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

Abstract of Title
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.

Acceleration Clause
Provision in a mortgage document stating that if a payment is missed or any other provision is violated the whole debt becomes immediately due and payable.

Acre
Measure of land equal to 43,560 square feet.

Acknowledgment
Formal declaration before a public official that one has signed a document. Prior to recording real estate legal documents, such as grant deeds and deeds of trust, a Notary Public acknowledges the person's signature on the document.

Action to Quiet Title
A court action to establish ownership of real property. Although technically not an action to remove a cloud on 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 for the life of the loan. These mortgages adjust periodically based on an index that changes with market conditions. The rate of interest is the sum of the index plus a margin ( the margin remains fixed for the life of the loan). Most ARMs have periodic interest rate and payment caps, as well as a life cap. Also referred to as AML's or VRM's.

Agent
Person authorized to act on behalf of another in dealings with third parties.

Agreement of Sale
Agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement or Land Contract. In Texas it is known as an Earnest Money Contract.

Alienation Clause
Provision in a mortgage document stating that the loan must be paid in full if ownership is transferred.

Alternative documentation
Verification documentation provided directly by the applicant, such as W-2s and pay stubs and bank statements, in lieu of verifications received from third parties.

American Land Title Association
Title policy that assures a lender that it has the proper rights as the beneficiary on a mortgage loan.

Amortization
Gradual payment of a debt through regular installments that cover both interest and principal.

Annual Percentage Rate(APR)
A measure of the total cost of credit (interest as well as other recurrring charges) expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans.

Appraisal and credit report fees
Fees generally collected by the lender and paid to outside companies performing the services.

Appraised Value
Opinion of the value of a property at a given time, based on location, improvements, etc., of the property and surroundings.

Appraisal Report
Estimate of real estate value, presumably by an expert. An appraisal evaluates the property at a given time based on facts regarding the location, improvements, neighborhood and comparable sales. Generally, the value is based on three approaches: cost, market and income.

Appreciation
Increase in value or worth of property.

Arrears
Payment made after it is 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.

"as is"
A clause that is sometimes used in the transfer of property, meaning there is no guarantee or warranty provided by the seller.

Assessment Base
The total assessed value of all property in a given assessment district.

Assessed Valuation
Value placed on property as a basis for levying property taxes; not identical with appraised or market value.

Assignment
Transfer of a contract from one party to another.

Assumption
New owner assumes the responsibility for repaying an existing mortgage. FHA and VA loans are fully assumable. Some adjustable rate mortgages may be partially assumable, but the new owners may be required to re-qualify for the loan.

Attached Homes
A home that has one or more common walls adjoining another home, ie, condominiums and row houses.

Balloon Loan
Mortgage in which the remaining principal balance becomes fully due and payable at a predetermined time. Most of the time, balloon loans have level payments unitl the note becomes due and payable.

Balloon Payment
The final payment of a mortgage which is larger than the regular payment; it usually extinguishes the debt.

Bankruptcies
A court action to restructure debt.

Beneficiary
The lender named on the mortgage note.

Binder
Preliminary agreement of sale, usually accompanied by earnest money (term also used with property insurance).

Blanket Mortgage
Mortgage covering more than one property.

Bond
A debt instrument in the capital markets. The US government, corporations and municipalities use bonds to raise money. Bonds can also be backed by real estate loans and the payments from mortgages.

Borrower
Any obligor on a mortgage note or any person that has acquired mortgaged property and assumed the obligations of the obligor under the mortgage note and the mortgage, or a person that has acquired title to any mortgaged property subject to the lien of the mortgage.

Bridge Financing
A form of interim loan, generally made between a short term loan and a long term loan when the borrower needs additional time before obtaining permanent financing.

Broker
A person that represents another for a fee in real estate transactions. Mortgage brokers help consumers locate suitable real estate loans and are paid a fee for their services.

Buydown
An interest rate buydown is the temporary reduction of the note rate and resulting monthly payments a borrower pays to the lender. The shortfall between the rate on the note and initial payment made by the borrower is usually paid by a third party such as a seller or builder.

Buydown reserve
Amount that has been contributed under a buydown agreement and held in trust to be applied in full or partial payment of certain monthly installments.

Buyer's Broker
Agent who takes the buyer as a client, and is obligated to represent their interest above all others, and owes specific fiduciary duties to the buyer.

