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Real estate & Financial Terms | Architectural and Construction Terms | Full Glossary

Real estate & Financial Terms

Adjustable Rate Mortgage (ARM)
A loan whose interest rate is adjusted according to movements in the financial market
Amortization
A payment plan by which a borrower reduces a debt gradually through monthly payments of principal and interest
Annual Percentage Rate (APR)
The annual cost off credit over the life of a loan, including interest, service charges, points, loan fees, mortgage insurance, and other items
Appraisal
An evaluation to determine what a piece of property would sell for in the marketplace
Appreciation
The increase in the value of a property
Assessment
A tax levied on a property or a value placed on the worth of property by a taxing authority
Assumption
A transaction allowing the buyer of a home to assume responsibility for an existing loan on the home instead of getting a new loan
Balloon
A loan which has a series of monthly payments (often for 5 years or less) with the remaining balance due in a large lump sum payment at the end
Binder
A receipt for a deposit paid to secure the right to purchase a home at terms agreed upon by the buyer and seller
Buydown
A subsidy (usually paid by a builder or developer) to reduce the monthly payments on a mortgage loan
Cap
A limit to the amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or over the life of the loan
Certificate of Occupancy
A document from an official agency stating that the property meets the requirements of local codes, ordinances, and regulations
Closing
A meeting to sign documents which transfer property from a seller to a buyer (Also called settlement)
Closing Costs
Charges paid at settlement for obtaining a mortgage loan and transferring real estate title
Conditions, Covenants, and Restrictions (CC and Rs
The standards that define how a property may be used and the protections the developer has made for the benefit of all owners in a subdivision
Condominium
A home in a multi-unit complex; each purchaser owns an individual unit, and all the purchasers jointly own the common areas, such as the surrounding land, hallways, etc
Conventional Loan
A mortgage loan not insured by a government agency (such as FHA or VA)
Convertibility
The ability to change a loan from an adjustable rate schedule to a fixed rate schedule
Cooperative
A form of ownership in a multi-unit complex; the purchasers own shares of the entire complex rather than owning individual units
Credit Rating
A report ordered by a lender from a credit bureau to determine if the borrower is a good credit risk
Default
A breach of a mortgage contract (such as not making monthly payments)
Density
The number of homes built on a particular acre of land Allowable densities are usually determined by local jurisdictions
Downpayment
The difference between the sales price and the mortgage amount on a home The downpayment is usually paid at closing
Due-on-Sale
A clause in a mortgage contract requiring the borrower to pay the entire outstanding balance upon sale or transfer of the property A mortgage with a due-on-sale clause is not assumable
Earnest Money
A sum paid to the seller to show that a potential purchaser is serious about buying
Easement
Right-of-way granted to a person or company authorizing access to the owner’s land; for example, a utility company may be grated an easement to install pipes or wires An owner may voluntarily grant an easement, or in some cases, be compelled to grant one by a local jurisdiction
Equity
The difference between the value of a home and what is owed on it
Escrow
The handling of funds or documents by a third party on behalf of the buyer and/or seller
Federal Housing Administration (FHA)
A federal agency which insures mortgages that have lower downpayment requirements than conventional loans
Fixed Rate Mortgage
A mortgage whose interest rate remains constant over the life of the loan The payments are not necessarily level (See Graduated Payment Mortgage and Growing Equity Mortgage)
Fixed Schedule Mortgage
A mortgage whose payment schedule for the life of the loan is established at closing The payments and interest rate are not necessarily level
Graduated Payment Mortgage (GPM)
A fixed-rate, fixed-schedule loan which starts with lower payments than a level payment loan; the payments rise annually over the first 5 to 10 years and then remain constant for the remainder of the loan GPMs involve negative amortization
Growing Equity Mortgage (Rapid Payoff Mortgage)
A fixed-rate, fixed-schedule loan which starts with the same payments as a level payment loan; the payments rise annually, with the entire increase being used to reduce the outstanding balance No negative amortization occurs, and the increase in payments may enable the borrower to pay off a 30-year loan in 15 to 20 years, or less
Hazard Insurance
