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ABSORPTION RATE Back to top
The ratio of the number of properties in an area that have been sold against the number available. Used to show the volatility of a market.
ABSTRACTION METHOD Back to top
This method of estimating the value of property uses similar properties available in the same market to extract the value of a parcel of land.
ACCELERATION CLAUSE Back to top
A provision in a mortgage that gives the lender the right to demand immediate payment of the outstanding loan balance under certain circumstances. Usually when the borrower defaults on the loan.
ACCESSORY BUILDING Back to top
A building separate from the main structure on a property. Often used for a specific purpose, such as a workshop, storage shed or garage.
ACCRETION Back to top
The natural growth of a piece of land resulting from forces of nature
ACRE Back to top
43,560 square feet. A measurement of area.
ACTUAL AGE Back to top
The amount of time that has passed since a building or other structure was built. See also: EFFECTIVE AGE
ADJUSTMENT DATE Back to top
The date the interest rate changes on an adjustable rate mortgage.
AD VAL OREM TAX Back to top
Taxes assessed based on the value of the land and improvements
ADDENDUM Back to top
A supplement to any document that contains additional information pertinent to the subject. Appraisers use an addendum to further explain items for which there was inadequate space on the standard appraisal form.
ADJUSTABLE-RATE MORTGAGE (ARM) Back to top
A type of mortgage where the interest rate varies based on a particular index, normally the prime lending rate.
ADJUSTED BASIS Back to top
The value of an asset (property or otherwise) that includes the original price plus the value of any improvement, and less any applicable depreciation.
ADJUSTED SALES PRICE Back to top
An opinion of a property's sales price, after adjustments have been made to account for differences between it and another comparable property.
AESTHETIC VALUE Back to top
The additional value a property enjoys based on subjective criteria such as look or appeal.
AFFIRMATION Back to top
A declaration that a certain set of facts are truthful.
AFFORDABILITY ANALYSIS Back to top
A calculation used to determine an individual's likelihood of being able to meet the obligations of a mortgage for a particular property. Takes into account the down payment, closing costs and on-going mortgage payments.
AGENT Back to top
A person who has been appointed to act on behalf of another for a particular transaction.
AMENITY Back to top
Any feature of a property that increases its value or desirability. These might include natural amenities such as location or proximity to mountains, or man-made amenities like swimming pools, parks or other recreation.
AMERICAN SOCIETY OF APPRAISERS Back to top
An organization of appraisal professionals and others interested in the appraisal profession.
AMORTIZATION Back to top
The repayment of a loan through regular periodic payment.
AMORTIZATION SCHEDULE Back to top
The breakdown of individual payments throughout the life of an amortized loan, showing both principal contribution and debt service (interest) fees.
AMORTIZATION TERM Back to top
The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years.
ANNUAL PERCENTAGE RATE (APR) Back to top
The rate of annual interest charged on a loan.
APPLICATION Back to top
A form used to apply for a mortgage loan that details a potential borrower's income, debt, savings and other information used to determine credit worthiness.
APPRAISAL Back to top
A ''defensible'' and carefully documented opinion of value. Most commonly derived using recent sales of comparable properties by a licensed, professional appraiser.
APPRAISAL REPORT Back to top
The end result of the appraisal process usually consists of one major standardized form such as, the Uniform Residential Appraisal Report form 1004, as well as all supporting documentation and additional detail information. The purpose of the report is to convey the opinion of value of the subject property and support that opinion with corroborating information.
APPRAISED VALUE Back to top
An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals.
APPRAISER Back to top
An educated, certified professional with extensive knowledge of real estate markets, values and practices. The appraiser is often the only independent voice in any real estate transaction with no vested interest in the ultimate value or sales price of the property.
APPRECIATION Back to top
The natural rise in property value due to market forces.
ARMS LENGTH TRANSACTION Back to top
Any transaction in which the two parties are unconnected and have no overt common interests. Such a transaction most often reflects the true market value of a property.
ASSESSED VALUE Back to top
The value of a property according to jurisdictional tax assessment.
ASSESSMENT Back to top
The function of assigning a value to a property for the purpose of levying taxes.
ASSESSMENT RATIO Back to top
The comparative relationship of a property's assessed value to its market value.
ASSESSOR Back to top
The jurisdictional official who performs the assessment and assigns the value of a property.
