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Glossary
of Terms
Abstract
A summary; an abridgment. Before the use of photostatic copying public
records were kept by abstracts of recorded documents.
Abstract
of Title
A compilation of the recorded documents relating to a parcel of land, from
which an attorney may give an option as to the condition of title. Still in
use in some states, but giving way to the use of title insurance.
Acre
A measure, usually of land, equal to 160 sq. rods (43,560 sq. ft.) in any
shape.
Action
to Quiet Title
A court action to establish ownership to real property. Although technically
not an action to remove a cloud on a title, the two actions are usually
referred to as "Quiet Title" actions.
Adjustable
Rate Mortgage(ARM)
A mortgage where the interest rate is not fixed, but changes during the life
of the loan in line with movements in an index rate. You may also see ARM's
referred to as AML's or VRM's.
Agency
An Agency relationship is one in which one person is empowered to act on
behalf of another, subject to the control and consent of the person being
represented.
Agent
The person who is acting on behalf of the principal or client.
Agreement
of Sale
In some states it is synonymous with a purchase agreement (Purchase
Agreement). In other states, it is synonymous with a land contract (Land
Contract).
Alienation
Clause
A clause calling for a debt under a mortgage or deed of trust to be due in
its entirety upon transfer of ownership of the secured property.
Amortize
To reduce a debt by regular payments of both principal and interest, as
opposed to interest only payment.
Annual
Percentage Rate(APR)
A measure of the cost of credit, expressed as a yearly rate. It includes
interest as well as other charges. Because all lenders follow the same rules
to ensure the accuracy of the annual percentage rate, it provides consumers
with a good basis for comparing the cost of loans, including mortgage plans.
Appraised
Value
An option of the value of a property at a given time, based on facts
regarding the location, improvements, etc., of the property and
surroundings.
Arrears
Payment made after its due is in arrears. Interest is said to be paid in
arrears since it is paid to the date of payment rather than in advance.
Assumability
When a home is sold, the seller may be able to transfer the mortgage to the
new buyer. This means the mortgage is assumable. Lenders generally require
credit review of the new borrower and may charge a fee for the assumption.
Some mortgages contain a due-on-sale clause, which means that the mortgage
may not be transferable to the new buyer. Instead, the lender may make you
pay the entire balance that is due when you sell the home. Assumability can
help you attract buyers if you sell your home.
Assumption
of Mortgage
Agreement by a buyer to assume the liability under an existing note secured
by a mortgage or deed of trust.
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
The final payment of a mortgage which is larger than the regular payment; it
usually extinguishes the debt.
Binder
A report issued by a title insurance company setting forth the condition of
title and setting forth conditions, which, if satisfied, will cause a policy
of title insurance to be issued.
Blanket
Mortgage
A mortgage covering more than one property of the mortgage.
Bridge
Financing
A form of interim loan, generally made between a short term loan and a long
term loan, when the borrower needs to have more time before taking on long
term financing.
British
Thermal Unit(B.T.U.)
Unit of heat required to raise one pound of water one degree Fahrenheit.
Buydown
With a buydown, the seller pays an amount to the lender so that the lender
can give you a lower rate and lower payments, usually for an early period of
a loan. The seller may increase the sales price to cover the cost of the
buydown.
Cap
A limit on how much the interest rate or monthly payment of an ARM can
change, either at each adjustment or during the life of the mortgage.
Payment CAP's don't limit the amount of interest the lender is earning so
the may cause negative amortization.
Certificate
of Eligibility
A certificate obtained by a veteran from a Veteran's Administration office
which states that the veteran is eligible for a V.A. insured loan.
Certified
Copy
A true copy, attested to be true by the officer holding the original.
Cestui
que trust
One having an equitable interest in property, legal title being vested in
trustee.
Chain
of Title
The chronological order of conveyancing of a parcel of land, from the
original owner to the present owner.
Closing
Statement
The statement which lists the financial settlement between buyer and seller,
and also the costs each must pay. A separate statement for buyer and seller
is sometimes prepared.
Cloud
on Title
An invalid encumbrance on real property, which if valid, would affect the
rights of the owner.
Co-Maker
Equally responsible for repayment as the borrower.
Commitment
A written promise to make or insure a loan for a specified amount and on
specified items.
Comparables
Properties used as comparisons to determine the value of a specified
property.
Condominium
A structure of two or more units, the interior space of which are
individually owned.
Construction
Loan
Short term financing of real estate construction. Generally followed by the
long term financing called a "take out" loan, issued upon
completion of improvements.
Contingency
The dependence upon a stated event which must occur before a contract is
binding.
Contract
of Sale
Depending on area of country it may be a Land Contract or a Purchase
Agreement.
