401(k)/403(b)

An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.

401(k)/403(b) loan

Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans.

80-10-10

A type of blended mortgage loan which avoids private mortgage insurance (PMI).  It consists of an 80% - 30 year first lien at market rates, a 10% - 15 year second lien at a slightly higher interest rate, and a 10% down payment.  Instead of having to come up with a 20% down payment, a buyer is able to avoid PMI with only 10% down.  While the interest rate on the second note is a bit higher, the total monthly payment is usually lower than a 90% mortgage with PMI.  In addition, the extra interest paid for the second lien is tax deductable, whereas PMI is not.  It is also possible to payoff just the second lien, thereby lowering the future monthly payments.  Some lenders also offer 75-15-10 and 80-15-5 programs.  This type of mortgage also gives the consumer the option of having a non-escrow loan without a 20% down payment.

abstract of title

A condensed version of the history of title to a piece of land that lists any transfers in ownership, as well as any liabilities attached to it, such as mortgages.

abutting

The joining, reaching, or touching of adjoining land. Abutting pieces of land have a common boundary.

acceleration clause

A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

acceptance

An offeree’s consent to enter into a contract and be bound by the terms of the offer.

accretion

An addition to land through natural causes.

acknowledgment

A declaration made by a person to a notary public, or other public official authorized to take acknowledgments, that the instrument was executed by him and that it was his free and voluntary act.

acre

A measure of land equal to 43,560 square feet.  Or a tract about 208.71 feet square or 160 square rods or 4840 square yards.

 

ad valorem

Designates an assessment of taxes against property. Literally, according to value.

 

additional principal payment

A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

adjustable rate mortgage (ARM)

A mortgage loan whose interest rate fluctuates according to the movements of an assigned index or a designated market indicator--such as the weekly average of one-year U.S. Treasury Bills--over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.

 

adjusted basis

The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

 

adjustment date

The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

 

adjustment period

The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
 

adjustments

Money that the buyer and sellers credit each other at the time of closing. Often includes taxes and down payment.

administrator/administratrix

A man/woman appointed by a court to settle the estate of a deceased person when there is no will. Contrast with executor/executrix.

adverse possession

The right of an occupant of land to acquire title against the real owner, where possession has been actual, continuous, hostile, visible, and distinct for the statutory period.  The requirements for adversely possessing property vary between states, but usually include continuous and open use for a period of five or more years and paying taxes on the property in question.

affidavit

Written statement signed and sworn to before some person authorized to take an oath.

agency

The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal, and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal and owes to that principal the duties of accounting, care, loyalty, and obedience. Also see buyer's broker.

agent

A person authorized to act for and under the direction of another person when dealing with third parties. The person who appoints an agent is called the principal. An agent can enter into binding agreements on the principal's behalf and may even create liability for the principal if the agent causes harm while carrying out his or her duties. See also attorney-in-fact.

alienation Clause

A clause in a mortgage, which gives the lender the right to call the entire loan balance due if the property is sold; due-on-sale clause.

amenities

Non monetary benefits and satisfactions derived from property ownership, such as a pleasant view, pride in home ownership, etc.
 

ammendment

A modification to an existing contract, mutually agreed to by all parties.  Examples might include a change in the pruchase price due to a low appraisal, or a change in the closing date.

amortization

The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time. (See term)

amortized mortgage

 A mortgage requiring periodic payments that include both interest and principal.  Also see self amortized loan.

annual membership

The amount that is charged annually for having a line of credit available. Often charged regardless of whether or not you use the line.

annual percentage rate (APR)

This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual note rate on your loan.

antitrust laws

Federal and state laws prohibiting, among other things, monopolies, monopolistic practices, restraint of trade, and price fixing.

application

The form used to apply for a mortgage loan, containing information about a borrower's income, savings, assets, debts, and more.

application fee

Fees that are paid upon application. Charges for property appraisal and a credit report are usually included in the application fee.

appraisal

A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

appraised value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

appreciation

The increase in the value of a property due to changes in market conditions, inflation, or other causes. Opposite of depreciation.

asking (list) price

The price placed on property for sale.

assessed value

The valuation placed on property by a public tax assessor for purposes of taxation.

assessment

The placing of a value on property for the purpose of taxation.

assessor

A local public official who determines the value of the property for taxation purposes.

asset

Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

assignee

A person to whom a property right is transferred. For example, an assignee may take over a lease from a tenant who wants to permanently move out before the lease expires. The assignee takes control of the property and assumes all the legal rights and responsibilities of the tenant, including payment of rent. However, the original tenant remains legally responsible if the assignee fails to pay the rent.
 

assignment

When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment, The company or individual is called the assignee.

assumable mortgage

A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan.

assumption

The term applied when a buyer assumes the seller's mortgage.

assumption of mortgage

The transfer of title to property to a grantee wherein he assumes liability for payment of an existing note secured by a mortgage against the property; should the mortgage be foreclosed and the property sold for a lesser amount than that due, the grantee-purchaser who has assumed and agreed to pay the debt secured by the mortgage is personally liable for the deficiency. Before a seller may be relieved of liability under the existing mortgage, the lender must accept the transfer of liability for payment of the note. Also known as simple assumption. Contrast with subject to mortgage.

attachment

Method by which a debtor's property is placed in the custody of the law and held as security pending outcome of a creditor's suit.

attorney's opinion of title

An instrument written and signed by the attorney who examines the abstracts of title, stating his opinion as to whether a seller may convey good title.
 

attractive nuisance

Something on a piece of property that attracts children but also endangers their safety. For example, unfenced swimming pools, open pits, farm equipment and abandoned refrigerators have all qualified as attractive nuisances.

auction

A public sale of property to the highest bidder.

balloon mortgage

A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid. Contrast with amortized mortgage.

balloon payment

A large final payment due at the end of a loan, typically a home or car loan, to pay off the amount your monthly payments didn't cover. Many states prohibit balloon payments in loans for goods or services that are primarily for personal, family or household use, or require the lender to let you refinance the balloon payment before forcing collection.

bankruptcy

By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

bill of sale

A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

biweekly mortgage

A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note:there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

blanket mortgage

One mortgage on a number of parcels of real property.

blockbusting

The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective entry, of members of a minority group;panic peddling. See Fair Housing.

 
bond

(1) A written agreement purchased from a bonding company that guarantees a person will properly carry out a specific act, such as managing funds, showing up in court, providing good title to a piece of real estate or completing a construction project. If the person who purchased the bond fails at his or her task, the bonding company will pay the aggrieved party an amount up to the value of the bond.

 

(2) An interest-bearing document issued by a government or company as evidence of a debt. A bond provides pre-determined payments at a set date to the bond holder. Bonds may be "registered" bonds, which provide payment to the bond holder whose name is recorded with the issuer and appears on the bond certificate, or "bearer" bonds, which provide payments to whomever holds the bond in-hand.  Mortgage interest rates are closely related to long term bond interest rates.

bond market

Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.

bonus to selling agent (BTSA)

Compensation, above and beyond the sales commission, offered to the real estate agent who brings the buyer to the transaction.  A BTSA is used to provide an extra incentive for real estate agents to show a particular listing.  Often the bonus is tied to closing within a certain time period or the property selling for a certain price.  A buyer's agent should not consider the BTSA a factor in any negotiations between buyer and seller.  Realistically, most BTSA's tend to disappear during initial negotiations, eventhough they should never be considered as negotiable after they have been offered.  Any bonus to selling agent should be contained in a written agreement between the seller and listing broker.  The BTSA is technically offered by the listing broker, not the seller, and thus should not be a subject of negotiation.

breach of contract

Failure, without legal excuse, of one of the parties to a contract to perform according to the contract.

bridge loan

Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.

broker

Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. (See the Home Loan Library that discusses the different types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

brokerage

For a commission or fee, bringing together parties interested in buying, selling, exchanging, or leasing real property.

 

BTSA

Acronym - bonus to selling agent.

building line

A line fixed at a certain distance from the front and/or sides of a lot beyond which no structure can project. See set back.

bundle of rights

Ownership in real property implies a group of rights, such as the right of occupancy, use and enjoyment, the right to sell in whole or in part, the right to control the use, the right to bequeath, the right to lease any or all of the rights, the right to the benefits derived by occupancy and use of the property, etc.

buy down

A cash payment, usually measured in points, to a lender in order to reduce the interest rate a borrower must pay.

buyer's broker

A licensee who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid by the buyer or the listing broker through a commission split. Some brokers conduct their business by representing buyers only.

calendar Year

A year using the actual number of days in each month for a total of 365 days in a year (366 days in a leap year).

call option

Similar to the acceleration clause.

cap

The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage. Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.

 

capital gains

The profit on the sale of a capital asset, such as stock or real estate. If you sell your primary residence, you can exclude $250,000 in profit from capital gains tax. A couple can exclude $500,000.

capitalization

The estimation of the value of income producing property by dividing the annual net income by the capitalization rate.

capitalization rate

The rate of expected return on investment property. A ratio of income to value.

cash Out

Receiving money back when refinancing your present mortgage. Not available on homestead property in Texas (See homestead).

cash-out refinance

When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."

CC&R

See covenants, conditions & restrictions.

 

CCCS

See Consumer Credit Counseling Service.

ceiling

The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

census

An official count of the number of people living in a certain area, such as a district, city, county, state, or nation. The United States Constitution requires the federal government to perform a national census every ten years. The census includes information about the respondents' sex, age, family, and social and economic status.

certificate of deposit

A time deposit held in a bank which pays a certain amount of interest to the depositor.

certificate of deposit index

One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.

certificate of eligibility

The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).

certificate of reasonable value (CRV)

Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

chain of title

A history of conveyances and encumbrances of a property from some starting point, whereby the present owner derives title.

channeling

The illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status; Steering. See Fair Housing.

chattel

See personal property.

 

cleaning fee

A nonrefundable fee charged by a landlord when a tenant moves in. The fee covers the cost of cleaning the rented premises after you move out, even if you leave the place spotless. Cleaning fees are illegal in some states and specifically allowed in others, but most state laws are silent on the issue. Landlords in every state are allowed to use the security deposit to clean a unit that is truly dirty.

clear title

A land title that doesn't have any liens (including a mortgage) against it.

closing

The conclusion of the sales transaction when the seller transfers title to the buyer in exchange for consideration. This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands. In Utah, these proceedings are usually held at a title company.

closing costs

Costs the buyer must pay at the time of the closing in addition to the down payment which may include points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance. Closing costs can vary considerably from one financial institution to another.

closing statement

A detailed written summary of the financial settlement of a real estate transaction, showing all charges and credits made, and all cash received and paid out.  See Settlement Statement

cloud on title

Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action. A claim or encumbrance that may effect title to land.

co-borrower

An additional individual who is both obligated on the loan and is on title to the property.

co-op

See cooperative housing or cooperative sale.

co-tenants

Two or more tenants who rent the same property under the same lease or rental agreement.  Each co-tenant is 100% responsible for carrying out the rental agreement, which includes paying the entire rent if the other tenant skips town and paying for damage caused by the other tenant.

collateral

In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust. Something of value deposited with a lender as a pledge to secure repayment of a loan.

collection

When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

commingling

The illegal practice of combining or mixing clients' funds with the agent's own funds.

commission

The compensation paid to a licensed real estate broker or by the broker to the salesman for services rendered. Usually a percentage of the selling price of the property.

common area assessments

In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.

common areas

Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

common law

An unwritten body of law based on general custom in England and used to an extent in some states.

community property

In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.

