Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

ABSORPTION RATE
The ratio of the number of properties in an area that have been sold against the number available. Used to show the volatility of a market. (back to top)

ABSTRACTION METHOD
This method of estimating the value of property uses similar properties available in the same market to extract the value of a parcel of land. (back to top)

ACCELERATION CLAUSE
A provision in a mortgage that gives the lender the right to demand immediate payment of the outstanding loan balance under certain circumstances. Usually when the borrower defaults on the loan. (back to top)

ACCRETION
The natural growth of a piece of land resulting from forces of nature. (back to top)

ACRE
43,560 square feet. A measurement of area. (back to top)

ADJUSTMENT DATE
The date the interest rate changes on an adjustable rate mortgage. (back to top)

AD VALOREM TAX
Taxes assessed based on the value of the land and improvements. (back to top)

ADDENDUM
A supplement to any document that contains additional information pertinent to the subject. Appraisers use an addendum to further explain items for which there was inadequate space on the standard appraisal form. (back to top)

AESTHETIC VALUE
The additional value a property enjoys based on subjective criteria such as look or appeal. (back to top)

AFFIRMATION
A declaration that a certain set of facts are truthful. (back to top)

AFFORDABILITY ANALYSIS
A calculation used to determine an individual's likelihood of being able to meet the obligations of a mortgage for a particular property. Takes into account the down payment, closing costs and on-going mortgage payments. (back to top)

AGENT
A person who has been appointed to act on behalf of another for a particular transaction. (back to top)

AMENITY
Any feature of a property that increases its value or desirability. These might include natural amenities such as location or proximity to mountains, or man-made amenities like swimming pools, parks or other recreation. (back to top)

AMERICAN SOCIETY OF APPRAISERS
An organization of appraisal professionals and others interested in the appraisal profession. (back to top)

AMORTIZATION
The repayment of a loan through regular periodic payment. (back to top)

AMORTIZATION SCHEDULE
The breakdown of individual payments throughout the life of an amortized loan, showing both principal contribution and debt service (interest) fees. (back to top)

AMORTIZATION TERM
The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years. (back to top)

ANNUAL PERCENTAGE RATE (APR)
The rate of annual interest charged on a loan. (back to top)

APPLICATION
A form used to apply for a mortgage loan that details a potential borrower's income, debt, savings and other information used to determine credit worthiness. (back to top)

APPRAISAL
A "defensible" and carefully documented opinion of value. Most commonly derived using recent sales of comparable properties by a licensed, professional appraiser. (back to top)

APPRAISAL FOUNDATION
A not-for-profit educational organization established by the appraisal profession in the United States in 1987. It is dedicated to the advancement of professional valuation and responsible for establishing, improving, and promoting the Uniform Standards of Professional Appraisal Practice (USPAP). (back to top)

APPRAISAL INSTITUTE
A world-wide organization dedicated to real estate appraisal education, publication and advocacy. (back to top)

APPRAISAL PRINCIPLES
The basic building blocks of the property valuation process, including property inspection, market analysis and basic economics. (back to top)

APPRAISAL REPORT
The end result of the appraisal process, usually consists of one major, standardized form such as the Uniform Residential Appraisal Report form 1004, as well as all supporting documentation and additional detail information. The purpose of the report is to convey the opinion of value of the subject property and support that opinion with corroborating information. (back to top)

APPRAISAL STANDARDS BOARD (ASB)
An independent board of the APPRAISAL FOUNDATION, which writes, amends, and interprets USPAP. The ASB is composed of up to seven appraisers appointed by the Foundation's Board of Trustees. The ASB holds public meetings throughout the year to interpret and amend USPAP. (back to top)

APPRAISED VALUE
An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals. (back to top)

APPRAISER
An educated, certified professional with extensive knowledge of real estate markets, values and practices. The appraiser is often the only independent voice in any real estate transaction with no vested interest in the ultimate value or sales price of the property. (back to top)

APPRECIATION
The natural rise in property value due to market forces. (back to top)

ARMS LENGTH TRANSACTION
Any transaction in which the two parties are unconnected and have no overt common interests. Such a transaction most often reflects the true market value of a property. (back to top)

ASSESSED VALUE
The value of a property according to jurisdictional tax assessment. (back to top)

ASSESSMENT
The function of assigning a value to a property for the purpose of levying taxes. (back to top)

ASSESSMENT RATIO
The comparative relationship of a property's assessed value to its market value. (back to top)

ASSESSOR
The jurisdictional official who performs the assessment and assigns the value of a property. (back to top)

ASSET
Any item of value which a person owns. (back to top)

ASSIGNMENT
Transfer of ownership of a mortgage - usually when the loan is sold to another company. (back to top)

ASSUMABLE MORTGAGE
A mortgage that can be taken over by the buyer when a home is sold. (back to top)

ASSUMPTION
When a buyer takes over, or "assumes" the sellers mortgage. (back to top)

BALLOON MORTGAGE
A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment. (back to top)

BALLOON PAYMENT
The final large payment at the end of a balloon mortgage term. (back to top)

BANKRUPTCY
When a person or business is unable to pay their debts and seeks protection of the state against creditors. Bankruptcies remain on credit records for up to ten years and can prevent a person from being able to get a loan. (back to top)

