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| Amortization |
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Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years). |
| Annual Percentage Rate (APR) |
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Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan. |
| ARM |
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Adjustable Rate Mortgage: a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly payment amount, however, is usually subject to a Cap. |
| Assessed Value |
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Value placed on property by the tax assessor. |
| Assessment |
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The valuation of property for the purpose of levying a tax or the amount of the tax levied. |
| Assessor |
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One appointed to assess property for taxation. |
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| Balloon Payment |
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The final installment paid at the end of the term of a note; used only when preceding installments were not sufficient to pay off the note in full. |
| Breach |
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Violation of an obligation in a contract. |
| Building Line or Setback |
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Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances. |
| Buy Down |
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A method of lowering the interest rates on a mortgage, either temporarily or for the entire term of the loan. Often points are paid up front to make up the difference between the rate actually charged on the mortgage and the rate at which the buyer pays. Practically anyone -- sellers, buyers, home builders, relatives, etc. -- can buy down rates. |
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| Cap |
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A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease. |
| Cash Reserves |
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A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs. The amount is determined by the lender. |
| Certificate of Title |
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A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property, which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title, that an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy. |
| Closing |
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In the sale of real estate it is the final moment when all documents are executed and recorded and the sale is complete. Also, a general selling term where a sales person is attempting to sell something and the buyer agrees to purchase. |
| Closing Costs |
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The expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. |
| Closing Date |
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The date on which the title to the property changes hands. |
| Closing Statement |
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A list of the final accounting of all funds and disbursement of both buyer and seller prepared by an escrow agent, which notes all costs each, must pay at the completion of a real estate transaction. |
| Commitment Letter |
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A letter from the lending institution giving formal approval for a mortgage loan. |
| Common Area |
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That area owned in common by owners of condominiums and planned sight development homes within a subdivision. |
| Community Property |
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Both real and personal property accumulated by a husband and wife after marriage through joint efforts of both living together. |
| Contingency |
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A condition upon which a valid contract is dependent. Typically found in the offer to purchase and the purchase and sale agreement. For example, the sale of a house is contingent upon the buyer obtaining adequate financing. |
| Contract |
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An agreement between two or more parties, written or oral, to do or not to do certain things. |
| Conventional Mortgage |
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A mortgage loan not insured by HUD or guaranteed by the Veterans` Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest rate limits.) |
| Conveyance |
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The transfer of the title to land from one to another. |
| Credit Bureau Score |
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A number representing the possibility a borrower may default. It is based upon credit history and is used to determine ability to qualify for a mortgage loan. |
| Credit History |
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History of an individual`s debt payment. Lenders use this information to gouge a potential borrower`s ability to repay a loan. |
| Credit Rating |
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A report ordered by a lender from a credit agency to determine a borrower`s credit habits. |
| Credit Report |
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A record that lists all past and present debts and the timeliness of their repayment; it documents an individual`s credit history. |
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| Debt-to-Income Ratio |
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A comparison of gross income to housing and non-housing expenses. With FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income. |
| Deed |
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A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also deed of trust, general warranty deed, quitclaim deed, and special warranty deed.) |
| Default |
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Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor`s responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust. |
| Deposit |
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A sum of money sometimes referred to as earnest money, binder or escrow, which is presented with the offer to purchase and the purchase and sale agreement. This money is held in escrow and goes towards the buyer`s closing costs. |
| Discount Point |
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Normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount. Discount points are paid to reduce the interest rate on a loan. |
| Down-Payment |
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The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the down payment amount and will acknowledge receipt of the down-payment. The down-payment is the difference between the sales price and maximum mortgage amount. The down-payment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the down-payment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the down-payment and to pay interest and expenses incurred by the purchaser. |
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| Earnest Money |
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Money put down by a potential buyer to show that he or she is serious about purchasing the home. It becomes part of the down payment if the offer is accepted, or is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. |
| Encumbrance |
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A legal right or interest in land that affects a good or clear title, and diminishes the lands value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it. |
| Equity |
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The residual value of real property beyond any mortgage thereon. |
| Equity |
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The value of a homeowner`s unencumbered interest in real estate. Equity is computed by subtracting from the property`s fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner`s equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property. |
| Escalation Clause |
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A clause in a lease providing for an increased rent at a future time due to increased costs to lessor, as in cost of living index, tax increases, etc. |
| Escrow |
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Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums and special assessments. |
| Estate |