Community Reinvestment Act

The federal law which requires federally regulated lenders to describe the geographical market area they serve. Deposits from that area are to be reinvested in that area whenever practical.

comparables

Properties which are similar to a particular property and are used to compare and establish a value for that property.

compound interest

Interest which is computed on the principal and any unpaid accumulated interest. Contrast with simple interest.

condemnation

The act of taking private property for public use, through due process under the right of eminent domain, with compensation to the owner.

condominium

A form of real estate, usually a dwelling with individual ownership of separate portions of the building plus shared ownership of the common areas.

condominium conversion

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

condominium hotel

A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.

construction loan

A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

consideration

The price or subject matter, which induces a contract; may be in money, commodity, exchange, or a transfer of personal effort.

constructive eviction

The provision of housing that is so substandard that, for all intents and purposes, a landlord has evicted the tenant. For example, the landlord may refuse to provide light, heat, water or other essential services, destroy part of the premises or refuse to clean up an environmental health hazard, such as lead paint dust. Because the premises are unlivable, the tenant has the right to move out and stop paying rent without incurring legal liability for breaking the lease. Usually, the tenant must first bring the problem to the landlord's attention and allow a reasonable amount of time for the landlord to make repairs.

 

Consumer Credit Counseling Service (CCCS)

A national non-profit agency that, at no cost, helps debtors plan budgets and repay their debts. One major criticism of CCCS is that each office is primarily funded by voluntary donations from the creditors that receive payments from debtors repaying their debts through that office.  The goal of CCCS is to insure that consumers repay the debts that they owe.  CCCS may arrange easy payment plans that increase the chances for repayment, but harm a consumer's credit in the process.  Agreeing to a payment plan and following it to the letter may not stop creditors from reporting delinquent repayment information to credit bureaus for each month the payment falls short of the previous minimum amount.

 

contingency

A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event.   A common example is a Buyer who enters into the purchase of another home before his current home is sold.  The Buyer will usually ask for the Seller to make the sale contingent upon the sale of the Buyer's current home.  If the Seller receives another offer for the property, the first Buyer must either agree to buy the home without any contingency, or step aside and let someone else purchase the home. A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

contract

A legally enforceable agreement to do, or not to do, a particular thing for a consideration.

contract for deed

A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, agreement of sale, conditional sales contract, or installment contract.  Buyers should be wary of this type of contract, since they can lose their entire investment if the owner declares brankruptcy, before the deed has been transferred.

contract for exchange of real estate

A contract for the sale of real estate in which the consideration is paid wholly or partly in real property instead of cash.

contract of sale

The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

conventional loan

A real estate loan, which is not insured by the FHA or guaranteed by the VA.

convertible ARM

An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.

conveyance

Written instrument, such as a deed or lease, that evidences transfer of some ownership interest in real property from one person to another.

 

cooperative housing

(1) A form of real estate, usually a dwelling in which residents own shares, but  do not directly own the space they inhabit.  Rather, owning a share of the building entitles the shareholder with the right to inhabit a certain space within the dwelling, such as an apartment.  Shares are usually proportional to the amount of space in each apartment.

(2) A living arrangement in which residents must perform certain duties or chores to benefit the entire residence, in addition to paying room and board. A common form of dormitory living.

 

cooperative sale

A sale of property in which the buyer is brought to the transaction by a real estate agent who works for a different real estate broker than the listing agent.  Both brokers/companies have agreed to cooperate in closing the property, and typically, splitting the commission.  Offers of cooperation and compensation are commonly found in the MLS property listings.

cooperative (co-op)

A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

cost approach to value

An estimate of value based on current construction costs, less depreciation, plus land value. Contrast with the income approach to value and the market data approach to value.

cost of funds index (COFI)

One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

counter offer

The rejection of an offer to buy or sell that simultaneously makes a different offer, changing the terms in some way. For example, if a Buyer offers $160,000 for a home, and the Seller replies that he wants $175,000, the Seller has rejected the Buyer's offer of $160,000 and made a counteroffer to sell at $175,000. The legal significance of a counteroffer is that it completely voids the original offer, so that if the Seller decided to sell for $160,000 the next day, the Buyer would be under no legal obligation to pay that amount for the property.

 

covenant

A restriction on the use of real estate that governs its use, such as a requirement that the property will be used only for residential purposes. Covenants are found in deeds or in documents that bind everyone who owns land in a particular development. See Covenants, Conditions & Restrictions.
 

covenants, conditions & restrictions (CC&Rs)

The restrictions governing the use of real estate, usually enforced by a homeowners' association and passed on to the new owners of property. For example, CC&Rs may tell you how big your house can be, how you must landscape your yard or whether you can have pets. If property is subject to CC&Rs, buyers must be notified before the sale takes place.

 

credit bureau

A private, profit-making company that collects and sells information about a person's credit history. Typical clients include banks, mortgage lenders and credit card companies that use the information to screen applicants for loans and credit cards. There are three major credit bureaus, Equifax, Experian andTrans Union, and they are regulated by the federal Fair Credit Reporting Act.

 

credit file

See credit report.

credit history

A record of an individual's repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.

credit insurance

Insurance a lender offers or requires a borrower to purchase to cover the loan. If the borrower dies or becomes disabled before paying off the loan, the policy will pay off the remaining balance.  Federal and state consumer protection laws require the lender to disclose to existing and potential borrowers the terms and costs of obtaining credit insurance because it can affect the terms of the loan.

credit limit

The maximum amount that you can borrow under a home equity plan.

 

credit report

An account of your credit history, prepared by a credit bureau. A credit report will contain both credit history, such as what you owe to whom and whether you make the payments on time, as well as personal history, such as your former addresses, employment record and lawsuits in which you have been involved. An estimated 50% of all credit reports contain errors, such as accounts that don't belong to you, an incorrect account status or information reported that is older than seven years (ten years in the case of a bankruptcy).

 

credit score

In the mortgage lending world, credit scores either make or break you when it comes to obtaining a home mortgage or getting the best rate you can.  There are three different scores available to a mortgage lender each being generated by the three different credit agencies. The most popular, known as a Fico score is from Experian (formally TRW), then there is a Beacon score from Equifax, and finally a Emperica score from Trans Union. This is the "mortgage scoring" system used to get a conventional mortgage.

 

Simply, credit scores are numbers calculated based upon your credit history. The better your credit, the higher your number or score will be - the worse your credit, the lower the score. The number of inquiries or times your credit has been pulled in the past 90 days will also lower your "score". In some instances, lack of credit results in "no score" on your report requiring you to provide "alternative credit" via your rental, utility or telephone payment histories. There's plenty you can do to improve your score if you know how the system works. Just don't expect much help from your lender--most consider the actual formulas a trade secret and don't want people angling for an advantage.  Congress is currently working on legislation to provide consumers with access to their credit scores and the formulas used to calculate these scores.

 

There are some lenders that do not rely on credit scores to the degree that most do. Some times, credit reports contain inaccuracies that lower your score, this is when a lender has to use a common sense approach to approving your loan. In some instances you may have to correct your credit report, wait for your score to improve, then reapply for the loan. Talk with your mortgage broker or lender to understand what your options are.

credit repository

An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

creditor

A person or entity (such as a bank) to whom a debt is owed.

cul-de-sac

A dead end street which widens sufficiently at the end to permit an automobile to make a "U" turn.

DBA

Doing Business As. Business names or aliases filed with the county.

debenture

Bonds issued without security.
 

debt service

The total amount of credit card, auto, mortgage or other debt upon which you must pay.

debt-service ratio

The measurement of debt payments to gross household income which may include, in addition to the main wage earner's salary, salaries of other wage earners, commissions, bonuses, overtime, etc.

Deceptive Trade Practices Act

Part of the federal Consumer Protection Act originally passed in 1973 and made specifically applicable to real estate in 1975, specifically prohibiting a lengthy number of false, misleading and deceptive acts or practices. The Texas Supreme Court has defined a deceptive trade practice as one "which has the capacity to deceive an average, ordinary person, even though that person may have been ignorant, unthinking, or credulous."

deduction

In tax law, an amount that you can subtract from the total amount on which you owe tax.  Examples of federal income tax deductions include mortgage interest, charitable contributions and certain state taxes. For example, if Aimee receives an income of $60,000 in 1998 and pays $12,000 in mortgage interest during that same year, she can deduct $12,000 when she fills out her federal tax return, leaving an amount of $48,000 upon which she must pay tax.

 

deed

A written instrument by which title to land is conveyed.
 

deed in lieu (of foreclosure)

Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record. A means of escaping an overly burdenome mortgage. If a homeowner can't make the mortgage payments and can't find a buyer for the house, many lenders will accept ownership of the property in place of the money owed on the mortgage. Even if the lender won't agree to accept the property, the homeowner can prepare a quitclaim deed that unilaterally transfers the homeowner's property rights to the lender.

deed of trust

The legal instrument used in Texas in lieu of a mortgage, in which the property is conveyed in trust to a trustee to be held as security for a loan. Some states, like California, do not record mortgages. Instead, they record a deed of trust which is essentially the same thing.
 

deed restrictions

Common name used in the Houston area to denote covenants, conditions & restrictions (CC&Rs).  Deed restrictions cover allowable land uses and home types and sizes within a neighborhood.  They are especially important within Houston, and unincorporated parts of Harris County, since zoning does not exist in these areas.

default

Non-performance of a duty arising under a contract or otherwise. Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.

defeasanse

A clause in a deed, lease, will or other legal document that completely or partially negates the document if a certain condition occurs or fails to occur. Defeasance also means the act of rendering something null and void. For example, a will may provide that a gift of property is defeasable--that is, it will be void--if the beneficiary fails to marry before the willmaker's death.

delinquency

Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

delivery

The actual transfer of the deed, or an act of a seller showing intent to make a deed effective, without which, there is no transfer of title to the property.

deposit

A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an "earnest money deposit."

depreciation

A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

descent

Acquisition of property through inheritance laws when there is no will (when a person dies intestate).

devise

A transfer of real estate by will or last testament.

disclosure

The making known of a fact that had previously been hidden; a revelation.  For example, in many states you must disclose major physical defects in a house you are selling, such as a leaky roof or potential flooding problem.

discount points (or points)

In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any "points" paid in addition to the one percent loan origination fee. A "point" is one percent of the loan amount. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).

discount rate

(1) The rate charged member banks who borrow from the Federal Reserve System.