BILL OF SALE
A physical receipt indicating the sale of property. (back to top)

BIWEEKLY MORTGAGE
A mortgage where you make "half payments" every two weeks, rather than one payment per month. This results in making the equivalent of 13 monthly payments per year, rather than 12, significantly reducing the time it takes to pay off a thirty year mortgage. (back to top)

BLIGHTED AREA
Any region of a city or town that has fallen into disrepair or otherwise has become undesirable. (back to top)

BONA FIDE
Any genuine offer, made without intent to defraud or deceive. (back to top)

BRIDGE FINANCING
An interim loan made to facilitate the purchase of a new home before the buyer's current residence sells and its equity is available to fund the new purchase. (back to top)

BROKER
An individual who facilitates the purchase of property by bringing together a buyer and a seller. (back to top)

BUFFER ZONE
A segment of land between two disparate municipal zones which acts as a shield to keep one zone from encroaching upon the other. Often used to separate residential districts from commercial areas. (back to top)

BUILDING CODE
Regulations that ensure the safety and material compliance of new construction within a municipality. Building codes are localized to ensure they are adequate to meet the risk of common hazards. (back to top)

BUILDING LINE OR SETBACK
The statutory distance between buildings and the property line, imposed by municipalities, home associations, or other agreements. (back to top)

BUY DOWN
Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage. (back to top)

CAPITAL
Accumulated goods and money which is most often used to generate additional income. (back to top)

CAVEAT EMPTOR
Literally translated: ''Let the buyer beware.'' A common business tenet whereby the buyer is responsible for verifying any and all claims by the seller of property. (back to top)

CERTIFICATE OF DEPOSIT
A document showing that the bearer has a certain amount of money, at a particular amount interest, on deposit with a financial institution. (back to top)

CERTIFICATE OF DEPOSIT INDEX
An index based on the interest rate of six month CD's. Used to set interest rates on some Adjustable Rate Mortgages. (back to top)

CERTIFICATE OF ELIGIBILITY
A document issued by the Veterans Administration that certifies eligibility for a VA loan. (back to top)

CERTIFICATE OF TITLE
A document designating the legal owner of a parcel of real estate. Usually provided by a title or abstract company. (back to top)

CERTIFIED GENERAL APPRAISER
Generally, any professional who has met the local or state requirements, and passed the appropriate certification exam, and is capable of appraising any type of property. (back to top)

CERTIFIED RESIDENTIAL APPRAISER
A sub-classification of appraiser who is only licensed to appraise residential property, usually up to four units. (back to top)

CHAIN OF TITLE
The complete history of ownership of a piece of property. (back to top)

CHATTEL
Any personal property which is not attached to or an integral part of a property. Chattel is not commonly taken into consideration when appraising the value of real property. (back to top)

CLEAR TITLE
Ownership of property that is not encumbered by any counter-claim or lien. (back to top)

CLOSING
A torturous process designed to induce cramping in a home buyer's hands by requiring signature on countless pieces of documentation that nobody has ever read. Or, the process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale (CLOSING COSTS). (back to top)

CLOSING COSTS
All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal. (back to top)

CLOSING STATEMENT
The document detailing the final financial arrangement between a buyer and seller and the costs paid by each. (back to top)

CO-BORROWER
A second person sharing obligation on the loan and title on the property. (back to top)

COLLATERAL
An asset which is placed at risk to secure the repayment of a loan. (back to top)

COLLECTION
The process a lender takes to pursue a borrower who is delinquent on his payments in order to bring the mortgage current again. Includes documentation that may be used in foreclosure. (back to top)

CO-MAKER
A second party who signs a loan, along with the borrower, and becomes liable for the debt should the borrower default. (back to top)

COMMISSION
A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property. (back to top)

COMMUNITY PROPERTY
In many jurisdictions, any property which has been acquired by a married couple. The ownership of the property is considered equal unless stipulated otherwise by both parties. (back to top)

COMPARABLES
An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property who's value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property. (back to top)

COMPOUND INTEREST
Interest paid on the principal amount, as well as any accumulated interest. (back to top)

CONCESSIONS
Additional value granted by a buyer or seller to entice another party to complete a deal. (back to top)

CONDEMNATION
The official process by which a property is deemed to be uninhabitable or unusable due to internal damage or other external conditions. (back to top)

CONSTRUCTION LOAN
A loan made to a builder or home owner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed. (back to top)

CONTIGUOUS
Connected to or touching along an unbroken boundary. (back to top)

CONTINGENCY
Something that must occur before something else happens. Often used in real estate sales when a buyer must sell a current home before purchasing a new one.