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The ownership interest of a person in real property. Is also used to refer to a deceased person`s property. And often used to describe a large home with spacious grounds. |
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| Fair Housing Act |
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A law that prohibits discrimination in all facets of the homebuying process on the basis of race, color, national origin, religion, sex, familial status, or disability. |
| Fair Market Value |
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The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation. |
| Fannie Mae |
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Federal National Mortgage Association (FNMA), a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors. By purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers. |
| Fee Simple |
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Ownership of title to property without any limitation, which can be sold, left at will, or inherited. |
| FHA |
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Federal Housing Administration, established in 1934 to advance homeownership opportunities for all Americans. Assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults. This encourages lenders to make loans to borrowers who might not qualify for conventional mortgages. |
| Fixed-Rate Mortgage |
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A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change. |
| Flood Insurance |
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Insurance that protects homeowners against losses from a flood. If a home is located in a flood plain, the lender will require flood insurance before approving a loan. |
| Floor Plan |
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Scaled drawing indicating all walls, windows, electrical outlets, furniture placement and interior finishes. |
| Foreclosure |
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A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. |
| Foundation |
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The supporting portion of a structure below the first floor construction, or below grade, including the footings. |
| Frame Inspection |
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The act of inspecting the home`s structural integrity and it`s complianceto local municipal codes. |
| Freddie Mac |
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Federal Home Loan Mortgage Corporation (FHLM), a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors. This provides lenders with funds for new homebuyers. |
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| General Warranty Deed |
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A deed which conveys not only all the grantor`s interests in - and title to - the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic`s liens against it) the grantee may hold the grantor liable. |
| Ginnie Mae |
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Government National Mortgage Association (GNMA), a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment. As with Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders. |
| Good Faith Estimate |
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An estimate of all closing fees including pre-paid and escrow items as well as lender charges. Must be given to the borrower within three days after submission of a loan application. |
| Grantee |
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That party in the deed that is the buyer or recipient. |
| Grantor |
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That party in the deed that is the seller or giver. |
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| Hard Credit Report |
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A report on one`s credit history that is a compilation of the three credit bureaus. |
| Hazard Insurance |
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Protects against damages caused to property by fire, windstorms and other common hazards. |
| Home Owners Association |
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An association of homeowners within a community formed to improve and maintain the quality of the community. An association formed by the developer of condominiums or planned developments. |
| Home Warranty |
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Offers limited protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner`s insurance. Coverage extends over a specific time period and does not cover the home`s structure. |
| Homeowner`s Insurance |
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An insurance policy that combines protection against damage to a dwelling and Is contents with protection against claims of negligence, or inappropriate action that results in someone`s injury or property damage. |
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| Insurance |
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Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium. |
| Interest Rate |
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The amount of interest charged on a monthly loan payment. Usually expressed as a percentage. |
| Intestate |
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A person who dies without making a will. |
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| Joint Tenancy |
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Joint ownership by two or more persons with right of survivorship. Upon the death of a joint tenant, his interest does not go to his heirs, but to the remaining joint tenants. |
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| Legal Description |
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The geographical identification of a parcel of land. |
| Lessee |
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One who contracts to rent property under a specified lease. |
| Lessor |
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An owner who contracts into a lease with a tenant (lessee). |
| Lien |
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A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. (See also Special Lien.) |
| Life Estate |
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An estate in real property for the life of a person. |
| Listing |
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(a) A property included in the multiple listing service. (b) A written agreement between a seller and a broker authorizing the broker to procure a buyer or tenant for his/her real estate. |
| Living Trust |
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A trust agreement, which the title to property and assets can be transferred into, thereby avoiding probate. The Living Trust was the first of the Trusts. A Trust is created when a living person (the Trustor) agrees to let someone (the Trustee) hold title to property for the benefit of someone (the Beneficiary). |
| Loan Fee |
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Also known as points, discount points or origination fee, this is a one time charge by a lender as compensation for their services. 1 point equals 1% of the mortgage amount. |
| Loan Originator |
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A person who works for the lending institution whose job it is to meet with potential borrowers to discuss loan options, rates, etc. |
| Loan-to-Value (LTV) Ratio |
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A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment. |
| Lock-in |
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Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time. |
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| Margin |
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An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage. |
| Market Analysis |
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An analysis performed to determine the current value of a property based on recently sold comparable properties, comparable properties that are currently for sale and the current overall market conditions. |
| Marketable Title |
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A title that is free and clear of objectionable liens, clouds, or other title defects. A title that enables an owner to sell his property freely to others and one which others will accept without objection. |
| Mechanic`s Lien |