(2) The rate used to convert future income into present value.

dispossess

To oust from land by legal process.

dominant tenement

Property that carries a right to use a portion of a neighboring property. For example, property that benefits from a beach access trail across another property is the dominant tenement.

down payment

An amount of money the buyer pays which is the difference between the purchase price and the mortgage amount.

dual agency

Representing the buyer and the seller in the same transaction by the same agent. Since there is an inherent conflict in fiduciary obligations to two different principals, dual agency, at best, is a risky undertaking. TRELA requires that all parties to a dual agency have full knowledge and consent (Disclosed Dual Agency). Contrast with intermediary.

due on sale

A clause in a mortgage agreement providing that, if the mortgagor (the borrower) sells, transfers, or, in some instances, encumbers the property, the mortgagee (the lender) has the right to demand the outstanding balance in full.

duress

Forcing action or inaction against a person's will.

earnest money

A deposit made by the buyer as evidence of good faith in offering to purchase real estate and to secure performance of the contract. Earnest money is typically held by a title company, in an escrow account, during the period between acceptance of the contract and the closing.

earnest money contract (EMC)

A contract for the sale or purchase of real estate in which the purchaser is required to tender earnest money to evidence good faith in completing the contractual obligations. Almost every sales contract for real estate in Texas will be an earnest money contract. Also see sales contract and promulgated contracts.

easement

A right to use another person's real estate for a specific purpose. The most common type of easement is the right to travel over another person's land, known as a right of way. In addition, property owners commonly grant easements for the placement of utility poles, utility trenches, water lines or sewer lines. The owner of property that is subject to an easement is said to be "burdened" with the easement, because he or she is not allowed to interfere with its use. For example, if the deed to John's property permits Sue to travel across John's main road to reach her own home, John cannot do anything to block the road. On the other hand, Sue cannot do anything that exceeds the scope of her easement, such as widening the roadway.

easement by prescription

A right to use property, acquired by a long tradition of open and obvious use. For example, if hikers have been using a trail through your backyard for ten years and you've never complained, they probably have an easement by prescription through your yard to the trail.

economic obsolescence

Loss of value of real property due to external forces or events; eg., a sewer plant is built next door to the subject property. Contrast with Functional Obsolescence.

effective age

An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

effective interest rate

The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.

 

effluxion of time

The normal expiration of a lease due to the passage of time, rather than due to a specific event that might cause the lease to end, such as destruction of the building.
 

egress

An exit, or the act of exiting. The most famous use of this word was by P.T. Barnum, who put up a large sign in his circus tent saying "This Way to the Egress."  Thinking an egress was some type of exotic bird, people eagerly went though the passage and found themselves outside the circus tent. Compareingress.

emblements

Annual crops produced by cultivation. They are deemed to be personal property.

eminent domain

The right of government to take private property for public use, through court action known as condemnation. The Fifth Amendment to the United States Constitution allows the government to take private property if the taking is for a public use and the owner is "justly compensated" (usually, paid fair market value) for his or her loss. A public use is virtually anything that is sanctioned by a federal or state legislative body, but such uses may include roads, parks, reservoirs, schools, hospitals or other public buildings. Sometimes called expropriation.

 

enclave community

Smaller in scope than master-planned communities,  enclave communities typically blend different price ranges of residential neighborhoods with amenities such as public recreation areas and parks, neighborhood schools and extensive landscaping.  Recreation areas may include public swimming pools, tennis courts, and children's play grounds.  Many offer large water features and gated access.

encroachment

A fixture, or structure, such as a wall or fence, which invades a portion of a property belonging to another.  Solutions range from paying the rightful property owner for the use of the property to the court-ordered removal of the structure.

encumbrance

A cloud against clear, free title to the property which does not prevent conveyance, such as unpaid taxes, easements, deed restrictions, mortgage loans, etc.

endorsement

Writing one's name, either with or without additional words, on a negotiable instrument, or on a paper attached to it.

Equal Credit Opportunity Act (ECOA)

The 1974 federal law (Title VII of the Consumer Credit Protection Act) which requires fairness and impartiality without discrimination on the basis of race, color, religion, national origin, sex or marital status, or receipt of income from public assistance programs in the extension of credit, and good faith exercises of any right under the Consumer Credit Protection Act (eg. the creditor must state reasons for denial of credit).

Equal Treatment/Different Impact

It is possible to be guilty of discrimination even by treating two individuals the same. If the results of the treatment are discriminatory, or tend to exclude or otherwise harm members of a minority group, or have discriminatory impact, they are against the law. For example, an apartment house which rents only to doctors and lawyers, where there are few, if any, minority doctors or lawyers in the area, may be a violation of the Fair Housing Laws.

equity

A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.

escalator clause

The clause in a contract permitting adjustments of the payments.

escheat

The reversion of property to the state in the event the owner thereof dies without leaving a will (intestate) and has no heirs to whom the property may pass by lawful descent.

escrow

A trust arrangement by which none or more parties deposit things of value with an authorized escrow agent in accordance with the terms of a real estate agreement.

escrow account

(1) A third party account that holds money safely while a sale is in progress.

(2) An account used to save monies required for the payment of an eventual debt.  Often used by lenders to save for property taxes, hazard insurance, homeowner's dues, etc.

Escrow accounts are typically non-interest bearing for the contributors, but may pay interest to the entity holding the account (lenders, title companies, lawyers, etc.).

escrow analysis

Once each year your lender will perform an "escrow analysis" to make sure they are collecting the correct amount of money for the anticipated expenditures.

escrow disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

estate

The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

estimate of value

An appraisal; the appraised value.

et ux

Abbreviation for "et uxor", meaning "and wife".
 

eviction

Removal of a tenant from rental property by a law enforcement officer. First, the landlord must file and win an eviction lawsuit, also known as an "unlawful detainer."

exception

As used in the conveyance of real estate, an exception is the exclusion of some part of the property conveyed, with title of that excepted part remaining with the grantor. For example, in most subdivision developments, mineral rights are not conveyed to the purchaser of a lot, but remain the property of the developer. Contrast with Reservation.

exclusive agency (EA)

A listing agreement which gives the listing agent the right to sell the property for a specified time. The owner reserves the right to sell the property himself without paying a commission to the agent. Brokers run the risk of investing their time, effort, and money in a listing that, even if sold through their marketing efforts, does not produce a commission. Contrast with Exclusive Right to Sell.

exclusive listing

A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.

exclusive right to sell (ERS)

A listing agreement which gives the listing agent the right to sell the property for a specified time, with the right to collect a commission if the property is sold by anyone, including the owner, during the listing period. Contrast with Exclusive Agency.
 

exculpatory clause

A provision in a lease that absolves the landlord from responsibility for all damages, injuries or losses occurring on the property, including those caused by the landlord's actions. Most states have laws that void exculpatory clauses in rental agreements, which means that a court will not enforce them.
 

executor/executrix

The man/woman appointed in a will to carry out the requests of the will. Contrast with Administrator/Administratrix.

expropriation

See eminent domain.

fair Credit Reporting Act

A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

fair market value

The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

fair Housing Act & Fair Housing Amendments Act

Federal laws that prohibit housing discrimination on the basis of race or color, national origin, religion, sex, familial status or disability. The federal Acts apply to all aspects of the landlord/tenant relationship, from refusing to rent to members of certain groups to providing different services during tenancy.

fair Housing Laws

Federal, state, and local laws, particularly Title VIII of the 1968 Civil Rights Act, Title VI of the Civil Rights Act of 1964, and the Civil Rights Act of 1866, which forbid discrimination because of race, sex, color, religion, or national origin, in the selling or renting of homes or apartments, and in other specified transactions. These laws have been recently been expanded to include familial status (having children) and disabilities (Americans with Disabilities Act).

 

Fannie Mae

Created by Congress in 1938 to bolster the housing industry during the Depression, Fannie Mae was originally part of the Federal Housing Administration (FHA) and authorized to buy only FHA-insured loans to replenish lenders' supply of money. In 1968, Fannie Mae became a private company operating with private capital on a self-sustaining basis.  Its role was expanded to buy mortgages beyond traditional government loan limits, reaching out to a broader cross-section of Americans.

 

Today, Fannie Mae operates under a congressional charter that directs it to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans. Fannie Mae receives no government funding or backing, and is one of the nation's largest taxpayers as well as one of the most consistently profitable corporations in America.  Fannie Mae establishes strict guidelines for mortgage loans it is willing to purchase.  As the largest buyer of mortgage loans in the US, these guidelines have become the industry standard for the majority of home loans.  Any loan that meets these Fannie Mae guidelines is called a "conforming loan".

 

FDIC

Acronym - The Federal Deposit Insurance Corporation.

 

Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation's mission is to maintain the stability of and public confidence in the nation's financial system. To achieve this goal, the FDIC has insured deposits and promoted safe and sound banking practices since 1933.  FDIC insurance is offered at almost every US bank and savings and loan. In general, the FDIC insures individual accounts in each financial institution for a maximum of $100,000.00 per account.  An individual or entity may only be insured for a total of $100,000.00 for all the accounts held in any one institution, or any of its branches.
 

Federal Emergency Management Agency (FEMA)

FEMA is the governmental unit that has leadership responsibilities for the Nation's emergency management system. Once the President has declared a major disaster, FEMA coordinates not only its own response activities but also those of as many as 28 other Federal agencies that may participate.  FEMA also works with States, territories, and communities during non-disaster periods to help plan for disasters, develop mitigation programs, and anticipate what will be needed when major disasters occur.  Among its many responsibilities the agency operates the Federal Insurance Administration, which makes flood insurance available to residents of communities that agree to adopt and enforce sound floodplain management practices.
 

Federal Home Loan Mortgage Corporation (FHLMC)

See Freddie Mac.

 

Federal Housing Administration

The Federal Housing Administration (FHA), a wholly owned government corporation, was established under the National Housing Act of 1934 to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgages; and to stabilize the mortgage market. FHA was consolidated into the newly established Department of Housing and Urban Development (HUD) in 1965. Since 1934, FHA has been extremely successful in achieving these goals.  FHA loans require special a appraisal/inspection that determine if a property meet the agency's minimum property standards.  While somewhat more expensive that a conventional loan in terms of interest rates and insurance fees, FHA loans offer slightly more liberal qualifying criteria.  The current maximum FHA loan amount in the Houston area, for a single-family home, is $139,650.00

fee simple estate

The most complete form of ownership of real property; absolute ownership. Commonly used to to denote a property where the owner has undivided title to the land on which the property is situated. The greatest possible interest a person can have in real estate. An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA

The Federal Housing Administration which insures mortgage loans made by approved lenders, in accordance with FHA regulations.