Caps
Caps are used on adjustable rate mortgages (ARMs) to limit the interest rate and/or the payment. Most ARMs have a periodic cap that is around 2% per year and a life cap of around 5%-6% over the life of the loan. "Payment only" caps sometimes create negative amortization where the principal balance of the loan increases rather than decreases over time.

Capital Gain
Taxable profit on the sale of an appreciated asset.

Cash reserves
Liquid assets the applicant will have remaining after making the down payment and paying closing costs.

Caveat Emptor
A legal term meaning "let the buyer beware".

Certificate of Eligibility
Certificate obtained by a veteran from a Veteran's Administration office which states that the veteran is eligible for a VA insured loan.

Certificate of Occupancy
Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

Certificate of Reasonable Value (CRV)
An appraisal of property for the purpose of insurance by the Veteran's Administration.

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 with the legal title being vested to the trustee.

Chain of Title
The chronological order of conveyance of a parcel of land from the original owner to the present owner.

Chattel
Personal property.

Closing
Conclusion of a real estate sale where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties (seller, old lender, real estate broker, etc.).

Closing Agent
A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company or attorney.

Closing Costs
Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring costs that include a one time charge for points, appraisal fees, etc. or a proration of recurring costs such as taxes and insurance incurred while the new buyer/borrower owns the real estate.

Closing Statement
Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.

Cloud on Title
An invalid encumbrance on real property, which, if valid, would affect the rights of the owner.

Co-Maker
Equally responsible for repayment as the borrower.

Combined loan to value ratio (CLTV ratio)
The sum of the balances on the first mortgage and any subordinate financing divided by the sales price or appraised value, whichever is lower. If there is a line of credit in a subordinate position, the CLTV ratio is based on the maximum line amount plus the principal balance of the subject loan. If any of the loans is subject to deferred interest or negative amortization, the CLTV ratio is based on the maximum permitted principal balance.

Commission
Fee paid to a broker or other entity for services rendered. Real estate brokers and mortgage brokers receive a commission for the services they provide; a real estate broker secures a buyer for a property that is for sale and a mortgage broker secures a mortgage loan for the buyer to finance the purchase of a property. Commissions are generally paid as a percentage of the sales price in a real estate transaction or the loan amount in a mortgage transaction.

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.

Conditional Commitment
A lenders promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.

Conditional Offer
Purchase offer in which the buyer proposes to purchase property only after certain events (sale of another home, finding a loan commitment, etc.) occur.

Condominium
A structure of two or more units, the interior space of which are individually owned.

Conforming loan amount
A loan amount which meets the limits of the Federal National Mortgage Association (Fannie Mae/FNMA) and the Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC).

Consideration
Anything of value given to induce another to enter into a contract, such as an earnest money deposit .

Construction Loan
Short-term financing for real estate construction. Generally followed by long term financing called a "take out" loan issued upon completion of construction.

Contingency
Condition which must be satisfied before the buyer can consummate the purchase of a property. Generally outlined in the purchase contract between the buyer and seller.

Contract of Sale
A purchase transaction in which the buyer receives possession of the property, but the seller retains title.

Conventional Loan
Mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans.

Convertible ARMs
ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.

Conventional Mortgage
A loan neither insured by the FHA nor guaranteed by the VA.

Cost Plus Contract
Building contract setting the builder's profit at a set percentage of actual cost of labor and materials.

Contract Sales Price
The full purchase price as stated in the contract.

Corporation
Body of persons granted a charter that legally recognizes them as a separate entity (legal person) having its own rights, privileges, and liabilities distinct from those of its members.

Cost Basis
Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any depreciation claimed on tax returns over the years.

Customer
Typically, the buyer, as opposed to the principal (seller).

Fannie Mae
One of the major secondary market investors that purchases loans from mortgage companies and other depository institutions. FNMA is a private corporation and its stock is traded on the New York Stock Exchange.

Federal Home Board
The board which oversees the Federal Home Loan Bank systems.

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.

Federal Home Loan Board
Board which charters and forbids discrimination in the sale.

Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC)
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.

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

Federal National Mortgage Association (Fannie Mae/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.

Federal Reserve Bank
Regulatory agency for certain commercial banks and bank holding companies. Sets monetary policy for the country and provides liquidity for supervised financial institutions.

Federal Tax Lien
Lien attached to property for nonpayment of a federal tax.

