Home Buyer Real Estate Glossary

Making the leap to a home purchase is a big one!  It's also very smart and wise to invest in your future.  I put this glossary of real estate terms together to help you understand the documents and information that you'll be reading along the way.

Acceleration Clause

The clause is a note or mortgage that can be enforced to make the entire debt due immediately if the mortgagor defaults

Adjustable Mortgage Rate

A mortgage loan in which the interest rate may increase or decrease at specific intervals, following an economic indicator

Agency

The relationship where the agent is employed by a client to act on the client's behalf

Alienation Clause

Mortgage clause stating that the balance of the secured debt becomes immediately due and payable at the mortgagee's option if the property is sold or title is transferred.

Appraisal

An estimate of a property's value by a licensed appraiser

Appreciation

An increase in the worth of value of a property

APR

Annual percentage rate

ARM

Adjustable rate mortgage

Assessment

The imposition of a tax, charge or levy, usually according to established rates.

Assumption of mortgage

Acquiring the title of a property on which there is an existing mortgage and agreeing to be liable for the terms and conditions or this mortgage to include payments

Balloon Mortgage

The final payment of a mortgge loan which is considerably larger than the requied periodic payments because the loan amount was not fully amortized.

Bargain and sale deed

A deed that has no warranties against liens or other encumbrances but implies that the grantor has the right to convey title

Beneficiary

The person who receives benefits resulting from specific acts

Bill of sale

A written document given to transfer the title of personal property

Cloud on title

An outstanding claim or encumbrance tht, if valid, affects or impairs the owner's title

Contract

An agreement legally entered into by two or more parties by the terms of which one or more of the parties, for a consideration, undertakes to do or refrain from doing some legal act or acts

Deed

A written document that, when executed and delivered, conveys title to or an interest in real estate

Dual Agency

Representing both parties to a transaction

Easement

A right to use the land of another for a specific purpose, as for a right-of-way or utilties

Estate

The degree, quantity, nature and extent of interest that a person has in real property

Fiduciary

One legally placed in a position of trust and confidence

Fraud

Intentional deception that hards another

Grantee

A person who receives a conveyance of real property from the grantor

Grantor

The person transferring title to or an interest in real property to a grantee

Habendum clause

The part of a deed beginning with the words "to have and to hold", following the granting clause and defining the extent of ownership the grantor is conveyng

Implied contract

A contract under which the agreement of partiesis demonstrated by their acts and conduct

Instrument

A written legal document

Interest

A charge made by a lender fo rthe use of money

Jalousie window

A window that consists of vertical rows of horizontal glass slats that operate together by a crank mechanism that connects all the slats.

Joint liability

The responsibility of two or more people to fulfill the terms of a home loan or debt.

Joint tenancy

Ownership by two or more people that gives equal shares of a piece of property. Rights pass to the surviving owner or owners.

Joist

A floor or ceiling support member supported by foundation walls, piers or beams. Subflooring is connected to floor joists.

Judgment

The decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person's property.

Judicial foreclosure

A procedure to handle foreclosure proceedings as civil matters.

Jumbo mortgage

Loans that exceed limits set by Fannie Mae and Freddie Mac. The current limit is $214,600.

Junior mortgage

A loan that subordinate to the primary loan

Kit home

A structure that contains prefabricated components and is put together by a contractor.

Knee wall

A wall-like structure that supports roof rafters.

Knob-and-tube wiring

An old-fashioned wiring system that has been replaced by fuses and circuit breakers.

Lead

A metallic chemical element present in older dwellings, primarily in the form of lead-based paint and lead plumbing. Exposure to lead has been found to be a health risk.

Lease

A binding agreement that contains the terms and conditions of a renter's occupancy.

Lease option

A lease that contains the right to purchase the property for a specific price within a certain time frame.

Leasehold estate

An arrangement in which the borrower does not own a specific piece of property but possesses a long-term lease.

Legal blemish

Blemishes on a piece of property, such as a zoning violation or fraudulent title claim.

Legal description

A specific way of identifying and locating a piece of real estate that is acceptable to a court.

Lender

A bank, savings institution or mortgage company that offers home loans.

Letter of intent

A formal statement that the buyer intends to purchase the property for a certain price on a certain date.