 

FHLMC

Acronym - Federal Home Loan Mortgage Corporation.  See Freddie Mac.

fiduciary

The relationship of trust, honesty and confidence between agent and principal; the faithful relationship owed by an agent to the principal.
 

finder's fee

A fee charged by real estate brokers and apartment-finding services in exchange for locating a rental property. These fees are permitted by law. Some landlords, however, charge finder's fees merely for renting a place. This type of charge is not legitimate and, in some areas, is specifically declared illegal.

firm commitment

A lender's agreement to make a loan to a specific borrower on a specific property.

first mortgage

A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).

fixed rate mortgage

A mortgage with an interest rate and monthly payment that doesn't vary for the term of the loan.

fixture

Personal property which has been attached to real estate so as to become part of the real property. The article must meet at least one of three conditions:

1. Attached in a permanent manner.

2. Specially adapted to the property. or

3. Intentionally made part of the real property.

Flood Control District

A special taxing district created to provide flood control in specific areas of a county.
 

flood insurance

A special and separate type of homeowner's insurance the provides coverage for damages resulting from flooding.  Flood insurance is required by most lenders only if the property is located within a designated flood plain.  The cost of the policy is related to the associated flooding risk.  If a property has a small section of land located within a flood plain, but away from the residential improvements (house), the lender will still require a policy, but its cost will be much lower.  Likewise, flood insurance policies for properties not located within any floodplain, are fairly inexpensive.

 

Most flood insurance is underwritten by the federal government through FEMA and the National Flood Insurance Program in cooperation with private insurance agencies.  More than 18,000 communities participate in the Federal flood insurance program. More than 3.8 million National Flood Insurance Program (NFIP) home and business policies are in effect.  The United States experiences flooding threats throughout all four seasons of the year and, in fact, flooding is the most common natural disaster. There are, on average, 1000 floods per year in the U.S.  Nearly everyone is at some risk of experiencing the effects of flooding.  In the Houston area, 25 percent of flood-insurance claims come from areas outside a designated flood plain.
 

flood plain

Flood plains are by definition subject to periodic flooding. They are generally characterized by relatively flat topography and soil types that were laid down during past inundations by flood waters.  If your property is in the 100-year flood plain, there is a 1-in-100 chance in any given year that your property will flood. If it is in the 25-year flood plain, there is a 1-in-25 chance in any given year that your property will flood. The statistical chance of flooding is not changed by any one flooding event; but repeated flooding may result in the flood plain being recalculated.

 

A 100-year flood plain is always wider than a 25-year flood plain, and the 25-year flood plain is contained within the 100-year flood plain. The flood prone areas of the United States cover approximately 150,000 square miles or 94 million acres of land, an area roughly the size of the State of Montana. People living in flood plains are 26 times more likely to experience a flooding disaster than they are a fire disaster during the life of the 30-year mortgage on their homes.

 

The changes in flood plain maps reflect changes in land use (such as increased building activity), changes in the waterways, and flood control improvements (such as detention ponds or other flood control measures).  As more lots are covered with more buildings and parking lots, the amount of water that flows into creeks and lakes increases because there is less vegetation to absorb the water when it rains. This is one reason why buildings that were not originally built in a flood plain are now in the 25-year or 100-year flood plain.

FNMA

Usually referred to as "Fannie Mae", the acronym stands for the Federal National Mortgage Association.

 

For Sale By Owner (FSBO)

An individual homeowner who is attempting to sell his property without a real estate broker.  The acronym, FSBO is pronounced "fizzbo."

foreclosure

A legal process instituted by a mortgagee or lien creditor after the debtor's default.
 

forfeiture

The loss of property or a privilege due to breaking a law. For example, a landlord may forfeit his or her property to the federal or state government if the landlord knows it is a drug-dealing site but fails to stop the illegal activity.  Likewise, a homeowner may lose his house to satisfy IRS debts or if the government suspects the home was bought with money derived from criminal acts.  The government may seize and sell the property at auction, often far below its fair market value, before the homeowner has been allowed the due process of a trial.  If the homeowner is found not guilty, the government is only required to pay back the amount received at auction, and not the market value.

fraud

A misstatement of a material fact made with intent to deceive or made with reckless disregard of the truth, and which actually does deceive.

 

Freddie Mac

Chartered by Congress in 1970, Freddie Mac is a publicly held corporation that purchases mortgages in the secondary mortgage market.  Freddie Mac came into being as the Federal Home Loan Mortgage Corporation (FHLMC) with the mission to create a continuous flow of funds to mortgage lenders.  By supplying lenders with the money to make mortgages and packaging the mortgages into marketable securities which are sold to investors, Freddie Mac also helps to sustain a stable mortgage credit system which in turn, reduces the mortgage rates paid by homebuyers.  Over the years, Freddie Mac has been responsible for opening the door to homeownership for one out of six home buyers in America who would not have qualified otherwise.

front foot

One linear foot (12 inches) along the street side of a lot.
 

FSBO

Acronym  - For Sale By Owner

functional obsolescence

Loss of value of real property caused by modernization or changing tastes or standards; e.g.. single bath, inadequate closet space, etc. Contrast witheconomic obsolescence.

garden home

See patio home

gated community

A neighborhood or group of neighborhoods, usually surrounded by masonary walls, restricting access through the use of a manned guard station or electronically operated gates.  The electronic gates may be opened through the use of individual remote controls and/or a numeric keypad and code.  Some gated communities restrict entry at all times, while others only limit access during the evening hours.  The City of Houston does not allow public city streets to be gated off, so only neighborhoods with private streets, may have restricted access.  The costs associated with maintaining a manned guard gate can significantly impact monthly maintenance fees, depending on the size of the community.

general lien

A lien that includes all the property owned by a debtor, rather than a specific property. Contrast with Specific Lien.

general warranty deed

A deed in which the grantor fully warrants good and clear title to the property. A general warranty deed offers the most protection of any deed.

 

Ginnie Mae

The common nickname for the Government National Mortgage Association.  Ginnie Mae was created in 1968 as a wholly owned corporation within the Department of Housing and Urban Development (HUD), having been separated from Fannie Mae.  Ginnie Mae does not loan money for mortgages. Instead, it operate in the secondary mortgage market, buying loans and selling mortgage-backed securities investors, which in turn, increases the availability of mortgage credit.

government loan (mortgage)

A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.

Government National Mortgage Association

See Ginnie Mae.

 

GNMA

Acronym - Government National Mortgage Association, also known as "Ginnie Mae"

good faith estimate

A written estimate of closing costs which a lender must provide you within three days of submitting an application.

government survey method

A system of land description (not used in Texas) which uses meridians (north and south lines) and base lines (east and west lines). Areas include quadrangles (24 miles on each side), townships (6 miles on each side), and sections (1 mile on each side). Also known as the Rectangular Survey Method. Contrast with metes and bounds, and recorded plat (Lot and Block Number) method.

grace period

A period of time during which a loan payment may be paid after its due date but not incur a late penalty. Such late payments may be reported on your credit report.

 

grant deed

A deed containing an implied promise that the person transfering the property actually owns the title and that it is not encumbered in any way, except as described in the deed. This is the most commonly used type of deed. Compare quitclaim deed.

grantee

A person to whom real estate is conveyed; the buyer.

grantor

A person conveying real estate by deed; the seller.

gross debt service

The amount of money needed to pay principal, interest and taxes, and sometimes energy costs. If the dwelling unit is a condominium, all or a portion of common fees are excluded, depending on what expenses are covered.

gross income

For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

gross lease

A commercial real estate lease in which the tenant pays a fixed amount of rent per month or year, regardless of the landlord's operating costs, such as maintenance, taxes and insurance. A gross lease closely resembles the typical residential lease. The tenant may agree to a "gross lease with stops," meaning that the tenant will pitch in if the landlord's operating costs rise above a certain  level. In real estate lingo, the point when the tenant starts to contribute is called the "stop level," because that’s where the landlord’s share of the costs stops.  Contrast with Net Lease.

habendum clause

The "to have and hold" clause which defines or limits the quantity of the estate granted in the premises of the deed.

hazard insurance

A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium.  Most common, lender required feature of homeowners insurance.

hereditaments

Property, personal and real, capable of being inherited.

 

high-rise

A nine-story or taller building containing residential apartments or condominium units.  In addition to spectacular views, most high-rises offer their residents a full range of amenities.  Building features may include 24-hour concierge service, swimming pools, spas, saunas, tennis courts, exercise areas, party rooms and guest suites.  Security is enhanced at these buildings by the manned entry desks and limited access, covered parking garages.  Compare with mid-rise.

highest and best use

The particular use of a real property which will produce the greatest financial return. The optimum use of a site as used in appraisal.  This is often determined by location, neighboring properties, deed restrictions and local zoning regulations.  A home built on a busy street, surrounded by commercial property, and not restricted from other development, is not fulfilling its highest and best use.  Once the property is redeveloped into commercial property, it can meet it economic potential.

 

HOA

Acronym -  homeowner's association
 

hold harmless

In a contract, a promise by one party not to hold the other party responsible if the other party carries out the contract in a way that causes damage to the first party. For example, many leases include a hold harmless clause in which the tenant agrees not to sue the landlord if the tenant is injured due to the landlord’s failure to maintain the premises. In most states, these clauses are illegal in residential tenancies, but may be upheld in commercial settings.

Home Equity Conversion Mortgage (HECM)

Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

home equity loan

A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax-deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.  Home equity loans were recently made available in Texas due to changes the homestead laws as of January 1, 1999.

home inspection

A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. 

home warranty

A service contract that covers a major housing system--for example, plumbing or electrical wiring--for a set period of time from the date a house is sold. The warranty guarantees repairs to the covered system and is renewable.  A basic, one year Buyer's warranty costs $295 to $350 with additional coverage available for garage door openers, spas, swimming pools, sprinkler system and other appliances.

 

homeowners' association (HOA)

An organization comprising neighbors concerned with managing the common areas of a subdivision or condominium complex. These associations take on issues such as maintaining common land and recreation areas, and collecting dues from residents. The homeowners' association is also responsible for enforcing any covenants, conditions & restrictions that apply to the property.  Payment of dues and participation in the homeowner's association may be either voluntary or mandatory, depending on the neighborhood.
 

homeowners' insurance

A type of insurance policy designed to protect homeowners from financial losses related the ownership of real property.  In addition to covering losses due to vandalism, fire, hail, etc.(hazard insurance), most policies also provide theft and liability coverage.  Flood related damage requires a separate flood insurance policy or rider.

homeowner's warranty

A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.

homestead

(1) The house in which a family lives, plus any adjoining land and other buildings on that land.

(2) Land, and the improvements thereon, designated by the owner as his homestead and, therefore, protected by state law from forced sale by certain creditors of the owner.  Texas offers homestead protection for a single residential property.  In addition, Texas mandates a minimum $15,000 school district property tax exemption on the appraised value of a homestead property.  Other taxing authorities, such as cities and counties, may offer additional property tax exemptions on homesteads.  Homestead protection will not stop foreclosures for deliquent mortgages, taxes or mandatory homeowner's associationdues.

