Here is a complete and easy to understand real estate glossary.
ABSTRACT OF TITLE – Is the condensed history of title of a property, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification that the history is complete and accurate.
ACCELERATION CLAUSE – Is a clause in your mortgage that allows the lender to accelerate and demand immediate payment of the outstanding loan balance for various reasons. Usually this only occurs if the borrower defaults on the loan or transfers title to another individual without notifying the lender.
ACCEPTANCE – Could be known as offer acceptance. It is the date when both parties to the offer, the seller and buyer, have agreed to the offer and fully signed and initialed the offer and turning it into an executed contract.
ADJUSTABLE RATE MORTGAGE (ARM) – A mortgage in which the interest changes in accordance with a specified index. These rates can go either up or down and are generally capped at a certain level.
ADVERSE POSSESSION – The unauthorized occupation of land belonging to another, by a person who does not have the consent of the owner. The unauthorized occupier is said to hold possession adversely to the rights and interests of the owner. Believe it or not, in most states, by operation of law, title to the land becomes vested to the unauthorized occupier after a fixed number of years of peaceful occupancy.
ALTA – American Land Title Association, this is the national trade association for the title insurance industry. ALTA is made up of title companies that conduct your closing and issue you an Owner’s Policy of Title Insurance.
AMORTIZATION – A loan that is paid in equal installments during its term. The loan payment consists of a portion that gets applied to the accruing interest and the remainder of the payments is applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
ANNUAL PERCENTAGE RATE (APR) – This is not the note rate on your loan. This rate is the total of all charges on your loan that includes interest, discount points, origination fees, loan broker commission, etc. This give you a full picture of the loan. If you are going to compare two loans this is the rate you should use, not the interest rate.
APPRAISAL – An estimate of the value of real estate. It uses local, comparable sales to determine a value of the home.
APPRAISER – Usually a licensed professional that is qualified by education, training, and experience to estimate the value of real property and personal property. Most appraisers are independent but hired by mortgage lenders to appraise homes for them.
APPRECIATION – The increase in the value of a property due to increases in market prices, inflation, or other causes.
ASSESSED VALUE – Is the value placed on the property by the public or county tax assessor for tax purposes. In general this value is different from the appraised value. For FishHawk Ranch home owners you can check out the Hillsborough County Property Appraiser website to see the assessed value for a specific property.
ASSIGNMENT – When ownership of your mortgage is transferred from one company or individual to another company or individual. The majority of loans made today are sold and assigned to another company.
ASSUMABLE MORTGAGE – The purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage. In today’s market finding an assumable mortgage is very rare.
BALLOON MORTGAGE – A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but at the end of the tenth year a balloon payment for the entire remaining balance must be paid.
BANKRUPTCY – By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a “Chapter 7” bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify a loan for a period of two or more years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.
BILL OF SALE – Document used to transfer title (ownership) of Personal Property. Real Property uses other forms to transfer ownership.
BI-WEEKLEY MORTGAGE – A mortgage in which you make payments every two weeks instead of once a month. The result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment goes directly toward the loan principle and is a great thirty year mortgage. This is a great way to cut years off of your 30 year mortgage!
BROKER – Because this is a real estate glossary the broker is a real estate broker. This is a person who has taken education beyond the agent level as required by state laws and has passed a broker’s license exam. Brokers can work alone or they can hire agents to work for them.
BROKERAGE – The real estate company is known as the brokerage. All REALTORS® work for a broker. The fees and commissions are paid to the broker and the broker pays the REALTOR®.
CAP RATE – A Cap Rate is a term used with Adjustable Rate Mortgages (ARMs). These ARMs have fluctuating interest rates, but in order to limit those fluctuations most ARMs have caps on how much the interest rate can go up during a specified period.
CASH OUT REFINANCE – This occurs when a borrower refinances their mortgage for more money than the current loan balance. They do this with the intention of getting extra cash to use for home upgrades or just for personal reasons.
CERTIFICATE OF ELIGIBILITY – For VA loans, this is a document that is issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan.
CERTIFICATE OF REASONABLE VALUE (CRV) – Again for VA loans, the CRV is issued once the appraisal has been performed on a property.