Protection against damage caused by fire, windstorm, or other common hazards Many lenders require borrowers to carry it in an amount at least equal to the mortgage
Housing Finance Agency
A state agency which offers a limited amount of below-market-rate home financing for low-and moderate-income households
Index
The interest rate or adjustment standard which determines the changes in monthly payments for an adjustable rate loan
Infrastructure
The public facilities and services needed to support residential development, including highways, bridges, schools, and sewer and water systems
Interest
The cost paid to a lender for the use of borrowed money
Joint Tenancy
A form of ownership by which the tenants own a property equally If one dies, the other would automatically inherit the entire property
Level Payment Mortgage
A mortgage whose payments are identical for each month over the life of the loan
Mortgage Broker
A broker who represents numerous lenders and helps consumers find affordable mortgages; the broker charges a fee only if the consumer fins a loan
Mortgage Commitment
A formal written communication by a lender, agreeing to make a mortgage loan on a specific property, specifying the loan amount, length of time and conditions
Mortgage Company (Mortgage Banker)
A company that borrows money from a bank, lends it to consumers who want to buy homes, then sells the loans to investors
Mortgage Loan
A contract in which the borrower’s property is pledged a s collateral and which can be repaid in installments over a long period The mortgagor (buyer) promises to repay principal and interest, to keep the home insured, to pay all taxes, and to keep the property in good condition
Mortgage Origination Fee
A charge by a lender for the work involved in preparing and servicing a mortgage application (usually 1 percent of the loan amount)
Mortgagee
The lender who makes a mortgage loan
Negative Amortization
An increase in the outstanding balance of a loan when a monthly payment is not large enough to cover all of the interest due
Note
A formal document showing the existence of a debt and stating the terms of repayment
PITI
Principal, interest, taxes, and insurance (the 4 major components of monthly housing payments)
Point
A charge of 1 percent of the mortgage amount Points are a one-time charge assessed by the lender at closing to increase the interest yield on a mortgage loan
Prepayment
Payment of all or part of a debt prior to its maturity
Principal
The amount borrowed in a loan, excluding interest and other charges
Property Survey
A survey to determine the boundaries of your property The cost will depend on the complexity of the survey
R-Value
The resistance of insulation material (including windows) to heat passing through it The higher the number, the greater the insulating value
Rapid Payoff Mortgage
(See Growing Equity Mortgage)
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring lenders to provide home buyers with information about known or estimated settlement costs The act also regulates other aspects of settlement procedures
Recording Fee
A charge for recording the transfer of a property, paid to a city, county, or other appropriate branch of government
Sales Contract
A contract between a buyer and seller which should explain, in detail, exactly what the purchase includes, what guarantees there are, when the buyer can move in, what the closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot get a mortgage commitment at the agreed-upon terms
Settlement
(See Closing)
Shared Appreciation Mortgage
A loan in which partners agree to share specified portions of the downpayment, monthly payment, and appreciation
Tenancy in Common
A form of ownership in which the tenants own separate but equal parts To inherit the property, a surviving tenant would either have to be mentioned in the will or, in the absence of a will, be eligible through state inheritance laws
Title
Evidence (usually in the form of a certificate or deed) of a person’s legal right to ownership of a property
Transfer Taxes
Taxes levied on the transfer of property or on real estate loans by state and/or local jurisdictions
Veterans Administration (VA)
A federal agency which insures mortgage loans with very liberal downpayment requirements for honorably discharged veterans and their surviving spouses
Walk-Through
A final inspection of a home before settlement to search for problems that need to be corrected before ownership changes hands
Warranty
A promise, either written or implied, that the material and workmanship of a product is defect-free or will meet a specified level of performance over a specified period of time Written warranties on new homes are either backed by insurance companies or by the builders themselves
Zoning
Regulations established by local governments regarding the location, height, and use for any given piece of property within a specific area