Leverage

The use of a small amount of cash--a 5 percent or 10 percent down payment--to buy a piece of property.

Liabilities

A borrower's debts and financial obligations.

Liability insurance

A policy that protects owners against any claims of negligence, personal injury or property damage.

Lien

A claim laid by one person or company on the property of another as security for money owed.

Maintenance fee

The monthly assessment members of a homeowners' association pay for the repair and maintenance of common areas.

Managed-competition lots

Lots in which buyers choose between one of several builders.

Mansard roof

A roof with four sides that slope upward from the roof edge to the square peak.

Mantel

The facing of stone, marble or other material around a fireplace.

Manufactured housing

Prefabricated homes that can range from simple trailers to larger dwellings.

Margin

The lender's "retail markup" on the mortgage. For example, if the index rate for an adjustable-rate mortgage is 5 percent but the lender has a 2.5 percentage-point margin, the rate the borrower will pay is 7.5 percent.

Market conditions

Factors affecting the sale and purchase of homes at a particular point in time.

Market value

The price that a piece of property sells for at a particular point in time.

Masonry

The brick or stone work on a building.

Master-planned community

A suburban plan that includes homes and commercial, work, educational and community facilities.

Maximum financing

A loan amount within 5 percent of the highest loan-to-value ratio allowed for a property.

Mechanic's lien

Subcontractors or suppliers sometimes will file an encumbrance, or mechanic's lien, against a property to seek payment.

Mechanical systems

A home's plumbing, wiring, heating and cooling systems.

Median price

The price of the house that falls in the middle of the total number of homes for sale in that area.

Mediation

A dispute-resolution process in which a neutral party works to resolve contract differences.

Mortgage

A legal document indicating a specific amount of money to purchase a home at a certain interest rate, and using the property as collateral.

Mortgage acceleration clause

A clause which allows a lender to demand that the entire balance of the loan be repaid in a lump sum under certain circumstances. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage banker

A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.

Mortgage broker

A company that matches lenders with prospective borrowers who meet the lender's criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.

Mortgage insurance

Required by lenders in some loans to protect them from a possible default . All conventional loans with less than a 20 percent down payments require private mortgage insurance, or PMI.

Mortgagee

A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.

Mortgagor

The person who borrows money to purchase a house. The lender is called the mortgagee.

Motivated buyer

Any buyer with a strong incentive to make a purchase.

Motivated seller

Any seller with a strong incentive to make a deal.

Move-in condition

A house that is ready for a new occupant.

Nail pops

Nails in load-bearing parts of new homes that pop out slightly because of settling of the structure.

Negative amortization

The situation occurs when a borrower's monthly payment is not large enough to cover both the principal and interest of a loan. As a result, the outstanding balance of the loan actually grows larger with each payment rather than smaller. Most fixed-rate loans are not subject to negative amortization, but many adjustable-rate mortgages are susceptible.

Negative-slope driveway

When a driveway drops down from street level to the garage.

Neo-traditional planning

Planning of a community that favors the return of new-home development with such traditional features as grid-street patterns, prominent front porches, backyard garages, multi-use buildings and housing clustered near commercial service areas.

Net cash flow

Income generated from investment property after expenses such as principal, interest, taxes and insurance are subtracted.

Online real estate listings

Properties listed for sale on the Internet.

Open house

A marketing tool in which a listing agent opens a house for view.

Open listing

A property given to a number of brokers to market at the same time.

Open space

Undeveloped land or common areas in a planned community reserved for parks, walking paths or other natural uses.

Option

A situation in which a buyer puts down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy.

Oral agreement

Contractual arrangements that are not in writing and are usually not legally binding.

Original principal balance

The amount of principal owed on a loan before a borrower makes any payments.

Origination fee

A fee charged by most lenders--also called points--for processing a loan. A point is 1 percent of the total loan amount.

Owner financing

A transaction in which the seller of a property agrees to finance all or part of the purchase.

Property tax

Property taxes are calculated at about 1.5 percent of the current market value.

Property tax deduction

The U.S. tax code allows homeowners to deduct the amount they have paid in property taxes.

Property value

The value of a piece of property is based on the price a buyer will pay at a certain time.

Proration

Agreed-upon percentages of certain expenses associated with a piece of property that must be paid by the buyer or the seller at the time of closing.