CONTRACT
A legally binding agreement, oral or written, between two parties. (back to top)

CONVENTIONAL MORTGAGE
A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.). (back to top)

CONVERTIBLE ARM
A mortgage that begins as and adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe. (back to top)

COVENANT
A stipulation in any mortgage that, if not met, can be cause for the lender to foreclose. (back to top)

CREDIT
A loan of money for the purchase of property, real or personal. Credit is either secured by an asset, such as a home, or unsecured. (back to top)

CREDIT HISTORY
A record of debt payments, past and present. Used by mortgage lenders in determining credit worthiness of individuals. (back to top)

CREDITOR
A person to whom money is owed. (back to top)

CREDIT REPORT
A detailed report of an individuals credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals. (back to top)

CREDIT REPOSITORY
Large companies that gather and store financial and credit information about individuals who apply for credit. (back to top)

CUL-DE-SAC
A dead-end street. One with only one entrance/exit. (back to top)

DATE OF APPRAISAL
The specific point in time as of which an appraiser designates the value of a home. Often stipulated as the date of inspection. (back to top)

DEBT
An obligation to repay some amount owed. This may or may not be monetary. (back to top)

DEBT EQUITY RATIO
The ratio of the amount a mortgagor still owes on a property to the amount of equity they have in the home. Equity is calculated at the fair-market value of the home, less any outstanding mortgage debt. (back to top)

DEED
A document indicating the ownership of a property. (back to top)

DEED-IN-LIEU (OF FORECLOSURE)
A document given by a borrower to a lender, transferring title of the property. Often used to avoid credit-damaging foreclosure procedures. (back to top)

DEED OF TRUST
A document which transfers title in a property to a trustee, who's obligations and powers are stipulated. Often used in mortgage transactions. (back to top)

DEED OF RECONVEYANCE
A document which transfers ownership of a property from a Trustee back to a borrower who has fulfilled the obligations of a mortgage. (back to top)

DEED OF RELEASE
A document which dismisses a lien or other claim on a property. (back to top)

DEED OF SURRENDER
A document used to surrender any claim a person has to a property. (back to top)

DEFAULT
The condition in which a borrower has failed to meet the obligations of a loan or mortgage. (back to top)

DELINQUENCY
The state in which a borrow has failed to meet payment obligations on time. (back to top)

DEPOSIT
Cash given along with an offer to purchase property, Also called EARNEST MONEY. (back to top)

DETACHED SINGLE-FAMILY HOME
A single building improvement intended to serve as a home for one family. (back to top)

DISCOUNT POINTS
Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount. (back to top)

DISTRESSED PROPERTY
A mortgaged property which has been foreclosed on. (back to top)

DUE-ON-SALE PROVISION
A clause in a mortgage giving the lender the right to demand payment of the full balance when the borrower sells the property. (back to top)

DOWN PAYMENT
An amount paid in cash for a property, with the intent to mortgage the remaining amount due. (back to top)

EARNEST MONEY DEPOSIT
A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer. (back to top)

EASEMENT
The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines. (back to top)

ECONOMIC DEPRECIATION
The decline in property value caused by external forces, such as neighborhood blight or adverse development. (back to top)

EMINENT DOMAIN
The legal process whereby a government can take ownership of a piece of property in order to convert it to public use. Often, the property owner is paid fair-market value for the property. (back to top)

ENCROACHMENT
A building or other improvement on one property which invades another property or restricts its usage. (back to top)

ENCUMBRANCE
A claim against a property. Examples are mortgages, liens and easements. (back to top)

EQUAL CREDIT OPPORTUNITY ACT (ECOA)
U.S. federal law requiring that lenders afford people equal chance of getting credit without discrimination based on race, religion, age, sex, etc. (back to top)

EQUITY
The difference between the fair market value of a property and that amount an owner owes on any mortgages or loans secured by the property. (back to top)

EQUITY BUILDUP
The natural increase in the amount of equity an owner has in a property, accumulated through market appreciation and debt repayment. (back to top)

ESCROW
An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property. (back to top)

ESCROW ACCOUNT
An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that goes into the escrow account each month. (back to top)

ESCROW ANALYSIS
An analysis performed by the lender usually once each year to see that the amount of money going into the escrow account each month is correct for the forecasted expenses. (back to top)

ESCROW DISBURSEMENTS
The payout of funds from an escrow account to pay property expenses such as taxes and insurance. (back to top)

ESTATE
The total of all property and assets owned by an individual. (back to top)

EXAMINATION OF TITLE
The report on the title of a property from the public records or an abstract of the title. (back to top)

EXCLUSIVE LISTING
An agreement between the owner of a property and a real estate agent giving the agent exclusive right to sell the property. (back to top)

FAIR MARKET VALUE
The price at which two unrelated parties, under no duress, are willing to transact business. (back to top)

FANNIE MAE
A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation's largest source of financing for home mortgages. (back to top)

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
The U.S. Government agency created in 1933 which maintains the stability of and public confidence in the nation's financial system by insuring deposits and promoting safe and sound banking practices. (back to top)

FEDERAL HOUSING ADMINISTRATION (FHA)
A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930's to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders. (back to top)

FEE APPRAISER
A certified, professional appraiser who forms an opinion of the fair market value of property and receives a set fee in exchange. (back to top)

FEE SIMPLE
A complete, unencumbered ownership right in a piece of property. (back to top)

FEE SIMPLE ESTATE
A form or ownership, or holding title to real estate. It is the most complete form of title, having an unconditional and unlimited interest of perpetual duration. (back to top)

FHA MORTGAGE
A mortgage that is insured by the Federal Housing Administration (FHA). (back to top)

