Glossary A - Z - REISkills.com

Terms and Acronyms

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REIs have their own language.

Here are Terms and Acronyms that you should know.

409 Real Estate Terms from REIClub,com

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

A
*Abstract of Judgment* – The summary of a court judgment that creates a
lien against a property when filed with the county recorder

*Abstract of Title* – historical summary of all of the recorded
instruments and proceedings that affect title to a property.

*Accelerated Cost Recovery System* – A tax calculation that provides
greater depreciation in the early years of ownership of real estate or
personal property.

*Acceleration Clause* – a loan provision giving the lender the right to
declare the entire amount immediately due and payable upon violation of
another specific loan provision, commonly referred to as the *Due on
Sale Clause.*

*Acceptance* – a buyers or sellers agreement to enter into a contract
and be bound by the terms of the offer.

*Accrued Interest* – interest that has been earned but not paid.

*Accumulated Depreciation* – in accounting, the amount of depreciation
expense that has been claimed to date.

*Acknowledgment* – a declaration by a person who has signed a document
that such signature is a voluntary act, made before a duly authorized
person.

*Acquisition Cost* – the price and all fees required to obtain a property.

*Acquisition Loan* – money borrowed for the purpose of purchasing a
property.

*Acre* – a two dimensional measure of land equaling 4,840 square yards
or 43,560 square feet.

*Addendum* – something added as an attachment to a contract.

*Additional Principal Payment* – Extra money included in the monthly
payment to help reduce the principal and shorten the term of the loan.

*Adjoining* – contiguous, attached, sharing a common border.

*Adjustable Rate Mortgage (ARM)* – a mortgage loan that allows the
interest rate to be changed at specific intervals over the maturity of
the loan, based on a monitored index.

*Adjusted Cost Basis* – The cost of any improvements the seller makes to
the property. Deducting the cost from the original sales price provides
the profit or loss of a home when it is sold.

*Adjusted Tax Basis* – the original cost or other basis of the property,
reduced by depreciation deductions and increased by capital expenditures.

*Adjustment Period* – The amount of time between interest rate
adjustments in an adjustable-rate mortgage.

*Administrator* – a person appointed by a court to administer the estate
of a deceased person who left no will.

*Administrator’s Deed* – A legal document that an administrator of an
estate uses to transfer property.

*Adverse Possession* – a means of acquiring title to real estate where
an occupant has been in actual, open, notorious, exclusive and
continuous occupancy of property for the period required by state law.

*Affidavit* – a written statement, sworn to or affirmed before an
officer who is authorized to administer an oath or affirmation.

*Agency* – the legal relationship between a principal and his agent
arising from a contract in which the principal engages the agent to
perform certain acts on behalf of the principal.

*Agreement for Deed* – see *Contract for Deed.*

*Alienation* – to convey or transfer title and possession of property.

*All Inclusive Trust Deed* – This applies to states that use trust deeds
instead of mortgages. It is the same as a wraparound mortgage.

*Amortized Loan* – loan that is repaid in a series of installments each
of which contains a portion that is applied to reduce the principal
amount of the loan and a portion that is applied to pay interest with
each successive payment allocates a larger portion to principal
reduction and a smaller portion to interest payment until the
outstanding balance is ultimately reduced to zero.

*Annual Cap* – maximum amount the interest rate on an adjustable rate
mortgage can be raised or lowered in the course of one twelve month period.

*Annual Percentage Rate (APR)* – effective rate of interest rate for a
loan per year including fees and points, disclosure of which is required
by the Truth-in-Lending Law.

*Anticipatory Breach* – A communication that informs a party that the
obligations of the original contract will not be fulfilled.

*Appraised Value* – opinion or estimate of a value of a property, values
are determined by one of three methods: comparable sales (residential),
replacement cost (insurance), or income approach (commercial).

*Appreciation* – an increase in the value of a property.

*Arrears* – mortgage payment includes interest for prior month, or
overdue payments in default.

*As-Is* – without guarantees as to condition.

*Assessed Value* – the value established for property tax purposes.

*Assignee* – the person to whom an agreement or contract is sold or
transferred.

*Assignment* – the method by which a right or contract is transferred.

*Assignor* – the person who assigns or transfers an agreement or
contract to another.

