Glossary

Abstract (of title)

A written summary of the title history of a particular piece of real estate.

Acceleration Clause

A clause in a Deed of Trust or note that accelerates or hastens the time when the debt becomes due. For example, most deeds of trust of loans contain a provision that the not shall become due immediately upon the sale or transfer of title of the loan, or upon failure to pay an installment of principal or interest. This is also called a due on sale clause.

Adjustment Period

The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.

Adjustable Rate Mortgage

A mortgage instrument with an interest rate that is periodically adjusted to follow a preselected published index. The interest rate is adjusted at certain intervals during the loan period.

Agency

Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the principal. Agency involving real property should be in writing, such as listing, trust, and powers of attorney.

Amortization

Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments.

Application Fee

That part of the closing costs pre-paid to the lender at time of application to cover initial expenses.

Appraisal

An opinion of value based on factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.

APR (Annual Percentage Rate)

The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. The APR is disclosed as a requirement of federal truth in lending statutes.

Assessed Value

Value placed upon property for property, tax purposes by the tax collector.

Assessment

A levy against property in addition to general taxes. Usually for improvements such as streets, and sewers.

Assumption of Mortgage

Agreement by a Buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor (usually the Seller) from liability.

Balloon Mortgage

A mortgage with periodic payments that do not fully amortize the loan. The outstanding balance of the mortgage is due in a lump sum at the end of the stated term.

Balloon Note

A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity.

Balloon Payment

A lump sum principal payment due at the end of some mortgages or other long- term loans.

Beneficiary

(1) One for whose benefit a trust is created. (2) In states in which deeds of trust are commonly used instead of mortgages, the lender (mortgagee) is called the beneficiary.

Binder

Sometimes known as an offer to purchase or an earnest money request. A binder is the acknowledgment of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.

Borrower

One who borrows funds, with the express or implied intention of repaying the loan in full, or giving the equivalent.

Breach of Contract

Failure to perform a contract, in whole or in part, without legal excuse. Bridge Loan – A short-term loan secured by the equity in an as-yet unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or the end of the loan term, whichever comes first. Interest payments may or may not be deferred until the house is sold.

Broker, Real Estate

One licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for his/her part in bringing together a Buyer and Seller, landlord and tenant, or parties to an exchange.

Buy Down

A fixed rate loan where the interest rate and payment are reduced for a specific period of time by paying the interest up front to subsidized the lower payment.

Cal-Vet Loans

Real estate loans available to armed forces veterans from California, at low interest rates.

Cap

The limit on how much interest rates or monthly payments can change, either at each adjustment or over the life of the mortgage.

Cap (interest rate)

The maximum interest rate increase allowable on an adjustable rate mortgage. Does not result in negative amortization. See Negative Amortization.

Cap (payment rate)

The maximum payment amount increase allowable an adjustable rate mortgage

Certificate of Reasonable Value (CRV)

A document that establishes the maximum value and loan amount for a VA guaranteed loan.

Certificate of Title

A statement that shows ownership of property, stating that the Seller has clear legal title.

Chain of Title

The chronological order of conveyances of aparcel of land, from the original owner to the present owner.

Clear Title

Real property against which there are no liens,especially involuntary liens (mortgages).

Closing

In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (orloan) is completed.

Closing Costs

Expenses incidental to a sale of real estate,such as loan fees, title fees, and appraisal fees.

Closing Statement

The statement which lists the financial settlement between Buyer and Seller, and the costs eachmust pay.

Cloud on Title

An invalid encumbrance on real property, which, if valid, would affect the rights of the owner. For example: A sells lot 1, tract 1, to B. The deed is mistakenly drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or, if necessary, by court action.

Commission

An agent’s or broker’s fee for bringing the principals together and helping to negotiate a real estate transaction, often a percentage of the sales price or flat fee.

Commitment

An agreement, frequently in writing, between a lender and a borrower to loan money at a future date, subject to certain conditions.

Community Home Buyer’s Program

A fixed rate loan with a low 3 to 5% down payment, no case reserve requirement, and easier qualifying ratios. Subject to borrower meeting income limits and attendance of a 4 hour training course on home ownership.