CERTIFICATE OF TITLE – In areas where attorneys examine abstracts or chains of title, a written opinion, executed by the examining attorney stating that title is vested as stated in the abstract.
CHAIN OF TITLE – An analysis of the transfers of title to a piece of property over the years.
CLEAR TITLE – Is a title that is free of liens or legal questions as to ownership of the property.
CLOSING – This has different meanings in different states and areas. I work in Hillsborough County, Florida and when we use the term Closing we are typically speaking about money changing hands and the buyer and seller signing all the final documents to transfer title to the new owner. In some states a real estate transaction is not consider “closed” until the documents are recorded at the local Clerk of Courts.
CLOSING COSTS – These costs are broken down into two categories, Non-Recurring Closing Costs and Prepaid Items. The Non-Recurring Closing Costs are that are paid just once as the result of buying the buying the property or obtaining a loan. An example of this would be mortgage points on a loan. Prepaid Items are that are likely to continue for a specified about of time or continue the entire time the borrower owns the property. These are like property taxes and homeowners insurance. A lender will give a borrower a Good Faith Estimate that attempts to estimate what these closing costs will be.
CLOSING STATEMENT (HUD1) – Also known as a Settlement Statement. Is a financial statement given to the buyer(s) and seller(s) at the property closing. It breaks down the borrower funds and seller funds on the transaction. Here is a sample copy of a Settlement Statement (HUD1).
CLOUD ON TITLE – Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.
COLLATERAL – With a mortgage loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the agreed upon terms.
COLLECTION – If a borrower falls behind on the mortgage, the lender attempts to contact the borrower in an attempt to bring the loan current. If that is not successful the Acceleration Clause will kick in. If the borrower is unable pay off the loan, the loan will eventually go to “collection.” As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.
COMMISSION – This is how real estate professionals and mortgage brokers get paid for their services.
COMMON AREA – Areas in buildings, land, and amenities owned or typically managed by a planned unit development (PUD) or homeowners’ association that are used by all of the unit owners or residents. The owners or residents share in the common expenses of their operation and maintenance usually in the form of dues or fees. Common areas include playgrounds, basketball courts, swimming pools, sports fields, parks, tennis courts, and other recreational facilities. This could also include common corridors of buildings and parking lots.
COMPARABLE SALES – To come up with an accurate property value both real estate agents and appraisers will use comparable sales. These sold properties will have similar characteristics and location as the subject property. These are also referred to as Comps.
CONDITIONS – Sometimes called contingency. This term deals with provisions in an offer that make a particular right contingent upon the occurrence of other event. For example we see a lot of offer that have this condition. This contract is contingent on the buyers selling their home by March 1, 2039. If for some reason the buyer cannot sell their home by that date they would have the right to cancel the contract. Now I would write a much more specific condition but for informational purposes this will work.
CONDOMINIUM – This one gets confused a lot. It is not a type of building it is actually a type of ownership. With this type of ownership all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. The main difference in condos and regular single family homes or townhomes is that there is no individual ownership of a plot of land. All the land in the condominium project is owned in common by all the homeowners.
CONSTRUCTION LOAN – Not used too much these days. The buyer applies for a short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses. This loan is starting to make a little bit of a comeback as some builders try to convey the financial risk associated with building the home. During the real estate market slowdown builders were stuck with millions of dollars of loan debt for projects they had underway. The buyers had small down payments and broke the contracts losing those down payments.
CONTINGENCY – Sometimes called conditions. A condition that must be met before a contract is legally binding. A good example is home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report or is contingent on the seller’s property disclosures.
CONTRACT – An agreement to do or not to do a certain thing. This can be either written or oral. Do yourself a favor and get everything in writing!
CONVENTIONAL MORTGAGE – Is a mortgage loan that is not insured by any government program, conventional loans are the most common type of mortgage. They differ from FHA loans and VA loans which are insured by the government. Conforming conventional loans follow the loan amount guidelines set by Fannie Mae and Freddie Mac. Non-conforming loans don’t meet those qualifications, but are also considered conventional. There are limits to the amount of the loan a conventional mortgage can be. For buyers looking to buy a home in FishHawk Ranch that limit is $417,000. For other areas you can look at the conforming loan limit data on the Federal Housing Finance Agency website.