*Assumable Mortgage* – An existing mortgage which allows the next
purchaser of a property to be liable for the payments and other
obligations of the note and mortgage. Depending on the type of loan, the
assumption of the obligation by this next purchaser may or may not
require a qualification and approval process and may or may not release
the original mortgagor (borrower) from further liability. A written
release from the mortgagee (lender) is required to relieve the original
mortgagor of responsibility.

*Attornment* – A tenant’s formal agreement to be a tenant of a new
landlord.

*Backup Contract* – a contract to buy real estate that becomes effective
if a prior contract fails to be consummated.

*Balance* – see *Principal Balance.*

*Balloon Loan* – a loan that has level monthly payments that will
amortize it over a stated term (e.g., 30 years) but that requires a lump
sum payment of the entire principal balance at the end of a shorter term
(e.g., 10 years).

*Balloon Payment* – An installment payment which is larger (most often
much larger) than the other scheduled payments. It is usually the last
payment. If a note is written for $50,000 at a fixed 9.0% rate of
interest with payments based on an amortization schedule of 30 years and
a balloon payment due in 5 years, the first 60 payments will each be
$402.31 (the normal payment for a 30 year loan at 9.0% interest) and the
last payment will be $47,940.15 which will be the outstanding balance
remaining after the 60th payment.

*Bankruptcy* – the financial inability to pay one’s debts when due
causes the debtor to seek relief through court action.

*Bankruptcy Discharge* – the release of a bankrupt party from the
obligation to repay debts that were or might have been proved in a
bankruptcy proceeding.

*Basis Point* – one 100th of 1%.

*Beneficiary* – the person who receives or is to receive the benefits
resulting from certain acts.

*Bilateral Contract* – a contract under which each party promises
performance.

*Bill of Sale* – a written instrument given to pass title of personal
property.

*Bird Dog* – someone who identifies a potential good real estate
investment opportunity and passes that deal on to another investor for a
fee.

*Biweekly Mortgage* – A mortgage that requires payments every two weeks
and helps repay the loan over a shorter term.

*Blanket Mortgage* – a single mortgage which attaches to more than one
property.

*Board Of Equalization* – A state board charged with ensuring that local
property taxes are assessed in a uniform manner

*Board of Realtors* – a local group of real estate licensees who are
members of the state and national association of Realtors.

*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.

*Breach of Contract* – a violation of the terms of a legal agreement,
default.

*Bridge Loan* – mortgage financing between the termination of one loan
and the beginning of another loan.

*Broker* – An individual who acts as an intermediary between two or more
parties for the purpose of negotiating a transaction agreeable to all of
the parties. In lending, the broker arranges and negotiates loan
amounts, interest rates and loan terms between borrowers and lenders.
Depending on the type of loan, the state wherein the transaction is
occurring and contractual arrangements, the broker may represent the
borrower, the lender or not have a fiduciary responsibility to either.
(See definition of “fiduciary responsibility” below.).

*Building Permit* – permission granted by a local government or agency
to build a specific structure at a specific site.

*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 payment of discounts points in exchange for a lower rate
of interest. It has the effect of providing the lender with a greater
yield today in exchange for a lower yield in the future. (See definition
of “discount points” below.).

*Call Option* – A clause in a loan agreement that allows a lender to ask
for the balance at any time.

*Cancellation Clause* – a contract provision that gives the right to
terminate the obligations upon the occurrence of specified conditions or
events.

*Cap* – a provision of an adjustable-rate mortgage (ARM) that limits how
much the interest rate or loan payments may increase or decrease. In
upward rate markets, it protects the borrower from large increases in
the interest rate or monthly payment. See lifetime payment cap, lifetime
rate cap, periodic payment cap, and periodic rate cap.

*Capital* – (1) money used to create income, either as an investment in
a business or an income property. (2) the money or property comprising
the wealth owned or used by a person or business enterprise. (3) the
accumulated wealth of a person or business. (4) the net worth of a
business represented by the amount by which its assets exceed liabilities.

*Capital Expenditure* – the cost of an improvement made to extend the
useful life of a property or to add to its value, such as adding a room.
The cost of repairing a property is not a capital expenditure. Capital
expenditures are appreciated over their useful life; repairs are
subtracted from income for the current year.