Comparables

Refers to similar properties used forcomparison purposes in the appraisal process. These properties will be reasonably the same size and location, with similar amenities and characteristics, so that the approximate fair market value of the subject property can be determined.

Condominium

A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors and ceilings) serve as its boundaries.

Consideration

Anything which is, legally, of value and induces one to enter into a contract.

Contingency

A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the Buyer obtaining financing.

Conventional Mortgage

A mortgage or deed of trust not obtained under a government insured program such as FHA or VA.

Conversion Clause

A provision in some ARMs that enables you to change an ARM to a fixed- rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed-rate mortgages. This conversion feature may cost extra.

Convey

To transfer real estate from one person to another by deed.

Conveyance

Transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged or assigned.

Co-operative

A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.

Covenants, Conditions and Restrictions (CC&R’s)

A term used in some areas to describe the restrictive limitations which may be placed on the property.

CRB

Certified Residential Broker. To be certified, a broker must be a member of the National Association of Realtors’ Managers’ Council, have two years of experience as a licensed broker manager and have completed five required Management courses.

CRS

Certified Residential Specialist. To be certified, an agent must be a member of the National Association of Realtors, Residential Sales Council, have completed at least 50 residential transactions and have completed five required Residential Division courses.

Credit Report

The report to a prospective lender on the credit standing of a prospective borrower.

Deed

Actually, any one of many conveying or financing instruments, but generally a conveyancing instrument, given to pass thee title to property upon sale.

Deed of Trust

An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and reconveyed upon payment in full.

Default

Failure to fulfill terms as agreed in the mortgage note.

Deposit

Money given by the Buyer with an offer to purchase. Shows good faith. Also called earnest money.

Discount Points

A negotiable fee paid to the lender tosecure financing for the Buyer. Discount points are up frontinterest charges to reduce the interest rate on the loan overthe life, or a portion, of the loan’s term. One discount pointequals one percent of the loan amount.

Disposable Income

Income, usually monthly income, leftover after fixed obligations and living expenses for thatperiod of income are paid.

Documentary Transfer Tax

A City/County tax on the saleof real property, based on the sale price.

Down Payment

Cash portion paid by a Buyer from his/herown funds, as opposed to that portion of the purchase pricewhich is being borrowed.

Due-On-Sale Clause

An acceleration clause that requiresfull payment of a mortgage or deed of trust when thesecured property changes ownership.

Earnest Money

The portion of the down payment deliveredto the Seller or Escrow agent by the purchaser with a written offer as evidence of good faith.

Easement

A right to limited use of land owned by another.An electric company, for example, could have an easementto put up electric power lines over someone’s property.

Encumbrance

A claim, lien, charge, or liability attached toand binding real property. Any right to, or interest in, landwhich may exist in one other than the owner, but which willnot prevent the transfer of fee title.

Equity

The market value of real property, less the amount of existing liens.

Escrow

A procedure in which a third party acts as a stakeholder for both the Buyer and the Seller, carrying out both parties’ instructions and assuming responsibility for handling all of the paperwork and distribution of funds.

Execute

To complete, to finish, in real estate deeds, to sign, seal, and deliver.

Fair Credit Reporting Act

A federal law giving one the right to see his/her credit report so that errors may be corrected. A lender refusing credit based on a credit report must inform the Buyer which company issued the credit report. The Buyer may see the report without charge if refused credit.

Federal Home Loan Banks

System of 11 regional banks established by the Home Loan Bank act of 1932 to keep a permanent supply of money available for home financing.

Fee Simple

Estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.

F.H.A. (Federal Housing Administration)

A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

FHA Loan

A loan insured by the Insuring Office of the Department of Housing and Urban Development, the Federal Housing Administration.

FHLMC (Freddie Mac)

Federal Home Loan Mortgage Corporation. A federal agency purchasing first mortgages, both conventional and federal insured; from members of the Federal Reserve and the Federal Home Loan Bank System.

Finance Charge

The total of cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

First Mortgage

A mortgage having priority over all other voluntary liens against certain property.

Fixed Rate Mortgage

A mortgage having a rate of interest which remains the same for the life of the mortgage.

Fixture

Property, such as a hot water heater or plumbing fixture, that has become permanently attached to a piece of real estate and goes with the property when it is sold.