CONSIDERATION – In a contract consideration is the concept of legal value. It is anything of value promised to another when making a contract. It can be anything from money to services to future promised actions.
COOPERATIVE (CO-OP) – Is another type of property ownership. This is where multiple owners of a multiunit housing complex own shares in the cooperative corporation that owns the property. This gives each resident the right to occupy a specific apartment or unit.
COST OF FUNDS INDEX (COFI) – One of the financial indexes that is used to determine interest rate changes for certain adjustable-rate mortgages.
COVENANT – A formal agreement or contract between two parties in which one party gives the other certain promises and assurances, such as covenants of warranty in a warranty deed.
CREDIT – An agreement in where a borrower receives something of value (usually money) in exchange for a promise to repay the lender (usually with interest) at a later date.
CREDIT HISTORY – The three main credit reporting agencies record and keep a history of an individual’s repayment of debt. When you apply for a loan, these histories are reviewed by mortgage lenders as one of the underwriting criteria in determining credit risk.
CREDITOR – A person or entity to whom money is owed.
CREDIT REPORT – A complete report of an individual’s credit history prepared by a credit bureau(s) and used by a lender in determining a loan applicant’s creditworthiness.
DEED – The legal document by which title to real estate is conveyed from one party to another.
DEED-IN-LIEU – Also known as deed in lieu of foreclosure. This is a legal document that coveys title to the lender when the borrower is in default and wants to avoid foreclosure. The borrower will ask the lender if they would agree to a deed-in-lieu. They may or may not accept that request.
DEFAULT – Failure to make the mortgage payment within a specified period of time. Typically is a payment has not been made within 30 days of the due date, the loan is considered to be in default.
DELINQUENCY – Is a failure to make mortgage payments when the payments are due. For most mortgages the payments are generally due on the first of the month. Even though lenders may give a couple day grace period before late fees are assessed, the payment could still be considered late and the loan delinquent. Once a loan is more than 30 days late lenders typically report the late payment to the credit bureaus.
DEPOSIT – Also called earnest money deposit or EMD. This is the sum of money the buyer gives in advance as good faith that they will complete the terms of the agreed upon contract. If the buyer defaults on the terms of the contract they run the risk of losing the deposit.
DEPRECIATION – Is the reduction in the value of an asset with the passage of time, due in particular to wear and tear or economic obsolescence.
DISCOUNT POINTS – A loan fee charged by a lender to increase the yield on the investment. Points can also be used to buy down the interest rate on a loan. One point equals 1% of the loan amount.
DOWN PAYMENT – Most lenders will require some sort of down payment from the borrower. While there are a couple 0% loans out there most of the loans will require anywhere from a 3% to a 20% down payment. This is calculated off of the purchase price of the home. Buyers cannot finance this with the mortgage.
DUE-ON-SALE PROVISION – Lenders do their best to make sure they are protected. This provision in the mortgage allows the lender to demand repayment of the mortgage in full if the borrower sells the property that serves as the collateral for the mortgage.
EARNEST MONEY (EMD) – Also called the deposit. This is the sum of money the buyer gives in advance as good faith that they will complete the terms of the agreed upon contract. If the buyer defaults on the terms of the contract they run the risk of losing the deposit.
EASEMENT – A right of way giving persons other than the owner of the property access to or over a property.
EFFECTIVE AGE – Used by real estate appraisers, it is the estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
EGRESS – The right to a path or right-of-way over which a person may leave or go away from his own real estate.
EMINENT DOMAIN – The right of a government to take privately owned property for public purposes under condemnation proceedings. When they pay the owner they use their own fair market value
ENCROACHMENT – The extension or improvement of a property that illegally intrudes on another person’s property.
ENCUMBRANCE – A claim, right, or lien upon the title to real estate, held by someone other than the real estate owner. This can be mortgages, leases, easements, or restrictions.
ENDORSEMENT – Also known as a title endorsement is an addition or limitation of coverage that is attached to a title insurance policy. The endorsements provide coverage that tailors the title policy to specifically fit the needs of the insured.
EQUAL CREDIT OPPORTUNITY (ECOA) – A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
EQUITY – The value of the property over and above the liens against it. It is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
EXECUTOR – A person named in a will to administer an estate. The court will appoint an administrator if no executor is named.
