Terms:

Acre

An area of land, containing 43,560 square feet, or 4,840 square yards.

Adjustable Rate Mortgage (ARM)

Adjustable-rate mortgage loan featuring an interest rate that moves up and down as market conditions change. ARMs generally offer a lower initial interest rate, but your mortgage payments may change (usually semiannually or annually). Rate changes are based on an index such as the one-year Treasury Index or the cost-of-funds index (COFi). Some ARMs can be converted to fixed rate.

Affidavit of Title

A written statement, made under oath by a seller or grantor of real property and acknowledged by a notary public, in which the grantor: (1) identifies him or herself and indicates marital status, (2) certifies that since the examination of the title on the date of contract no defects have occurred in the title, and (3) certifies that he or she is in possession of the property (if applicable).

Agreement of sale

A purchase agreement, the seller and the buyer agree to buy and sell according to certain price and terms. May also be called contract of terms.

Alienation Clause ("Due on Sale Clause")

A mortgage clause that gives the lender the right to call the whole balance of the loan due when ownership of property transfers.

ALTA (American Land Title Association)

Since any lending institution funding a loan for the acquisition of property wants assurance of good title on the property, there is a special policy prepared for the benefit of the lender known as ALTA Policy.

Amortization

A schedule for repayment of a loan, including interest and principal, by regular installment payments. Mortgage loans are typically amortized over 15 to 30 years.

Annual Percentage Rate (APR)

The total yearly cost of a loan stated as a percentage of the loan amount: Includes the base interest rate, primary mortgage insurance, and loan origination fee (points). Use the APR to compare various loan programs, as all lenders are required to use the same guidelines in determining APR.

Annuity

An amount of money, which constitutes one of a series of periodic payments.

Application Fee

Often non-refundable, this is the fee charged by the lender to cover a portion of the costs of processing a loan application.

Appraisal

A professional opinion of the market value of a property. Sometimes, an appraised value may be dependent upon certain improvements or repairs being made.

Appraiser

A qualified person who is employed to establish the value of property.

Appreciation

Is the increase in the value of property. This may result from economic condition or supply and demand.

Appurtenance

A privilege, right, or physical item that passes on with the land upon transfer of title.

Assessed Value

Value placed on a property by the tax assessor for property tax purposes.

Assessment

Evaluating property for tax purposes.

Assessor

The person who evaluates property for tax purposes.

Assumable Mortgage

A mortgage that can be taken over (assumed) by the buyer when a property is sold.

Balloon Mortgage

A mortgage that offers lower interest rates for a shorter term financing, usually seven years, and requires final payment or refinancing at the end of the term.

Balloon Payment

A payment of a loan that extinguishes the debt.

Blanket Mortgage

A mortgage that secures more than one property.

Breach of Contract

The violation of an obligation in a contract.

Building Code

Regulations established by the local governments, restricting the structural requirements for buildings.

Building Line (Set Back Ordinance)

A line located at a certain distance from the front and sides of a lot establishing where a building can be erected.

Buy Down

Payment of additional money (points) to lower the interest rate of the loan.

Cap

Limit on the amount an adjustable rate mortgage may increase or decrease during specific intervals and over the term of the loan. This safeguard protects the buyer from dramatic changes in monthly payments.

Capital Gain

Taxable profit derived from the sale of a capital asset. The capital gain is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing costs, fixing up expenses, capital improvements, allowable depreciation, etc.

Capital improvement

Improvements to property that add to the value, and extend the useful life of the property.

Capital Loss

Losses from the sale of capital, opposite of capital gain.

Closing

See "Settlement".

Closing Costs

Expenses (such as loan fees, title fees, appraisal fees, etc.), over and above the price of the property, incurred by buyers and sellers in transferring ownership. Also called "settlement costs". Closing costs may be paid by the buyer, the seller or shared by both. In some cases, all or a portion of these costs may be included in the financing amount.

Closing Statement

The statement showing buyers and sellers charges and credits, and including copies of the forms used in a closing.

Cloud on the Title

A claim or encumbrance that is still outstanding, if it proved valid then it will affect the marketability of the title.

Common Elements

Elements in a condominium project that are owned jointly by the condo owners in a group.

Community Property

Property owned by the husband and wife jointly which was acquired while they were married to each other.