*Capital Improvement* – any structure or component erected as a
permanent improvement to real property that adds to its value and useful
life. (See Capital Expenditure).

*Capitalization (Cap) Rate* – rate of return used to derive the capital
value of an income stream, divide annual income by net operating income.

*Carrying Charges* – expenses necessary for holding property, such as
taxes and interest on idle property or property under construction.

*Cash Flow* – The net operating income minus the total of all debt
service payments. (See definition of “net operating income” below.)

*Cash Flow Basis* – this calculation shows when your monthly payment
savings exceed your estimated closing costs and discount points. It does
not consider the tax impact or differences in principal balance
reduction between your current loan and the refinance suggestions. You
can use the Amortization Schedule Calculator to compare principal reduction.

*Cash Out* – Cash given to the borrower from the proceeds of a loan.
While relatively common as part of a refinance, it is uncommon, but not
impossible, as a benefit of a small percentage of non-conforming loans
used for a purchase.

*Cash-Out Refinance* – a refinance transaction in which the new loan
amount exceeds the total of the principal balance of the existing first
mortgage and any secondary mortgages or liens, together with closing
costs and points for the new loan. This excess is usually given to the
borrower in cash and can often be used for debt consolidation, home
improvement, or any other purpose. The borrower effectively borrows
against the home equity.

*Caveat Emptor* – let the buyer beware.

*Certificate of Eligibility* – issues by the Veterans Administration to
those who qualify for a VA loan.

*Certificate of Insurance* – a document issued by an insurance company
to verify the coverage.

*Certificate of Occupancy (C.O.)* – a document issued by a local
government or agency permitting the structure to be occupied by members
of the public.

*Certified Commercial Investment Member (CCIM)* – a designation awarded
by the Realtors National Marketing Institute, which is affiliated with
the National Association of Realtors.

*Certified Residential Broker (CRB)* – a designation awarded by the
Realtors National Marketing Institute, which is affiliated with the
National Association of Realtors.

*Certified Residential Specialist (CRS)* – a designation awarded by the
Realtors National Marketing Institute, which is affiliated with the
National Association of Realtors.

*Chain of Title* – a history of conveyances and encumbrances affecting a
title from the time that the original patent was granted or as far back
as records are available.

*Clear Title* – a marketable title, one free of clouds and disputed
interests.

*Closing* – The formal meeting where loan documents are signed and funds
disbursed. Note, however, that Federal law requires that funds not be
disbursed for three business days on certain loans where personal
residences serve as the security. (See definition of “recission” below.)

*Closing Costs* – The expenses which borrowers incur to complete the
loan transaction. These costs may include title searches, title
insurance, closing fees, recording fees, processing fees and other charges.

*Closing Date* – the date on which the seller delivers the deed and the
buyer pays for the property.

*Closing Statement* – an accounting of funds from a real estate
transaction, also known as a HUD-1.

*Cloud on Title* – an outstanding claim or encumbrance that, if valid,
would affect or impair the owner’s title.

*Coinsurance Clause* – a provision in a hazard insurance policy stating
the minimum amount of coverage that must be maintained – as a percentage
of the total value of the property – in order for the insured to collect
the full amount of a loss.

*Collateral* – property pledged as security for a debt.

*Collectors Deed* – If the Property has not been redeemed during the
one-year redemption period, the holder of the Certificate of Purchase
may apply for and receive a Collectors Deed to the property

*Combined Loan-to-Value (CLTV)* – The total of all loans relative to the
value of the property. If a property has a value of $100,000 and three
loans totaling $125,000, the CLTV is 125% ($125,000 / $100,000).

*Commitment* – The notification that a lender has approved a loan.
Virtually all commitments are issued conditionally; that is, subject to
some list of conditions that must be satisfied prior to funding actually
taking place. Typical conditions include appraisals of a certain value,
clean title, verification of representations by the borrower, etc.