(3) Land acquired out of the public lands of the United States. The term "homesteaders" refers to people who got their land by settling it and making it productive, rather than purchasing it outright.

 

house closing

The final transfer of the ownership of a house from the seller to the buyer, which occurs after both have met all the terms of their contract and the deed has been recorded.  Also known as just "closing".
 

Housing and Urban Development, Deparment of (HUD)

The U.S. Department of Housing and Urban Development. This is the agency responsible for enforcing the federal Fair Housing Act.
 

HUD

Acronym - Housing and Urban Development.

HUD-1 settlement statement

A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the "closing statement" or "settlement sheet."

implied warranty of habitability

A legal doctrine that requires landlords to offer and maintain livable premises for their tenants. If a landlord fails to provide habitable housing, tenants in most states may legally withhold rent or take other measures, including hiring someone to fix the problem or moving out. See constructive eviction.

improvements

Valuable additions to the land, such as buildings, fences, roads, etc., which increase the value of the property.

incidents of ownership

Any control over property. If you give away property but keep an incident of ownership--for example, you give away an apartment building but retain the right to receive rent--then legally, no gift has been made. This distinction can be important if you're making large gifts to reduce your eventual estate tax.

income approach to value

An estimate of value based on the monetary returns that a property can be expected to generate; capitalization. Contrast with the cost approach to valueand the market data approach to value.

Independent School District

In Texas, all but one of the state's school districts are considered "Independent" since they do not fall under the direct control of any other local government, and their boundaries are not constrained by any city or county border lines.  Each district is run by an elected school board, which appoints a superintendent and sets budgets and tax rates.  Only the State of Texas has the authority to regulate and oversee the actions of an Independent School District.

 

The one exception is the Stafford Municipal School District, which de-annexed itself from the Fort Bend Independent School District.  Stafford MSD lies entirely within the city limits of the City of Stafford, and shares its recreational and auditorium facilities.

index

A number, usually a percentage, upon which future interest rates for adjustable rate mortgages are based.

ingress

An entrance, or the act of entering. Compare egress.

inspection clause

A stipulation in an offer to purchase that makes the sale contingent on the findings of a home inspector.

insurable title

A title which a title company will insure.

interest

(1) The sum paid in return for the use of money; could be considered rent for the use of money.

(2) The type and extent of ownership in property.

interest rate

The periodic charge, expressed as a percentage, for use of credit.

intermediary

As of January 1, 1996, a broker may act as an intermediary between the parties if the broker complies with the The Texas Real Estate License Act. The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker's obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction:

(1) shall treat all parties honestly;

(2) may not disclose that the owner will accept a price less than than the asking price unless authorized in writing to do so by the owner;

(3) may not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer; and

(4) may not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License act or a court order or if the information materially relates to the condition of the property.

With the parties' consent, a broker acting as an intermediary between the parties may appoint a person who is licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out instructions of one party and another person who is licensed under the Act and associated with the broker to communicate with and carry out instructions of the other party.

intestate

Legal designation of a person who has died without leaving a valid will.

intimidation

As defined in the fair housing laws, it is the illegal act of coercing, intimidating, threatening, or interfering with a person in exercising or enjoying any right granted or protected by federal, state or local fair housing laws.

invitee

A business guest, or someone who enters property held open to members of the public, such as a visitor to a museum. Property owners must protect invitees from dangers on the property. In an example of the perversion of legalese, social guests that you invite into your home are called "licensees."

joint tenancy

A way for two or more people to share ownership of real estate or other property. When two or more people own property as joint tenants and one owner dies, the other owners automatically own the deceased owner's share. For example, if a parent and child own a house as joint tenants and the parent dies, the child automatically becomes full owner. Because of this right of survivorship, no will is required to transfer the property; it goes directly to the surviving joint  tenants without the delay and costs of probate. Contrast with tenancy in common.

judgment

The official and authentic decision of a court of justice concerning the respective rights and claims of the parties to an action or suit.

judicial foreclosure

A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.

jumbo loan

A loan that exceeds Fannie Mea's and Freddie Mac's loan limits, currently at $417,000. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

laches

Delay or negligence in asserting one's rights.

landlord

The owner of any real estate, such as a house, apartment building or land, that is leased or rented to another person, called the tenant.

latent defect

Hidden structural defects and flaws.

lease

An oral or written agreement (a contract) between two people concerning the use by one of the property of the other. A person can lease real estate (such as an apartment or business property) or personal property (such as a car or a boat). A lease should cover basic issues such as when the lease will begin and end, the rent or other costs, how payments should be made, and any restrictions on the use of the property. The property owner is often called the "lessor," and the person using the property is called the "lessee."  In Texas, any lease over one year in length, must be in writing.

lease option

A contract in which an owner leases his house (usually for one to five years) to a tenant for a specific monthly rent, and which gives the tenant the right to buy the house at the end of the lease period for a price established in advance. This allows a potential home buyer move into a house he may wish to eventually buy without having to come up with a down payment or financing at that time.

lease purchase

A contract in which an owner leases his house (usually for one to five years) to a tenant for an increased monthly rent, and which gives the tenant the right to buy the house at the end of the lease period for a price established in advance, with the incremental rent increase being used to form a down payment.  Buyers should be wary of this type of contract since they may lose their extra rent/down payment money should the owner suffer financial setbacks before the purchase has been completed.

 

leasehold estate

A form of real estate in which a tenant is allowed to construct permanent structures upon a parcel of leased land, and derive some use or income from said structures during the period of the lease.  Leasehold estates usually involve long-term leases, ranging from 20 to 99 years.  Land owners are able to have their property developed, with no out of pocket expenses.  Instead of having to sell their land too soon, they retain their family's rights to the land, while receiving a steady income stream.  The tenant saves the initial land acquisation costs and may gain access to property that would be otherwise unavailable.  The downside is, as the lease nears the end or its term, the tenant's investment becomes uncertain, and the landlord is in a position to make demands for compensation, above the fair market price.  Leaseholds are much more common in commercial real estate, but can apply to some residential properties as well.  Hawaii has many leasehold condominium projects, and even Houston has at least one mid-rise condominium building that lacks ownership of the land it occupies.

legal description

A description of a specific parcel of real estate which is acceptable to the courts in that state, and which will allows an independent surveyor to locate and identify it. Usually it uses one of the following methods; government survey (Not Used in Texas), metes and bounds, or recorded plat (lot and block number).

lender

The institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."

less favorable treatment

Any time a person is treated differently on the basis of race, sex, religion, color, familial status, disability, or national origin, either by action or inaction, in the selling or leasing of real property, it is a violation of the Fair Housing Laws.  Also known as unequal treatment or different treatment.

lessee

Tenant leasing property.

lessor

One who leases property to a tenant.

leverage

The use of borrowed funds to finance an investment and to magnify the rate of return.

 

Levy Improvement District (LID)

A type of Water Control and Improvement District, used to build and maintain levies.  Levies are used to contain flooding creeks and rivers.

liabilities

A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

liability insurance

Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner's insurance policy.

licensee

A person licensed by the Texas Real Estate Commission to engage in real estate brokerage, either as a broker or as a salesman.

LID

Acronym - Levy Improvement District.

lien

A monetary claim against a property. These should be settled before the sale is finalized.

lien theory state

Texas is a Lien Theory State, where legal title of mortgaged property resides with the mortgagor (borrower), with the mortgage as a lien against the property. Contrast with title theory state.

life cap

For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage.

life estate

An interest in property only for the duration of someone's life.

life tenant

One who has a life estate in real property.

limited equity housing

An arrangement designed to encourage low-and moderate-income families to purchase housing, in which the housing is offered at an extremely favorable price with a low down payment. The catch is that when the owner sells, she gets none of the profit if the market value of the unit has gone up. Any profit returns to the organization that built the home, which then resells the unit at an affordable price.

line of credit

An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

liquid asset

A cash asset or an asset that is easily converted into cash.

lis pendens

A notice indicating that legal action is pending on a property.

listing agreement

The legal agreement between the listing agent/broker and the vendor, setting out the services to be rendered, describing the property for sale, and stating the terms of payment.

loan

A sum of borrowed money (principal) that is generally repaid with interest

loan officer

Also referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.

loan origination

How a lender refers to the process of obtaining new loans.

loan servicing

After you obtain a loan, the company you make the payments to is "servicing" your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.

 

loan-to-value ratio (LTV)

The ratio of the amount being loaned in respect to the appraised value of the property, usually expressed as a percentage.  If a buyer was putting down $20,000, and borrowing a first lien of $180,000, on a $200,000 property, then the loan would have a 90% LTV.  Loan-to-value ratios can effect interest rates, loan qualifying criteria, and lender requirements for PMI and escrow accounts.

lock or lock In

A commitment you obtain from a lender assuring you a particular interest rate or feature or a definite time period. Provides protection should interest rates rise between the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds you have borrowed.

lock-in period

The time period during which the lender has guaranteed an interest rate to a borrower.

loft

(1) A style of residential construction. In Houston the term "loft" is used quite liberally.  It may refer to an older building that has been converted into residential condominiums, or it may mean a new mid-rise project with a "loft-style" finish to the units.  There are also new construction townhomes that are promoted as being "lofts".  A builder creates new loft space by leaving exposed brick walls, bare polished concrete floors and having unhidden heating ducts, trusses, etc.

(2) An upstairs room or area that has an open wall, overlooking a room or area below.

 

LTV

See loan-to-value ratio.

mandatory continuing education (MCE)

The State of Texas requires that its licensed real estate brokers, and salesmen (who have met their SAE requirement), attend at least 15 hours of certified real estate education courses before each license renewal (every two years).  At least six of the 15 hours must be in legal topics.

manufactured home

A structure built in a factory, that is later shipped to, and placed on, the homesite.  The term can apply to both mobile homes and pre-fab homes.

margin

An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages.

marginal land

Property which is barely profitable to use.

market approach to value

An estimate of value based on the actual sales prices of comparable properties. Contrast with cost approach to value and income approach to value.

market value

The price that a willing buyer and a willing seller, both given full information, and neither under pressure to act, would agree upon. Also known as Fair Market Value.

 

master-planned community

A large scale, mixed use, real estate development that follows a long term, comprehensive plan.  Master-planned communities typically blend different price ranges of residential neighborhoods with some commercial properties designed to serve the residents' needs.  Residential properties may include patio homes, townhouses, condominiums and apartment complexes in addition to neighborhoods of single-family homes.  Likewise, multiple home builders are included in the construction of the various neighborhoods.  Commercial development can consist of retail strip centers ans shopping malls, restaurants, entertainment venues and office buildings.

 

In addition, master-planned communities usually offer amenities such as public recreation areas and parks, neighborhood schools and extensive landscaping.  Recreation areas may include public swimming pools, tennis courts, children's play grounds and sports fields.  Many offer large water features and public or private golf courses.