Condemnation

The process of exercising the government's right of eminent domain.

Conditional Sale Contract

A contract whereby the seller retains title to the sold property until the purchaser meets certain conditions and requirements that are stated in the contract.

Conditional Withdrawal

A multi-list term meaning that a property is taken off the market (no longer for sale), but there is still a condition of the withdrawal. Generally the condition is that the house will be re-listed at a later time with the same agent.

Conditions

Requirements that must be satisfied to consummate a transaction. Not satisfying these requirements may release a party from a certain obligation

Condominium

The ownership of a unit in a multi unit structure. In addition to the ownership of the unit, the owner also shares in common elements.

Condominium Association

see "Homeowner's association".

Construction/End Loan

A mortgage that finances the construction of a home and converts to permanent financing when the home is completed. It allows buyers to deal with only one lender, file only one credit application and pay only one set of closing costs.

Contingency

A condition that must be met before a contract is legally binding.

Contract

A written agreement that may involve one or more parties that is legally binding to do a certain act.

Contract of sale

see "agreement of sale"

Conventional Loans

A loan secured by investors, but insured by neither the FHA nor guaranteed by the VA. Both fixed rate and adjustable rate loans are available with conventional financing.

Convertible ARM

Some ARMs include a provision allowing conversion to a fixed-rate mortgage at specified times, typically during the first five years of the loan. Some lenders charge a premium for this option, find out the exact conversion terms and costs from your lender. This will help you decide whether this is a cost-effective option.

Conveyance

The transferring of real property from one person to another.

Deed

The legal document conveying title (ownership) to a property.

Deed Restrictions

A requirement in a deed that limits the use of property being conveyed.

Default

Not performing an obligation required under the contract.

Deferred Maintenance

Due repairs to a property that have not been completed which cause physical deterioration.

Depreciation

The loss of value of property through time which may actually occur, or may be allowed as a tax expense on the income tax return. Depreciation allowed on paper does not necessarily result from actual deterioration of property.

Deterioration

The physical wear and tear that leads to actual depreciation of property.

Discharge of Mortgage

A document used to release a mortgage that is a lien on a property.

Disclosure Report

An act relating to disclosure by the seller of residential real property. The purpose of this report is to provide prospective buyers with information about material defects in the residential real property. A seller's disclosure form is needed before the sale of property.

Discount Points or Points

Any amount paid to the lender when a loan is originated to reduce the interest rate of the loan. In most cases each point is equal to one percent of the original loan amount. Either the buyer or seller may pay points.

Down Payment

The part of the purchase price that the buyer pays in cash and does not finance with a loan.

Dual Agency

Some states permit a real estate licensee to potentially act as a dual agent, that is, represent more than one party to the transaction. A licensee may legally act as a dual agent with the written disclosure and informed consent of a consumer in form required by law.

Due on Sale Clause

See "Alienation Clause".

Earnest Money

An amount of money, deposited by a buyer under the terms of a contract, that is to be forfeited if the buyer defaults but applied on the purchase price if the sale is closed.

Easement

The right to use property that belongs to another person.

Easement Appurtenant

An easement given over one parcel of land to benefit another parcel and to provide access to it. The parcel of land over which easement is given is called the servient estate, and the parcel of land benefiting from such an easement is dominant estate.

Egress

The way out from the property. The opposite of ingress.

Elliot Larson

Michigan Civil Rights Act, approved by governor on Jan 13, 1977. Prohibits discrimination because of age and marital status, and with regards to employment height and weight. Was amended June 9, 1992 to include familial status.

Emblements

Plants that grow on the property.

Encroachment

The trespassing of property from one land to the other, for example, a garage overlapping the property line.

Encumbrance

Liens, mortgages, taxes, judgments, easements, deed restrictions, etc. that may diminish the value of property.

Equitable title

The interest held by a vendee under a land contract. Example: In a land contract or an installment purchase plan, the right that the payer has in obtaining title to the property upon payment of the note in full is the equitable title.

Equity

The market value of a property minus the amount of any existing loans or liens.

Escheat

When a person dies without a will and without any heirs, his/her property reverts back to the state.

Escrow Account

A separate account for accumulating the portion of your monthly payments that will pay future taxes, insurance, fees, assessments and so forth. Depending on your lender and the financing you select, an escrow account may be required.