*Comparable Sales* – As part of the appraisal process, those relatively
recently sold properties which will be compared to the subject property
(the property being appraised) for the purpose of forming an opinion of
value for the subject property. The facts and details of the comparable
properties will be compared to those of the subject. In an urban
setting, to be of credible assistance in this process, comparable sales
must have the same use as the subject, have many similarities to the
subject in terms of size of house, size of lot, construction, bedroom
count, room count, floor plan, amenities, street traffic and be in the
same neighborhood and have been sold in the recent past (preferably no
more than six months) by way of an “arms length” transaction (i.e., not
sold to a relative or friend and not sold due to a forced sale or
distress sale) and be within one mile of the subject property. More
liberal standards will apply for rural property and some suburban
properties but the basic premise holds, the more similar the comparable
sales are to the subject property, the more accurate the value assigned
to the subject property will be. Lenders will often compensate for the
less precise nature of rural appraised values by allowing only lower
loan-to-value ratios than those in urban settings, usually 10% lower.
(See definition of “loan-to-value” below.)

*Conditions, Covenants, and Restrictions (CCR’s)* – promises written
into deeds and other instruments agreeing to performance or
nonperformance of certain acts, or requiring or prohibiting certain uses
of the property.

*Conforming Loan* – A loan which has underwriting criteria consistent
with (i.e., conforming to) those strict guidelines of Fannie Mae,
Freddie Mac, FHA or VA. These are typically the lowest interest rate
loans with very good terms. (See definitions of “Fannie Mae”, “Freddie
Mac”, “FHA”, “VA” and “underwriting” below.).

*Consideration* – anything of value given to induce entering into a
contract.

*Contiguous* – actually touching, having a common boundary.

*Contingency* – 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* – an agreement between competent parties to do or not do
certain things for consideration.

*Contract For Deed* – a real estate installment selling arrangement
whereby the buyer may use, occupy, and enjoy land, but no deed is given
by the seller until all or a specified part of the sale price has been
paid, same as land contract.

*Contractor* – one who contracts to provide specific goods or services.

*Conventional Loan* – A conforming loan with no government guarantee;
that is, a Fannie Mae or Freddie Mac loan. (See definition of
“conforming loan” above.).

*Conversion* – changing property to a different use or form of ownership.

*Convey* – to deed or transfer title to another.

*Cooperative (co-op)* – a type of multiple ownership in which the
residents of a multi-unit housing complex own shares in the cooperative
corporation that owns the property, giving each resident the right to
occupy a specific apartment or unit.

*Counteroffer* – rejection of an offer with a simultaneous substitute offer.

*Creative Financing* – any financing arrangement other than a
traditional mortgage from a third party lending institution.

*Credit Line* – A loan that allows revolving use of the credit; that is,
after funds have been borrowed and repaid they may be borrowed again
without applying for a new loan. Typically, a credit limit is
established and some or all of the available funds can be optionally
disbursed at closing. Undisbursed funds are available for the borrowers
use at any time. Payments are required only on the outstanding balance.
They are similar in use to a credit card except that they typically use
checks to access the funds. They are inexpensive, effective tools for
investors.

*Dealer* – one who holds real property primarily for sale to customers,
merchandise is inventory and gain on sale is treated as ordinary income.

*Debt Coverage Ratio (DCR)* – A ratio used in underwriting loans for
income producing property which is created by dividing net operating
income by total debt service. Ratios of at least 1.10 are generally
required with ratios of 1.20 and higher considered the norm. (See
definition of “underwriting” below.).

*Debt Ratio (DR, D:I)* – Also known as debt to income. The ratio of the
total of minimum monthly debt payments to gross monthly income. If
minimum monthly payments on a credit card, auto lease, and mortgage
(PITI) were $30, $220 and $750 respectively and the gross monthly income
was $3000, the debt ratio would be 33.33% ($1000 / $3000). Only debt
obligations that will be in place after the loan has funded are
considered. Payments for food, utilities, entertainment, medical bills,
etc. are not included in the calculation. Contractual obligations for
rent (e.g., a lease) would be included in the calculation. The housing
ratio in this example would be 25.0% ($750 / $3000). The preferred
candidate for conventional loans typically would have debt ratios of 28%
for housing and 36% for the total with the maximum ratios allowed (on a
case by case basis with compensating factors; i.e., some other strong
positive to offset the negative of the higher debt ratio) being around
30% / 40% (housing / total). FHA and VA loans allow a total of
approximately 41.0%. Non-conforming loans may allow total debt ratios as
high as 55% or so. True “hard money” loans seldom consider debt ratios.
(see definitions of “PITI”, “Housing Ratio”, “Non-conforming Loan” below).

