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A
Abstract of Title
A report of the public records relating to a particular
piece of land. Needed to assure clear title when buying
a home.
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Abstract
of Judgment
A report summarizing a court judgment that creates a lien
against a property when recorded by municipality.
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Acceleration
Clause
Allows the lender to demand payment of your loan at an
accelerated pace, or in full, if there is a default to
the terms agreed upon in the note.
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Acceptance
The written approval of an offer.
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Addendum
A modification to the terms of a contract.
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Adjustable
Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically
based on an index.
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Adjustment
Period
Predefined timeframe in which interest rates may change
based on the terms of an adjustable rate mortgage.
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Amortization
Loan payment calculated to pay off the debt at the end
of a fixed period, including; principle, interest on the
outstanding balance.
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Annual
Percentage Rate (APR)
The total cost of attaining a loan, inclusive of finance
charges and fees, expressed as an annual rate.
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Application
A request for a loan completed by borrowers detailing
income, assets, liabilities and other pertinent information
needed to evaluate credit worthiness.
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Application
Fee
A fee that may be charged by some lenders to process a
loan application.
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Appraisal
An estimate of the value of property, made by a professional
appraiser.
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Appraisal
Fee
The charge for an appraisal.
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Appraisal
Report
A report usually prepared for a lender to analyze the
value of a specific property based on condition, location,
and other pertinent factors.
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Appreciation
The increase in the value of a property.
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APR
(Annual Percentage Rate)
The total cost of the loan, including interest and other
finance charges, expressed as a yearly rate.
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ARM
(Adjustable Rate Mortgage)
A mortgage with an interest rate that changes at pre-defined
timeframes based on the sum of an index and margin.
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As-Is
Condition
A property being bought or sold in its existing condition.
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Asking
Price
The initial price or listing price a seller is asking
for a property.
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Assessment
Value
The value used by municipalities to assess property taxes.
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Assets
Items of value such as cash, real estate, art, investments,
and securities.
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Assignor
One who transfers the rights and interests of a property
to another.
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Assumable
Mortgage
A type of mortgage that allows a seller to transfer the
terms of an existing mortgage to a buyer.
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B
Back End Ratio
Used to qualify a borrower for a mortgage. It is the
ratio of total housing payment plus installment minimum
payments and other loan/lease payments divided by gross
monthly income.
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Bad
Credit Mortgage Loans
Bad credit mortgage loans are commonly called sub-prime
loans, and are usually rated from A to D. There are many
factors to consider including closing costs, interest
rates and pre-payment penalties. Even without perfect
credit, it is still possible to obtain financing.
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Balloon
Mortgage
A mortgage that is amortized over a specific timeframe
(usually 15 or 30 years) that is due in full prior point
in time (as example, 5 years).
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Bankruptcy
A court proceeding authorizing reorganization or discharge
of debts.
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Before
Tax Income
Gross incomes before taxes are deducted.
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Bill
of Sale
A written agreement that transfers property from a seller
to a buyer.
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Binder
A preliminary good faith agreement with a down payment
between a buyer and seller of real estate deposit. The
binder summarizes the terms of the transaction. In the
event the buyer cancels the transaction the deposit is
usually for forfeited.
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Bylaws
and regulations that govern a homeowner's association
or corporation.
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C
Cancellation Clause
A clause that explains under what terms or conditions
a party may terminate a contract.
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Cap
The most the interest rate can adjust for an adjustable
rate mortgage at adjustment intervals.
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Capital
Improvements
Improvements made to the value of a property.
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Cash
Out Refinancing
Refinancing a mortgage where the new loan amount exceeds
the amount of the current loans. The borrower receives
the additional funds at close of escrow.
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Caveat
Emptor
A legal principle derived from the Latin phase, meaning
"let the buyer beware."
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CC&R's
(Covenants, Conditions, and Restrictions)
The rules and regulations that govern condominiums, planned
unit developments and similar housing projects.
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Certificate
of Occupancy
A document issued by the local municipality to a builder,
stating that the property is suitable for habitation.