Closing
Cost
Expenses incurred in the closing of a real estate or mortgage transaction.
Conventional
Mortgage
A loan neither insure by the FHA nor guaranteed by the VA.
Conversion
Clause
A provision in some ARMs that allows you to change the ARM to a fixed-rate
loan at some point during the term. Usually the conversion is allowed at the
end of the first adjustment period. At the time of the conversion, the new
fixed rate is generally set at one of the rate then prevailing for
fixed-rate mortgages. The conversion feature may be available at extra cost.
Cost
Plus Contract
A building contract setting the builder's profit at a set percentage of
actual cost of labor and materials.
Contract
Sales Price
The full purchase price as stated in the contract.
County
A division within a state, usually encompassing one or more cities or towns.
Certificate
of Reasonable Value(CRV)
An appraisal of property for the purpose of insurance by the Veteran's
Administration.
Declaration
of Restrictions
A set of restrictions filed by a subdivider to cover an entire tract or
subdivision.
Defective
Title
Title to a negotiable instrument obtained by fraud. Title to real property
which lacks some of the elements necessary to transfer good title.
Depreciation
Decrease in value to real property improvements caused by deterioration or
obsolescence.
Devise
Real estate left by will.
Devisee
One to whom real estate is given by will.
Devisor
A testator who leaves real estate.
Direct
Reduction Mortgage
An amortized mortgage. One on which principal and interest being computed on
the remaining balance.
Disbursements
Payments made during the course of an escrow or at closing.
Discount
Is an ARM with an initial discount, the lender gives up a number of
percentage points of interest to give you a lower rate and lower payments
for part of the mortgage term. After the discount period, the ARM rate will
probably go up depending on the index rate.
Documentary
Tax Stamps
Stamps, affixed to a deed, showing the amount of transfer tax.
Dragnet
Clause
A clause in a mortgage or deed or trust which places the real estate as
security for existing debts between the parties.
Easement
A right created by grant, reservation, agreement, prescription, or necessary
implication, which one has in the land of another.
Eminent
Domain
A Government right to acquire private property for public use by
condemnation, and the payment of just compensation.
Encroachment
Construction onto the property of another, wall, fence, etc.
Encumbrance
A claim, line charge, attached to and binding real property.
Equity
The difference between the market value of the property and the homeowners
mortgage debt.
Escrow
Delivery of a deed by a grantor to a third party for delivery to the grantee
upon the happening of a contingent event.
Escrow
Payment
That portion of a mortgagor's monthly payment held in trust by the lender to
pay for taxes mortgage insurance, hazard insurance, lease payments, and
other items as they become due, also know as "impounds" in some
states.
Escrow
Reimbursement
An assumptions or wrap loan transactions, the buyer reimburses the seller
for the current balance of his escrow (or impounded) funds.
Federal
Home Board
The board which charters and regulates federal savings and loan
associations, as well as controlling the system of Federal Home Loan Banks.
Federal
Tax Lien
A lien attached to property for nonpayment of a federal tax.
Fee
Simple
An estate under which the owner is entitled to unrestricted powers to
dispose of the property, and which can be left by will or inherited.
Federal
Home Loan Board
The board which charters and forbids discrimination in the sale.
Federal
Housing Administration
A federal Agency which insures first mortgages, enabling lenders to loan a
very high percentage of the sale price.
Freddie
Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A federal Agency purchasing first
mortgages, both conventional and federally insured, from members of the
Federal Reserve System, and the Federal Home Loan Bank System.
Foreclosure
A proceeding in or out of court, to extinguish all rights, title, and
interest, of the owner(s) of property in order to sell the property to
satisfy a lien against it.
Full
Disclosure
Revealing all the known facts which may affect the decision of a buyer or
tenant.
General
Lien
A lien such as a tax lien or judgment lien which attaches to all property of
the debtor rather than the lien of, for example, a trust deed, which
attaches only to a specific property.
Ginnie
Mac (GNMA)
Government National Mortgage Association. A federal association working with
FHA which offers special assistance in obtaining mortgages, and purchases
mortgages in a secondary capacity.
Grandfather
Clause
The clause in a law permitting the continuation of a use, business, etc.,
which, when was permissible but, because of a change in the law is now not
permissible.
Ground
Rent
Rent paid for vacant land. If the property is improved, ground rent is the
portion attributable to the land only.
Heir
and Assigns
Words
usually found in a deed, showing the interest the grantee is receiving.
Home
Owner Association
An association of people who own homes in a given area for the purpose of
improving or maintaining the quality of the area.
