Glossary

Agreement for Sale	A document in which the purchaser agrees to buy certain real estate (or personal property) and the seller agrees to sell under stated terms and conditions. Also called sales contract, binder or earnest money contract.
Amortization	Gradual debt reduction. Normally, the reduction is made according to a predetermined schedule for installment payments.
Annual Percentage Rate	A term used in the Truth in Lending Act to represent the full cost of a loan including interest and loan fees.
Appraisal	A formal, written estimation of the current market value of a home.
Appraiser	The appraiser decides the market value of a home based on its condition and the selling prices of comparable homes recently sold in the area. His or her job is to compute a fair estimate of market value to help the lender decide a reasonable loan amount.
Appreciation	An increase in value, the opposite of depreciation.
Assessed Valuation	The value that a taxing authority places upon personal property for the purposes of taxation.
Borrower	A mortgagor who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable.
Broker (Real Estate)	One who receives a commission or fee for bringing buyer and seller together and assisting in the negotiation of contracts between them. In most states a license is required.
Building Code	The local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.
Certificate of Occupancy	Written authorization given by a local municipality that allows a newly completed or substantially completed structure to be inhabited.
Chain of Title	The history of all the documents transferring title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Chattel	Personal property.
Closing	The conclusion of a transaction. In real estate, closing in dudes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction.
Closing Agent/ Attorney	A closing agent or attorney assures that all documentation related to the sale of a house has been completed properly, including the title search and title insurance. The closing agent explains all closing documents to the buyer and the seller, obtains their signatures where necessary and records the documents.
Closing Costs	All of the costs to the buyer and seller individually that are associated with the purchase, sale, or financing of real property. They include, but are not limited to, prorating of agreed items such as taxes and rents, the cost of title insurance policies, and the cost of credit reports, recording fees and escrow fees. Synonyms: closing costs, settlement costs.
Closing Statement	A financial disclosure giving an account of all funds received and expected at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance.
Collateral	Property pledged as security for a debt, such as the real estate as security for a mortgage.
Commission	An agent's fee for negotiating a real estate or loan transaction, often expressed as percentage of the sales price or mortgage amount.
Commitment	An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to compliance with stated conditions.
Condominium	A form of ownership of real property. The purchaser receives title to a particular unit and a proportionate interest in certain common areas.
Condominium Declaration	The basic condominium document that must be registered by the developer before the first unit is sold. This declaration thoroughly describes the entire condominium entity, including each unit and all common areas.
Contingency	A condition that must be met before a contract is binding. For example, the sale of a house might be contingent upon the seller paying for certain repairs.
Contract of Sale	A contract between a purchaser and a seller of real property to convey a title after certain conditions have been met and payments have been made.
Conventional Loan	A mortgage loan not insured by FHA or guaranteed by VA or Farmers Home Administration.
Credit Rating	A rating given to a person to establish willingness to pay obligations based upon one's past history of timely payment.
Credit Report	A report to a prospective lender on the credit standing of a prospective borrower, used to help determine credit worthiness.
Debt-To- Income Ratio	Long-term debt expenses as a percentage of monthly income. Lenders use this ratio to qualify borrowers for mortgage loans, typically setting a maximum debt-to-income ratio of 36%.
Earnest Money	A sum of money given to bind a sale of real estate; a deposit.
Easement	Right or interest in the land of another entitling the holder to a specific limited use, privilege, or benefit such as laying a sewer, putting up electric power lines or crossing the property.
Equity	The home owner's interest in a property; the difference between fair market value and the current amount the owner owes on the property.
Escrow Account	An amount set up by the lender into which the borrower makes periodic payments, usually monthly, for taxes, hazard insurance, assessments, and mortgage insurance premiums. The funds are held in trust by the lender who pays the sums as they become due.
Fair Market Value	The price at which property is transferred between a willing buyer and a willing seller, each of whom has reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.
FHA	FEDERAL HOUSING ADMINISTRATION - A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders.
FHLMC	FEDERAL HOME LOAN MORTGAGE CORPORATION - A private corporation created by Congress to support the secondary mortgage market. It sells participation certificates secured by pools of conventional mortgage loans, their principal and interest guaranteed by the federal government through the FHLMC. Popularly known as Freddie Mac.
First Mortgage	A real estate loan that creates a primary lien against real property.
FNMA	FEDERAL NATIONAL MORTGAGE ASSOCIATION - A private corporation created by Congress to support the secondary mortgage market. FNMA sells mortgage-backed securities backed by pools of conventional loans. Payment of principal and interest on these securities is backed by the US Government. Popularly known as Fannie Mae.
Gross Monthly Income	The amount of consistent and stable income that an individual receives each month, averaged over a period of time. This amount includes overtime pay, bonuses, commissions and income from dividends or interest, provided that the individual can show a consistent history of receiving such income.
Hazard Insurance	A contract that pays for loss on a home from certain hazards, such as fire.
Homeowners Association	An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.
Homeowners Policy	A multiple peril insurance policy commonly called "package policy". It is available to owners of private dwellings and covers the dwelling and contents in the case of fire or wind damage, theft, liability for property damage, and personal liability.
Housing Expense Ratio	A home owner's monthly housing expense as a percentage of his or her monthly income.
Inspector	The property/mechanical inspector examines a home to evaluate its plumbing, electrical work, appliances, heating and cooling systems, roof and structural stability.
Interest	Money paid for the use of money - that is, money paid for a loan.
Loan-To- Value Ratio	The relationship between the amount of a home loan and the total value of the property. For example, if you receive a loan of $95,000 on a home that costs $100,000, the loan-to-value ratio is 95%.
Lock-In Rate	A commitment from a lender to make a loan at a pre-set interest rate at some future date, usually for not more than 90 days. A fee may be charged to "lock-in" a rate.
Market Value	The highest price that a willing buyer would pay and the lowest a willing seller would accept.
Mortgage	An interest in real property given as security for the payment of an obligation.
Mortgagee	A lender to whom property is conveyed as security for a loan.
Mortgagor	One who borrows money, giving as security a mortgage or deed of trust on real property.
PITI	Principal, Interest, Taxes, and Insurance are the components of a mortgage payment.
Planned Unit Development	(PUD) - A subdivision having lots or areas owned in common and reserved for the use of some or all of the owners of the separately owned lots.
Point	A dollar amount paid to a lender for making a loan. A point is one percent of the loan amount. Also called discount points.
Principal	The original balance of money loaned, excluding interest. Also, the remaining balance of a loan, excluding interest.
Real Estate Broker	The seller of the house pays the real estate broker to attract potential buyers and help negotiate the contract between the seller and the buyer. The broker identifies available properties for buyers and shows them homes that meet their criteria.
Realtor	A member of the National Association of Realtors.
Realtist	A member of the National Association of Real Estate Brokers.
RESPA	Real Estate Settlement Procedures Act. RESPA is a federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.
Servicer	After a mortgage loan closes, the loan servicer collects the payments, manages escrow accounts, pays escrowed taxes and insurance, and manages delinquent payments. Lenders often "release" servicing to another business, which means that a home buyer will not necessarily send house payments to the original lender.
Settlement	The closing of a mortgage loan.
Title	The evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed. Title may be acquired through purchase, inheritance, gift, or through foreclosure of a mortgage.
Title Insurance	Insurance which provides for the payment of a specific amount of funds for loss caused by defects in the title to real estate.
Unsecured Note	A loan that is not backed by collateral (property).
Veterans Administration (VA)	An independent agency of the federal government created in 1930. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.
Zoning	City or county laws specifying how property may be used in specific areas.