Flood Certification

An independent agency report required by the lender to determine whether a property is located in a flood hazard zone. Such condition would then require a federally mandated flood insurance policy.

Flood Insurance

Insurance indemnifying banks against loss by flood damage. Required by lenders (usually banks) in areas designated (federally) as potential flood areas. The insurance is private but federally subsidized.

FNMA (Fannie Mae)

Federal National Mortgage Association. A private corporation dealing in the purchase of first mortgages, at discounts.

Foreclosure

A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower’s debt.

GNMA (Ginnie Mae)

Government National Mortgage Association. A federal association, working with F.H. A., which offers special assistance in obtaining mortgages, and purchases mortgages in a secondary capacity.

Good Faith

Done with good intentions, without knowledge of fraudulent circumstances, or reason to inquire further.

Graduated Payment Mortgage

A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

Gross Income

Normal income, including overtime, prior to any payroll deductions that is regular and dependable. This income may come form more than one source.

Hazard Insurance

Real estate insurance protecting against loss caused by fire, some natural causes, and vandalism, depending upon the terms of the policy.

Home Inspection Report

A qualified inspector’s report on a property’s overall condition. The report usually includes an evaluation of both the structure and mechanical systems.

Homeowner’s Association

(1) An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. (2) An association formed by the builder of condominiums or planned developments, and required by statue in some states. The builder’s participation as well as the duties of the association are controlled by statute.

Homeowner’s Insurance

Includes the coverage of Hazard Insurance plus added coverage such as personal liability, theft away from the home (items stolen from the insured’s car), and other such coverage.

Home Warranty Plan

A warranty that protects against failure of mechanical systems within the property. Usually this includes plumbing, electrical, heating systems and installed appliances.

Housing Starts

Number of houses on which construction has begun. The figures are used to determine the availability of housing, need for real estate loans, need for labor and materials.

HUD-1 Form

See Real Estate Settlement Statement

Impound Account

Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. The borrower pays a portion of, for example, the yearly taxes, with each monthly payment. The lender pays the tax bill from the accumulated funds.

Income Property

Real estate that is owned for investment purposes and not used as the owner’s residence.

Index

An index used to adjust the interest rate of an adjustable rate mortgage loan. For example: the change in U.S. Treasury securities (T-bills) with a 1 year maturity. The weekly average yield on said securities, adjusted to a constant maturity of one year, which is the result of weekly sales, may be obtained weekly. This change in rates is the “index” for the change in the specific adjustable rate mortgage.

Instrument

Any writing having legal form and significance, such as a deed, mortgage, will, and lease.

Interest

A charge paid for the use of money.

Interest Rate

The percentage of an amount of money which is paid for its use for a specified time, usually expressed as an annual percentage.

Interest Rate Cap

The maximum interest rate increase of an adjustable rate loan. For example: a 6% loan with a 5% interest rate cap would have a maximum interest for the life of the loan which would not exceed 11%.

Interim Financing

See Bridge Loan

Joint Tenancy

An undivided interest in property, taken by two or more joint tenants. The interests must be equal, occurring under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Land Contract

When the Buyer agrees to make payments directly to the Seller at pre-negotiated terms. The Seller agrees to deed the property to the Buyer upon completion of the agreement. The Buyer becomes the owner of equity in this type of sale. (Also see Owner Financing)

Late Charge

A charge to the borrower for the failure to pay an installment payment on time.

Lease

An agreement by which an owner of real property gives the right of possession to another for a specified period of time and for a specified consideration (rent). Title does not pass.

Legal Description

A method of geographically identifying a parcel of land, which is acceptable in a court of law. A description parcel of land sufficient to identify the property such as a lot and tract number.

Lien

An encumbrance against property for money, either voluntary or involuntary. All liens are encumbrances but all encumbrances are not liens.

Lis Pendens

A legal notice recorded to show pending litigation relating to real property, and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.

Loan Commitment

A written promise to make a loan for a specified amount on specified terms.

Loan Origination Fee

One time setup fee charged by lender.

Loan Package

The file of all items necessary for the lender to decide whether to give a loan. Items would include the information on the prospective borrower (for example, loan application, credit report, financial statement, employment letters) and information on the property (for example, appraisal, survey)

Loan-To-Value (LTV) Ratio

The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

Maintenance Reserve

Money reserved to cover anticipated maintenance costs.