Impound
Account
Account held by a lender for payment of taxes, insurance, or other
Index
The index if the measure of interest rate changes that the lender uses to
decide how much the interest rate on an ARM will change over time. You
should ask your lender how the index for any ARM you are considering has
change in recent years, and where it is reported.
Independent
Contractor
The term is most important as used to describe the relationship of broker
and salesperson, employee or independent contractor. If employee, the broker
must withhold income tax and pay social security, provide workmen's
compensation, and may be liable for some negligent acts of the salesperson
while on the job. All of this is avoided by the broker if salesperson is an
indepent contractor.
Installment
Sale
A tax term used to describe a sale which is usually accomplished by use of a
land contract.
Insured
Mortgage
A mortgage insured against loss to the mortgagee in the event of default and
failure of the mortgaged property to satisfy the balance owing plus costs of
foreclosure.
Interest
Rate
The percentage of an amount of money which is paid for its use for a
specified time.
Joint
and Several
A liability which allows the creditor to sue any one of the debtors or sue
all together.
Joint
Tenancy
An undivided interest in property, taken by two or more joint tenants. The
interests must equal, accruing under the same conveyance, and beginning at
the same time. Upon death of a joint tenant the interest passes to the
surviving joint tenants, rather than to the heirs of the deceased.
Judgement
The decision of a court of law. Money judgments, when recorded, become a
lien on real property of the defendant.
Late
Charge
A penalty for failure to pay an installment on time.
Legal
Description
A description by which property can be definitely located by reference to
surveys or recorded maps. Sometimes referred to simply as the legal.
Lease
with Option to Purchase
A lease under which the lessee has the right to purchase the property. The
option may run for the length of the lease or only for a portion of the
lease period.
Lender
A general term encompassing all mortgages, and beneficiaries under deeds of
trust.
Letter
of Intent
A formal method of stating that a prospective developer, buyer or lessee, is
interested in property.
Liber
A latin word for book.
Lien
An encumbrance against property for money, either voluntary or involuntary.
Life
Estate
An estate in real property for the life of a living person. The estate then
reverts back to the grantor or on to a third party.
Limited
Partnership
A partnership consisting of one or more general partners who conduct the
business and are responsible for losses, and one or more special partners,
contributing capital and liable only to the amount contributed.
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
Package
The information given to the lender regarding the borrower and the property
necessary to decide to give or not to give the loan.
Loan
Ratio
The amount of a loan to the value or selling price of real property.
Loan-to-Value
Ratio
The ratio of the mortgage loan amount to the properties appraised value (or
the selling price whichever is less).
Margin
The number of percentage points the lender adds to the index rate to
calculate the ARM interest rate at each adjustment.
Marketable
Title
Title which can be readily marketed to a reasonably prudent purchaser aware
of the facts and their legal meaning concerning liens and encumberances.
Mechanics
Lien
A lien created by statue for the purpose of securing priority of payment for
the price of value of work performed and materials furnished in construction
of repair of improvements to land, and which attached to the land as well as
the improvements.
Mortgage
Broker
One who for a fee, brings together a borrower and lender, and handles the
necessary applications for the borrower to obtain a loan against real
property by giving a mortgage or deed of trust as security. Also known as a
loan broker.
Mortgage
Guaranty Insurance Corporation (MGIC)
A private corporation which, for a fee, insures mortgage loans similar to
FHA and VA insurance, although not insuring as great a percentage of the
loan.
Mortgage
or Deed of Trust
Written pledge of real property given by the mortgagor to secure a debt.
Should be recorded in the County Recorders Office.
Mortgagee
The lender of money or the receiver of the mortgage document.
Mortgagor
The borrower of money or the giver of the mortgage document.
Mortgage
Insurance
Insurance required for loans with a loan above 80.01%.
Mortgage
Warehousing
A system whereby a mortgage company will hold loans which would ordinarily
be sold, in order to sell later at a lower discount. These are used as
collateral security with a bank to borrow new money to loan.
Negative
Amortization
Amortization means that monthly payments are large enough to pay the
interest and reduce the principal on your mortgage. Negative amortization
occurs when the monthly payments do not cover all of the interest cost. The
interest cost which is not covered by the payment is added to the unpaid
principal balance. This means that even after making many payments, you
could owe more than you did at the beginning of the loan. Negative
amortization can occur when an ARM has a payment cap that results if monthly
payments not high enough to cover the interest due.
Nonconforming
Use
A property which does not conform to the zoning of an area.
Note
A written promise to repay a certain sum of money on specified terms.
Open
End Mortgage
A mortgage permitting the mortgagor to borrow additional money under the
same mortgage, with certain conditions, usually, as to the assets of the
mortgage.
Orginination
Fee
A fee or charge for work involved in the evaluation, preparation and
submission of a proposed mortgage loan.
