real estate vocabulary

Abstract of title: A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record which may effect the marketability of the title.

Adjustable Rate Mortgage (ARMS): Mortgage loans where the interest rate and monthly payments may be adjusted periodically to correspond with changes in the cost of funds.

Amortization: Paying a loan by making scheduled payments on the amount you borrowed with interest.

Amortization Schedule: A schedule showing each payment of a loan to be amortized and shows the break down of payment into the amount applied to principal and the amount applied to interest.

Annual Percentage Rate (APR): The cost of your credit expressed as a yearly percentage. It includes interest and other finance charges such as points, origination fees and mortgage insurance.

Assumption Fee: Lender’s charge for paperwork involved in processing records for a new buyer assuming an existing loan.

Balloon Payment: When the final installment payment on a note is greater than the preceding installment payments and it pays the note in full.

Buydown: Money you can pay your lender at the beginning of a loan to temporarily lower your interest rate and monthly payments.

Buyer Broker: A real estate professional who works for you and represents you, the buyer.

Caps: A feature of adjustable rate mortgages that limits how high your interest rate can rise. This protects you from dramatic upward swings in the interest rate market.

Certificate of Reasonable Value (CRV): The federal Veterans Administration appraisal commitment to property value.

Closing: The official statement of your home purchase and mortgage loan.

Condominium: A system of individual fee ownership of units in a multi-family structure, combined with joint ownership of common areas of structure and the land.

Contingency: The dependence upon a stated event which must occur before a contract is binding. For example: The sale of a house is contingent upon the buyer obtaining financing.

Conventional Loan: A mortgage or deed of trust not obtained under a government insured program (such as FHA or VA).

Cooperative Ownership: Also called a stock co-operative or a co-op. A structure of two or more units in which the right to occupy a unit is obtained by the purchase of stock in the corporation which owns the building.

Deed of Trust: An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary), and re conveyed upon payment in full.

Downpayment: The difference between the sales price of a home and the mortgage amount. The downpayment is usually paid with the cashier’s check at closing.

Earnest Money: Downpayment made by a purchaser of real estate as evidence of good faith.

Equity: The difference between a home’s market value and the balances on outstanding home loans. Your equity value is considered an asset.

Escrow: Delivery of a deed by a grantor to a third party for delivery to the grantee.

Federal Housing Administration (FHA): An agency of the federal government that insures mortgage loans.

FHA Loan: A loan insured by the Federal Housing Administration against loss to your lender. An FHA loan usually requires a lower downpayment than a conventional mortgage.

Float Down Option: Lowers your interest rate if market rates drop after you lock in, or commit to a certain rate.

Gross Income: Your income before any taxes or other obligations are deducted.

Homeowner’s Insurance: Insurance that protects your home and possessions from theft and damage.

Home Warranty Insurance: Private insurance insuring a buyer against defects (usually in plumbing, heating, and electrical) in the home purchased. The period of insurance varies and both new and used homes may be insured.

Interest: A fee you pay for borrowing money.

Listing Agent: A real estate professional who is contacted by and works for the seller. He or she can do nothing to harm the seller’s position, but assists you with the purchase and shows the features of the homes.

Origination Fee: A sum, usually a small percentage of your loan amount, charged by your lender to process your mortgage paperwork.

PITI: Shorthand for “Principal-Interest-Taxes-Insurance,” the four elements of your monthly mortgage payments.

Planned Unit Development (PUD): A subdivision having common areas maintained by its homeowners, they are also often zoned for residential as well as commercial uses (neighborhoods with schools, shopping, etc.)

Point: A fee charged by your lender to maintain or lower the interest rate on a mortgage loan. A point is equal to one percent of the amount borrowed.

Prepayment Penalty: A fee charged by your lender if you pay off your loan before it is due.

Principal: Your loan amount, excluding interest.

Private Mortgage Insurance (PMI): Insurance that protects the lender if foreclosure on your home is unavoidable.

Property Taxes: Taxes homeowners pay for community services like public schools. These taxes are typically included in your monthly mortgage payment.

Purchase and Sale Agreement: A contract between you and the seller that defines the terms and conditions of your home purchase.

Rate Lock: Guarantees a certain interest rate and points for a specified period of time, from 30 to 60 days or longer. This protects you from fluctuating market conditions.

Survey: A measurement of land by a registered surveyor that shows dimensions, easements and improvements.

Title: Written evidence that proves you are the owner of your property.

Title Insurance: Insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects may run to the fee (chain of title) or to encumbrances.

Underwriting: The analysis of your overall credit and property value and the determination of a mortgage rate and term.

VA Loan: A loan guaranteed by the Department of Veterans Affairs against loss to your lender.

Variable Interest Rate: An interest rate which fluctuates as the prevailing rate moves up or down. In mortgages there are usually maximums as to frequency and amount of fluctuation. Also called “flexible interest rate.”