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Certificate
of Title
A document issued by a title company or a written opinion
from an attorney stating that the seller of a property
has good marketable and insurable title to the property
for sale.
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Chain
of Title
The ownership history of a property outlined in an official
record.
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Clear
Title
A property that has no encumbrances such as mortgages,
liens, or judgments recorded against it.
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Closing
The final step in the purchase of a property, in which
documents are signed and recorded and the property is
transferred to the new owner.
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Closing
Costs
Various costs related to the sale of real estate, including
loan, title, escrow, and appraisal fees.
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Cloud
on Title
An outstanding encumbrance on a property which may adversely
affect the marketability of title.
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Collateral
Property that a borrower offers as security to obtain
a loan.
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Collection
Steps taken by a lender to obtain overdue payments on
a loan.
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Commitment
An approval to provide a mortgage to an applicant under
for a specific timeframe and terms.
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Common
Area
An area in some housing communities that is owned by all
residents and maintained by home owner association dues.
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Community
Property
A classification in certain states of property owned jointly
by a husband and wife.
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Comparables
Like properties used in appraisals for the purpose of
determining the fair market value of the subject property.
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Condominium
Individual ownership of a unit within a building or development
with common areas owned by all residents. The individual
owners own the interior space of the dwelling. They do
not own the land the condominium sits on.
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Conforming
Loan:
A mortgage loan that meets the underwriting guidelines
outlined by Fannie Mae or Freddie Mac.
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Construction
Loan
A short term loan of which funds are disbursed in stages
by the lender, for the construction of a home.
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Construction
to Permanent Loan
Converting a construction loan to a traditional mortgage
loan after construction is complete.
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Consumer
Credit
Monies owed that is not secured by real estate.
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Contract
A legal agreement between two or more parties.
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Contract
to Purchase
A contract depicting the terms of purchase between a buyer
and seller.
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Convertible
Adjustable Rate Mortgage
An adjustable rate loan that may convert to a fixed rate
under certain terms and conditions.
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Conveyance
The transfer of a property's title from one party to another.
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Co-Signer
A second party to a financial transaction that is equally
and jointly responsible for the terms of the note.
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Counteroffer
A response to an offer to purchase property, usually requesting
a change in the terms set forth in the buyer's offer.
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Credit
Bureau
A company whose function is to collect credit data and
issue credit reports. A credit bureau will generally access
credit information held by a credit repository.
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Credit
History
A history of an individuals timeliness in paying monthly
obligations.
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Creditor
Any individual or institution to whom a debt is owed.
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Credit
Rating
Credit worthiness assigned to an individual based on current
credit, credit history, and financial standing.
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Credit
Report
A report furnished by independent credit agencies summarizing
a consumer's credit history.
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Credit
Repository
A company that gathers financial and credit information
about individuals who have applied for credit. The credit
repository usually furnishes data to credit reporting
agencies or bureaus. The major agencies are Equifax, Trans
Union, and Experian.
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D
Debt Consolidation Mortgages
A loan in which the owner of a property borrows against
any remaining equity in the property for the purposes
of paying off other debt - including high interest credit
cards.
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Debt
Ratio
The ratio of all monthly payment obligations to gross
income. Expressed as a percent.
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Deed
A legal document that transfers ownership of real property
from one party to another.
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Default
Failure of a note holder to abide by the terms of the
note or deed of trust.
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Delinquent
Mortgage
A mortgage that is behind on regularly scheduled payments.
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Depreciation
A property's decrease in value due to wear and tear, adverse
changes in the neighborhood, or any other reasons.
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Discharge
The final step in bankruptcy proceedings, in which debts
are no longer owed or collectable.
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Discount
Points
Fees that a borrower may pay to attain a lower rate of
interest. Each point is equal to one percent of the loan
amount.
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Distressed
Property
Property that is run down and is in need of improvement.
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Documentary
Stamps
A municipal tax, in the form of stamps, that is required
on deeds and mortgages in some states, when property passes
from one to another.