FINAL VALUE ESTIMATE
The opinion of value of a piece of property resulting from an appraisal following the USPAP guidelines. (back to top)

FIRST MORTGAGE
The primary loan or mortgage secured by a piece of property. (back to top)

FIXED-RATE MORTGAGE (FRM)
A mortgage which has a fixed rate of interest over the life of the loan. (back to top)

FLOOD INSURANCE
Supplemental insurance which covers a home owner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones. (back to top)

FLOOR PLAN
The representation of a building which shows the basic outline of the structure, as well as detailed information about the positioning of rooms, hallways, doors, stairs and other features. Often includes detailed information about other fixtures and amenities. (back to top)

FLUE
The furnace exhaust pipe, usually going through the roof. (back to top)

FORECLOSURE
The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan. (back to top)

FORFEITURE
The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property. (back to top)

FRONTAGE
The segment of a property that runs along a point of access, such as a street or water front. (back to top)

FUNCTIONAL OBSOLESCENCE
A decrease in the value of property due to a feature or lack thereof which renders the property undesirable. Functional obsolescence can also occur when the surrounding area changes, rendering the property unusable for its originally intended purpose. (back to top)

GALVANIZED PIPE
Iron pipe with a galvanized (zinc) coating. (back to top)

GAMBREL ROOF
A "barn-like" roof, where the upper portion of the roof is less-steeply angled than the lower part. (back to top)

GENERAL LIEN
A broad-based claim against several properties owned by a defaulting party. (back to top)

GEORGIAN
A classic, English-style hose characterized by simple rectangular shape and multiple stories. (back to top)

GFI
Ground Fault Interrupter. A type of circuit breaker required in areas where water is present. (back to top)

GINNIE MAE
A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers. (back to top)

GIRDER
A main supporting beam. (back to top)

GOVERNMENT MORTGAGE
Any mortgage insured by a government agency, such as the FHA or VA. (back to top)

GRADE
The slope of land around a building. Also ground level. (back to top)

GRANTEE
Any person who is given ownership of a piece of property. (back to top)

GRANTOR
Any person who gives away ownership of a piece of property. (back to top)

GROSS AREA
The sum total of all floor space, including areas such as stairways and closet space. Often measured based on external wall lengths. (back to top)

GROUTING
Material used around ceramic tile. (back to top)

GUTTER
The trough around the edge of the roof that catches and diverts rain. (back to top)

HALF-SECTION
320 acres. (back to top)

HAZARD INSURANCE
Insurance covering damage to a property caused by hazards such as fire, wind and accident. (back to top)

HEADER
The framing elements above an opening such as a window or door. (back to top)

HEARTH
The floor of a fireplace or the area immediately in front of it. (back to top)

HEIGHT ZONING
A municipal restriction on the maximum height of any building or other structure. (back to top)

HIDDEN AMENITIES
Assets of a property which contribute to its value, but are not readily apparent. Examples might include upgraded or premium building materials. (back to top)

HIGHEST AND BEST USE
The most profitable and likely use of a property. Selected from reasonably probable and legal alternative uses, which are found to be physically possible, appropriately supported and financially feasible to result in the highest possible land value. (back to top)

HOME EQUITY CONVERSION MORTGAGE (HECM)
Also known as a reverse annuity mortgage. It allows home owners (usually older) to convert equity in the home into cash. Normally paid by the lender in monthly payments. HECM's typically don't have to be repaid until the borrower is no longer occupying the home. (back to top)

HOME EQUITY LINE OF CREDIT
A type of mortgage loan that allows the borrower to draw cash against the equity in his home. (back to top)

HOME INSPECTION
A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value. (back to top)

HOME INSPECTOR
A person who performs professional home inspections. Usually, with an extensive knowledge of house construction methods, common house problems, how to identify those problems and how to correct them. (back to top)

HOMEOWNER'S ASSOCIATION
An organization of home owners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants. (back to top)

HOMEOWNER'S INSURANCE
A policy which covers a home owner for any loss of property due to accident, intrusion or hazard. (back to top)

HOMEOWNER'S WARRANTY
An insurance policy covering the repair of systems and appliances within the home for the coverage period. (back to top)

HUD MEDIAN INCOME
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD). (back to top)

HUD-1 STATEMENT
A standardized, itemized list, published by the U.S. Department of Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected with a particular property purchase. (back to top)

IMPROVED LAND
Any parcel of land which has been changed from its natural state through the creation of roads, buildings or other structures. (back to top)

IMPROVEMENTS
Any item added to vacant land with the intent of increasing its value or usability. (back to top)

IMPROVEMENT RATIO
The comparative value of a improved piece of land to its natural, unaltered state. (back to top)

INCOME APPROACH
The process of estimating the value of property by considering the present value of a stream of income generated by the property. (back to top)

INCOME PROPERTY
A piece of property whose highest and best use is the generation of income through rents or other sources. (back to top)

INDEPENDENT APPRAISAL
An estimation of value created by a professional, certified appraiser with no vested interest in the value of the property. (back to top)

INSPECTION
The examination of a piece of property, its buildings or other amenities. (back to top)

INSURABLE TITLE
The title to property which has been sufficiently reviewed by a title insurance company, such that they are willing to insure it as free and clear. (back to top)