Owners
Policy
Title insurance for the owner of property, rather than a lienholder.
Package
Mortgage
Mortgage covering both real and personal property.
Paper
A mortgage, deed of trust, or land contract, which is given instead of cash.
Partial
Release
A release of a portion of property covered by a mortgage.
Perc
Test (Percolation)
The test to determine the capability of the soil to absorb liquid, both for
construction and septic systems.
Permanent
Mortgage
A mortgage on completed construction on the same property under one mortgage
or trust deed.
PMI
Private Mortgage Insurance
Insurance similar to FHA or VA insurance, insuring part of the first
mortgage or deed of trust, enabling a lender to make a conventional loan of
a higher percentage of the property value.
Points
A point is equal to one percent of the principal amount of your mortgage.
For example, if you get a mortgage for $100,000, one point is means you pay
$1000 to the lender. Lenders frequently charge points in both fixed-rate and
adjustable-rate mortgages in order to increase the yield of the mortgage and
to cover loan closing costs. These points are usually collected at closing
and may be paid by the borrower or the home seller, or may be split between
them.
Property
Tax
Generally, tax levied on both real and personal property.
Prorate
To divide in proportionate shares, such as taxes, insurance, rent, or other
items.
Purchase
Money Mortgage
A Mortgage given by the buyer to the seller as part of the purchase
consideration, as opposed to a hard money mortgage.
Quit
Claim Deed
A deed operating as a release; intended to pass any title, interest, or
claim which the grantor may have in the property.
Real
Estate
Land and anything permanently affixed to the land, and those things attached
to the building.
Recital
Setting forth in a deed or other writing some explanation for the
transaction.
Recourse
The right of the holder of a note secured by a mortgage or deed of trust to
look personally to the borrower or endorser for payment.
Refinancing
The repayment of a debt from the proceeds of a new loan using the same
property as security.
Reissuerate
A charge for a title insurance policy if a previous policy on the same
property was issued within a specified period. Reissue is less than the
original charge.
REIT
(Real Estate Investment Trusts)
A method in investing in real estate in a group, with certain tax
advantages.
Release
An instrument releasing property from the lien of the mortgage, judgment,
etc.
Recision
of Contract
Annulling a contract and placing the parties to it in a positionas if there
had not been a contract.
RESPA
(Real Estate Settlement Procedures Act)
A
federal statute requiring disclosure of certain costs in the sale of
residential improved property which is to be financed by a federally insured
lender.
Revenue
Stamps
Formerly federal tax on a sale of real property. Canceled and replaced by
state tax stamps.
Secondary
Financing
A loan secured by a mortgage or trust deed, which lien is junior to another
mortgage or trust deed.
Secondary
Mortgage
The buying and selling of first mortgages of trust deeds by banks, insurance
companies, government agencies, and other mortgagees.
Security
Real or personal property pledged by a borrower, as additional protection
for the lender's interest.
Septic
System
A sewage system, whereby waste is drained through pipes and a tile field
into a septic tank.
Set
Back Ordinance
Regulates the distance from the lot line to the point where improvements may
be constructed.
Settlement
Statement
A statement prepared by broker, escrow, or lender, giving a complete
breakdown of costs involved in a real estate sale.
Sheriff's
Deed
Deed given at sheriff's sale in foreclosure of mortgage.
Signed
Sealed and Delivered
A phrase indicating that everything necessary to convey has been done by the
grantor.
Specific
Performance
An action to compel the performance of a contract, when money damages for
breach would not be satisfactory.
Statutory
Lien
An involuntary lien, includes tax liens, judgment liens, mechanic liens,
etc.
Substitute
of Trustee
A document which is recorded to change the trustee under the deed of trust.
Tax
Lien
Lien for nonpayment of taxes.
Tax
Sale
Public sale of property at auction by governmental authority, after a period
of nonpayment of property taxes.
Tenancy
by the Entirety
A form of ownership by husband and wife whereby each owns the entire
property. In event of death of one, the survivor owns the property without
probate.
Title
Often used interchangeably with the work ownership. It indicates the
accumulation of all rights in property, the owner and others.
Title
Insurance
An insurance policy which protects the insured (purchaser and lender) against
loss arising from defects in title
Vesting
Denotes the manner in which title is held. Examples of common vestings are:
Community Property, Joint Tenancy and Tenancy in Common.
Regards,
Diane Triolo
Call me @ 1-610-867-6322
or E-mail
Charles
L. Annibale Real Estate
2299
Brodhead Road - Suite
C-A
Bethlehem, Pennsylvania 18020
Tel: 610-867-6322
Broker of Record: Charles L. Annibale
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