Federal Tax Return
The U.S. government's method to identify individual and companys' annual tax responsibility.

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

Fiduciary
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.

Financial Depositor Institutions
Banks, savings and loans or credit unions.

First Mortgage
Mortgage holding priority over the claims of subsequent lenders against the same property.

Fixture
Personal property that has become part of the real estate.

Foreclosure
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.

Freddie Mac
A government sponsored agency, publicly traded on the New York Stock Exchange, that purchases mortgage loans from mortgage bankers and financial depository institutions. FHLMC is a major secondary market investor.

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

General Lien
Lien such as a tax lien or judgement 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.

Government National Mortgage Association (GNMA/Ginnie Mae)
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.

Grandfather Clause
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.

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

Grantee
The buyer, who receives a deed.

Grantor
The buyer, who gives a deed.

Hazard Insurance
Insurance on a property against fire and similar risk.

Heirs and Assigns

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.

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

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.

Housing and Urban Development (HUD)
Federal government agency that oversees FHA.

HUD 1
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.

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Impound Account
Account held by a lender for payment of taxes, insurance or other related expenses.

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

Index
Published rate or benchmark measure of current interest rate levels used to calculate periodic changes in rates charged on adjustable rate mortgages.

Installment Sale
Tax term used to describe a sale which is usually accomplished by use of a land contract.

Insured Mortgage
Mortgage insured against loss to the mortgagee in the event of default and failure of the mortgaged property to satisfy the balance owing plus cost of foreclosure.

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.

Interest Rate
Percentage of an amount of money which is paid for its use for a specified time.

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

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

Joint Tenancy
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
Decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Jumbo Loan
Loans that are above the loan limits set by FNMA and FHLMC. Also known as nonconforming loans.

Junior Mortgage
A mortgage subordinate to another mortgage.

Land Contract
Installment plan for buying a house. Used as an alternative to obtaining a loan from a traditional source such as a mortgage banker or savings and loan.

Late Charge
Penalty for failure to pay an installment on time.

Lease with Option to Purchase
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.

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.

Lender
General term encompassing all mortgages and beneficiaries under deeds of trust.

Lender's Instructions
Document that lenders prepare for the closing agent that outlines the requirements for loan closing.

Letter of Intent
Formal method of stating that a prospective developer, buyer or lessee is interested in property.

Lien
Encumbrance against property for the payment of debt; may be a mechanic's lien, mortgage, unpaid taxes or judgment.

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

Limited Partnership
Consists of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, who contribute capital and are liable only to the amount contributed.

Lis Pendens
Notice that litigation is pending on a property.

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

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.

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

Loan Officer
Person who helps borrowers through selection, processing and closing of a mortgage loan. Can be paid a commission or salary for their services and can work for mortgage brokers, mortgage bankers, or depository institutions.

Loan Origination Fees
Cost to obtain a loan that is paid to the originating lender or broker.

Loan Package
Information regarding a borrower and property which is the basis for a lender's credit decision to extend or deny credit.

Loan Ratio
Amount of a loan to the value or selling price of real property.

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

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

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

Market Value
Most likely price a given property will bring, assuming fully informed buyer and seller.

Marketable Title
Title that is free of liens, clouds on title and legal defects affecting the property.

Mechanics Lien
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.

Mortgage
Lien or claim against real property given as security for a loan. It is a two party agreement as apposed to tri-party agreemenet of a deed of trust.

Mortgage Broker
Professional who helps consumers through selection, processing and closing of a mortgage loan. Most have access to a wide range of mortgage products through many lenders. They are paid a fee by the borrower when a suitable mortgage is found and closed.

Mortgagee
The lender of money or the receiver of the mortgage document.

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

Mortgage Banker
Financial intermediaries who orginate mortgage loans through loan officers or independent mortgage brokers and sell the mortgages into the secondary mortgage market.

Mortgage Note
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.

Mortgage Warehousing
Funding facility, such as a commercial bank, 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.

Mortgagor
The borrower of money or the giver of the mortgage document.

Negative Amortization
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.

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

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

Note
Written promise to repay a certain sum of money on specified terms.

Office of Comptroller Currency
Federal government regulatory agency that oversees some commercial banks.

Office of Thrift Supervision
Federal government regulatory agency that oversees savings and loans.

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

Origination Fee
Fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.

Owner of record
Individual(s) named on a deed that has been recorded at the local municipality.

Owners Po