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Due-On-Sale
Clause
A statement in loan documents that states that says that
in the event of transfer of title due to a sale, the loan
must be paid in full.
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E
Early Occupancy
When the seller of a property allows the buyers to occupy
the property before the sale is complete.
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Earnest
Money
The deposit money a buyer gives to a seller with the offer
to purchase a property.
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Easement
A right given to an individual or agency authorizing access
to or over the owner's property.
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Encumbrance
A claim or lien on a property that affects having a clean
title.
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Equal
Credit Opportunity Act
A federal law prohibiting lenders or other creditors from
refusing credit based on the applicant's race, color,
religion, national origin, sex, marital status, age (provided
the applicant has the capacity to contract); on the fact
that all or part of the applicant's income is derived
from public assistance; or the fact that the applicant
has in good faith exercised any right under the Consumer
Credit Protection Act.
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Equity
value of a homeowner's property after deducting existing
liens.
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Escrow
(Impound) Analysis
An annual review of an escrow account by a lender to determine
if the lender is withholding enough funds from the borrower's
monthly mortgage payment to cover property taxes, insurance,
or other expenses.
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Escrow
Closing
When all conditions for the real estate transaction are
met and the property title is transferred to the buyer.
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Escrow
Instructions
Instructions prepared by the escrow agent stating the
terms and conditions of a transaction. The escrow instructions
are agreed to by all parties.
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Examination
of Title:
A review of public records and other documents by a title
company to establish the chain of ownership of a property.
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F
Fair Credit Reporting Act
A federal law that prevents old or inaccurate information
from remaining in consumer credit files and regulates
credit reporting procedures.
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Fair
Debt Collection Practices Act
A federal law that renders debtor harassment illegal and
regulates collection practices.
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Fair
Housing Act
federal law that outlaws denying rent or refusing to sell
property to anyone based on race, color, religion, familial
status (having one or more children), handicap, or national
origin.
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Fannie
Mae (FNMA):
The Federal National Mortgage Association, a congressionally
chartered company, owned by shareholders, that buys mortgages
from lenders and resells them as securities in the secondary
mortgage market.
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Federal
Home Loan Mortgage Corporation
A company, commonly known as Freddie Mac, that buys mortgages
from lenders and resells them to investors.
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Federal
Housing Administration (FHA)
A government agency that operates various home loan programs.
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Fee
Simple
A type of property ownership in which the owner owns both
the land and the structures and is entitled to use the
property freely in accordance with state and local laws.
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FHA
Loans
Mortgages insured by the Federal Housing Administration
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FHA
Mortgage Rates
FHA mortgage rates are typically well priced, although
the associated points can vary from lender to lender.
The loan limits are set by the FHA.
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First
Mortgage
The first mortgage on a property that has priority over
all other mortgages recorded against it.
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Fixed
Rate Mortgage
A home loan with an interest rate that does not change
for the entire term of the loan.
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Foreclosure
A legal process in which a lender enforces early payment
of a mortgage in default by taking and selling the mortgaged
property to repay the loan, legal costs, and other liens
on the property.
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Front
End Ratio
Expressed as a percentage and calculated by dividing the
mortgage payment (including principal, interest, tax,
and insurance) by gross monthly income.
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G
Gift Funds
Cash a borrower receives from a relative or another
source, used to make a down payment on a property.
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Good
Faith Estimate
An estimate, provided by a lender, summarizing all the
monies needed to close a mortgage transaction.
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Government
National Mortgage Association
An agency, commonly known as Ginnie Mae, which purchases
only government-backed loans, then resells them to investors.
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Grace
Period
A period of time after the payment due date during which
a penalty for late payment is not assessed.
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Gross
Income
Total household income before any taxes or voluntary deductions
taken out.
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H
Hazard Insurance
Insurance that protects a homeowner and lender against
losses due to damage from such disasters as fire, wind,
or other common hazards.
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Home
Equity Loan
A loan in which the owner of a property borrows against
any remaining equity in the property.
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Home
Inspection
An examination of the construction, condition, and internal
systems of a home by a qualified inspector prior to purchase.
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