a deed that has been recorded at the local municipality. back to top

Owners Policy - Title insurance for the owner of property, rather than a lien holder. back to top

Ownership - The right to possess and use property to the exclusion of others. back to top

P

Package Mortgage - Mortgage covering both real and personal property. back to top

Paper - A mortgage, deed of trust or land contract which is given instead of cash. back to top

Parole Evidence - The legal rule which prevents previous oral or written negotiations to a signed contract from changing the contract. back to top

Partial Release - A release of a portion of property covered by a mortgage. back to top

Permanent Mortgage - A mortgage on completed construction on the same property under one mortgage or trust deed. back to top

Personality - Property which is movable. All property is either personality, realty or mixed. back to top

Physical Depreciation - A term that is frequently used when physical deterioration is intended. In a broad concept it may relate to those elements contributing to depreciation that are existent or inherent in the physical property itself, as distinguished from other and external circumstances that may influence its utilization. Not a clear or proper them without qualification and explanation. back to top

PITI - Abbreviation for principal, interest, taxes and insurance, often combined in a single monthly mortgage payment. back to top

Plat - A map or chart of a lot, subdivision or community, showing boundary lines, buildings and easements. back to top

PMI - Abbreviation for private mortgage insurance: insurance issued by a company, which insures the lender against loss in the event that the borrower defaults on the mortgage. back to top

Points - Origination fees charged by the originating lender or broker and/or discount fees charge by lenders to increase the overall yield. A point is equal to one percent of the principal amount of your mortgage. back to top

Portfolio Loan - Loans held as an investment by a bank, savings and loan or credit union. back to top

Power of Attorney - A written instrument authorizing a person to act as the agent of the person granting it, and a general power authorizing the agent to act generally in behalf of the principle. A special power limits the agent to a particular or specific act as: a landowner may grant an agent special power of attorney to convey a single and specific parcel of property. Under the provisions of a general power of attorney, the agent having the power may convey any or all property of the principal granting the general power of attorney. back to top

Prepaid Interest - Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on the 15th of the month and the first payment is due 45 days later, the lender will charge 15 days of prepaid interest. back to top

Prepaid Items of Expense - Perorations of prepaid items of expense which are credited to the seller in the closing statement. back to top

Prepayment - Full payment of the principal before the due date; occurs when a property is sold or the borrower refinances the existing loan. back to top

Prepayment Penalty - Charge levied by the lender for paying off a mortgage loan before its maturity date. back to top

Primary Mortgage Market - The process of obtaining a real estate loan, including the consumer's completion of a loan application form, validation of the credit and property information, loan underwriting by the lender and closing of the mortgage loan. back to top

Primary Residence - Considered the permanent location of residency. back to top

Principal - 1) The outstanding balance of a loan. 2) A party to a real estate transaction. 3) The head of a real estate firm. back to top

Private Mortgage Insurance (PMI) - Insurance which covers the portion of a mortgage loan above 80% thereby reducing the lenders risk to principal loss in the event of a borrowers default. The insurance coverage allows lenders to make higher loan-to-value ratios (95% LTV). back to top

Processing, Underwriting and Document Fees - Charges for the lender's services associated with making the loan. back to top

Property - The rights of ownership. The right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights. Property is generally classified into two groups, personal property and real property. back to top

Property Tax - A tax levied by the local municipality or county on real and personal property. back to top

Perorations - The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing. back to top

Prorate - To divide in proportionate shares, such as taxes, insurance, rent, or other items. back to top

Planned Unit Development (PUD) - A housing development where there is a homeowners association and common areas owned by the homeowners. back to top

Purchase Money Mortgage - A mortgage used to finance the purchase of real property. back to top