*Decree* – an order issued by one in authority, a court order or decision.

*Deed* – written document, properly signed and delivered, that conveys
title to real property.

*Deed in Lieu of Foreclosure* – the act of giving property back to the
lender without foreclosure.

*Deed of Trust (DOT)* – DOT’s are similar to mortgages in that they
serve as security for a loan by encumbering real estate. However, a
mortgage is between two parties (borrower and lender) and a deed of
trust involves three parties (borrower, lender and trustee). The trustee
holds the property in trust as security for the payment of the debt and
can sell the property if the borrower defaults.

*Deed Restriction* – see *Conditions, Covenants, and Restrictions*.

*Default* – Failure to meet all of the commitments and obligations
specified in the mortgage or deed of trust. Defaults usually give the
lender the right to accelerate payments and start foreclosure.

*Defeasance* – clause in mortgage that gives the borrower the right to
redeem the property after default by paying the full indebtedness and
fees incurred.

*Deferred Maintenance* – a type of physical depreciation due to lack of
normal upkeep.

*Deferred Payments* – payments to be made at some future date.

*Deficiency Judgment* – a court order stating that the borrower still
owes money when the security for a loan does not entirely satisfy a
defaulted debt.

*Density* – the intensity of land use.

*Density Test* – An analysis of soil to determine if the surface can
support the foundation of a house.

*Depreciation Recapture* – when real property is sold at a gain and
accelerated depreciation has been claimed, the owner may be required to
pay tax at ordinary income rates to the extent of the excess accelerated
depreciation.

*Discount Points* – One point equals one percent of the loan amount.
Paying points has the effect of giving the lender a higher yield. Two
points on a $100,000 mortgage would cost $2,000 ($100,000 x 0.02).

*Document Preparation* – this fee covers the expenses associated with
this process of preparing some of the legal documents that you will be
signing at the time of closing, such as the mortgage, note, and
truth-in-lending statement

*Down Payment* – The portion of the purchase price paid by a buyer to a
seller from sources of funds outside of those provided by a lender.

*Draw* – a periodic advance of funds from a lender.

*Due Diligence* – The act of carefully reviewing, checking and verifying
all of the facts and issues before proceeding. In lending it is, among
other things, verification of employment, income and savings; review of
the appraisal; credit report; and status of the title.

*Due-on-Sale* – see *Acceleration Clause* – reservation of lender’s
right to call the loan due and payable upon sale of the property.

*Earnest Money* – a deposit made by a purchaser of real estate to show
good faith.

*Easement* – the right, privilege, or interest that one party has in the
land of another.

*Easement by Necessity* – the right of an owner to cross over another’s
property for a special necessary purpose.

*Easement by Prescription* – continued use of another’s property for a
special purpose can convert to permanent use if certain conditions are met.

*Egress* – a means of access or exit.

*Eminent Domain* – the right of the government or a public utility to
acquire property for necessary public use by condemnation, but the owner
must be fairly compensated.

*Employer-Assisted Housing* – a special Fannie Mae housing initiative
that offers several different ways for employers to work with local
lenders to develop plans to assist their employees in purchasing homes.

*Encroachment* – a building, part of a building, or obstruction that
physically intrudes upon, overlaps, or trespasses upon the property of
another.

*Encumbrance* – any right to or interest in land that affects its value,
including mortgage loans, unpaid taxes, easements, junior liens, or deed
restrictions.

*Equal Credit Opportunity Act (ECOA)* – a federal law that requires
lenders and other creditors to make credit equally available without
discrimination based on race, color, religion, national origin, age,
sex, marital status, or receipt of income from public assistance programs.

*Equitable Conversion* – a legal doctrine in some states in which, under
a contract of sale, buyers and sellers are treated as though the closing
has taken place in that the seller in possession has an obligation to
take care of the property.

*Equitable Title* – the interest held by one who has agreed to purchase,
but has not yet closed the transaction.

*Equity* – The value of the unencumbered interest in real estate as
determined by subtracting the total of the unpaid mortgage balances plus
the sum of any current liens against the property from the property’s
fair market value.