Maker

One who executes (signs) as the maker (borrower)of a note.

Margin

The number of percentage points the lender addsto the index rate to calculate the ARM interest rate at eachadjustment.

Marketability

Saleability. The probability of selling propertyat a specific time, price and terms.

Marketable Title

Title which can be readily marketed (sold)to a reasonably prudent purchaser aware of the facts andtheir legal meaning concerning liens and encumbrances.

Market Price

The price a property brings in a given market. Commonly used interchangeably with market value, although not truly the same.

Market Value

The price at which a property will sell, assuming a knowledgeable Buyer and Seller, both operating without undue pressure.

Material Fact

A fact upon which an agreement is based, and without which, said agreement would not be made.

Maturity

(1) Termination period of a note. For example: A 30 year mortgage has a maturity of 30 years. (2) In sales law, the date a note becomes due.

Mechanics Lien

A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.

Moisture Barrier

Insulating materials used to prevent the build up of moisture (condensation) in walls and other parts of a building.

Mortgagee

The party lending the money and receiving the mortgage. Some states treat the mortgagee as the “legal” owner, entitled to rents from the property. Other states treat the mortgagee as a secured creditor, the mortgagor being the owner. The matter is the more modern and accepted view.

Mortgage Credit Certificate (MCC) Program

A first time home buyer program subject to purchase price and income limits and limited to Alameda, Contra Costa, San Mateo and Santa Clara counties. The MCC program is actually a special tax credit and assists Buyers in qualifying on almost any loan program.

Mortgage Insurance

Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal government writes this form of insurance through the FHA and VA.

Mortgage Life Insurance

A type of term life insurance often bought by mortgagors. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the debt is automatically covered by insurance proceeds.

Mortgage Note

A written promise to pay a debt at a stated interest rate during a specified term. The agreement is secured by a mortgage.

Mortgagor

The party who borrows the money and gives the mortgage.

Multiple Listing

An exclusive listing, submitted to all members of an association, so that each may have an opportunity to sell the property.

Negative Amortization

Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that isn’t covered is added to the unpaid principal balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when as ARM has a payment cap that results in monthly payments that aren’t high enough to cover the interest.

Note

A unilateral agreement containing an express and absolute promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand. Usually provides for interest and, concerning real property, is secured by a mortgage or trust deed.

Notice of Action

Recorded notice that real property may be subject to a lien, or even that title is defective, due to pending litigation. Notice of a pending suit, also called “Lis Pendens”.

Notice of Cessation

A notice stating that work has stopped on a construction project. Done to accelerate the period of filing a mechanic’s lien.

Notice of Completion

A notice, recorded to show that a construction job is finished. The length of time in which mechanic’s liens may be filed depends upon when and if a notice of completion is recorded.

Notice of Default

Notice filed to show the borrower under a mortgage or deed of trust is in default (behind on payments).

Offer

A presentation or proposal for acceptance, in order to form a contract. To be legally binding, an offer must be definite as to price and terms.

Offer and Acceptance

Necessary elements of a contract to sell real estate.

Offer to Purchase

A written proposal to buy a piece of real estate that becomes binding when accepted by the Seller. Also called a sales contract.

Origination Fee

A fee made by a lender for making a real estate loan. Usually a percentage of the amount loaned, such as one percent.

Owner Occupied

Property physically occupied by the owner.

Owner Financing

A purchase in which the Seller provides all or part of the financing.

Ownership

Rights to the use, enjoyment and alienation of property, to the exclusion of others. Concerning real property, absolute rights are rare, being restricted by zoning laws, restrictions, and liens.

Payment Cap

A maximum amount for a payment under an Adjustable Mortgage Loan, regardless of the increase in the interest rate. If the payment is less than the interest alone, negative amortization is created.

Payoff

The payment in full of an existing loan or other lien.

Personal Property

Any property which is not designated by law as real property.

Piggybank Loan

A loan made jointly by two or more lenders on the same property under one mortgage or trust deed. One 90% loan, for example, may have one lender loaning 80% and another (subordinate) lender loaning the top 10% (high risk portion).