The term "master-planned" has become somewhat of an overused buzzword in the current market place.  True master-planned communities require a a multi-year commitment from the developer and contain thousands of homes.

maturity

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

MCE

See mandatory continuing education.

mechanic's lien

A legal claim placed on real estate by someone who is owed money for labor, services or supplies contributed to the property for the purpose of improving it. Typical lien claimants are general contractors, subcontractors and suppliers of building materials. A mechanics' lien claimant can sue to have the real estate sold at auction and recover the debt from the proceeds. Because property with a lien on it cannot be easily sold until the lien is satisfied (paid off), owners have a great incentive to pay their bills.

mediation

A dispute resolution method designed to help warring parties resolve their own dispute without going to court. In mediation, a neutral third party (the mediator) meets with the opposing sides to help them find a mutually satisfactory solution. Unlike a judge in her courtroom or an arbitrator conducting a binding arbitration, the mediator has no power to impose a solution. No formal rules of evidence or procedure control mediation; the mediator and the parties usually agree on their own informal ways to proceed.

merged credit report

A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.

metes and bounds

A system of land description using distance (metes) and angles/compass directions (bounds), beginning and ending at the same point. Contrast with government survey and recorded plat method.

mid-rise

A 4-story to 8-story tall building that contains residential apartment or condominium units.  While not offering the panoramic views of a high-rise, mid-rise buildings can offer comparable levels of amenities and services.  Building features may include 24-hour concierge service, swimming pools, spas, saunas, tennis courts, exercise areas, and party rooms.  Security is enhanced at these buildings by the manned entry desks and limited access, covered parking garages.

mineral rights

An ownership interest in the minerals contained in a particular parcel of land, with or without ownership of the surface of the land. The owner of mineral rights is usually entitled to either take the minerals from the land himself or receive a royalty from the party that actually extracts the minerals.

minimum payment

The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit. In some plans, the minimum payment may be "interest only," (simple interest). In other plans, the minimum payment may include principal and interest (amortized).

minority

As defined in the Civil Rights Act of 1968 as part of the Fair Housing Laws "'minority' means any group, or any member of a group, that can be identified either: (1) by race, color, religion, sex, disability, or national origin; or (2) by any other characteristic (such as familial status) on the basis of which discrimination is prohibited by a federal, state, or local fair housing law.

misrepresentation

A false statement, or concealment, of material fact with the intention of inducing action of another.

mobile home

A type of manufactured home, that is transported to the home site using wheels attached to the structure.  Mobile homes come in various widths and lengths, and maybe composed of one to three pieces.  A one piece home is called a "single-wide", while a house that is joined together from two halves is called a "double-wide".  Recently, "triple-wides" have appeared, and become as the largest mobile homes available.  Most sections are between 14 and 16 feet wide, and 54 to 80 feet in length.  Mobile homes do not require any foundation or substructure.  They sit up off the ground, with skirting used around the base to hide the wheel and jacks.  While it is possible to tie down a mobile home to a piece of land, using straps and screw-in anchors, the structures are very susceptible to high winds and tornados.

modification

Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.

month-to-month tenancy

A rental agreement that provides for a one-month tenancy that is automatically renewed each month unless either tenant or landlord gives the other the proper amount of written notice (usually 30 days) to terminate the agreement. Some landlords prefer to use month-to-month tenancies because it gives them the right to raise the rent after giving proper notice. This type of rental also provides a landlord with an easy way to get rid of troublesome tenants, because in most states month-to-month tenancies can be terminated for any reason.  It is also common for leases to revert to month-to-month tenancies at the end of the original lease period, if another lease has not been signed.

monument

A fixed object or point, either natural or man-made, used in making a survey.

mortgage

A contract providing security for the repayment of a loan, registered against property, with stated rights and remedies in the event of default. Lenders consider both the property (security) and financial worth of the borrower (covenant) in deciding on a mortgage loan. A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.

mortgage banker

Originates mortgage loans, loaning you their funds and closing the loan in their name.

mortgage broker

A person or company having contacts with financial institutions or individuals wishing to invest in mortgages.

mortgage loan

A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The mortgage or deed of trustis your agreement to pledge your home or other real estate as security.

mortgagee

The lender in a mortgage loan transaction.

mortgage insurance (MI)

Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

mortgage insurance premium (MIP)

The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

mortgage life and disability insurance

A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.

mortgagor

The borrower in a mortgage loan transaction.

MUD

See Municipal Utility District.

Multiple Listing Service (MLS)

A system by which a number of real estate firms share information about homes that are for sale.  Membership usually provides a monthly book and/or computer service that provides Realtors^® with detailed listings of most homes currently on the market.

Municipal Utility District (MUD)

Municipal Utility Districts are authorized under the Texas Constitution, Article III, Section 52, or Article XVI, Section 59.  They are local political subdivisions of the State, governed by a board of directors.  After the terrible floods in Texas during 1912-14, people across the state realized there was a real need to confirm the State's duty to not only prevent floods but, also through the storage of flood waters, to conserve the water for beneficial usages.  This was the genesis for the passage of Section 59 of Article XVI in 1917, which allowed water districts to operate with unlimited bonded indebtedness.  In 1925, legislation was passed which authorized the creation of Water Control and Improvement Districts -- WCIDs -- with the same bonded indebtedness and taxing authority.

 

To create a new water district, a developer files an application through the Office of the State Attorney General.  The application outlines the developer's plans for providing various services such as water, sewer and drainage to areas where municipal services are not already in place.  A Board of Directors is established, which is assisted by qualified professionals who provide services on a fee basis. Not all water districts are created equal.  Some are established under General Law; some by Commissioners Court; and others are created by the governing board of a city.  Special law districts are created by an act of the State Legislature.  All water districts, however,  must comply with the laws contained in the Water Code.

 

Water districts are generally empowered to incur debt and levy taxes.  If voters approve unlimited tax bonds, a debt service tax to pay the bonds is also approved.  Each year, the water district board is obligated to levy a property tax adequate to cover the debt.  This tax is levied on all property in the district based on appraised value, regardless of services received, and must comply with the Property Tax Code. The tax rate must be published each year and public hearings held if the effective tax rate increases more than three percent over the previous year.  District voters may also approve a maintenance tax.  Water districts must comply with the Texas Open Meetings Act and the Texas Open Records Act and have an annual audit performed by an independent auditing firm.  Water districts are generally empowered to:

negative amortization

Amortization in which the payment made is insufficient to fund complete repayment of the loan at its termination. Usually occurs when the increase in the monthly payment is limited by a ceiling. The portion of the payment which should be paid is added to the remaining balance owed. The balance owed may increase, rather than decrease over the life of the loan.

net lease

A commercial real estate lease in which the tenant regularly pays not only for the space (as he does with a gross lease) but for a portion of the landlord’s operating costs as well. When all three of the usual costs--taxes, maintenance and insurance--are passed on, the arrangement is known as a "triple net lease." Because these costs are variable and almost never decrease, a net lease favors the landlord.  Accordingly, it may be possible for a tenant to bargain for a net lease with caps or ceilings, which limits the amount of rent the tenant must pay. For example, a net lease with caps may specify that an increase in taxes beyond a certain point (or any new taxes) will be paid by the landlord. The same kind of protection can be designed to cover increased insurance premiums and maintenance expenses.  Contrast with gross lease.

net listing

A price, which must be expressly agreed upon, below which the owner will not sell the property and at which the broker will not receive a commission; the broker receives the excess over and above the net listing price as commission. The broker in this type of listing will have a very hard time maintaining his fiduciary responsibilities to his seller since his interests are potentially at odds with the interests of the seller.

no cash-out refinance

A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."

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.

non-escrowing loan

Typically, mortgage lenders require escrow accounts for property taxes, hazard insurance, and sometimes, homeowner's association dues.  Monthly contributions to these accounts are rolled into a lender's mortgage payment.  In Texas, escrow accounts are non-interest bearing, so many borrowers prefer the option of keeping the monies for their hazard insurance and property taxes in their own interest bearing accounts, until they become due.  Most lenders only allow non-escrowing loans on mortgages with an 80% or lower, loan-to-value ratio. Property taxes can be paid as late as January 31st of the following year before interest and penalties begin to accrue.  If the borrower has the discipline to save the monies for taxes and insurance independently, a non-escrowing loan would be the smart choice.  Most lenders charge a one-time fee at closing for selecting the non-escrow option.  Non-escrowing loans also have lower closing costs since the lender does not collect reserves, which place a 2-3 month cushion of pro-rated payments in the escrow account.  Additionally, the seller's pro-rated share of the year's property taxes is applied directly to the buyer's closing costs, instead of being placed into the escrow account.

note

A written instrument of credit attesting to a debt and promise to pay. A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

note rate

The interest rare stated on a mortgage note.

no-points loan

Almost all lenders offer loans at "no points." You will find the interest rate on a "no points" loan is approximately a quarter percent higher than on a loan where you pay one point.

notice of default

A formal written notice to a borrower that a default has occurred and that legal action may be taken.

nuisance

Something that interferes with the use of property by being irritating, offensive, obstructive or dangerous. Nuisances include a wide range of conditions, everything from a chemical plant's noxious odors to a neighbor's dog barking. The former would be a "public nuisance," one affecting many people, while the other would be a "private nuisance," limited to making your life difficult, unless the dog was bothering others. Lawsuits may be brought to abate (remove or reduce) a nuisance. See quiet enjoyment, attractive nuisance.

obsolescence

A loss in value of real property caused by changes either internal or external to the property. See economic obsolescence, functional obsolescence, andphysical deterioration.

offer

A proposal to enter into an agreement with another person. An offer must express the intent of the person making the offer to form a contract, must contain some essential terms--including the price and subject matter of the contract--and must be communicated by the person making the offer. A legally valid acceptance of the offer will create a binding contract.

open house

An opportunity for prospective buyers to view a house in a low pressure environment.

open listing

A listing under which the principal (owner) reserves the right to list his property with other brokers.

option

The right to purchase property within a definite time at a specified price. There is no obligation to purchase, but the seller is obligated to sell if the option holder exercise the right to purchase. For the option to be valid, it must include consideration.

option fee

An amount of money payed by a prospective Buyer, to a Seller, in order to obtain an option period, as specified in Paragraph 7 of a TREC promulagated earnest money contract.  If a Buyer decides to close on the property, the option fee may be credited to his funds at closing.

option period

Current residential earnest money contracts, promulagated by the Texas Real Estate Commission offer the choice of an option period, under Paragraph 7.  During this period, the length of which is negotiable, the Buyer has a right to inspect the property and has an absolute right to terminate the offer/contract for any reason, without penalty.  In exchange for this option period, the Buyer pays an option fee to the Seller.  If the Buyer decides to continue with the sale of the property, this option fee may be credited to him at closing.  Typical option periods run from 7 to 14 days long.

ordinance

A law adopted by a town or city council, county board of supervisors or other municipal governing board. Typically, local governments issue ordinances establishing zoning and parking rules and regulating noise, garbage removal, and the operation of parks and other areas that affect people who live or do business within the locality's borders.

original principal balance

The total amount of principal owed on a mortgage before any payments are made.

origination fee

A fee charged by lenders, in addition to interest, for services in connection with granting of a loan. Usually a percentage of the loan amount. On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.

owner financing

A property purchase transaction in which the property seller provides all or part of the financing.

panic peddling

The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective entry, of members of a minority group;blockbusting. See Fair Housing.

partial payment

A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.

party wall

Wall erected on line between adjoining properties for the use of both properties.
 

patio home

A single-family home that sits on a small lot, often with one outside wall of the structure sitting on the property line.  Patio homes have no common structural walls with adjoining propeties, but their zero lot line wall may form part of their neighbors backyard fence/wall.  These properties often have a small back or side yard large enough for a patio or garden area.  Also known as a garden home.

payment change date

The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

percentage lease

Lease in which all or part of rental is a specified percentage of gross income from total sales made upon the premises.

periodic payment cap

For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.

periodic rate cap

For an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

person

An individual, a partnership, or a corporation, foreign or domestic.

personal property

Property which is tangible, movable, and not fixed to the land. Also called chattel and personalty. Contrast with real property.

personalty

Personal property; chattel. Contrast with Realty.

physical deterioration

The loss of value to real property from all causes due to the action of the elements and old age. Physical deterioration can be either curable or incurable.

