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Real Estate Glossary

Adjustable-rate mortgage (ARM)
A mortgage that permits the lender to adjust the interest rate periodically on the basis of changes in a specified index.

ALTA title policy
Title insurance policy with extended coverage that is issued for the benefit of the lender.

Amortization schedule
A timetable schedule showing the amount of each payment applied to interest and principal and the remaining balance after each payment is made.

Annual percentage rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage, and loan origination fee (points).

Appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser.

Association transfer fee
Paid to the homeowner’s association (if applicable).

Biweekly payment mortgage
A mortgage requiring payments every two weeks instead of the standard monthly payment. The result for the borrower is a substantial savings in interest.

Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Certificate of title
A statement provided by an abstract company title or attorney stating that the title to real estate is legally held by the current owner.

Closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs.

Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan.

Commission
The fee charged by a broker or agent for providing services related to a real estate transaction such as procuring the property, bringing the parties together, and negotiating a purchase contract or loan.

Credit report
A report on the past ability of a loan applicant to pay installment payments.

Deed
The legal document conveying title to a property.

Discount points
Also known as “points”, 1 point equals 1% of the loan amount. The more points you pay, the lower your interest rate will be & vice versa.

Earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Equity
A homeowner’s financial interest in a property.

Escrow Fee
A fee charged by the escrow company to handle the paperwork in transferring title, adjusting taxes, distributing funds, etc. The fee is based on the sales price & is usually split between the Buyer and Seller

Escrow/impound fee
Funds held by the lender for payment of taxes and insurance when due usually does not include maintenance fees

Exclusive listing
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner’s right to sell the property himself without the payment of a commission.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.

Home inspection
A thorough inspection that evaluates the structural and mechanical condition of a property.

Interest
Cost of loan funds – always paid in arrears

Lien
The legal claim against a property that must be satisfied before the property may be sold.

Lock-in
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time.

Maintenance fee
Charged by the homeowner’s association as set out in the subdivision restrictions

Mortgage
A legal document that pledges a property to the lender as security for payment of a debt.

Mortgage insurance
A contract that insures the lender against loss caused by a mortgagor’s default on a government mortgage or conventional mortgage.

Mortgagee’s title policy
Required by the lender to insure that the lender has a valid lien – does not protect the buyer, only the lender

Net worth
The value of all of a person’s assets, including cash, minus all liabilities.

Origination fee
A fee the buyer pays the lender to originate a new loan

Owner’s title policy
Insures that the buyer has title to the property

Point
1% of loan amount

Prepaid interest
The lender will require prepaid interest from the day of funding to the first day of the following month

Pre-payment penalty
Charged by the lender for premature payment of a loan balance

Prime rate
The interest that banks charge to their preferred customers.

Principal
The amount borrowed or remaining unpaid.

Private mortgage insurance (PMI)
Insurance against a loss by a lender (mortgagee) in the event of default by a borrower (mortgagor).

Real estate agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

REALTOR®
A registered collective membership mark which identifies real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics.

Realtor’s fees
An amount paid to the realtor as compensation for his/her services

Recording fees
Charged by the county clerk to record documents in the public records

Restrictions
Certified copy of deed restrictions required by a lender

Survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachment, and other physical features.

Tax certificates
Certificates issued by taxing authorities showing the current year’s taxes, the last year the taxes were paid, and any delinquencies to be collected at closing

Tax impounds
An account held by the lender to pay future taxes. Typically a few months worth of taxes is collected by the lender at the close of escrow

Title search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Truth in Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate and other charges.

Underwriting
The process of evaluating a loan application to determine the risk involved for the lender.
 
 

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