ASSET Back to top
Any item of value which a person owns.
ASSIGNMENT Back to top
Transfer of ownership of a mortgage usually when the loan is sold to another company.
ASSUMABLE MORTGAGE Back to top
A mortgage that can be taken over by the buyer when a home is sold.
ASSUMPTION Back to top
When a buyer takes over, or "assumes" the sellers mortgage.
ATTACHED HOUSING Back to top
Any number of houses or other dwellings which are physically attached to one another, but are occupied by a number of different people. The individual houses may or may not be owned by separate people as well.
BALLOON MORTGAGE Back to top
A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment.
BALLOON PAYMENT Back to top
The final large payment at the end of a balloon mortgage term.
BANKRUPTCY Back to top
When a person or business is unable to pay their debts and seeks protection of the state against creditors. Bankruptcies remain on credit records for up to ten years and can prevent a person from being able to get a loan.
BIWEEKLY MORTGAGE Back to top
A mortgage where you make "half payments" every two weeks, rather than one payment per month. This results in making the equivalent of 13 monthly payments per year, rather than 12, significantly reducing the time it takes to pay off a thirty year mortgage.
BRIDGE FINANCING Back to top
An interim loan made to facilitate the purchase of a new home before the buyer's current residence sells and its equity is available to fund the new purchase.
BROKER Back to top
An individual who facilitates the purchase of property by bringing together a buyer and a seller.
BUILDING CODE Back to top
Regulations that ensure the safety and material compliance of new construction within a municipality. Building codes are localized to ensure they are adequate to meet the risk of common hazards.
BUILDING LINE OR SETBACK Back to top
The statutory distance between buildings and the property line, imposed by municipalities, home associations, or other agreements.
BUY DOWN Back to top
Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage.
CALL OPTION Back to top
A clause in a mortgage which allows the lender to demand payment of the outstanding balance at a specific time.
CAP Back to top
Associated with Adjustable Rate Mortgages. A limit on how high monthly payments or how much interest rates may change within a certain time period or the life of the mortgage.
CAPITAL Back to top
Accumulated goods and money which is most often used to generate additional income.
CAPITAL EXPENDITURE Back to top
An outlay of funds designed to improve the income-producing capabilities of an asset or to extend its economic life.
CASH-OUT REFINANCE Back to top
Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash.
CAVEAT EMPTOR Back to top
Literally translated: ''Let the buyer beware.'' A common business tenet whereby the buyer is responsible for verifying any and all claims by the seller of property.
CERTIFICATE OF OCCUPANCY Back to top
Issued by an appropriate jurisdictional entity, this document certifies that a building complies with all building codes and is safe for use or habitation.
CERTIFICATE OF TITLE Back to top
A document designating the legal owner of a parcel of real estate. Usually provided by a title or abstract company.
CHAIN OF TITLE Back to top
The complete history of ownership of a piece of property.
CLEAR TITLE Back to top
Ownership of property that is not encumbered by any counter-claim or lien.
CLOSING Back to top
A torturous process designed to induce cramping in a home buyer's hands by requiring signature on countless pieces of documentation that nobody has ever read. Or, the process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale (CLOSING COSTS).
CLOSING COSTS Back to top
All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal.
CLOSING STATEMENT Back to top
The document detailing the final financial arrangement between a buyer and seller and the costs paid by each.
CO-BORROWER Back to top
A second person sharing obligation on the loan and title on the property.
COLLATERAL Back to top
An asset which is placed at risk to secure the repayment of a loan.
COLLECTION Back to top
The process a lender takes to pursue a borrower who is delinquent on his payments in order to bring the mortgage current again. Includes documentation that may be used in foreclosure.
CO-BORROWER Back to top
A second party who signs a loan, along with the borrower, and becomes liable for the debt should the borrower default.
COMMISSION Back to top
A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property.
COMMON AREA ASSESSMENTS Back to top
Fees which are charged to the tenets or owners of properties to cover the costs of maintaining areas shared with other tenets or owners. Commonly found in condominium, PUD or office spaces.
COMMON AREAS Back to top
Any areas, such as entryways, foyers, pools, recreational facilities or the like, which are shared by the tenets or owners of property near by. Commonly found in condominium, PUD or office spaces.
COMMUNITY PROPERTY Back to top
In many jurisdictions, any property which has been acquired by a married couple. The ownership of the property is considered equal unless stipulated otherwise by both parties.