FAIR CREDIT REPORTING ACT (FCRA) – Is a federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information.
FAIR MARKET VALUE – Also known as Market Value is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay an unpressured seller with the same knowledge.
FEDERAL HOME LOAN MORTGAGE COMPANY – Also known as Freddie Mac (FHLMC), is a federally controlled and operated corporation developed to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
FEDERAL NATIONAL MORTGAGE CORPORATION – Also known as Fannie Mae (FNMA), is a tax-paying corporation created by congress to support the mortgage industry by purchasing mortgages from lenders. This provide banks and other financial institutions with fresh money so they can make new loans. This allows the U.S. housing and credit markets to have some flexibility and liquidity.
FEDERAL HOUSING ADMINISTRATION – (FHA) – This is an agency that is part of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The Federal Housing Administration sets certain standards for construction and underwriting but does not lend any money.
FEE SIMPLE – This is the highest degree of ownership which a person can have in real estate. An interest in real estate which gives the owner unqualified ownership and full power of disposition.
FIRST MORTGAGE – This refers to the position of the mortgage or the priority order as a lien compared to other mortgages or liens on the same property. In the case of a foreclosure a mortgage that is in first position has a better chance of recouping some if its investment than a mortgage in the second position.
FIXED RATE MORTGAGE – Is a mortgage that the interest stays fixes or does not change during the entire term of the loan.
FLOOD INSURANCE – Insurance that covers the property from damage resulting from flooding. It is required for mortgaged properties located in federally designated flood areas. Flood insurance may also cover items like water damage from a broken pipe, etc.
FORECLOSURE – The legal process by which a borrower in mortgage default is deprived of his or her interest in the mortgaged property. The process usually involves a judicial sale to pay the debt in the event of default.
GOOD FAITH ESTIMATE (GFE) – An estimate of closing costs the lender is required to give to the borrower within three days of borrower applying for a mortgage loan. It needs to be complete and accurate regarding the lender’s own charges and there are certain tolerances the lender must meet in regards to charges third-party providers such as title insurers, agents, attorneys and surveyors may charge.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION – Also known as Ginnie Mae. They guarantee the timely payment of principal and interest payments on residential mortgage backed securities to institutional investors worldwide. These securities, called “pools” of mortgage loans, are used as collateral for the issuance of securities in financial markets.
GRANTEE – The person to whom an interest in real property is conveyed.
GRANTOR – The person conveying an interest in real property.
HAZARD INSURANCE – Real estate insurance coverage that protects the homeowner in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
HEIR – A person who inherits or who is entitled to inherit real estate by provisions of law or under the provisions of a will.
HOME EQUITY CONVERSION MORTGAGE (HECM) – Home Equity Conversion Mortgage (HECM) – Is usually referred to as a reverse annuity mortgage or reverse mortgage. This is unique because instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. There are certain restrictions that apply. For additional reverse mortgage details you can visit the HUD website.
HOME EQUITY LINE OF CREDIT (HELOC) – Is usually a mortgage loan in the second or third position. It allows borrowers to tap into equity in the home and borrow cash against it.
HOME INSPECTION – Buying a home? Get a home inspection! A professional home inspector will evaluate the structural and mechanical condition of a property. Receiving a satisfactory home inspection is often included as a contingency in the contract by the buyer.
HOMEOWNERS ASSOCIATION (HOA) – A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. They sometimes collect fees and enforce the deed restrictions in the community.
HOMEOWNERS INSURANCE – An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
HOMEOWNERS WARRANTY – A type of insurance that is purchased by home buyers that will covers repairs to certain items in the home like heating or air conditioning systems if they break down within the coverage period. Sometimes sellers purchase the warranty for new buyers. In some cases offering the warranty can help get a home sold.
HUD-1 SETTLEMENT STATEMENT – Also known as the Closing Statement. This is a financial statement given to the buyer(s) and seller(s) at the property closing. It breaks down the borrower funds and seller funds on the transaction.
INGRESS – The right or permission to enter; also the means or place of entry such as a right-of-way across adjoining land.
INVESTOR – Is usually a holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. This could be any person or institution that invests in mortgages.