PITI

This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.

PITI reserves

A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

planned unit development (PUD)

In a PUD, the planned unit development association owns and maintains property in a real property development project for the benefit of its members, who are owners of individual parcels of real property in the development and are members of the association because of that ownership.  The level of services and fees are similar to a condominium complex, but since each owner has title to a specific parcel of land, lenders may treat units as non-condominiums.  This allows higher LTV loans and eliminates owner occupancy percentage requirements.

plat book

A record of recorded subdivisions of land.

PMI

Acronym -  private mortgage insurance.

points

Fees paid to induce lenders to make mortgage loans at a particular interest rate. Each point is equal to one percent (1%) of the loan principal. Same asdiscount points.

police power

The authority of a government to adopt and enforce law governing the use of real estate based on the need to promote public safety, health, and general welfare.

power of attorney (POA)

A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

pre-approval

A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification.

prepayment

Paying off all or part of the mortgage before the scheduled date.

prepayment clause in a mortgage

Statement of the terms upon which the mortgagor (borrower) may pay the entire or stated amount on the mortgage principal at some time prior to the due date.

prepayment penalty

A fee paid to the lending institution for paying a loan prior to the scheduled maturity date..

pre-qualification

This usually refers to the loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

primary mortgage market

Lenders who originate loans and makes funds available directly to the borrowers. Contrast with secondary mortgage market.

prime rate

The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.

principal

The amount of money owed to the lender not including interest.

principal balance

The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.

principal, interest, taxes, and insurance (PITI)

The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

principle of conformity

An appraisal principle which holds that the maximum value is realized when a reasonable degree of homogeneity (sameness) exists in a neighborhood.

private mortgage insurance (PMI)

Mortgage insurance that is provided by a private mortgage insurance  company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.

promulgated contracts

The Texas Real Estate Commission has prepared and authorized various standard contracts which must be used by all licensees when acting as agents in real estate transactions with limited exceptions.
 

property taxes

Taxes that are paid yearly on real property.  Property taxes are ad valorem, based on the assessed value of the real property.  In Texas the assessed value is determined by the County Appraisal District.  Each taxing authority multiplies this appraised value by its annual tax rate.  Taxing authorities include local school districts, counties, cities, water districts(MUD's, PUD's, LID's, etc.), and other special tax districts.

promissory note

A written promise to repay a specified amount over a specified period of time.<

pro-rate

To divide or distribute proportionally. At closing, various expenses such as taxes, insurance, interest, rents, etc. are prorated between the seller and buyer.

public auction

A meeting in an announced public location to sell property to repay a mortgage that is in default.

Public Utility District (PUD)

A water district, created by a city or county, promoting development of a designated area by providing water and sewer services.  The PUD operates in the same manner as a Municipal Utility District, but is created by a local government, not a private developer.

PUD

Acronym - planned unit development.

Acronym - Public Utility District.

puffing

Non-factual or extravagant statements and opinions made to enhance the perceived desirability of a property. The is a fine line between legal puffing and illegal misrepresentation, and puffing is best avoided. An example of puffing would be, "This home has the best view in the city". Also known as puffery.

purchase agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

purchase money transaction

The acquisition of property through the payment of money or its equivalent.

purchase offer

A document that lists the price, terms and conditions under which a buyer is willing to purchase a property.

qualify

To meet a mortgage lender's approval requirements.

qualifying ratios

Comparisons of a borrower's debts and gross monthly income.

quiet enjoyment

The right of a property owner or tenant to enjoy his or her property without interference.  Disruption of quiet enjoyment may constitute a nuisance. Leases and rental agreements often contain a "covenant of quiet enjoyment," expressly obligating the landlord to see that tenants have the opportunity to live undisturbed.
 

quitclaim deed

A deed that transfers whatever ownership interest the transferor has in a particular property.  The deed does not guarantee anything about what is being transferred, including an actual ownership interest.  For example, a divorcing husband may quitclaim his interest in certain real estate to his ex-wife, officially giving up any legal interest in the property.  A quit claim deed may also be used to clear up a cloud on the title to the property in cases where there is a question of a possible ownership claim.  Compare with grant deed.

rate lock

A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

ready, willing and able

A buyer who is prepared to buy on the seller's terms and has the financial capacity to do so.

real estate

Refers to land and improvements and the rights to own or use them. "A leasehold, as well as any other interest or estate in land, whether corporeal, incorporeal, freehold, or non-freehold, and whether the real estate is situated in this state or elsewhere." {TRELA, Section 2(1)} In popular usage, Real Estate is used interchangeably with real property and realty.

real estate agent

A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

Real Estate Appraiser, licensed

A person licensed to legally appraise real estate property for a fee.  Texas has required its appraiser be licensed since 1939.  In 1991 the responsibility for licensing real estate appraisers was transfered from the Texas Real Estate Commission to a newly formed Texas Appraiser Licensing and Certification Board (TALCB).  There are several classes of licensed real estate appraisers, with the highest classification - Certified General RE Appraiser, requiring a minimum of 180 classroom hours, and 3,000 hours appraisal work over at least 2½ years.

real estate board

A non profit organization representing local real estate agents/brokers and salespeople, which provides services to its members and maintains and operates the Multiple Listing Service in the community.

Real Estate Broker, licensed

To be eligible to apply for a real estate Broker License, an individual must have not less than two (2) years active experience in Texas as a licensed real estate salesperson and 180 classroom hours of core real estate coursesplus an additional 720 classroom hours in related courses acceptable to the Commission.  The applicant must also pass the Real Estate Broker's exam, and then continue to maintain his license with mandatory continuing education (MCE) courses .

Real Estate Inspector, licensed

A Licensed Real Estate Inspector is someone who is licensed by who holds himself out to the public as being trained and qualified to inspect property. Formerly known as Registered Real Estate Inspector before January 1, 1996.

Real Estate Salesperson, licensed

To be eligible to apply for a real estate Salesperson License, an individual must complete core education courses in Principles of Real Estate , Law of Agency and Law of Contracts.  An additional six (6) semester (90 classroom) hours must be completed in core courses or in related courses acceptable to the Commission. The applicant must also pass the Real Estate Salesperson's exam, and then continue to maintain his license with mandatory continuing education (MCE) courses.  Recently licensed real estate salespersons are required to complete a total of 18 semester (270 classroom) hours of education by the end of their third year of licensure, taking at least 30 hours per year.

real property

Refers to the right to own land and improvements. Commonly used interchangeably with Real Estate and Realty. Contrast with personal property.

REALTOR^®

A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the NATIONAL ASSOCIATION OF REALTORS®.

realty

Refers to land and buildings and other improvements from a physical standpoint. Real Estate and Real Property tend to be used interchangeably with Realty in everyday usage. Contrast with personalty.

receiver

Court-appointed custodian who holds property for the court, pending final disposition of the matter before the court.

recorded plat

A subdivision map filed with the county recorder's office that shows the location and boundaries (lot and block number) of individual parcels of land. Contrast with government survey method and metes and bounds.

recorder

The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."

recording

The act of entering in the public records, the written record of title to real property, thereby giving constructive notice to the public.

recovery fund

A fund maintained by the Texas Real Estate Commission which upon court order is used to reimburse the public for monetary loss due to illegal acts of licensees.

redlining

The illegal practice of refusing to originate mortgage loans, or limiting their number, in certain neighborhoods on the basis of racial or ethnic composition. See Fair Housing.

refinancing

To apply for a new mortgage in order to gain better terms, usually either a lower interest rate or a different principal amount.

Regulation 'Z'

Truth in lending law developed by the Federal Reserve System which requires lenders to provide full disclosure of the terms of the loan, including interest rates expressed as an annual percentage rate (APR).

RELA

Real Estate License Act.

release

To relinquish an interest or claim to a piece of property.

remainder

The future interest in an estate which takes effect after the termination of another estate, such as a life estate; what is left at the termination of a life estate.

remaining balance

The amount of principal that has not yet been repaid. See principal balance.

remaining term

The original amortization term minus the number of payments that have been applied.

rent control

Laws that limit the amount of rent landlords may charge, and that state when and by how much the rent can be raised. Most rent control laws also require a landlord to provide a good reason, such as repeatedly late rent, for evicting a tenant. Rent control exists in some cities and counties in California, Maryland, New Jersey, New York and Washington, D.C.

rent loss insurance

Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

repayment plan

An arrangement made to repay delinquent installments or advances.

replacement reserve fund

A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

reserves

Amounts of money set aside by a mortgage company to assure payment of property taxes, homeowners' association dues, and insurance premiums.  The money is kept in an escrow account

reservation

A right reserved by a grantor in the sale or lease of a property. In a sale, the title of all property passes to the grantee, but the use may be reserved for the grantor. Contrast with exception.

RESPA

Real Estate Settlement Procedures Act is a federal law which deals with the procedures to be followed in a real estate closing, and is intended to make borrowers more knowledgeable about possible costs and charges.

restrictions

Limitations on the use or occupancy of real estate contained in a deed or in local ordinances pertaining to land use.

revolving debt

A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.

right of first refusal

A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

right of ingress or egress

The right to enter or leave designated premises.

right of survivorship

The right of a surviving joint tenant to take ownership of a deceased joint tenant's share of the property. See joint tenancy.

riparian owner

One who owns land bounding upon a river or water course (stream, creek, bayou, etc.).
 