COMPARABLES Back to top
A term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property whose value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property.
CONCESSIONS Back to top
Additional value granted by a buyer or seller to entice another party to complete a deal.
CONDEMNATION Back to top
The official process by which a property is deemed to be uninhabitable or unusable due to internal damage or other external conditions.
CONSTRUCTION LOAN Back to top
A loan made to a builder or home owner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed.
CONTINGENCY Back to top
Something that must occur before something else happens. Often used in real estate sales when a buyer must sell a current home before purchasing a new one. Or, when a buyer makes an offer that requires a complete home inspection before it becomes official.
CONTRACT Back to top
A legally binding agreement, oral or written, between two parties.
CONVENTIONAL MORTGAGE Back to top
A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.).
CONVERTIBLE ARM Back to top
A mortgage that begins as and adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe.
COOPERATIVE (CO-OP) Back to top
A form of ownership where each resident of a multiunit property owns a share in a cooperative corporation that owns the building. With each resident having rights to a specific unit within the building.
COST OF FUNDS INDEX (COFI) Back to top
An index of financial institutions costs used to set interest rates for some Adjustable Rate Mortgages.
COVENANT Back to top
A stipulation in any mortgage that, if not met, can be cause for the lender to foreclose.
CUL-DE-SAC Back to top
A dead-end street. One with only one entrance/exit.
DEED Back to top
A document indicating the ownership of a property.
DEFAULT Back to top
The condition in which a borrower has failed to meet the obligations of a loan or mortgage.
DELINQUENCY Back to top
The state in which a borrow has failed to meet payment obligations on time.
DEPOSIT Back to top
Cash given along with an offer to purchase property, Also called EARNEST MONEY.
DEPRECIATION Back to top
The natural decline in property value due to market forces or depletion of resources.
DETACHED SINGLE-FAMILY HOME Back to top
A single building improvement intended to serve as a home for one family.
DISCOUNT POINTS Back to top
Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount.
DUE-ON-SALE PROVISION Back to top
A clause in a mortgage giving the lender the right to demand payment of the full balance when the borrower sells the property.
DUPLEX Back to top
A single-building improvement which is divided and provides two units which serve as homes to two families.
DOWN PAYMENT Back to top
An amount paid in cash for a property, with the intent to mortgage the remaining amount due.
EARNEST MONEY DEPOSIT Back to top
A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.
EASEMENT Back to top
The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines.
EFFECTIVE AGE Back to top
The subjective, estimated age of a property based on its condition, rather than the actual time since it was built. Excessive wear and tear can cause a property's effective age to be greater than its actual age.
EMINENT DOMAIN Back to top
The legal process whereby a government can take ownership of a piece of property in order to convert it to public use. Often, the property owner is paid fair-market value for the property.
ENCROACHMENT Back to top
A building or other improvement on one property which invades another property or restricts its usage.
ENCUMBRANCE Back to top
A claim against a property. Examples are mortgages, liens and easements.
ENERGY EFFICIENCY RATIO Back to top
An efficiency rating system for air conditioning units that corresponds to the number of BTU's output per watt of electricity used.
EQUAL CREDIT OPPORTUNITY ACT (ECOA) Back to top
U.S. federal law requiring that lenders afford people equal chance of getting credit without discrimination based on race, religion, age, sex etc
EQUITY Back to top
The difference between the fair market value of a property and that amount an owner owes on any mortgages or loans secured by the property.
ESCROW Back to top
An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property.
ESCROW ACCOUNT Back to top
An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that go into the escrow account each month.
EXAMINATION OF TITLE Back to top
The report on the title of a property from the public records or an abstract of the title.
EXCLUSIVE LISTING Back to top
An agreement between the owner of a property and a real estate agent giving the agent exclusive right to sell the property.
FAIR MARKET VALUE Back to top
The price at which two unrelated parties, under no duress, are willing to transact business.
FANNIE MAE Back to top
A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation's largest source of financing for home mortgages.
FEDERAL HOUSING ADMINISTRATION (FHA) Back to top
A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930's to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders.
FEE SIMPLE Back to top
A complete, unencumbered ownership right in a piece of property.
FHA MORTGAGE Back to top
A mortgage that is insured by the Federal Housing Administration (FHA).