JOINT TENANCY – Is a form of ownership or taking title to a property that each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
JUDGMENT – This is a decision (or judgment) made in a court of law. Judgments that require the repayment of a debt the court may place a lien against the debtor’s real property to be used as collateral for the judgment’s creditor.
JUMBO LOAN – A jumbo loan or mortgage is a home loan with a loan amount that exceeds conforming loan limits set by Fannie Mae and Freddie Mac. Currently for FishHawk Ranch homeowners and most of the United States that limit is $417,000. There are a few areas in the country that are considered high-cost areas and those areas have a limit that goes up to $625,500. To confirm the conforming loan limits in your area Fannie Mae has created a quick chart.
LATE CHARGE – A penalty the borrower must pay if the mortgage payment is late. Typically there is a 15 day grace period before late charges kick in but check with your lender.
LEASE – An agreement between a property owner and a tenant granting the use or occupancy of land during a specified period in exchange for rent.
LEASE OPTION – Also known as rent to own or option to buy. This is an alternative financing option that allows home buyers to lease a home with an option to buy. Each month’s rent payment may consist of not only the rent, but an additional amount that can be applied toward the down payment on the property should the renter choose the option to purchase the property at an already specified price.
LEGAL DESCRIPTION – This is a property description that is recognized by law. It is sufficient to locate and identify the property without oral testimony. An example of a legal description is FISHHAWK RANCH PHASE 2 PARCEL DD-1A LOT 6 BLOCK 74.
LENDER – This term can mean a few different things depending on the context. A lender can be the actual business or individual that makes the mortgage loan like Bank of America. In some cases the individuals representing the firm are referred to as a lenders, like a loan officer or the proper term Mortgage Loan Originator or MLO.
LIABILITIES – This is a borrower’s personal financial obligations. These liabilities include current mortgages, car loans, credit card debt, alimony and other amounts that are owed to others.
LIEN – Also known as a Property Lien. This is a legal claim against property granting the lien holder a specified amount of money upon the sale of the property. These liens are used to ensure the payment of a debt, with the property acting as collateral. A good example of this would be a mortgage lien.
LIS PENDENS – Is a legal notice to the world that a lawsuit is pending.
LOAN – Is an amount of money borrowed to purchase a property. In real estate these loans are usually amortized and repaid with interest.
LOAN MODIFICATION – For one reason or another a lender will agree to modify the terms of a mortgage without requiring the borrower to refinance.
LOAN OFFICER – Known by many names. Could be mortgage broker, loan representative, account executive and more. The correct terminology is Mortgage Loan Originator. The MLO serves many functions and has various responsibilities: they solicit loans, represent lending institutions, and they act as the go between for the borrower and the lender.
LOAN POLICY – Is a policy of title insurance issued to the mortgage lender that insures them against loss by defects in, liens against, or unmarketability of title.
LOAN SERVICING – This could be done by the lender or a company hired by the lender. After you get a loan, the servicing company is the company you are making your mortgage payments to. They process payments, send statements, manage the escrow account and ensure that items like insurance and property taxes are paid on the property.
LOAN-TO-VALUE (LTV) – This is a term used a lot in the mortgage world. It is the percentage ration between your loan amount and the appraised value of your home. So if you loan amount was $150,000 and the appraised value is $200,000 the LTV would be 75%.
MARKETABLE TITLE – Also known as a merchantable title is a title which a court of equity considers to be so free of material defects and liens that it will legally force its acceptance by a buyer.
MARKET VALUE – Also Fair Market Value, is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay an unpressured seller with the same knowledge.
MECHANIC’S LIEN – A lien on real estate, created by operation of law. It ensures the payment of debt for services, labor or materials provided in the construction of buildings and real property.
MORTGAGE – This gets confused with a loan. A mortgage is really a promise to pay the loan not the loan itself. It is a legal document that pledges a property to the lender as security for payment of a debt.
MORTGAGE BANKER – A mortgage banker generally originates and funds their own loans. These loans are then sold on the secondary market.
MORTGAGE BROKER – Is a mortgage company that originates loans. They typically have relationships with multiple lenders. They will shop multiple lenders to try and get a borrower the best rate and terms.
MORTAGEE – Is the lender.