INTEREST RATE
A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds. (back to top)

INVESTMENT PROPERTY
Any piece of property that is expected to generate a financial return. This may come as the result of periodic rents or through appreciation of the property value over time. (back to top)

JAMB
The side of a door frame. (back to top)

JOINT TENANCY
A situation where two or more parties own a piece of property together. Each of the owners has an equal share, and may not dispose of or alter that share without the consent of the other owners. (back to top)

JOISTS
Horizontal beams laid on edge to support flooring or a ceiling. (back to top)

JUDGMENT
An official court decision. If the judgment requires payment from one party to another, the court may put a lien against the payees property as collateral. (back to top)

JUDICIAL FORECLOSURE
A type of foreclosure conducted as a civil suit in a court of law. (back to top)

JUMBO LOAN
A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans. (back to top)

LALLY COLUMN
A concrete filled steel pipe used to support beams. (back to top)

LATE CHARGE
An extra charge, or penalty added to a regular mortgage payment when the payment is made late by an amount of time specified in the original loan document. (back to top)

LATENT DEFECTS
Any defect in a piece of property which is not readily apparent, but which has an impact of the value. Structural damage or termite infestation would be examples of latent defects. (back to top)

LEASE
A contract between a property owner and a tenant specifying the payment amount, terms and conditions, as well as the length of time the contract will be in force. (back to top)

LEASEHOLD ESTATE
A type of property ''ownership'' where the buyer actually has a long-term lease on the property. (back to top)

LEASE OPTION
A lease agreement that gives the tenant an option to buy the property. Usually, a portion of the regular monthly rent payment will be applied towards the down payment. (back to top)

LEGAL DESCRIPTION
The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection. (back to top)

LENDER
The person or entity who loans funds to a buyer. In return, the lender will receive periodic payments, including principal and interest amounts. (back to top)

LIABILITIES
A person's outstanding debt obligations. (back to top)

LIABILITY INSURANCE
Insurance that covers against potential lawsuit brought against a property owner for alleged negligence resulting in damage to another party. (back to top)

LIEN
Any claim against a piece of property resulting from a debt or other obligation. (back to top)

LIFE CAP
A limit on how far the interest rate can move for an Adjustable Rate Mortgage. (back to top)

LIKE-KIND PROPERTY
Any property which is substantially similar to another property. (back to top)

LINE OF CREDIT
An extension of credit for a certain amount for a specific amount of time. To be used by the borrower at his discretion. (back to top)

LIQUID ASSET
Any asset which can be quickly converted into cash at little or no cost, or cash itself. (back to top)

LOAN
Money borrowed, to be repaid with interest, according to the specific terms and conditions of the loan. (back to top)

LOAN OFFICER
A person that "sells" loans, representing the lender to the borrower, and the borrower to the lender. (back to top)

LOAN ORIGINATION
How a lender refers to the process of writing new loans. (back to top)

LOAN SERVICING
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to. (back to top)

LOAN-TO-VALUE RATIO (LTV)
The comparison of the amount owed on a mortgaged property to its fair market value. (back to top)

LOCK-IN
An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time. (back to top)

LOCK-IN PERIOD
The amount of time the lender has guaranteed an interest rate to a borrower. (back to top)

MAJOR DEFICIENCY
A deficiency that strongly impacts the usability and habitability of a house. Or a deficiency that may be very expensive to repair. (back to top)

MANUFACTURED HOUSING
Once known as ''mobile homes,'' manufactured housing is any building which has been constructed off site, then moved onto a piece of real property. (back to top)

MARGIN
The difference between the interest rate and the index on an adjustable rate mortgage. (back to top)

MARGINAL LAND
Land whose value has been diminished due to some internal defect or external condition. In most cases, the cost to correct the flaw or condition is as much or more than the expected return from the property. (back to top)

MASTER ASSOCIATION
An umbrella organization that is made up of multiple, smaller home owner's associations. Often found in very large developments or condominium projects. (back to top)

MATURITY
The date on which the principal balance of a financial instrument becomes due and payable. (back to top)

MERGED CREDIT REPORT
A credit report derived from data obtained from multiple credit agencies. (back to top)

METES AND BOUNDS
A traditional way of describing property, generally expressed in terms of distance from a known landmark or intersection, and then following the boundaries of the property back to its origin. (back to top)

METROPOLITAN AREA
The accumulated land in and around a city or other municipality which falls under the political and economic influence of that entity. (back to top)

MINERAL RIGHTS
The legal right to exploit and enjoy the benefits of any minerals located below the surface of a parcel of land. (back to top)

MISREPRESENTATION
A statement by one party in a transaction that is incorrect or misleading. Most misrepresentations are deemed to be intentional and thus may constitute fraud. Others, however, some are rendered through simple mistakes, oversights or negligence. (back to top)

MORTGAGE
A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral. (back to top)

MORTGAGE BANKER
A financial institution that provides primary and secondary mortgages to home buyers. (back to top)

MORTGAGE BROKER
A person or organization that serves as a middleman to facilitate the mortgage process. Brokers often represent multiple mortgage bankers and offer the most appropriate deal to each buyer. (back to top)