FINAL VALUE ESTIMATE Back to top
The opinion of value of a piece of property resulting from an appraisal following the USPAP guidelines.
FIRST MORTGAGE Back to top
The primary loan or mortgage secured by a piece of property.
FIXED-RATE MORTGAGE (FRM) Back to top
A mortgage which has a fixed rate of interest over the life of the loan.
FIXTURE Back to top
Any piece of personal property which becomes permanently affixed to a piece of real property.
FLOOD INSURANCE Back to top
Supplemental insurance which covers a home owner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones.
FLOOR PLAN Back to top
The representation of a building which shows the basic outline of the structure, as well as detailed information about the positioning of rooms, hallways, doors, stairs and other features. Often includes detailed information about other fixtures and amenities.
FORECLOSURE Back to top
The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan.
FRONTAGE Back to top
The segment of a property that runs along a point of access, such as a street or water front.
FUNCTIONAL OBSOLESCENCE Back to top
A decrease in the value of property due to a feature or lack thereof which renders the property undesirable. Functional obsolescence can also occur when the surrounding area changes, rendering the property unusable for its originally intended purpose.
GENERAL LIEN Back to top
A broad-based claim against several properties owned by a defaulting party.
GINNIE MAE Back to top
A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers.
GOVERNMENT MORTGAGE Back to top
Any mortgage insured by a government agency, such as the FHA or VA.
GRANTEE Back to top
Any person who is given ownership of a piece of property.
GRANTOR Back to top
Any person who gives away ownership of a piece of property.
GROSS AREA Back to top
The sum total of all floor space, including areas such as stairways and closet space. Often measured based on external wall lengths.
HAZARD INSURANCE Back to top
Insurance covering damage to a property caused by hazards such as fire, wind and accident.
HIDDEN AMENITIES Back to top
Assets of a property which contribute to its value, but are not readily apparent. Examples might include upgraded or premium building materials.
HIGHEST AND BEST USE Back to top
The most profitable and likely use of a property. Selected from reasonably probable and legal alternative uses, which are found to be physically possible, appropriately supported and financially feasible to result in the highest possible land value.
HOME EQUITY CONVERSION MORTGAGE (HECM) Back to top
Also known as a reverse annuity mortgage. It allows home owners (usually older) to convert equity in the home into cash. Normally paid by the lender in monthly payments. HECM's typically do not have to be repaid until the borrower is no longer occupying the home.
HOME EQUITY LINE OF CREDIT (HELOC) Back to top
A type of mortgage loan that allows the borrower to draw cash against the equity in his home.
HOME INSPECTION Back to top
A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value.
HOME INSPECTOR Back to top
A person who performs professional home inspections. Usually, with an extensive knowledge of house construction methods, common house problems, how to identify those problems and how to correct them.
HOMEOWNER'S ASSOCIATION Back to top
An organization of home owners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants.
HOMEOWNER'S INSURANCE Back to top
A policy which covers a home owner for any loss of property due to accident, intrusion or hazard.
HOME WARRANTY Back to top
An insurance policy covering the repair of systems and appliances within the home for the coverage period.
HUD-1 STATEMENT Back to top
A standardized, itemized list, published by the U.S. Department of Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected with a particular property purchase.
IMPROVED LAND Back to top
Any parcel of land which has been changed from its natural state through the creation of roads, buildings or other structures.
IMPROVEMENTS Back to top
Any item added to vacant land with the intent of increasing its value or usability.
IMPROVEMENT RATIO Back to top
The comparative value of an improved piece of land to its natural, unaltered state.
INCOME APPROACH Back to top
The process of estimating the value of property by considering the present value of a stream of income generated by the property.
INCOME PROPERTY Back to top
A piece of property whose highest and best use is the generation of income through rents or other sources.
INDEPENDENT APPRAISAL Back to top
An estimation of value created by a professional, certified appraiser with no vested interest in the value of the property.
INSPECTION Back to top
The examination of a piece of property, its buildings or other amenities.
INSURABLE TITLE Back to top
The title to property which has been sufficiently reviewed by a title insurance company, such that they are willing to insure it as free and clear.
INTEREST RATE Back to top
A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.
INVESTMENT PROPERTY Back to top
Any piece of property that is expected to generate a financial return. This may come as the result of periodic rents or through appreciation of the property value over time.