MORTGAGE INSURANCE (MI) – Also known as Private Mortgage Insurance. This is insurance that the lender requires a borrower to purchase. It covers the lender against some of the losses that could occur if the borrower defaults on the loan. Mortgage insurance is generally required for all loans with more than an 80% LTV. Over time when the LTV improves to less than 80% the mortgage insurance terminates.
MORTGAGE INSURANCE PREMIUM (MIP) – Is an insurance policy used in FHA loans if your down payment is less than 20%. The FHA assesses either an “upfront” MIP (UFMIP) at the time of closing, or an annual MIP that is calculated every year and paid in 12 installments.
MORTGAGOR – The borrower of money in a real estate loan.
NEGATIVE AMORTIZATION – Sometimes known as neg-am is a loan where the borrower makes a minimum payment. The minimum payment may not cover all of the interest that would normally be due at the current interest rate. The result is the unpaid interest gets added to the balance of the loan. This creates negative amortization on the loan. I do not recommend this kind of loan to anyone!
NOTE – Also known as Mortgage Note. It is 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 – This is the stated interest rate on a mortgage note.
NOTICE OF DEFAULT – Is a formal written notice is a notification given to a borrower stating that he or she has not made their payments by the predetermined deadline, or is otherwise in default on the mortgage contract.
ORIGINATION FEE – Is a mortgage term that refers to the amount of money a lender or mortgage broker will charge a borrower to do the loan.
OWNER FINANCING – The current property owner will provide some or all of the financing to the new buyer.
OWNER’S POLICY – A policy of title insurance usually purchased by the seller that insures the new buyer of real estate against loss caused by defects in, liens against, or unmarketability of the owner’s title.
PERSONAL PROPERTY – In real estate, this means any property that is not real property. For example a couch or a lamp.
PLANNED UNIT DEVELOPMENT (PUD) – It is a type of building development as well as a regulatory process. The FishHawk Ranch community is a perfect example of a PUD. It is a designed grouping of both varied and compatible land uses, such as housing, recreation, commercial centers, and industrial parks, all contained within a subdivision or community. It is also a type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association.
POINT – A mortgage term. A point is equal to 1 percent of the amount of the mortgage.
POWER OF ATTORNEY – A legal instrument authorizing one (giving power) to act as another person’s agent or attorney. This can be for specific time periods as well as for specific items.
PRE-APPROVAL – This term gets confused a lot even with industry professionals with pre-qualification. They are two completely different approaches to finding out how much a borrowing may be approved for. With a pre-approval the mortgage professional will ask for and review the borrower’s tax returns, bank statement and other important documents. With a pre-qualification there is no verification. There is a much more in-depth review process with a pre-approval. Ultimately the pre-approval will give the borrower a very good idea of the amount of the loan they will get approved for. Here is a great pre-approval vs pre-qualification article so you can really understand the difference.
PREPAYMENT – This is any amount the borrower pays to reduce the principal balance of a loan before the due date. This may be full payment or any partial payments.
PREPAYMENT PENALTY – This is a fee or penalty that may be charged to a borrower that pays off a loan before it is due or before a specified period of time. With new loans originated today prepayment penalties are very rare.
PREMIUM – This has a few different meanings. In insurance it is the amount paid for an insurance policy. In real estate it is an amount of money or bonus paid above the regular price.
PRE-QUALIFICATION – See pre-approval.
PRIME RATE – In banking terms, it is the minimum interest rate charged by commercial banks on short-term business loans to large, “A” rated customers or corporations. In general changes in the Prime Rate do not directly affect mortgages rates.
PRINCIPLE – This is the amount borrowed or remaining on the loan. This can also be called Principle Balance.
PRINCIPLE, INTEREST, TAXES AND INSURANCE (PITI) – It is the monthly payment of the total of those four items.
PRIVATE MORTGAGE INSURANCE (MI) – See Mortgage Insurance.
PROBATE – A legal procedure in which the validity and probity of a document, such as a will, is proven.
PROMISSORY NOTE – A written promise to pay a specified sum of money at a stated time to a specified person. In addition to the payment of principal, a promissory note usually provides for the payment of interest.
PUBLIC RECORDS – The transcriptions in a recorder’s office of instruments which have been recorded, including the indexes pertaining to them. Most public records today can be found online.
PURCHASE AGREEMENT – Is the agreement signed by the buyer(s) and seller(s) specifying the exact terms and conditions the property will be sold.