*Escheat* – the reversion of property to the state in the event that the
owner dies without leaving a will and has no legal heirs.

*Escrow* – an agreement between two or more parties providing that
certain instruments or property be placed with a third party for
safekeeping, pending the fulfillment or performance of a specified act
or condition.

*Escrow Account* – An account from which funds can be disbursed only for
specified reasons; i.e. the money is held in trust for a specific use.
In lending, these accounts are most often used to hold and disburse real
estate taxes and hazard insurance premiums which have been paid in
advance (usually on a monthly basis) by the borrower.

*Escrow Analysis* – the periodic examination of escrow accounts to
determine if current monthly deposits will provide sufficient funds to
pay taxes, insurance, and other bills when due.

*Escrow Collections* – funds collected by the loan servicer and set
aside in an escrow account to pay borrower expenses such as property
taxes, mortgage insurance, and hazard homeowners insurance.

*Escrow Disbursements* – the use of escrow funds to pay real estate
taxes, homeowners insurance, mortgage insurance, and other property
expenses as they become due.

*Escrow Payment* – the portion of a borrower’s monthly payment that is
held by the loan servicer to pay for taxes, hazard homeowners insurance,
mortgage insurance, lease payments, and other items as they become due.
Known as ”impounds” or ”reserves” in some states.

*Estate* – the degree, nature, and extent of interest that a person has
in real property.

*Estate at Sufferance* – the wrongful occupancy of property by a tenant
after the lease has expired.

*Estate for Life* – see *Life Estate*.

*Estate Tax* – a tax on the value of property left by the deceased,
subject to certain tax rules.

*Estoppel* – a doctrine of law that stops one from later denying facts
which that person once acknowledged were true and others accepted on
good faith.

*Eviction* – legal proceeding by a lessor (landlord) to recover
possession of property.

*Exchange* – under Section 1031 of the IRS Tax Code, like-kind property
used in a trade or business or held as an investment can be exchanged
tax-free, subject to certain conditions.

*Exclusive Listing* – a written contract that gives a licensed real
estate agent the exclusive right to sell a property for a specified
time, but reserving the owner’s right to sell the property alone
without the payment of a commission.

*Exculpatory Clause* – provision in a mortgage allowing the borrower to
surrender the property to the lender without personal liability.

*Facade* – the outside front wall of a building.

*Face Value* – the dollar amount, shown by words and/or numbers on a
document.

*Fair Credit Reporting Act* – a federal law that allows individuals to
examine and correct information used by credit reporting services.

*Fannie Mae (FNMA)* – Federal National Mortgage Association, a federally
chartered corporation that purchases mortgages and packages them to sell
as securities.

*Federal Fair Housing Law* – a federal law that forbids discrimination
on the bais of race, color, sex, religion, or national origin in the
selling or renting of property.

*Federal Housing Administration (FHA)* – an agency within HUD that
administers many loan programs designed to make housing more available.

*Fee Agreement* – An agreement between a borrower and a broker which
normally specifies the relationship between them and the amount of
compensation to the broker.

*Fee Simple* – absolute ownership of real property.

*Fiduciary Responsibility* – An obligation to act in the best interest
of another party. This type of obligation typically exists when one
person places special trust and confidence in another person and that
responsibility is accepted.

*First Mortgage* – That mortgage which is recorded at the earliest time.
The time of recording is the sole criteria. Size of loan and type of
mortgage are immaterial. When the first mortgage is paid off and
released, the second mortgage (if any existed) becomes the first mortgage.

*Fixed Payment Mortage* – a loan secured by real property which features
a periodic payment of interest and principal which is constant over the
term of the loan.

*Fixed Rate Mortgage* – A mortgage with an interest rate that remains
the same through the life of the loan.

*Floodplain* – A level land area subject to periodic flooding from a
contiguous body of water.

*Forbearance* – a course of action a lender may pursue to delay
foreclosure or legal action against a delinquent borrower

*Foreclosure* – The process by which the mortgagor’s (borrower’s) rights
to a property are terminated. While the general process is similar from
state to state, the actual procedures tend to vary greatly.

*FRBO* – for rent by owner.

*Freddie Mac (FHMLC)* – Federal Home Loan Mortgage Corporation, a
federally chartered corporation that purchases mortgages and packages
them to sell as securities.