MORTGAGEE
The entity that lends money in a real estate transaction. (back to top)

MORTGAGE INSURANCE
A policy that fulfills that obligations of a mortgage when the policy holder defaults or is no longer able to make payments. (back to top)

MORTGAGE INSURANCE PREMIUM (MIP)
An fee that is often included in mortgage payments that pays for mortgage insurance coverage. (back to top)

MORTGAGE LIFE INSURANCE
A policy that fulfills the obligations of a mortgage when the policy holder dies. (back to top)

MORTGAGOR
The entity that borrows money in a real estate transaction. (back to top)

MULTI-FAMILY PROPERTIES
Any collection of buildings that are designed and built to support the habitation of more than four families. (back to top)

NATIONAL ASSOCIATION OF MASTER APPRAISERS (NAMA)
A non profit professional association organized in 1982, dedicated to the advancement of professionalism in real estate appraisal. (back to top)

NATIONAL SOCIETY OF REAL ESTATE APPRAISERS
An organization founded in 1956 which promotes standards of professionalism in its members. (back to top)

NATURAL VACANCY RATE
The percentage of vacant properties in a given area that is the result of natural turnover and market forces. (back to top)

NEGATIVE AMORTIZATION
When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest. (back to top)

NEIGHBORHOOD LIFE-CYCLE
The evolution of neighborhood use and demographics over time. Economic fluctuations, municipal zoning changes and population shifts can effect the life cycle. (back to top)

NEIGHBORHOOD
A subsection of a municipality that has been designated by a developer, economic forces or physical formations. (back to top)

NET LEASABLE AREA
The space in a development, outside of the common areas, that can be rented to tenants. (back to top)

NEW ENGLAND COLONIAL
An architectural style dating from early American history typified by a two-story building with clapboard siding. (back to top)

NO-COST LOAN
Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it. (back to top)

NO-POINT LOAN
A loan with no "points." The interest rate on such a loan will be higher than a loan with points paid. Also sometimes refers to a refinance loan where closing costs are included in the loan. (back to top)

NON-CONFORMING USE
The use of land for purposes contrary to the applicable municipal zoning specifications. Often occurs when zoning changes after a property is in use. (back to top)

NONLIQUID ASSET
Any asset which can not be quickly converted into cash at little or no cost. (back to top)

NOTE
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. (back to top)

NOTE RATE
The interest rate stated on a mortgage note. (back to top)

NOTICE OF DEFAULT
Formal written notice from a lender to a borrower that default has occurred. (back to top)

OBSOLESCENCE
The process of an assets value diminishing due to the development of more desirable alternatives or because of the degradation of its capabilities. (back to top)

OCCUPANCY
A physical presence within and control of a property. (back to top)

OCCUPANCY RATE
The percentage of properties in a given area that are occupied. (back to top)

OCTOPUS RECEPTACLE
An outlet with too many devices plugged into it, using a power strip or other device to multiply the outlets. (back to top)

OFF-SITE IMPROVEMENTS
Buildings, structures or other amenities which are not located on a piece of property, but are necessary to maximize the use of the property or in some way contribute to the value of the property. (back to top)

OFF-STREET PARKING
Designated parking spaces associated with a particular building or other structure which are not located on public streets. (back to top)

OLD TERMITE ACTIVITY
Where no termites are currently active, but indications of past activity can be seen. (back to top)

ON-SITE IMPROVEMENTS
Buildings, structures or other amenities that are erected on a piece of property and contribute to its value. (back to top)

OPEN SPACE
Any land which has not had any significant buildings or structures erected on it. Most often used to describe desirable neighborhood features like parks. (back to top)

OPEN SPLICE
An uncovered electrical connection. (back to top)

ORIGINAL EQUITY
The amount of cash a home buyer initially invests in the home. (back to top)

ORIGINAL PRINCIPAL BALANCE
The total amount of principal owed on a mortgage loan at the time of closing. (back to top)

ORIGINATION FEE
Refers to the total number of points paid by a borrower at closing. (back to top)

OWNER FINANCING
A transaction where the property owner provides all or part of the financing. (back to top)

OWNER OCCUPIED
The state of property wherein the owner occupies at least some portion of the property. (back to top)

PARGING
The cement coat applied to block foundations. (back to top)

PARTIAL INTEREST
A shared ownership in a piece of property. May be divided among two or more parties. (back to top)

PARTIAL PAYMENT
A payment of less than the regular monthly amount. Usually, a lender will not accept partial payments. (back to top)

PERIODIC PAYMENT CAP
The limit on how much regular monthly payments on an Adjustable Rate Mortgage can change during one adjustment period. (back to top)

PERIODIC RATE CAP
The limit on how much the interest rate on an Adjustable Rate Mortgage can change during any one adjustment period. (back to top)

PERSONAL PROPERTY
Owned items which are not permanently affixed to the land. (back to top)

PERSONAL RESIDENCE
The primary domicile of a person or family. (back to top)

PLANNED UNIT DEVELOPMENT (PUD)
A coordinated, real estate development where common areas are shared and maintained by an owner's association or other entity. (back to top)

PLAT
A plan or chart of a piece of land which lays out existing or planned streets, lots or other improvements. (back to top)