JOINT TENANCY Back to top
A situation where two or more parties own a piece of property together. Each of the owners has an equal share, and may not dispose of or alter that share without the consent of the other owners.
JUMBO LOAN Back to top
A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans.
LATENT DEFECTS Back to top
Any defect in a piece of property which is not readily apparent, but which has an impact of the value. Structural damage or termite infestation would be examples of latent defects.
LEASE Back to top
A contract between a property owner and a tenant specifying the payment amount, terms and conditions, as well as the length of time the contract will be in force.
LEASEHOLD ESTATE Back to top
A type of property ''ownership'' where the buyer actually has a long-term lease on the property.
LEASE OPTION Back to top
A lease agreement that gives the tenant an option to buy the property. Usually, a portion of the regular monthly rent payment will be applied towards the down payment.
LEGAL DESCRIPTION Back to top
The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection.
LENDER Back to top
The person or entity who loans funds to a buyer. In return, the lender will receive periodic payments, including principal and interest amounts.
LIEN Back to top
Any claim against a piece of property resulting from a debt or other obligation.
LIFE CAP Back to top
A limit on how far the interest rate can move for an Adjustable Rate Mortgage.
LIKE-KIND PROPERTY Back to top
Any property which is substantially similar to another property.
LOAN Back to top
Money borrowed, to be repaid with interest, according to the specific terms and conditions of the loan.
LOAN OFFICER Back to top
A person that "sells" loans, representing the lender to the borrower, and the borrower to the lender.
LOAN ORIGINATION Back to top
How a lender refers to the process of writing new loans.
LOAN SERVICING Back to top
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.
LOAN-TO-VALUE RATIO (LTV) Back to top
The comparison of the amount owed on a mortgaged property to its fair market value.
LOCK-IN Back to top
An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time.
LOCK-IN PERIOD Back to top
The amount of time the lender has guaranteed an interest rate to a borrower.
MAJOR DEFICIENCY Back to top
A deficiency that strongly impacts the usability and habitability of a house. Or a deficiency that may be very expensive to repair.
MANUFACTURED HOUSING Back to top
Once known as ''mobile homes,'' manufactured housing is any building which has been constructed off site, then moved onto a piece of real property.
MARGINAL LAND Back to top
Land whose value has been diminished due to some internal defect or external condition. In most cases, the cost to correct the flaw or condition is as much or more than the expected return from the property.
MASTER ASSOCIATION Back to top
An umbrella organization that is made up of multiple, smaller home owner's associations. Often found in very large developments or condominium projects.
METES AND BOUNDS Back to top
A traditional way of describing property, generally expressed in terms of distance from a known landmark or intersection, and then following the boundaries of the property back to its origin.
MORTGAGE Back to top
A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral.
MORTGAGE BANKER Back to top
A financial institution that provides primary and secondary mortgages to home buyers.
MORTGAGE BROKER Back to top
A person or organization that serves as a middleman to facilitate the mortgage process. Brokers often represent multiple mortgage bankers and offer the most appropriate deal to each buyer.
MORTGAGEE Back to top
The entity that lends money in a real estate transaction.
MORTGAGE INSURANCE Back to top
A policy that fulfills those obligations of a mortgage when the policy holder defaults or is no longer able to make payments.
MORTGAGE INSURANCE PREMIUM (MIP) Back to top
A fee that is often included in mortgage payments that pays for mortgage insurance coverage.
MORTGAGOR Back to top
The entity that borrows money in a real estate transaction.
MULTI-FAMILY PROPERTIES Back to top
Any collection of buildings that are designed and built to support the habitation of more than four families.
NEGATIVE AMORTIZATION Back to top
When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest.
NEIGHBORHOOD Back to top
A subsection of a municipality that has been designated by a developer, economic forces or physical formations.
NET LEASABLE AREA Back to top
The space in a development, outside of the common areas, that can be rented to tenants.
NON-CONFORMING USE Back to top
The use of land for purposes contrary to the applicable municipal zoning specifications. Often occurs when zoning changes after a property is in use.
NOTE Back to top
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
NOTE RATE Back to top
The interest rate stated on a mortgage note.
NOTICE OF DEFAULT Back to top
Formal written notice from a lender to a borrower that default has occurred.
OBSOLESCENCE Back to top
The process of an assets value diminishing due to the development of more desirable alternatives or because of the degradation of its capabilities.