PITI (Principal, Interest, Taxes and Insurance)

Used to indicate what is included in monthly payment on real property. Principal, interest, taxes (property) and insurance (hazard) are the four major portions of a usual monthly payment.

Planned Unit Development (PUD)

A zoningdesignation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Users may be residential, commercial or industrial.

Plat

A map of a piece of land showing boundary lines, streets, actual measurements and easements.

Point

An amount equal to 1% of the loan principal. Lenders charge loan points to increase their yield on a mortgage. Points are considered prepaid interest.

Power of Attorney

An authority by which one person (principal) enables another (attorney-in- fact) to act for him. (1) General power – authorizes sales, and mortgaging, of all property of the principal. Invalid in some jurisdictions. (2) Special power specifies property, Buyers, price and terms. How specific it must be varies in each state.

Pre-approval

A commitment by a lender to extend credit provided that specific conditions are met.

Preliminary Title Report

A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued.

Pre-Qualification

A preliminary assessment of a Buyer’s ability to secure a loan, based on a specific set of lending guidelines and Buyer representations made. This is not a guarantee or commitment by a lender to extend credit.

Prepaid Items

Those expenses of property which are paid in advance and will usually be prorated upon sale, such as taxes, insurance, and rent.

Prepayment Penalty

A penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due.

Prime Rate

The interest rate charged by banks to their preferred corporate customers, it tends to be an estimator for general trends in short term interest rates.

Principal

(1) The person who gives authority to an agent or attorney. (2) Amount of debt, not including interest. The face value or a note, and mortgage.

Private Mortgage Insurance

Insurance against a loss by a lender in the event of default by a borrower (mortgagor). The insurance is similar to insurance by a government agency such as FHA, except that it is issued by a private insurance company. The premium is paid by the borrower and is included in the mortgage payment.

Promisee

One to whom a promise has been made, such as the lender under a promissory note.

Promisor

One who makes a promise. The borrower under a promissory note.

Promissory Note

Promise in writing, and executed by maker, to pay specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to bearer.

Proration

To divide (prorate) property taxes, insurance premiums, and rental income, between Buyer and Seller proportionately to time of use, or the date of closing.

Public Records

Usually at a county level, the records of all documents which are necessary to give notice. The records are available to the public. All transactions for real estate should be recorded.

Purchase Agreement

Agreement between a Buyer and Seller of real property, setting forth the price and terms of sale.

Qualifying Ratios

Guidelines applied by lenders to determine how large a loan to grant a home Buyer.

Quitclaim Deed

A deed operating as a release: intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.

Real Estate

(1) Land and anything permanently affixed to the land, such as buildings, fences, and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items which would be personal property if not attached. The term is generally synonymous with real property, although in some states a fine distinction may be made. (2) May refer to rights in real property as well as the property itself.

Real Estate Settlement Statement

Final settlement statement often referred to as the HUD-1 form, used to itemize Buyer, Seller, broker, and lender charges and credits at closing.

Realtor

Real estate broker or associate active in local real estate board affiliated with the National Association of Realtors.

Reconveyance

An instrument used to transfer title from a trustee to the equitable owner or real estate, when title is held as tolerable security for a debt. Most commonly used upon payment in full of a trust deed. Also called a deed of reconveyance or release.

Recording

Filing documents affecting real property as a matter of public record, giving notice to future purchasers, creditors, or their interested parties. Recording is controlled by statute and usually requires the witnessing and notarizing of an instrument to the recorded.

Recording Fee

Amount paid to recorder’s office in order to make a document a matter of public record.

RESPA

Real Estate Settlement Procedures Act. Federal statute effective June 20, 1975, requiring disclosure of certain costs in the sale of residential (one to four family) improved property to be financed by a federally insured lender.

Refinancing

Repaying a debt with the proceeds of a new loan, using the same property as collateral or security.

Regulation Z

The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.

Retaining Wall

A wall used to contain or hold back dirt, water, or other materials of a similar nature.

Right of Survivorship

The right of a survivor of a deceased person to the property of said deceased. A distinguishing characteristic of a joint tenancy relationship.

Sales Contract

Another name for a sales agreement, and purchase agreement.