POINT
A percentage of a mortgage amount (one point = 1 percent). (back to top)

PRE-APPROVAL
The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers. (back to top)

PREFABRICATED
Any building or portion thereof which is manufactured and assembled off site, then erected on a property. (back to top)

PREPAYMENT
Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized. (back to top)

PREPAYMENT PENALTY
A fee that may be charged to a borrower who pays off a loan before it is due. (back to top)

PRE-QUALIFICATION
Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan. (back to top)

PRIME RATE
The interest rate that banks and other lending institutions charge other banks or preferred customers. (back to top)

PRINCIPAL
The amount owed on a mortgage which does not include interest or other fees. (back to top)

PRINCIPAL BALANCE
The outstanding balance of principal on a mortgage. Does not included interest due. (back to top)

PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)
The most common constituents of a monthly mortgage payment. (back to top)

PRIVATE MORTGAGE INSURANCE (PMI)
A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%. (back to top)

PROPERTY
Any item which is owned or possessed. (back to top)

PURCHASE AGREEMENT
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. (back to top)

QUADRAPLEX
Any building designed to accommodate four families. (back to top)

QUALIFYING RATIOS
Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrower's monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income. (back to top)

QUITCLAIM DEED
A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear. (back to top)

RAFTER
A structural element of the roof, sloping from the peak to the outer walls. (back to top)

RANCH HOUSE
An architectural style typified by a single-story, low-roof construction. Popular in the western U.S. (back to top)

RATE LOCK
A guarantee from a lender of a specific interest rate for a period of time. (back to top)

RAW LAND
Any land which has not been developed. (back to top)

REAL ESTATE
A piece of land and any improvements or fixtures located on that land. (back to top)

REAL ESTATE AGENT
A licensed professional who facilitates the buying and selling of real estate. (back to top)

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
A federal law requiring lenders to give full disclosure of closing costs to borrowers. (back to top)

REAL PROPERTY
Land, improvements and appurtenances, and the interest and benefits thereof. (back to top)

REALTOR
A real estate agent or broker who is a member of the National Association of Realtors. (back to top)

RECEPTACLE
An electrical outlet to plug into. (back to top)

RECORDER
A local government employee whose role it is to keep records of all real estate transactions within the jurisdiction. (back to top)

RECORDING
The filing of a real estate transaction with the appropriate government agent (normally the RECORDER). A real estate transaction is considered final when it is recorded. (back to top)

REFINANCE TRANSACTION
A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash. (back to top)

RELOCATION SERVICE
Any company or agency that assists corporate employees in relocating from one place to another. Services may include hiring and coordinating real estate agents, moving companies, utilizes and the like. (back to top)

REMAINING BALANCE
The amount of principal, interest and other costs that has not yet been repaid. (back to top)

REMAINING TERM
The amount of time remaining on the original amortization schedule. (back to top)

REMODEL
An activity designed to improve the value or desirability of a property through rebuilding, refurbishing, redecorating or adding on to it. (back to top)

REPAYMENT PLAN
A plan to repay delinquent payments, agreed upon between a lender and borrower, in an effort to avoid foreclosure. (back to top)

REPLACEMENT RESERVE FUND
An account, or fund, setup for the replacement of short life items , such as carpeting, in the common areas of a cooperative property. (back to top)

RESIDENTIAL PROPERTY
A piece of property whose highest and best use is the maintenance of a residence. (back to top)

REVOLVING DEBT
A type of credit that allows the borrower/customer to make charges against a predetermined line of credit. The customer then pays monthly installments on the amount borrowed, plus interest. (back to top)

RIDGE BOARD
The structural member of a roof where the rafters join at the top. (back to top)

RIGHT OF FIRST REFUSAL
An agreement giving a person the first opportunity to buy or lease a property before the owner offers it for sale to others. (back to top)

ROOF PITCH
The degree of slope in a roof. (back to top)

RURAL
An area outside of an established urban area or metropolitan district. (back to top)

SALE PRICE
The actual price a property sells for, exclusive of any special financing concessions. (back to top)

SALES COMPARISON APPROACH
An appraisal practice which estimates the value of a property by comparing it to comparable properties which have sold recently. (back to top)

SCARCITY
An economic principal that dictates the price of a good or service through the interaction of supply and demand. When an item is scarce, its price tends to rise, given a constant demand. Real Estate is a classic example of scarcity. (back to top)

SECOND MORTGAGE
A loan secured by the equity in a home, when a primary mortgage already exists. (back to top)

SECONDARY MORTGAGE MARKET
An economic marketplace where mortgage bankers buy and sell existing mortgages. (back to top)

SECURED LOAN
A loan that is backed by collateral. In the case of a mortgage loan, the collateral is the house. (back to top)

SECURITY
The property used as collateral for a loan. (back to top)

SEMIDETACHED HOUSING
Two residences which share a common wall. (back to top)

SERVICER
A financial institution which collects mortgage payments from borrowers and applies the appropriate portions to principal, interest and any escrow accounts. (back to top)

SERVICING
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to. (back to top)

SHEATHING
The covering on outside walls beneath the siding or exterior finish such as stucco. (back to top)

