Glossary of Real Estate Terms

accrued interest - Interest earned for the period of time elapsed since interest was last paid.

adjustable rate mortgage (ARM) - A mortgage in which the interest rate is periodically adjusted based on the movement of a preselected index

agreement for sale - Document in which purchaser agrees to buy certain real estate/ personal property and seller agrees to sell under stated terms and conditions. Also called sales contract, binder or earnest money contract.

amortization - Loan payment by equal periodic payments to retire principal at the end of a fixed period and to pay accrued interest on the outstanding balance.

annual percentage rate - Term in the Truth in Lending Act representing full cost of a loan, including interest and loan fees.

appraisal - A report that sets forth an estimate or opinion of value based upon a factual analysis.

appreciation - An increase in value; the opposite of depreciation.

balloon mortgage - A mortgage with periodic installments of principal and interest which do not fully amortize the loan. The balance of the loan is due in a lump sum at a specified date in the future, usually at the end of the term.

bridge loan - Form of interim financing which is secured by borrower's present residence (which is usually for sale) to allow the proceeds to be used to close on a new home before the present home is sold.

building code - The local regulations that control design, construction and materials used in construction. Building codes are based on safety and health standards.

buydown - Money advanced by seller or builder to reduce borrower's monthly mortgage payments during the entire term of the mortgage or for the first few years.

certificate of occupancy - Written authorization given by local municipality allowing a newly completed or substantially completed structure to be inhabited.

closing - Conclusion of a real estate transaction. Includes delivery of a deed, financial adjustments, signing of notes and disbursement of funds necessary to the sale of loan transaction.

closing costs - Money paid by borrower to effect the closing of a mortgage loan. Normally includes origination fee, title insurance, survey, attorney's fees and prepaid items like taxes and insurance escrow payments.

closing statement - A financial disclosure giving an account of all funds received and expected at the closing, including the escrow deposits for taxes, hazard insurance and mortgage insurance.

condominium - A unit of real property to which title is given, usually to the interior surfaces. Title to the common areas is in terms of percentages and refers to the entire condominium project less the separately owned units.

contract of sale -  A contract between a purchaser and a seller of real property to convey a title after certain conditions have been met and payments have been met.

conventional mortgage - A mortgage that is not insured by the FHA, guaranteed by the VA Or Farmers Home administration.

conversion - Conversion by a borrower of an adjustable rate mortgage to a fixed rate mortgage.

debt-to-income ratios - Ratios used to qualify a borrower by comparing the borrower's total monthly housing expense and total monthly debt to gross income.

earnest money - A sum of money given to bind a sale of real estate; a deposit,

escrow holdback - Funds held in escrow until completion of postponed improvements or repairs.

FNMA (Fannie Mae) - A term commonly used when referring to the Federal National Mortgage Association.

FHA Mortgage -  A mortgage which is insured by the FHA; may be referred to as a "government" mortgage.

FHLMC (Freddie Mac) – A term commonly used to refer to the Federal Home Loan Mortgage Corporation, which is a congressionally chartered corporation that purchases conventional mortgages in the secondary mortgage market.

first mortgage -  A mortgage which is the primary lien against a property.

fixed-rate mortgage - A mortgage for which the interest rate is set for the entire term of the loan. If the interest rate changes because of enforcement of the due-on-sale provision, the mortgage is considered a fixed rate mortgage.

interest rate - The note rate or rate of interest paid by the borrower.

land-to-value - The ratio of the value of the land to the lower of the purchase price or current appraised value expressed as a percentage.

liquid assets - Demand deposits, savings accounts, IRAs, Keoghs, 401 (k) plans, CDs, and publicly traded stocks and bonds.

loan closing date - The date on which loan proceeds are disbursed to the borrower.

loan-to-value ratio (LTV) - Ratio of outstanding principal of the mortgage loan to the appraised value/ purchase price of the mortgaged property, whichever is lower, expressed as a percentage.

mortgage - A formal document, including the security instrument, the note, the title, evidence and all other necessary documents and papers, that is executed by a property owner pledging the property as security for the payment of debt.

mortgagee - A lender to whom property is conveyed as a security for a loan.

mortgagor - One borrowing money, giving as security a mortgage/deed of trust on real property.

note - The applicable form of instrument that evidences the loan as required under this Correspondent Guide, including any addenda.

point - A dollar amount paid to a lender for making a loan. A point is one percent of the loan amount. Also called discount points.

PIT  - Principal, interest, taxes and insurance, which compromise the borrower's housing expense.

plat map - A map representing a piece of land subdivided into lots with streets, boundaries, easements and dimensions shown. It is usually recorded and made part of the public record.

reduced documentation - A processing option which does not require verification of employment or income.

second mortgage - A mortgage or other lien position subordinate to the first mortgage.

survey - A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimension, and the location and dimension of any improvements.

title - The evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed. Title may be acquired through purchase, inheritance, gift or through foreclosure of a mortgage.

title insurance - Insurance that provides for the payment of a specific amount of funds for loss caused by defects in the title to real estate.

zoning - City or county laws specifying how property may be used in specific areas.