Punch list

Buyers compile a punch list during the final walk-through detailing items to be fixed before closing.

Purchase agreement

A document which details the purchase price and conditions of the transaction.

Purchase-money mortgage

A mortgage that a borrower obtains to acquire a property.

Radon

A ground-generated radioactive gas that seeps into some homes through sump pumps, cracks in the foundation and other inlets. A leading cause of lung cancer , radon is found in mostly the northern half of the country.

Rate lock

When interest rates are volatile, many borrowers want to "lock in" an interest rate and many lenders will oblige, setting a limit on the amount of time the guaranteed interest rate is in effect.

Rate-improvement mortgage

A loan with a clause that entitles a borrower to a one-time cut in the interest rate without going through refinancing.

Real Estate Settlement Procedures Act (RESPA)

A federal law designed to make sellers and buyers aware of settlement fees and other transaction-related costs. RESPA also outlaws kickbacks in the real estate business.

Real estate

Land and anything permanently affixed to it, including buildings, fences and other items attached to the structure.

Real estate agent

A real estate agent has a state license to represent a buyer or a seller in a real estate transaction in exchange for a commission. Most agents work for real estate brokers.

Real estate attorney

A lawyers who specializes in real estate transactions.

Real estate broker

A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission. Most brokers also have agents working for them, and are entitled to a portion of their commissions.

Real estate investment trusts (REITs)

The trusts are publicly traded companies that own, develop and operate commercial properties.

Real property

Land and any permanent fixtures on it, including buildings, trees and minerals.

Realtor

A designation for an agent or broker who is a member of the National Association of Realtors.

Refinancing

The process of replacing an older loan with a new mortgage that has better terms.

Regulation Z

The federal code issued under the Truth-in-Lending Act which requires that a borrower be advised in writing of all costs associated with the credit portion of a financial transaction.

Rehabilitation mortgage

A mortgage that provides for the costs of repairing and improving a resale home or building.

Sales contract

A contract signed by the buyer and sellerthat details the terms of a home purchase.

Seller broker

A seller broker represents the interest of the seller.

Seller carry-back

An agreement in which the seller provides financing for a home purchase.

Seller take-back

An agreement in which the seller provides financing for a home purchase.

Seller's market

A hot real estate market in which sellers have the advantage and multiple offers are common.

Semi-custom home

The buyer of a semi-custom home is free to make some design changes but not to the home's structural plan.

Septic system

A self-contained sewage treatment system that distributes wastewater to an underground storage area and relies on bacterial action to decompose solid waste matter.

Tax deduction

A tax break given by the government. Mortgage interest, loan points and property taxes can be deducted.

Tax lien

An impediment placed against a property, such as back taxes.

Tax sale

The public sale of a property by the government for nonpayment of taxes.

Tax shelter

A term often applied to real estate investment and refers to various tax advantages.

Tear-down condition

A house that requires the entire interior to be rebuilt.

Underwriting

The process that lenders go through to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan.

Undisclosed heir

A person who claims the right to a piece of property after the death of an owner without a will.

Undisclosed spouse

An unidentified marital partner who can claim the right to a piece of property.

Unrecorded deed

An unrecorded deed transfers ownership from one party to another without being officially recorded.

Unsecured loan

Any loan that is not backed by collateral.

Upgrades

Options than the standard carpeting, lighting, finish carpentry and other amenities offered to all buyers in a new-home project.

VA loans

A program that allows most veterans to purchase a house without a down payment.

Variable interest rate

A loan rate that moves up and down based on factors including changes in the rate paid on bank certificates of deposit or Treasury bills.

Variable rate

An interest rate that changes with fluctuations in such indexes as the U.S. Treasury bill index.

Variable rate mortgage

A loan with an interest rate that hinges on factors such as the rate paid on bank certificates and Treasury bills.

Wainscoting

Wood paneling, tongue-and-groove boards or similar material installed between a baseboard and a chair rail.

Waiver

A voluntary relinquishing of certain rights or claims.

Walk-out basement

A feature that allows a door to open onto ground level.

Walk-through

A buyer's final inspection of the home to determine if conditions in the purchase agreement have been satisfied.

Warranty

A legally binding promise to do something in the future.

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