Road Utility District (RUD)

Pursuant to Article III, Section 52 of the Texas Constitution, a Road Utility District may be created to construct, acquire, improve and provide financing for a road facility.  The term "road facility" is defined as a road constructed, acquired or improved by a district; or property, an easement, or work constructed, acquired, or improved by a district and necessary or appropriate for, or in aid of the improvement of, a river, creek, or stream to prevent overflow; or the construction and maintenance of a pool, lake, reservoir, dam, canal or waterway for the purpose of drainage, if the property, easement, or works is related to, or in furtherance of, the construction, acquisition, or improvement of a road.

running with the land

A phrase used in property law to describe a right or duty that remains with a piece of property no matter who owns it. For example, the duty to allow a public beach access path across waterfront property would most likely pass from one owner of the property to the next.
 

Rural Fire Prevention District (RFPD)

A special taxing district created to provide rural residents with fire-fighting, fire prevention and other emergency services.

sales contract

A written agreement stating the terms of the sale agreed to by both buyer and seller. S standard contracts must be used by all licensees, with certain limited exceptions. See earnest money contract.

sale-leaseback

A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.

Salesperson Annual Education (SAE)

A real estate salesperson is required to complete a total of 18 semester (270 classroom) hours of education by the end of their third year of licensure.  All active and inactive salespersons, who are under the SAE requirement, must show evidence of having completed a minimum of 30 hours in core or related real estate education each year or until a total of 270 classroom hours have been completed. At least 180 hours of the 270 must be in core real estate.  Therefore the other 90 hours may be in related. Evidence of successful completion must be received on or before the renewal filing deadline. If this documentation is not received on time, the license will expire.

SAE

Acronym -  Salesperson Annual Education

second mortgage

A mortgage that has a lien position subordinate to the first mortgage.

secondary mortgage market

Buying and selling of existing mortgage loans, designed to provide additional liquidity for lenders. Contrast with primary mortgage market.  Also seeFannie Mae, Freddie Mac and Ginnie Mae.

secured loan

A loan that is backed by collateral.

security

The property that will be pledged as collateral for a loan.

security deposit

A payment required by a landlord to ensure that a tenant pays rent on time and keeps the rental unit in good condition. If the tenant damages the property or leaves owing rent, the landlord can use the security deposit to cover what the tenant owes.

security interest

An interest that a lender takes in the borrower's property to assure repayment of a debt.

self amortized loan

A loan which will retire the debt by systematic payments of principal and interest, so that at the end of the loan period, the balance will be zero.

seller carry-back

An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

servicer

An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

servicing

The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

servicing a loan

The ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.

servient tenement

Property that is subject to use by another for a specific purpose. For example, a beachfront house that has a public walkway to the beach on its premises would be a servient tenement.

setback

The distance a building must be set back from the property lines in accordance with local zoning ordinances or deed restrictions.

settlement statement

See HUD1 Settlement Statement

shared equity mortgage

A home loan in which the lender gets a share of the equity of the home in exchange for providing a portion of the down payment. When the home is later sold, the lender is entitled to a portion of the proceeds.

short sale (of house)

A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage.  Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. See also deed in lieu (or foreclosure).

simple interest

Interest computed only on the principal balance. Contrast with compound interest.

single-family home

A free-standing, residential structure, designed to accomodate one family.  Single-family homes include traditional houses, as well as patio homes.

special warranty deed

A warranty deed which, instead of warranting the title from sovereignty of the soil to the last grantee, merely warrants the title against every person whomsoever lawfully claiming or to claim the same, or any part thereof, by, through or under the grantor.

specific lien

A claim that only applies to or affects a certain property or group of properties. Contrast with general lien.

specific performance

Carrying out of the precise terms agreed upon in a contract. Also see suit for specific performance.

spite fence

An unsightly fence erected for no other purpose than to irritate a neighbor. Such a fence may be illegal under local fence height and appearance regulations or state laws that specifically bar spite fences. Even if it doesn't violate regulation or laws, the fence may still be illegal if it was built with malicious intent.

Statute of Frauds

The law which requires among other things, that all contracts transferring real estate, or for the leasing of property for over one year, must be in writing to be enforceable.

statutory year

A year composed of twelve months, each with thirty (30) days, for a total of 360 days in a statutory year. Also known as a banker's year. Contrast withcalendar year.

steering

The illegal practice of directing members of minority groups to, or away from, certain areas or neighborhoods; channeling. See Fair Housing.

subdivision

A housing development that is created by dividing a tract of land into individual lots for sale or lease.

subject to mortgage

The buyer of an already mortgaged property makes the payments, but does not take personal responsibility for the loan. Should the mortgage be foreclosed and the property sold for a lesser amount than is owed, the grantee-buyer is not personally liable for the deficiency, but the grantor-seller is. Contrast withassumption of mortgage.

sublease

A rental agreement or lease between a tenant and a new tenant (called a sublessee) who will either share the rental or take over from the first tenant. The sublessee pays rent directly to the tenant.  The tenant is still completely responsible to the landlord for the rent and for any damage, including that caused by the sublessee. Most landlords prohibit subleases unless they have given prior written consent. Compare with assignment.

subordinate financing

Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

subpoena

A legal process ordering a witness to appear and give testimony or to present documents under penalty of law. 

substitution, principle of

The principle which states that a buyer will pay no more for a property than the cost of an equally desirable alternative property.

succession

The passing of property or legal rights after death. The word commonly refers to the distribution of property under a state’s intestate succession laws, which determine who inherits property when someone dies without a valid will. When used in connection with real estate, the word refers to the passing of property by will or inheritance, as opposed to gift, grant, or purchase.

suit for specific performance

A legal action brought by either a buyer or a seller to enforce performance of the terms of a contract.

survey

A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

sweat equity

Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.

taking

See eminent domain.

tenancy by the entirety

A special kind of property ownership that's only for married couples. Both spouses have the right to enjoy the entire property, and when one spouse dies, the surviving spouse gets title to the property (called a right of survivorship). It is similar to joint tenancy, but it is available in only about half the states.

tenancy in common

A type of ownership in which two or more people have an undivided interest in property, without the right of survivorship. Upon death of one of the owners, his/her interest passes to his/her heirs or devises. Contrast with joint tenancy.

tenant

Anyone, including a corporation, who rents real property, with or without a house or structure, from the owner (called the landlord). The tenant may also be called the "lessee."

tenants in common

See tenancy in common.

tenement

Everything that may be occupied under a lease by a tenant.

term

The actual life of a mortgage, at the end of which the mortgage becomes due and payable unless the lender renews the mortgage.

third-party origination

A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

time is of the essence

A clause, which if included in a contract, makes failure to perform by a specified date a material breach or violation of the contract.

timeshare

An arrangement under which a purchaser receives an interest in real property and the right to use an accommodation or amenities, or both, for a specified period and on a recurring basis. Used primarily for selling vacation properties.

title

The right of ownership of a property.

title company

A company that provides title insurance policies. In Texas title companies also act as escrow agents, conduct title searches and hold closings.

title insurance

Protection for lenders or homeowners against financial loss resulting from legal defects in the title.

title search

Checks all the records relating to the property to determine whether the seller can sell the property, and can do so free of liens.

title theory state

The system in which the lender has legal title to the mortgaged property and the borrower has equitable title. Texas is not a title theory state. Contrast withlien theory state.

torrens system

A system of land registration (not used in Texas) in which clear title is established with a governmental authority, which issues title certificates to owners.

townhouse

A dwelling unit usually with two,three or four floors, and shared structural walls. It can be individually owned, a condominium, a cooperative, a planned unit development or a rental property.

transaction fee

A fee which may be charged each time you draw on a home equity credit line.

transfer of ownership

Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.

transfer tax

State or local tax payable when title passes from one owner to another.

treasury index

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

triple net lease

See net lease.

trust deed

The most common method of financing real estate purchases in California (most other states use mortgages). The trust deed transfers the title to the property to a trustee--often a title company--who holds it as security for a loan. When the loan is paid off, the title is transferred to the borrower. The trustee will not become involved in the arrangement unless the borrower defaults on the loan. At that point, the trustee can sell the property and pay the lender from the proceeds.  In Texas it is more commonly refered to as a deed of trust.

trustee

One who as agent for others handles money or holds title to their land.

Truth-in-Lending

A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.

two-step mortgage

An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

two- to four-family property

A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

trustee

A fiduciary who holds or controls property for the benefit of another.

underwriting

The process of verifying data and approving a loan.

unlawful detainer

An eviction lawsuit.

usufruct

The right to use property--or income from property--that is owned by another.

usury

Charging more than the rate of interest allowed by law.

VA

The Veterans Administration, a federal agency which guarantees loans made to qualified veterans on approved property.

VA mortgage

A mortgage that is guaranteed by the Department of Veterans Affairs (VA).

vara

A measurement of length of 33 ¹/₃ inches in Texas.

variable rate

An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

variance

An exception to a zoning ordinance, usually granted by a local government. For example, if you own an oddly shaped lot that could not accommodate a home in accordance with your city's setback requirement, you could apply at the appropriate office for a variance allowing you to build closer to a boundary line.

vendee

Purchaser.

vendor

Seller.

vested

Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.

Veterans Administration (VA)

An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

view ordinance

A law adopted by some cities or towns with desirable vistas--such as those in the mountains or overlooking the ocean--that protects a property owner from having his or her view obstructed by growing trees. View ordinances don't cover buildings or other structures that may block views.
 

village acre

A lot size used in the Houston area to denote a 40,000 square foot parcel.  In the Memorial Villages of Bunker Hill, Hedwig, Hillshire, Hunter's Creek, Piney Point and Spring Valley, lot sizes are often expressed in village acres or a fractions of village acres.  The term was coined by developers who successfully lobbied for slighty smaller, minimum lot size requirements, in the cities' zoning regulations.
 

virtual home tour

Any method used to provide internet users with a graphical presentation of a home, or homes.  Presentations may include web pages, java applets, streaming video, panoramic images and bubble views.

void

Having no legal force or effect; legally invalid.

voidable

A contract which appears valid and enforceable on the surface, but may be declared invalid by one of the parties, such as a contract entered into by a minor.

waiver

The intentional or voluntary relinquishment of a known claim or right.
 

walk through

(1) A Buyer's on-site inspection of the property being purchased,  just prior to closing.

(2) A detailed inspection of a new construction home, in which punch list and cosmetic items are addressed, prior to final acceptance.

warranty deed

A  type of deed that contains express assurances about the legal validity of the title being transferred.  See general warranty deed andspecial warranty deed.

writ of execution

A court order which authorizes and directs the proper officer of the court (usually the sheriff) to carry into effect the judgment or decree of the court.

zero lot line

A term generally used to describe the positioning of a structure on a lot so that one side rests directly on the lot's boundary line (no set back).  Where allowed by zoning and/or deed restrictions, it is used for "patio homes".

zoning

Exercise of police power of city in regulating and controlling the character or use of property. Zoning laws divide cities into different areas according to use, from single-family residences to industrial plants. Zoning ordinances control the size, location, and use of buildings within these different areas.  Houston is the largest city in the U.S. without zoning. Most of the other cities and villages within the Houston Metropolitan Area do have zoning regulations.

- Updated November 3, 2010 10:44 p.m.