Escrow Agent

A disinterested third party appointed to act as custodian for documents and funds during the transfer from seller to buyer.

Estate

The property held by a deceased person.

Estoppel Certificate

A document in which a borrower certifies the amount owed on a mortgage loan and the rate of interest.

Exclusive Agency Listing

Also referred to as exclusive listing. A listing agreement by which the broker is specified as the only agent hired to sell the property, however the owner has the right to sell the property without paying the commission if the owner sells it through his/her own efforts.

Exclusive Right to Sell

A listing that employs one exclusive agent and promises her/him a fee in the event anyone procures a buyer, including other competing agents, or the sellers themselves.

Executed Contract

A contract in which all parties have fulfilled their promises.

Execution of a Contract

Signing of a contract by all parties involved to make it valid.

Fair Market Value

The estimated value of property, provided it's offered for sale for a reasonable amount of time, and the buyer and seller are not under presser to sell.

FANNIE MAE

The Federal National Mortgage Association. This is a private corporation that provides money for the secondary mortgage market.

Federal Fair Housing Act

This is a federal, non-discrimination law that took effect in 1968. It prohibits discrimination in housing on the basis of race, color, religion, sex, or national origin. The Fair Housing Amendment act of 1988 added persons with handicaps (mental and physical) and familial status (families with children). The Michigan Civil Rights Act "Elliot Larson" approved in 1977 prohibits discrimination based on age and marital status.

Fee

Interest in real property.

Fee Simple Title

As best I can sum this up it means that the owner of the property owns the interest of the property, there are no tenants or other owners with an interest in the property.

FHA Financing

A loan insured by the Federal Housing Administration (FHA) and made by an approved lender in accordance with the FHA's regulations. FHA requires that the property being purchased meet certain minimum standards. This mortgage may be easier to qualify for than a conventional mortgage, but it also has a lower maximum loan limit that varies depending on the average cost of housing in a given region. FHA loans require the borrower to pay mortgage insurance premiums (MIP) if the down payment is less then 20%. Fixed and adjustable rates are available with FHA loans.

Fiduciary

The loyalty relationship between the agent and the principal. It also refers to the agent as a "fiduciary" to the principal, i.e. a person who owes loyalty to the principal

Financial Index

An agreed upon basis for making interest rate changes on an adjustable rate mortgage. One example of a financial index could be the cost of U.S. Treasury Bonds.

Fixed Rate

The interest rate does not change during the entire term of the loan.

Fixtures

Personal property attached to real property that has become a part of real property.

Flood Insurance

Additional insurance that compensates for physical property damages resulting from flooding. It is required for properties located in federally designated flood areas.

FREDDIE MAC

This is known as the Federal Home Loan Corporation, which is a federal agency that provides money for the secondary mortgage market.

Grandfather Clause

A clause, in the law, that allows for the continuation of a pre-existing situation, as in an exemption for zoning laws.

Grant

To transfer interest in real estate using a deed.

Guaranteed Mortgage

A mortgage that secures a loan, which is guaranteed by the Veterans Administration.

Habendum

Clause Part of the deed, "To have and to hold", defining the extent the grantor is conveying.

Home Owner's Association

A group that maintains the interests of a subdivision or condominium complex. May be as little as a set of rules, or as much as maintenance of common grounds. There may also be a monthly fee.

Homestead

The right, given to a homeowner, to exempt her/his home from judgments and bankruptcies.

HUD

The Department of Housing and Urban Development.

Independent Contractor

One who is retained to perform a certain act, but is subject to the control and direction of another, only as to the end result, and not as to the way they performs the act. This person normally sets their own working hours, pays their own expenses, receives no employee benefits, and pays for their own social security and income tax to the government, but not as a withholding from their paycheck. The majority of real estate salespeople work as independent contractors.

Ingress

The way to enter a property.

Initial Interest Rate

The interest rate charged for the first six or 12 months of an adjustable rate mortgage (before the first interest rate adjustment).

Instrument

A written legal document.

Insured Mortgage

A mortgage that secures debt with insurance, provided by a government agency, or a private corporation.

Interest Rate Cap

Limit on the amount an adjustable rate mortgage may increase or decrease during specific intervals and over the term of the loan. This safeguard protects the buyer from dramatic changes in monthly payments.