*FSBO* – for sale by owner.

*Fully Amortized Adjustable-Rate Mortgage* – A mortgage that amortizes,
or pays down, the balance of a loan.

*Gable Roof* – one with a triangle, with the ridge forming an angle at
the top and each eave forming an angle at the bottom.

*Gain* – an increase in money or property value.

*Garden Apartments* – a housing complex whereby some or all tenants have
access to a lawn area.

*General Contractor* – one who constructs a building or other
improvement for the owner or developer.

*General Lien* – a lien that includes all of the property owned by the
debtor, rather than a specific property.

*General Warranty Deed* – a deed in which the grantor agrees to protect
the grantee against any other claim to title of the property.

*Gentrification* – the displacement of lower income residents by higher
income residents in a neighborhood.

*Graduated-Payment Mortgage(GPM)* – A mortgage that requires a borrower
to make larger monthly payments over the term of the loan. The payment
is unusually low for the first few years but gradually rises until year
three or five, then remains fixed.

*Grantee* – the party to whom title to real property is conveyed.

*Grantor* – the party who gives the deed.

*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 Monthly Income* – Income before deductions for taxes, social
security, saving plans, court ordered child support, etc.

*Gross Rent Multiplier* – the sales price divided by the gross annual
rental rate.

*Ground Lease* – one that rents the land only.

*Habendum Clause* – The ”to have and to hold” clause that defines the
quantity of the estate granted in the deed.

*Hard Money Loan* – A loan that is underwritten with the condition and
value of the property as the primary criteria for approval. Secondary
issues may include the credit of the borrower, the ability of the
borrower to repay the loan and/or the ability of the borrower to manage
the property or successfully complete a rehab and sell the property.
Owner occupancy, debt ratios and other issues are seldom a factor.
Appraisals rather than purchase prices are used to determine value. Cash
out purchases are often allowed and are another key benefit. These loans
are usually approved within days and are often funded in two weeks or
under with times as short as two or three days not uncommon. The cost
for the benefits of speed of funding, lax underwriting and other
advantages is typically a moderately high interest rate (usually low to
mid teens) and high points (usually 5 to 10). (See definition of
“underwriting” below.)

*Hazard Insurance* – Insurance to provide compensation if the
improvements are damaged or destroyed. It is almost always a requirement
of loans.

*Hereditaments* – property, personal and real, capable of being inherited

*Hiatus* – A gap between two parcels of land that is not included in the
legal description of either property.

*Highest and Best Use* – the use that is most likely to produce the
greatest net return to the land and/or building over a given period.

*Holdover Tenant* – a tenant who remains in possession of leased
property after the expiration of the lease term.

*Home Equity Loan* – In the most literal sense, this expression applies
to virtually all loans (first mortgages and second mortgages, fixed and
adjustable interest rates, credit lines and fully amortizing loans,
etc.) placed on an owner occupied property when the loan-to-value after
the Home Equity Loan closes is no higher than 100%. That is, it is a
loan secured by the available equity of an owner occupied residential
property.

*Homeowner Association (HOA)* – an organization of the homeowners in a
particular subdivision, planned unit development, or condominium created
to enforce deed restrictions and manage common elements of the development.

*Homeowners’ Warranty* – A special insurance policy that covers certain
home repairs for a specified amount of time.

*Homeowner’s Insurance (Hazard Insurance)* – insurance coverage that
compensates for physical damage to a property from fire, wind,
vandalism, or other hazards. The policy typically combines personal
liability insurance and property hazard insurance coverage for a
dwelling and its contents. See also homeowner’s insurance.

*Homestead* – status provided to a homeowner’s principal residence by
some state statutes to protect the home against judgments up to
specified amounts.

*Homestead Exemption* – in some jurisdictions a reduction in the
assessed value allowed for one’s personal residence.

*Housing and Urban Development (HUD)* – a federal government agency
established to implement certain federal housing and community
development programs.

*Housing Code* – local government ordinance that sets minimum standards
of safety and sanitation for existing residential buildings.

*Hypothecate* – to pledge somehing as security without having to give up
possession of it.

*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.

*Impound Account* – see *Escrow Account*.

*Improvements* – additions to raw land such as buildings, streets,
sewers, etc. that 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.