QUIT CLAIM DEED – A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made. This deed which does not imply that the grantor holds title, but which surrenders and gives to the grantee any possible interest or rights which the grantor may have in the property.
RATE LOCK – Is a commitment issued by a lender to a borrower specifying or “locking” in an interest rate for a specified period of time at a specific cost. These locks do expire so you need to ensure the loan is complete and closed before the expiration.
REAL PROPERTY – Land and any items that go with it that include items like structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
REALTOR® – A real estate agent, real estate broker or broker associate who holds active membership in a local real estate board that is affiliated with the NATIONAL ASSOCIATIONS of REALTORS®
REVOLVING DEBT – When calculating your debt for a loan approval one of the items looked at is revolving debt. A good example of revolving debt is a credit card. These allow customers the ability to borrow against a preapproved line of credit when purchasing goods and services.
SECOND MORTGAGE – A mortgage ranking in priority immediately below or subordinate to a first mortgage.
SECONDARY MARKET – The secondary mortgage market exists to keep liquidity in the mortgage market, there is buying and selling of existing mortgages. Basically groups or “pools” of mortgages are sold to investors.
SETTLEMENT STATEMENT – Also known as the HUD1 Settlement Statement or Closing Statement. This is a financial statement given to the buyer(s) and seller(s) at the property closing. It breaks down the borrower funds and seller funds on the transaction.
SPECIAL WARRANTY DEED – A special warranty deed is a deed in which the seller warrants or guarantees the title only against defects arising during the period of his or her tenure or ownership of the property. The grantor makes no warranty against defects existing before the time of his or her ownership. It is less protective to the buyer than a general warranty deed.
SUBDIVISION – Is a housing development that is created by dividing a tract of land into individual lots for sale or lease. It generally has facilities like streets, sidewalks, parks, easements and public utilities laid out.
SURVEY – Is generally it is a map showing the precise legal boundaries, the location of improvements, easements, rights of way, encroachments, and other physical features of the property.
TAX LIEN – Is a lien that is imposed upon real estate by operation of law. Its purpose is to secure the payment of real estate taxes.
TENANT – Is generally the renter of a property under a lease.
TENANTS IN COMMON – This involves two or more people who hold title to a single piece of real estate and is vested in such a manner that they have a common or equal right to possession and enjoyment of the property, but each holds a separate individual interest or estate in the property. Each owner may sell or encumber their respective interest or dispose of it by will, and if they die without leaving a will, their heirs will inherit the undivided interest.
THIRD PARTY – Is generally a term used for anyone that is not a principal parties to a contract. A title company is a good example of a third party.
TITLE – Is a legal document proving a person’s right of ownership of a property.
TITLE COMPANY – Used a lot in Florida, this is a company that specializes in examining and insuring titles to real estate. They also will perform real estate closings and hold EMD’s.
TITLE DEFECT – This is a piece of property or asset that has a publicly-recorded encumbrance, such as a lien, mortgage or judgment. The title cannot transfer to another party until the defect is cured.
TITLE INSURANCE – This is an insurance that protects the lender via a lender’s policy or the buyer via an owner’s policy against loss arising from disputes over ownership of a property. The lender’s policy is paid for by the buyer and the owner’s policy is paid for by the seller.
TITLE SEARCH – A title company will review and check the title records of a property to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding on the property.
TRANSFER TAX – These are state or local taxes that are payable when title passes from one owner to another. In Florida these are called Documentary Stamps or Doc Stamps.
TRUTH-IN-LENDING (TILA) – A federal law enacted in 1968. It’s been changed and added to a lot over the years but the most important aspects concern the pieces of information that must be disclosed to a borrower prior to extending credit such as the annual percentage rate (APR), term of the loan and total costs to the borrower. This information must be conspicuous on documents presented to the consumer before signing, and also possibly on periodic billing statements.
TRUSTEE – Is a fiduciary who holds or controls property for the benefit of another.
UNDERWRITER – Lenders employ underwriters they work like real estate detectives. Their job is to make sure you have represented yourself and your finances truthfully, and that you haven’t made any false or misleading claims on your loan application.
WARRANTY DEED – Simply it is a deed that guarantees a clear title to the buyer of real property.