SHEETROCK
Also called drywall, the gypsum board commonly used on interior walls. (back to top)

SILL PLATE
The lumber used around the foundation to support exterior wall framing. (back to top)

SILL COCK
Garden hose pipe connection. (back to top)

SINGLE-FAMILY PROPERTY
A property designed and built to support the habitation of one family. (back to top)

SOFFIT
The underside of a cornice at the eaves. (back to top)

STUCCO
A textured plaster exterior (and occasionally interior) wall finish. (back to top)

STUD
A vertical framing piece in a wall, generally 2x4 lumber in interior walls. (back to top)

SUBDIVISION
A residential development that is created from a piece of land which has been subdivided into individual lots. (back to top)

SUBJECT PROPERTY
A term which indicates a property which is being appraised. (back to top)

SUMP
A basin into which water drains and from which the water is pumped out. (back to top)

SURVEY
A specific map of a piece of property which includes the legal boundaries and any improvements or features of the land. Surveys also depict any rights-of-way, encroachments or easements. (back to top)

SWEAT EQUITY
The method whereby a home owner develops equity in a property, either during the purchase or throughout its life, by personally constructing improvements rather than paying to have them built. (back to top)

TAX-EXEMPT PROPERTY
Any property which is not taxed. (back to top)

TENANCY
The right to occupy a building or unit. (back to top)

TENANCY IN COMMON
A form of holding title, whereby there are two or more people on title to a property, ownership does not pass on to the others upon the death of one individual. (back to top)

THIRD PARTY ORIGINATION
When a lender uses a third party to originate and package loans for sale to the secondary market (Fannie Mae, Freddie Mac). (back to top)

TITLE
A specific document which serves as proof of ownership. (back to top)

TITLE COMPANY
An organization which researches and certifies ownership of real estate before it is bought or sold. Title companies also act at the facilitator ensures all parties are paid during the real estate transaction. (back to top)

TITLE INSURANCE
A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise. (back to top)

TITLE SEARCH
The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist. (back to top)

TRANSFER OF OWNERSHIP
Any means by which the ownership of a property changes hands. (back to top)

TRANSFER OF TAX
Taxes payable when title passes from one owner to another. (back to top)

TRAP
A bend in water pipe. (back to top)

TRUSTEE
A fiduciary who holds or controls property for the benefit of another. (back to top)

TRUTH IN LENDING
A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage. (back to top)

TUDOR
A style of architecture typified by exposed stone, wood and brick construction. Similar in style to English manor homes. (back to top)

UNDER-IMPROVED LAND
A piece of land which has been improved, but not to the full extent of its potential. (back to top)

UNENCUMBERED PROPERTY
Any property which has no outstanding claims or liens against it. (back to top)

UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP)
Developed in 1986 by the Ad Hoc Committee on Uniform Standards and copyrighted in 1987 by The Appraisal Foundation, USPAP forms the guidelines followed by every licensed and certified real estate appraiser in the United States. The purpose of these Standards is to establish requirements for professional appraisal practice, which includes appraisal, appraisal review, and appraisal consulting. The intent of these Standards is to promote and maintain a high level of public trust in professional appraisal practice. (back to top)

USEFUL LIFE
The span of time over which a property can be used or can provide benefits to its owner. (back to top)

VACANCY RATE
The current percentage of vacant properties in a given area, regardless of why they are vacant. (back to top)

VA MORTGAGE
A mortgage that is guaranteed by the Department of Veterans Affairs (VA). (back to top)

VARIANCE
An exception to municipal zoning regulations granted for a specific time period to allow for non-conforming use of the land. (back to top)

VENT PIPE
A pipe allowing gas to escape. (back to top)

VESTED
Having the right to use a portion of a fund such as an IRA. Typically vesting occurs over time. If you are 100% vested, you have a right to 100% of the fund. (back to top)

VETERANS AFFAIRS, DEPARTMENT OF (VA)
The successor to the Veteran's Administration, this government agency is responsible for ensuring the rights and welfare of our nation's veterans and their dependents. Among other duties, the VA insures home loans made to veterans. (back to top)

VOLTAGE
An expression of electric force, or pressure. One volt being the force needed to move one amp against one ohm resistance. (back to top)

WALK-THROUGH INSPECTION
A process whereby an appraiser examines a property in preparation for estimating its value. Also, the process of inspecting a property for any damage prior to that property being bought or sold. (back to top)

WARRANTY
An affidavit given to stipulate the condition of a property. The person giving the warranty assumes liability if the condition turns out to be untrue. (back to top)

WATT
An expression of amount of electrical power. Volt times amps equals watts. (back to top)

WEAR AND TEAR
A term used to indicate the normal damage inflicted on a property through every-day use. (back to top)

WEATHER STRIPPING
Material used around windows and doors to prevent drafts. (back to top)

WEEP HOLE
Drainage hole that allows water to escape. (back to top)

ZERO LOT LINE
A municipal zoning category wherein a building or other fixture may abut the property line. (back to top)

ZONE
A specific area within a municipality or other jurisdiction which conforms to certain guidelines regarding the use of property in the zone. Typical zones include single-family, multi-family, industrial, commercial and mixed-use. (back to top)