Real Estate Terms
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Amortization |
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Monthly repayment schedule in which a loan is repaid in fixed payments of principal
and interest. |
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Cashier's Check (or Bank Check) |
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A check whose payment is guaranteed because it was paid for in advance and is drawn
on the bank's account instead of the customer's |
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Closing (or Settlement) |
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Meeting between the buyer, seller, and lender and/or their agents at which property,
documents and/or funds legally change hands. |
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Closing Statement |
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Financial disclosure statement that lists the funds received and expected at the
closing |
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Credit Report |
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Report on a buyer's credit history required by the lender before approval. |
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Deed of Trust |
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Agreement to pledge property as security for a loan, used in many states in place
of a mortgage. In such an arrangement, the borrower transfers legal title to a trustee
who holds the property in trust as security for the repayment of the debt. The deed
of trust becomes void if the debt is repaid, but if the borrower defaults on the
loan, the trustee may sell the property to pay the debt. |
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Deed |
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Legal document by which title to a property is transferred from one owner to another.
The deed contains a description of the property, and is signed, notarized, and recorded
at the courthouse at closing. |
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Discount Points (or Points) |
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Money paid to a lender at closing in exchange for lower interest rates. Each point
is equal to 1% of the loan amount. |
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Documentary Stamps |
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A state tax, in the forms of stamps, required on deeds and mortgages when real estate
title passes from one owner to another. |
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Earnest Money |
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Deposit made by a buyer towards the down payment in evidence of good faith when
the purchase agreement is signed. |
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Escrow |
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Deposit of money and documents to a neutral third party until the closing. |
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Escrow Account |
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Account held by a lender containing funds collected as part of mortgage payments
for annual expenses such as taxes and insurance, so that the homeowner does not
have to collect a large sum when these fall due. |
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Fair Market Value |
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The sales price of a property on the open market given a reasonable time to sell. |
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Fixed Rate Loan |
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A loan that has an interest rate that remains the same through the life of the loan. |
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Good Faith Estimate |
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A required statement from the lender that shows all of the expected closing costs. |
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Gross Income |
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All money coming into a household on a regular basis. |
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Hazard Insurance |
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Protects the insured against loss due to fire or other natural disaster in exchange
for a premium paid to the insurer.
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Home Equity Loan |
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A loan secured by the equity in your home. These are sought for a variety of purposes,
including home improvements, major purchases or expenses, and debt consolidation.
Interest paid is usually tax-deductible. |
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Homeowners Warranty |
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A type of insurance that covers repairs to specified parts of a house for a specific
period of time. |
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HUD-I Settlement Statement |
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A form that itemizes the closing costs associated with purchasing a home. |
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Interest |
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Money paid to a lender as compensation for money that is borrowed |
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Interest Rate |
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The periodic charge, expressed as a percentage, for use of credit. |
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Joint Tenancy |
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The ownership of property by two or more persons with the survivor taking the share
in the event of any of the other parties being deceased. |
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Lien |
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A claim by one person on the property of another for payment of a debt. |
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Loan Application |
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Document required by lenders prior to loan approval containing detailed information
about the borrower and property. |
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Loan Application Fee |
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Fee paid by prospective buyer to lender when applying for a mortgage. |
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Lock or Lock In |
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A lender's guarantee of an interest rate for a set period of time, usually between
loan application and loan closing; protects borrower against rate increases during
that time. |
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Marketable Title |
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A title that is free and clear of liens, clouds or other defects that would prevent
the sale of the property. |
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Monthly Housing Expense |
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Total monthly expense of principal, interest, taxes and insurance. |
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Mortgage |
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The legal instrument recorded at the county that secures the interest of the lender
in the borrower repaying the Note. |
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Mortgage Broker |
Arranges financing for borrowers, but places loans with lenders rather than funding
them with their own money.
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Mortgage Note |
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Legal document obligating a borrower to repay a loan at a stated interest rate during
a specified period of time. The agreement is secured by a mortgage.Outlines the
terms by which the borrower has to repay the loan.
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Per Diem Interest |
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Interest calculated per day. (Depending on the day of the month on which closing
takes place, you will have to pay interest from the date of closing to the end of
the month. Your first mortgage payment will probably be due the first of the following
month.) |
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PITI |
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Principal, interest, taxes, and insurance. This is your monthly house payment. |
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PMI |
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Private mortgage insurance, required by many lenders when a borrower's down payment
is less than 20% of the purchase price. |
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Prepayment Penalty |
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Fee charged by a lender for early payment of debt. |
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Prequalifying |
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The lender's process of determining whether a borrower is capable of retaining a
loan for the purchase of a house at a particular price. |
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Property Tax & Insurance Escrow |
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Money collected monthly by the lender and held to pay taxes and insurance when due. |
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Property Tax |
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A government tax based on the market value of a property.
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Purchase Agreement |
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Contract signed by buyer and seller stating the terms and conditions under which
a property will be sold. |
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Real Estate Broker |
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An agent who represents a buyer or seller in a real estate transaction. |
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Recording Fee |
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Money paid to an agent for entering the sale of a property into the public records.
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Refinancing |
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The process of paying off one loan with the proceeds from a new loan secured by
the same property. |
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Second Mortgage |
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A subordinate mortgage made in addition to a first mortgage. |
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Survey |
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A measurement of land, prepared by a licensed surveyor, showing a property's boundaries,
elevations, improvements, and relationship to surrounding tracts. |
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Title |
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Document that gives evidence of ownership of a property. Also the rights of ownership
and possession of that property. |
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Title Company |
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A company that insures title to property. |
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Title Insurance |
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Insurance which protects the lender (lender's policy) or the buyer (owner's policy)
against loss due to disputes over ownership of a property.
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Title Search |
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Examination of municipal records to ensure that the seller is the legal owner of
a property and that there are no liens other claims against the property. |
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Transfer Tax |
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Tax paid when title passes from one owner to another. |
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Underwriting |
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The process of verifying data and evaluating a loan for approval. The underwriter
gives the final loan approval. |
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VA Loan |
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Home loan available to veterans with little or no down payment and guaranteed by
the U.S. Veteran's Administration. |
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Walk-Through |
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A final inspection of a home to check for problems that may need to be corrected
before closing. |
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