OCCUPANCY Back to top
A physical presence within and control of a property.
OCCUPANCY RATE Back to top
The percentage of properties in a given area that are occupied.
OFF-SITE IMPROVEMENTS Back to top
Buildings, structures or other amenities which are not located on a piece of property, but are necessary to maximize the use of the property or in some way contribute to the value of the property.
ON-SITE IMPROVEMENTS Back to top
Buildings, structures or other amenities that are erected on a piece of property and contribute to its value.
ORIGINAL EQUITY Back to top
The amount of cash a home buyer initially invests in the home.
ORIGINAL PRINCIPAL BALANCE Back to top
The total amount of principal owed on a mortgage loan at the time of closing.
ORIGINATION FEE Back to top
Refers to the total number of points paid by a borrower at closing.
OWNER FINANCING Back to top
A transaction where the property owner provides all or part of the financing.
OWNER OCCUPIED Back to top
The state of property wherein the owner occupies at least some portion of the property.
PARTIAL INTEREST Back to top
A shared ownership in a piece of property. May be divided among two or more parties.
PERIODIC PAYMENT CAP Back to top
The limit on how much regular monthly payments on an Adjustable Rate Mortgage can change during one adjustment period.
PERIODIC RATE CAP Back to top
The limit on how much the interest rate on an Adjustable Rate Mortgage can change during any one adjustment period.
PERSONAL PROPERTY Back to top
Owned items which are not permanently affixed to the land.
PLANNED UNIT DEVELOPMENT (PUD) Back to top
A coordinated, real estate development where common areas are shared and maintained by an owner's association or other entity.
PLAT MAP Back to top
A plan or chart of a piece of land which lays out existing or planned streets, lots or other improvements.
POINT Back to top
A percentage of a mortgage amount (one point = 1 percent).
PRE-APPROVAL Back to top
The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers.
PREFABRICATED Back to top
Any building or portion thereof which is manufactured and assembled off site, then erected on a property.
PREPAYMENT Back to top
Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized.
PREPAYMENT PENALTY Back to top
A fee that may be charged to a borrower who pays off a loan before it is due.
PRE-QUALIFICATION Back to top
Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan.
PRIME RATE Back to top
The interest rate that banks and other lending institutions charge other banks or preferred customers.
PRINCIPAL Back to top
The amount owed on a mortgage which does not include interest or other fees.
PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI) Back to top
The most common constituents of a monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI) Back to top
A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%.
PROPERTY Back to top
Any item which is owned or possessed.
PURCHASE AGREEMENT Back to top
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
QUADRAPLEX Back to top
Any building designed to accommodate four families.
QUALIFYING RATIOS Back to top
Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrower's monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income.
QUITCLAIM DEED Back to top
A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear.
RATE LOCK Back to top
A guarantee from a lender of a specific interest rate for a period of time.
RAW LAND Back to top
Any land which has not been developed.
REAL ESTATE Back to top
A piece of land and any improvements or fixtures located on that land.
REAL ESTATE AGENT Back to top
A licensed professional who facilitates the buying and selling of real estate.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) Back to top
A federal law requiring lenders to give full disclosure of closing costs to borrowers.
REAL PROPERTY Back to top
Land, improvements and appurtenances, and the interest and benefits thereof.
REALTOR® Back to top
A real estate agent or broker who is a member of the NATIONAL ASSOCIATION of REALTORS®.
RECORDING Back to top
The filing of a real estate transaction with the appropriate government agent (normally the RECORDER). A real estate transaction is considered final when it is recorded.
REFINANCE TRANSACTION Back to top
A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash.
REMODEL Back to top
An activity designed to improve the value or desirability of a property through rebuilding, refurbishing, redecorating or adding on to it.
RESIDENTIAL PROPERTY Back to top
A piece of property whose highest and best use is the maintenance of a residence.
RIGHT OF FIRST REFUSAL Back to top
An agreement giving a person the first opportunity to buy or lease a property before the owner offers it for sale to others.
SALE PRICE Back to top
The actual price a property sells for, exclusive of any special financing concessions.
SALES COMPARISON APPROACH Back to top
An appraisal practice which estimates the value of a property by comparing it to comparable properties which have sold recently.