Joint Tenancy

Ownership held by two or more persons with the right of survivorship.

Land

Real property, which consists of the surface of the earth, including the sub surface and what is above the surface.

Land Contract

A contract, by which, a person buys real estate, and pays the purchase price in installments. The seller, hereby, retains the title to the property, and transfers it to the buyer upon payment in full.

Legal Description

A statement that identifies land according to a legal system.

Lien

A charge or claim against the real estate of another.

Loan Commitment

A written promise by a lender to make a loan under certain terms and conditions. These include interest rate, length of the loan, lender fees, annual percentage rate, mortgage and hazard insurance and other special requirements.

Loan to Value Ratio (LTV)

The ratio of the mortgage loan principal (amount borrowed) to the property's appraised value. On a $ 100,000 home, with a mortgage loan of $ 80,000, the loan to value ratio is 80%.

MAGGIE MAE

The Mortgage Guarantee Insurance Corporation. A privately owned corporation that insures loans on real estate, usually when the buyer has a small down payment, lower than 20%.

Market Comparison Approach

Appraisal method that employs information available on comparable properties that have sold similar to the property in question.

Market Price

The actual price paid for property.

Market Value

An estimated sum as to what the property value is, providing proper exposure, and no pressure due on the buyer or seller.

Marketable Title

Good title to the property, that has no clouds on it and may be transferred freely.

Mechanic's Lien

A lien placed on real property because of unpaid bills for improvements on the property.

Metes and Bounds

A method used to legally describe property using a point of beginning, distances, boundaries, monuments, and benchmarks.

Mill

Equal to one tenth of one cent, or $.001

Mortgage

A temporary conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.

Mortgage Banker

A company that originates mortgages exclusively for resale in the secondary market.

Mortgage Broker

An individual or company that for a fee acts as an intermediary between borrowers and lenders.

Mortgage Insurance Premium (MIP)

The insurance issued by a government agency such as the FHA

Mortgage Pre-Approval Service

A service offered by many lenders that allows you to qualify for financing before finding a property to buy.

Mortgagee

The lender of money or the receiver of the mortgage document.

Mortgagor

The borrower of money or the giver of the mortgage document.

Non-Conforming Use

Use of land that does not match zoning law.

Note

A written promise to pay a certain amount of money at a certain time at a certain interest rate.

Offer

A promise made by one party to act in a certain manner, if the other party agrees to perform a certain act.

On or Before

A phrase generally referring to a date by which an action must occur. On that date, or before it.

Option

A right, obtained to purchase property, at a certain price and terms, and within a specified period of time.

Ordinance

The law enacted by the local government, as in a city or county.

Origination Fee

A fee charged by the lender for making a real estate loan. Usually a percentage of the amount loaned, such as one percent. Not to be confused with an application fee.

Owner's Association

A committee that is formed to establish regulations in condo projects. It consists of the owners of the individual condos.

Package Mortgage

A mortgage that secures a loan to purchase real and personal property, in one transaction.

PITI

(principal, Interest, Taxes, Insurance) Stands for principal, interest, taxes, and insurance -the components that make up the monthly loan payments.

Plat

A plan or map showing location and dimensions of property.

PMI

(Private Mortgage Insurance) Insurance written by a private company that insures repayment of the loan balance to the lender in the event of default by the borrower. Usually required for homes financed with less than a 20 percent down payment.

Pocket Card

An identification card, supplied to licensees that must be carried while doing business as evidence of being licensed.

Points

See "Discount Points"

Prepayment Privilege (Penalty)

The right given to a purchaser to pay all or part of a debt prior to its maturity. The mortgagee cannot be compelled to accept any payment other than those originally agreed to.

Prequalification

The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.

Principal

(1) A person who employs, and authorizes another person who is called an agent to act on her/his behalf. (2) The initial loan amount issued for a mortgage.

Procuring Cause

The cause, leading through a certain series of events to the happening of a final event.

Property

The right of ownership. Property may be personal or real.

Property Owner's Association

see "Home owner's association".

Purchase Agreement

See "Agreement of Sale".

Quiet Enjoyment

The right of possession, without outside interference.

Quieting Title

Court action to remove a cloud from a title.