Second Mortgage

A mortgage which ranks after a first mortgage in priority. Properties may have two, three, or more mortgages, deeds of trust, or land contracts, as liens at the same time. Legal priority would determine whether they are called a first, second, third, lien.

Secondary Mortgage Market

The buying and selling of existing mortgages through agencies (i.e. Fannie Mae, Freddie Mac).

Septic System

A sewage system, whereby waste is drained through pips and a title field (a system of clay tiles and gravel) into a septic tank. Found in areas where city or county sewers have not yet been installed.

Septic Tank

An underground tank into which a sanitary sewer drains from a building. The sewage is held until bacterial action changes the solids into liquids or gasses, which are then released into the ground.

Signed, Sealed and Delivered

A phrase indicating that everything necessary to convey has been done by the grantor. Modernly, signed, and delivered are still necessary, but the only seals commonly used are by governments, corporations, and notaries.

Simple Interest

Interest computed on principal alone, as opposed to compound interest.

Special Assessment

Lien assessed against real property by a public authority to pay costs of public improvements (for example, sidewalks, sewers, street lights) which directly benefits the assessed property.

Specific Performance

An action to compel the performance of a contract, when money damages for breach would not be satisfactory.

Statement of Identity

Also called Statement of Information, a confidential form filled out by Buyer and Seller to help a title company determine if any liens are recorded against either. Very helpful when people with common names are involved.

Statute

A law which comes from a legislative body. A written law, rather than law established by court cases.

Subordinate

To make subject or junior to.

Succession

Passing of real property by will or inheritance, rather than by grant of a deed or any other form or purchase.

Survey

The measurement of the boundaries of a parcel of land, its area and sometimes its topography.

Take Out Loan

The “permanent” (long term) financing of real estate after completion of construction.

Tax Base

The assessed valuation of real property, which is multiplied by the tax rate to determine the amount of tax due.

Tax Lien

(1) A lien for nonpayment of property taxes. Attaches only to the property upon which the taxes are unpaid. (2) A federal income tax lien. May attach to all property of the one owning taxes.

Tenancy in Common

An undivided ownership in real estate by two or more persons. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exists.

Tenant

(1) A holder of property under a lease or other rental agreement. (2) Originally, one who had the right to possession, irrespective of the title interest.

Terms

The consideration, other than price, in a sale, lease, and mortgage. For example: the way the money will be paid, time to take possession, and conditions.

“Time Is Of The Essence”

Clause used in contracts to bind one party to performance at or by a specified time in order to bind the other party to performance.

Title

The evidence one has of right to possession of land.

Title Insurance Policy

A policy that protects the purchaser, mortgage or other party against losses concerning title to the property and matters such as easements, encroachments and liens.

Title Search

A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.

Topography

The contour of land surface, such as flat, rolling, and mountainous.

Transfer

The act by which the title to property is conveyed from one person to another.

Transfer Tax

City/County tax on the transfer of real property. Based on purchase price or money changing hands. Also called documentary transfer tax.

Trust

A fiduciary relationship under which one holds property (real or personal) for the benefit of another. The party creating the trust is called the settler, the party holding the property is the trustee, and the party for whose benefit the property is held is called the beneficiary.

Trustee

(1) One who is appointed, or required by law, to execute a trust. (2) One who holds title to real property under the terms of a deed of trust.

Trustor

The borrower under a deed of trust. One who deeds his property to a trustee as security for the repayment of a loan.

Truth-In-Lending

A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.

Underwriting

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

Veterans Administration (VA)

An agency of the Federal government which, among other things, insures and guarantees loans or veterans.

VA Loan

A loan that is partially guaranteed by the Veterans Administration and made by a private lender.

VA Mortgage Funding Fee

A premium of up to 1-7/8 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.

Variable Rate Mortgage (VRM)

See adjustable rate mortgage

Verification of Deposit (VOD)

A document signed by the borrower’s financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment (VOE)

Document signed by the borrower’s employer verifying position and salary.

Warrant

To legally assure that title conveyed is good and possession will be undisturbed.

Warehouse Fee

Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short term loans than on mortgage loans, the mortgage firm has an economic loss which is offset by charging a warehouse fee.

Wrap-Around Mortgage

A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgage under the wrap-around collects a payment based on its face value then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wraparound contains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate than if refinancing.