Glossary

Acceptance: Consent to an offer to enter into contract

Adjustable-Rate Mortgage (ARM): A mortgage that allows the interest rate to be changed periodically

Agency: A legal relationship in which an owner-principal engages a broker-agent in the sale of property, or a buyer-principal engages a broker-agent in the purchase of property

Amortization: The gradual repayment of a mortgage by periodic installments

Annual Percentage Rate (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the mortgage amount

Appraisal: An evaluation of a piece of property to determine its value

Appreciation: Increase in value due to any cause

Assessed Value: The valuation placed on property by a public tax assessor as the basis of property taxes

Broker: A person licensed by a state real estate commission to act independently in conducting a real estate brokerage business. Although requirements vary from state to state, an individual must usually have at least one year of experience in the industry and pass an examination to earn a broker's license.

Building Codes: State and local laws that regulate the construction of new property and the rehabilitation of existing property

Cap: The maximum amount an interest rate or monthly payment can change, either at adjustment time or over the life of the mortgage

Closing: The final step in the sale and transfer of ownership of a property. The title is transferred from the seller to the buyer; the buyer signs the mortgage and pays costs of settlement; any money due the seller and purchaser are paid.

Closing Costs: Fees and expenses, not including the price of the home, payable by the seller and the buyer at the closing (e.g., brokerage commissions, title insurance premiums, inspection, appraisal, recording, attorney's fees)

Condominium: Ownership of a unit only, rather than the entire building with the land

Condominium Hotel: A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services, and is operated as a commercial hotel even though the units are individually owned

Consideration: Anything of value to induce another to enter into a contract (i.e., money, services, a promise)

Contingency: A condition that must be satisfied before a contract is binding

Contract: An agreement to do or not do a certain thing

Conventional Mortgage: A fixed-rate, fixed-term mortgage not insured by the federal government

Deed: A legal document conveying title to a property

Deposit: A sum of money given in advance of a larger amount being expected in the future. In real estate, often called "earnest money deposit" or “reservation deposit.”

Disclosure Laws: State and federal regulations which require sellers to disclose such conditions as whether a house is located in a flood plain or whether there are known defects in or affecting the property

Earnest Money: A portion of a down payment given to the seller by a potential buyer indicating the buyer's intent to complete the purchase of the property

Encroachment: A condition that limits the interest in a title to property such as a mortgage, deed restrictions, easements, unpaid taxes, etc.

Equity: The value of real estate over and above the liens against it. It is obtained by subtracting the total liens from the value.

Equity Mortgage: A mortgage based on the borrowers' equity in their home rather than on their creditworthiness

Escrow: The placement of money or documents with a third party for safekeeping pending the fulfillment or performance of a specified act or condition

Fixed-Rate Mortgage: A loan that fixes the interest rate at a prescribed rate for the duration of the loan

Graduated-Payment Mortgages: A mortgage that starts with low monthly payments and increases at a predetermined rate

Growing-Equity Mortgage: A mortgage loan in which the monthly payments increase by a specific amount each year, with the "overpayments" applied to the principal

Investor: The holder of a mortgage or the permanent lender for whom the mortgage maker services the loan; any person or institution that invests in mortgages

Lease Purchase Agreement: Buyer makes a deposit for the future purchase of a property with the right to lease the property in the interim

Loan-to-Value ratio: The relationship between the amount of a home mortgage and the total value of the property. Lenders may limit their maximum mortgage to 80% to 95% of value.

Lock-In Rate: A commitment made by lenders on a mortgage loan to "lock in" a civilian rate pending mortgage approval. Lock-in periods vary.

Market Value: The highest price a buyer will pay for a property and the lowest price the seller will accept

Mortgage: One type of document used to make property as the security for the payment of a loan

Mortgage Broker: An individual or company that obtains mortgages for others by finding lending institutions, insurance companies or private sources to lend the money; may also make collections and handle disbursements

Mortgagee: The lender of money or the receiver of the mortgage

Mortgagor: The borrower of money or the giver of the mortgage document

Note: A written promise to pay a certain amount of money

Origination Fee: A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan

Private Mortgage Insurance (PMI): Insurance issued to a lender by a private company to protect the lender against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan-to-value ratios. The borrower pays the premiums.

Promissory Note: A written contract containing a promise to pay a definite amount of money at a definite future time

REALTOR^® and REALTOR^® Associate: Registered collective membership marks that identify real estate professionals who are members of the National Association of REALTORS^® and who subscribe to its strict Code of Ethics

Savings Bank: A financial institution organized to hold individual depositors' funds in interest-bearing accounts and to make long-term investments, such as home mortgage loans

Second Mortgage/Second Deed of Trust/Junior Mortgage or Junior Lien: An additional loan imposed on a property with a first mortgage; generally a higher interest rate and shorter term than a "first" mortgage.

Shared Equity Mortgage: A home loan in which an investor is granted a share of the equity, thereby allowing the investor to participate in proceeds from resale

Survey: The process by which a parcel of land is measured and its area ascertained

Tenancy in Common: Ownership by two or more persons who hold an undivided interest without right of survivorship. (In the event of the death of one owner, his/her share will pass to his/her heirs.)

Title: A document that is evidence of ownership

Title Insurance: Protection for lenders and homeowners against financial loss resulting from legal defects in the title

Variance: A special suspension of zoning laws to allow the use of property in a manner not in accordance with existing laws

Zoning Restrictions: Local municipal ordinances that classify property according to specific uses such as single family, residential, commercial, industrial, multi-family, etc.

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