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A lien created by statute on a specific property for labor or materials contributed to an improvement on that property. |
| Money Market Accounts |
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These are like a savings account usually offered through Securities Brokerage houses and some banks, which usually pay higher interest rates, have checkwriting features, along with a variety of other features. In most cases, a great place to put funds from the closing of a real estate transaction. Check with a Mutual Funds Registered Representative for details. |
| Mortgage |
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A lien on the property that secures the promise to repay a loan. |
| Mortgage Banker |
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A company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac. |
| Mortgage Broker |
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A firm that originates and processes loans for a number of lenders. |
| Mortgage Insurance |
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A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home`s purchase price. |
| Mortgage Insurance Premium (MIP) |
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A monthly payment, usually part of the mortgage payment paid by a borrower for mortgage insurance. |
| Mortgagee |
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The lender in a mortgage agreement. |
| Mortgagor |
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The borrower in a mortgage agreement. |
| Multiple Listing Service |
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A service provided to real estate agents that lists homes under a seller`s representation agreement and may be available for sale. A computerized database of all homes listed by real estate agents. |
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| Negative Amortization |
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When monthly payments are not enough to cover interests costs, they are added to the principal balance, and you may end up owing more than when you started. This is most likely to occur with ARMs that have payment caps. |
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| Option |
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A right given for consideration to purchase or lease property upon stipulated terms within a specific period of time. |
| Origination Fee |
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Application fee(s) for processing a proposed mortgage. |
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| P.M.I.(Private Mortgage Insurance) |
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Private mortgage insurance, required by many lenders when a borrower`s down payment is less then 20% of the purchase price. |
| Permit |
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A governmental municipal authorization to perform a building process, as in a Zoning/Use permit -- the authorization to use a property for a specific use (e.g. a garage, a single family residence, etc.). |
| Personal Property |
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All property that is not land and is not permanently attached to land; everything that is moveable. |
| PITI |
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Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner`s and mortgage, if applicable) goes into an escrow account to cover the fees when they are due. |
| Plot Plan |
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An overhead view plan that shows the location of the home on the lot. Includes all easements, property lines, set backs, and legal descriptions of the home. Provided by the surveyor. |
| Points |
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Sometimes called "discount points. " A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are charged by a lender to raise the yield on his loan at a time when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited from paying points on HUD or Veterans` Administration guaranteed loans (sellers can pay, however). On a conventional mortgage, points may be paid by either buyer or seller or split between them. |
| Pre-approval |
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A pre-commitment from a lending institution to a buyer based on background checks, hard credit reports and review by an underwriter. Commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. |
| Prepayment |
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Payment of mortgage loan - or part of it - before due date. Mortgage agreements sometimes restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages. |
| Prepayment Penalty |
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A penalty within a note, mortgage, or deed of trust imposing a penalty if the debt is paid in full before the end of its terms. |
| Prequalifying |
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The lender`s process of judging if a borrower is creditworthy and capable of making payments on a loan. |
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| R Value |
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A measure of insulation. A measure of a materials resistance to the passage of heat. The higher the R value, the more insulating "power" it has. For example, typical new home`s walls are usually insulated with 4" of batt insulation with an R value of R-13, and a ceiling insulation of R-30. |
| Real Estate |
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Land and everything permanently attached to land; sometimes used interchangeably with the terms real property and realty. |
| Real Estate Salesperson |
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A person performing any of the acts included in the definition of real estate broker but while associated and supervised by a real estate broker. |
| Realtor |
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A real estate broker holding membership in a real estate board affiliated with the National Association Of Realtors. |
| Recording Deed |
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Entering the deed (owner`s title) in public records to protect against subsequent claimants. |
| Refinancing |
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The process of the same mortgagor paying off one loan with the proceeds from another loan. |
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| Special Assessments |
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A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc. |
| Special Warranty Deed |
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A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee`s title. |
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| Tax |
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As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public. |
| Term |
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The length of time in which a loan is to be paid off. |
| Terms and Conditions |
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The negotiable issues outlined in the offer to purchase and / or the purchase and sale agreement. |
| Title |
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Possessing ownership of real estate. As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate. |
| Title Insurance |
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Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee`s title policy. " Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner`s title policy", if he desires the protection of title insurance. In most cases Title Companies and Escrow Companies are one in the same, both providing the same services. It is simply a different name for the services, used in various parts of the country. |
| Title Search or Examination |
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A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title. |
| Trustee |
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A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. (See deed of trust.) |
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| Underwriter |
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The person in the lending institution whose job it is to review loan documentation and evaluate the borrower`s ability and willingness to repay the loan. |
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| Variable Interest Rate |
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