Quit Claim Deed

A deed that conveys the grantor's interests in property to the grantee, There is no warranty given with the trade of the deed.

Rate Guarantee

The lender's guarantee, usually for a specified period of time, that the interest rate in effect the date you apply for a loan (or at the time of approval) will be the final rate on your loan when closed.

Real Estate Investment Trust (REIT)

An arrangement under federal and state law where a group of investors can invest their money in real estate, and receive better tax treatment than a corporation.

Real Property

The land, and house permanently attached to the land, as opposed to personal property which is not a part of the land, nor attached to the real property.

REALTOR?

A word used to describe a member of a real estate board affiliated with the National Association of Realtors.

Recording a Document

Entering the documents into the public records at the registers of deeds office in the county where the property is located to give public and constructive notice.

Refinance

Replacing an existing loan with anew one to get a lower rate, switch from one loan type to another, or convert equity to cash. A refinance loan will involve various loan fees, just as with any other mortgage.

Register of Deeds

The office, in each county, where legal documents relating to the sale of real property are recorded.

Regulation Z

Also known as the truth-in-lending law, a federal law that requires credit institutions to inform the borrowers the true cost of obtaining credit.

RESPA (Real Estate Settlement Procedures Act)

A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Right of First Refusal

When this right is given to a person, that person has the right to purchase the property, when the property is offered for sale, and an offer is made on such property. This person can buy the property if they match the offer made on it by a third party.

Right of Way

A form of easement that allows a person to pass over the property of another person.

Riparian Rights

An owner's right in land that borders on or includes a stream, river, or lake. These rights include access to and use of the water.

Sale Contract

See "Agreement of Sale".

Secondary Mortgage Market

The lender will frequently sell his loan to an entity in the secondary mortgage market. This secondary market has nothing to do with second mortgages; instead, it consists of government or private associations that buy loans from primary lenders. Often the loans are bought and grouped together in a pool for resale. The best known of the participants in the secondary mortgage market is FANNIE MAE, the federal national mortgage association. Fannie Mae buys and sells both first and second mortgages. GINNIE MAE tends to favor FHA and VA loans since they are stable loans but also buys conventional mortgages.

Setback

Zoning requirement that requires the building to start at a certain distance from the property line.

Settlement

Closing a transaction, this is the event where property exchanges hands, as well as money. All documents are signed at the closing.

Sheriff's Deed

A deed, drawn under court order, to convey title of property that is sold to satisfy a judgment or foreclosure.

Special Assessments

Special taxes levied on a property that is the result of a public improvement, paving of streets, and constructing sewer lines.

Specific Performance

A court order requiring a party to carry out her/his promise in a valid contract. The order usually takes place as a result of a lawsuit by the other party.

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.

Tax Deed

A deed given to a person who purchased property because of nonpayment of taxes.

Tax Sale

A sale of property because of nonpayment of taxes.

Term

The number of years before a loan is paid in full; 15 to 30 year terms are most common for home mortgages.

Term Mortgage

The borrower pays interest only on the loan, and the whole principal is due in a lump sum after a certain period of time.

Testate

To die with a will.

Title

A legal document that proves a person's right to ownership of a property.

Title Insurance

Insurance to protect the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of property.

Title Option

An attorney's opinion of a title, based on an Abstract of Title.

Transfer Tax

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

Trust Account

A bank account that the broker maintains to handle other people's money, deposited on behalf of property purchased (Ernest Money).

Underwriting

The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's credit worthiness and the quality of the property itself.

Usury Laws

Laws limiting the legal amount a lender can charge the borrower in interest rates on a loan.

VA Financing

A loan guaranteed by the Veterans Administration (VA) to a qualified veteran and made by an authorized lender on an approved property. Fixed and adjustable rates are available with VA loans. The VA charges borrowers a funding fee.

Valid

Binding and enforceable.

Valuation

The act of estimating value of property.

Variance

Zoning permission allowing the introduction of a nonconforming use.

Void

Not binding, unenforceable.

Warranty Deed

A deed, whereby the grantor promises the grantee protection against any claims of title by a third party.

Window Treatments

Curtains, blinds, valences, shades or anything attached to the windows.

Zoning

Regulating the use of property by local governments to ensure proper development of the community.

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