Real Estate Terms
- The maximum amount the interest rate can change annually
or cumulatively over the life of an adjustable-rate mortgage.
For example, if the caps are 2 percent annual and 6 percent
life of loan, a mortgage with a first-year rate of 10
percent could rise to no more than 12 percent the second
year, and no more than 16 percent over the entire loan
of title - A statement provided by a title company
or attorney stating that the title to the real estate
is legally held by the current owner.
- Personal property.
title - A title that is free of liens or legal
questions as to ownership of a piece of property.
- The meeting at which the sale of a property is finalized.
The buyer signs the lender agreement for the mortgage
and pays closing costs and escrow amounts. The buyer and
seller sign documents to transfer ownership of the property.
Also known as the settlement.
costs - Expenses incurred by buyers and sellers
in transferring ownership of a property. Closing costs
normally include an origination fee, an attorney's fee,
taxes, escrow payments, and charges for title insurance.
Lenders or Realtors? provide estimates of closing costs
to prospective home buyers.
statement - A financial disclosure accounting
for all funds changing hands at the closing. See also
on title - Any fact or condition that could adversely
affect the title.
- In real estate, the broker or salesperson's fee for
assisting the transaction, usually expressed as a percentage
of the total paid by the buyer.
letter - A formal offer by a lender stating the
approved terms for lending money to a home buyer.
area assessment - A levy against individual unit
owners in a condominium or planned unit development to
pay for upkeep, repairs and improvements to the property's
common areas, such as corridors, elevators, parking lots,
swimming pools and tennis courts.
or "comps" - Refers to "comparable
properties," which are used for comparative purposes
in the appraisal process. Comps are recently sold properties
that are similar in size, location and amenities to the
home for sale. Comps help an appraiser determine the fair
market value of a property.
- A real estate project in which each unit owner has title
to a unit of the project, and sometimes an undivided interest
in the common areas.
loan - A loan that conforms to the standard rules
for purchase by Freddie Mac or Fannie Mae.
- Adjoining or touching.
- A condition that must be met before a contract is legally
binding. For example, home buyers often include a contingency
that specifies that the contract is not binding until
after a satisfactory report from a qualified home inspector.
See home inspection.
- In real estate parlance, the contract is the
legal document by which buyer and seller make offers and
counteroffers. The real estate contract describes the
property, includes or excludes items in the property,
names the price, apportions the closing costs between
the parties and sets forth a closing date. When buyer
and seller agree on terms and sign the same document,
the property is said to be "under contract."
More formally known as agreement for sale, purchase agreement
or earnest money contract.
mortgage - Usually refers to a fixed-rate, 30-year
mortgage that is not insured by the FHA, Farmers Home
Administration (FmHA) or Veterans Administration.
ARM - An adjustable rate mortgage (ARM) that
can be converted to a fixed-rate mortgage under specified
or co-op - A type of multiple ownership in which
the residents of a multiunit housing complex own shares
in the cooperative corporation that owns the property,
giving each resident the right to occupy a specific apartment
index, or COFI - A yield index based upon the
cost of funds to savings & loan institutions in the
San Francisco Federal Home Loan Bank District. It is one
of the indexes commonly used to set the rate of adjustable
- A written restriction on the use of land, most commonly
in use today in homeowners associations.
report - A report on a person's credit history
prepared by a credit bureau and used by a lender in determining
a loan applicant's record for paying debts in a timely
ratio - The percentage of a person's monthly
earnings used to pay off all debt obligations. Lenders
consider two ratios, constructed in slightly different
ways. The first, called the front-end ratio, the ratio
of the monthly housing expenses ? including principal,
interest property taxes and insurance (PITI) is compared
to the borrower's gross, pretax monthly income. In the
back-end ratio, a borrower's other debts, such as auto
loans and credit cards, are also figured in. Lenders usually
take both into account and set an acceptable ratio, which
might be expressed as 33/39. Some lenders, and some lending
qualifying agencies such as FHA, take only the back-end
ratio into account.
- The legal document conveying title to a property.
- A decline in the value of property; the opposite of
points - A type of point (1 percent of a loan)
paid by the borrower to reduce the interest rate.
payment - The amount of a property's purchase
price that the buyer pays in cash and does not finance
with a mortgage.
money deposit - A deposit made by potential home
buyers during negotiations with the seller. The sum shows
a seller that a buyer is serious about purchasing the
- The right of another to use property. The most
common easements are for utility lines.
- A lien, charge or liability against a property.
Credit Opportunity - Act 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.
domain - The right of public agencies to take
land for public use.
- The value of a homeowner's unencumbered interest
in real estate. Equity is the difference between the home's
fair market value and the unpaid balance of the mortgage
and any outstanding liens. Equity increases as the mortgage
is paid down or as the property enjoys appreciation.
payment - The portion of a homeowner's monthly
mortgage payment that is held by the loan servicer to
pay for taxes and insurance. Also known as reserves. The
loan servicer holds the escrow funds separately from money
meant to pay off principal and interest