- M -

Marketable Title

A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Master association

A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.

Maturity

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

Merged credit report

A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your credit.

Modification

Margin

(Also called "Spread"). The amount the lender adds to the index to determine the Fully Indexed Accrual Rate.

Money market account

A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.

Money market fund

A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

Monthly Housing Expense

Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.

Monthly payment mortgage

A mortgage that requires payments to reduce the debt once a month.

Mortgage

A legal document that pledges a property to the lender as security for a payment of a debt.

Mortgage Banker

A company that originates mortgages exclusively for resale in the secondary market.

Mortgage Broker

A company that for a fee matches borrowers with lenders.

Mortgage Insurance Premium

(MIP). The fee paid to FHA or a private insurer for mortgage insurance.

Mortgagee

The lender in a mortgage agreement.

Mortgage Commitment

A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance Premium

The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.

Mortgage life insurance

A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

Mortgage Note

A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Mortgagor

The borrower in a mortgage agreement.

Multidwelling units

Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

Multifamily mortgage

A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.

Back to Top

- N -

Negative Amortization

(Also called "Deferred Interest"). If the payments are too small to cover the interest due on a loan, the remaining interest owed is added to the outstanding loan balance, causing negative amortization.

Net cash flow

The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

Net Effective Income

Gross income less federal income tax.

Negative amortization

A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization

Net Worth

The value of all assets, including cash, less total liabilities.

No cash-out refinance

A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

Non-liquid asset

An asset that cannot easily be converted into cash.

Note

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

The interest rate stated on a mortgage note.

Notice of Default

A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Back to Top

- O -

- P -

Payment Adjustment Period

The length of time (typically a year) between changes to the AML borrower's P&I payment.

Payment Buy down

Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.

Payment Cap

A limit on the amount the payment can be changed at the end of each Payment Adjustment Period.

Payment Discount

In a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers.

Periodic payment cap

A limit on the amount that payments can increase or decrease during any one-adjustment period.

Periodic rate cap

A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Personal property

Any property that is not real property.

PITI

Principal, Interest, Taxes and Insurance are components of a mortgage payment.

Plat

A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Points

A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.

Power of attorney

A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time. 

Prepayment

Payment of mortgage loan, or part of it, before due date.

Pre-qualification

The process of determining how much money a prospective homebuyer will be eligible to borrow before application.

Prime rate

The interest rates that banks charge to their preferred customers.

Principal

The amount borrowed or remaining unpaid, also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Private Mortgage Insurance

Insurance provided by nongovernmental insurers that protect lenders against loss if a borrower defaults.

Promissory note

A written promise to repay a specified amount over a specified period of time.

Public auction

A meeting in an announced public location to sell property to repay a mortgage that is in default.

Planned Unit Development (PUD)

A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Purchase Agreement

See Agreement of Sale.

Purchase money transaction

The acquisition of property through the payment of money or its equivalent.

Back to Top

- Q -

Qualifying Ratios

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

Quitclaim Deed

A deed, which transfers whatever interest, the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See Deed.)

Back to Top

- R -

Radon

A radioactive gas found in some homes that in sufficient concentrations could cause health problems.

Rate Caps

(Also called "Interest Rate Caps"). A limit on the amount of which the interest rate charged to the borrower can be changed.

Rate lock

A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.

Real Estate Broker

A middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

Real Estate Owned

(REO). A term frequently used by lending institution as applied to ownership of real property acquired for investment or as a result of foreclosure.

RESPA

(Real Estate Settlement Procedures Act). A Federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.

Real property                   

Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

REALTOR

A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Recission

The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent.

Recorder

The public official who keeps records of transactions that affects real property in the area.

Recording

The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record. Refinancing

The process of the same mortgagor paying off one loan with the proceeds from another loan.

Rehabilitation mortgage

A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.

Remaining balance

The amount of principal that has not yet been repaid.

Remaining term

The original amortization term minus the number of payments that have been applied.

Repayment plan

An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."

Replacement reserve fund

A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

Restrictive Covenants

Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

Revolving liability

A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.

Right of first refusal

A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of ingress or egress

The right to enter or leave designated premises.

Right of survivorship

In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

RTC

(Resolution Trust Corporation). Formed to resolve thrift failures over the next three years and dispose of their assets and liabilities.

Back to Top

- S -

Sales Agreement

See Agreement of sale.

Second Mortgage

A mortgage that has rights that are subordinate to the rights of the first mortgage holders.

Secondary Mortgage Market

The buying and selling of existing mortgages.

Seller-Provided Funds

(Also called "Seller Contributions"). Seller-provided funds include all transaction cost paid by the seller except the real estate agent's (or brokers) fee.

Servicer

The party who has entered into an agreement with the insured to service a loan.

Settlement Costs

See Closing Costs.

Single Premium

A premium, which provides coverage for more than a year. empty)

Special Assessments                                

A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, streetlights, etc.

Special Lien

A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See Lien.)

Special Warranty Deed

A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.

Survey

A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.

Back to Top

- T -

Tax

As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public.

Tax Lien

A claim against real estate for the amount of its unpaid taxes.

Teaser Rate

Similar to a Payment Discount, but implies either an unusually large initial rate discount or an attempt by the lender to lure an otherwise unqualified borrower into the mortgage.

Tenancy by the entirety

A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.

Tenancy in common

A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenancy.

Tenant-stockholder

The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy agreement.

Third-party origination

A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Title

As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.

Title Company

A company that specializes in examining and insuring titles to real estate.

Title Insurance

Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.

Title Search or Examination

A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.

Total Debt Ratio

Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.

Total expense ratio

Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.

Trade equity

Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.

Transfer of ownership

Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership.

Transfer tax

State or local tax payable when title passes from one owner to another.

Treasury index

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.

Trustee

A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.

Truth-In-Lending

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

Two- to four-family property

A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

Back to Top

- U -

- V -

Government Loans FHA / VA

Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).

Vested

Having the right to use a portion of a fund such as an individual retirement fund.

Department of Veterans Affairs (VA)

An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

Back to Top

- W -

- X -

- Y -

- Z -

Zoning Ordinances

The acts of an authorized local government establishing building codes, and setting forth

Back to Top