SCARCITY Back to top
An economic principal that dictates the price of a good or service through the interaction of supply and demand. When an item is scarce, its price tends to rise, given a constant demand. Real Estate is a classic example of scarcity.
SECOND MORTGAGE Back to top
A loan secured by the equity in a home, when a primary mortgage already exists.
SECONDARY MORTGAGE MARKET Back to top
An economic marketplace where mortgage bankers buy and sell existing mortgages.
SECURED LOAN Back to top
A loan that is backed by collateral. In the case of a mortgage loan, the collateral is the house.
SECURITY Back to top
The property used as collateral for a loan.
SEMIDETACHED HOUSING Back to top
Two residences which share a common wall.
SERVICER Back to top
A financial institution which collects mortgage payments from borrowers and applies the appropriate portions to principal, interest and any escrow accounts.
SERVICING Back to top
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.
SINGLE-FAMILY PROPERTY Back to top
A property designed and built to support the habitation of one family.
SUBDIVISION Back to top
A residential development that is created from a piece of land which has been subdivided into individual lots.
SUBJECT PROPERTY Back to top
A term which indicates a property which is being appraised.
SURVEY Back to top
A specific map of a piece of property which includes the legal boundaries and any improvements or features of the land. Surveys also depict any rights-of-way, encroachments or easements.
SWEAT EQUITY Back to top
The method whereby a home owner develops equity in a property, either during the purchase or throughout its life, by personally constructing improvements rather than paying to have them built.
TAX-EXEMPT PROPERTY Back to top
Any property which is not taxed.
TENANCY Back to top
The right to occupy a building or unit.
TENANCY IN COMMON Back to top
A form of holding title, whereby there are two or more people on title to a property, ownership does not pass on to the others upon the death of one individual.
THIRD PARTY ORIGINATION Back to top
When a lender uses a third party to originate and package loans for sale to the secondary market (Fannie Mae, Freddie Mac).
TITLE Back to top
A specific document which serves as proof of ownership.
TITLE COMPANY Back to top
An organization which researches and certifies ownership of real estate before it is bought or sold. Title companies also act at the facilitator ensures all parties are paid during the real estate transaction.
TITLE INSURANCE Back to top
A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise.
TITLE SEARCH Back to top
The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist.
TRANSFER OF OWNERSHIP Back to top
Any means by which the ownership of a property changes hands.
TRANSFER OF TAX Back to top
Taxes payable when title passes from one owner to another.
TRUTH IN LENDING Back to top
A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage.
UNDER IMPROVED LAND Back to top
A piece of land which has been improved, but not to the full extent of its potential.
UNENCUMBERED PROPERTY Back to top
Any property which has no outstanding claims or liens against it.
UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP) Back to top
Developed in 1986 by the Ad Hoc Committee on Uniform Standards and copyrighted in 1987 by The Appraisal Foundation, USPAP forms the guidelines followed by every licensed and certified real estate appraiser in the United States. The purpose of these Standards is to establish requirements for professional appraisal practice, which includes appraisal, appraisal review, and appraisal consulting. The intent of these Standards is to promote and maintain a high level of public trust in professional appraisal practice.
USEFUL LIFE Back to top
The span of time over which a property can be used or can provide benefits to its owner.
VACANCY RATE Back to top
The current percentage of vacant properties in a given area, regardless of why they are vacant.
VA MORTGAGE Back to top
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
VARIANCE Back to top
An exception to municipal zoning regulations granted for a specific time period to allow for non-conforming use of the land.
VETERANS AFFAIRS, DEPARTMENT OF (VA) Back to top
The successor to the Veteran's Administration, this government agency is responsible for ensuring the rights and welfare of our nation's veterans and their dependents. Among other duties, the VA insures home loans made to veterans.
WALK-THROUGH INSPECTION Back to top
A buyer's final inspection of the home to determine if conditions in the purchase agreement have been satisfied. Usually occurs the day prior to closing.
WARRANTY Back to top
An affidavit given to stipulate the condition of a property. The person giving the warranty assumes liability if the condition turns out to be untrue.
WEAR AND TEAR Back to top
A term used to indicate the normal damage inflicted on a property through every-day use.
ZERO LOT LINE Back to top
A municipal zoning category wherein a building or other fixture may abut the property line.
ZONING Back to topGuidelines regarding the use of property established by local government. Typical zones include single-family, multi-family, industrial, commercial and mixed-us
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