*Indemnify* – to protect another person against loss or damage.

*Index* – The published cost of money that serves as the minimum basis
for determining the interest rate for an adjustable rate mortgage. Among
the commonly used indices are the Prime Rate (Prime), the London
Interbank Offering Rate (LIBOR), the Cost of Funds (COF) and the 1 year
Treasury Bill (1 year T). The particular index is generally, though not
always, selected based on how often an interest rate is supposed to
adjust. Loans which allow monthly interest rate adjustments commonly use
the Prime Rate. Loans that adjust semi-annually may use LIBOR. The 1
year Treasury and the Cost of Funds are often used for loans which
adjust on an annual basis. There are other Treasury instruments which
are used for 3 and 5 year adjustment periods. The interest rate of the
loan is determined by adding a margin to the index. The size of the
margin is typically a function of the index used and the credit
worthiness of the borrower. Typical margins on a Prime Rate based loan
would be 0.0 to 5.0 so that if the Prime Rate were 8.25% and the margin
were 2.0 (typical for an “average” borrower), the interest rate would be
10.25% (8.25 + 2.0).

*Initial Note Rate* – With regard to an adjustable rate mortgage, the
note rate upon origination. This rate may differ from the fully indexed
note rate.

*Installment Contract* – see *Contract for Deed*

*Installment Sale* – when a seller accepts a mortgage for all or part of
the sale, tax on the gain is paid as the mortgage principal is collected.

*Insurance Binder* – a document that states that insurance is
temporarily in effect. Because the coverage will expire by a specified
date, a permanent policy must be obtained before the expiration date.

*Insured Mortgage* – a mortgage that is protected by the Federal Housing
Administration (FHA) or by private mortgage insurance (PMI). If the
borrower defaults on the loan, the insurer must pay the lender the
lesser of the loss incurred or the insured amount.

*Inter Vivos* – during one’s life.

*Interest Accrual Rate* – the percentage rate at which interest accrues
on the mortgage. In most cases, it is also the rate used to calculate
the monthly payments.

*Interest Rate* – The percentage of the loan amount charged for
borrowing money; i.e., the cost of the money expressed as a percentage.

*Interest Rate Buydown Plan* – a temporary buydown gives a borrower a
reduced monthly payment during the first few years of a home loan and is
typically paid for in an initial lump sum made by the seller, lender, or
borrower. A permanent buydown is paid the same way but reduces the
interest rate over the entire life of a home loan.

*Interim Financing* – a loan, including a construction loan, used when
the property owner is unable or unwilliing to arrange permanent financing.

*Intestate* – having made no valid will.

*Joint and Several Liability* – a creditor can demand full repayment
from any and all of those who have borrowed, each borrower is liable for
the full debt, not just the prorated share.

*Joint Tenancy* – ownership of realty by two or more persons, each of
whom has an undivided interest.

*Joint Venture* – an agreement between two or more persons who invest in
a single business or property.

*Judgment* – a decree of a court stating that one individual is indebted
to another and fixing the amount of the indebtedness.

*Judgment Creditor* – one who has received a court decree or judgment
for money due from a debtor.

*Judgment Lien* – the claim upon the property of a debtor resulting from
recording a judgment.

*Judicial Foreclosure* – having a defaulted debtor’s property sold where
the court ratifies the price paid.

*Jumbo Loan* – A loan larger than the maximum allowed by conforming
loans. The threshold amount has traditionally been adjusted more or less
on an annual basis and has been in the low $200,000’s. Banks and
mortgage brokers can quote the current threshold. They are typically
available at interest rates slightly higher than those of conforming
loans and typically require the same underwriting standards as
conforming loans. (see definition of “conforming loan” above).

*Junior Mortgage* – a mortgage whose claim against the property will be
satisfied only after prior mortgages have been repaid.

*Kicker* – A payment required by a mortgage in addition to normal
principal and interest.

* Lien* – A claim on a property of another as security for money owed.
Examples of types of liens would include judgments, mechanic’s liens,
mortgages and unpaid taxes.

*Land Contract* – see *Contract for Deed.*

*Land Lease* – see* Ground Lease.*

*Land Trust* – A revocable, living trust primarily used to hold title to
real estate for privacy and anonymity. Also known as an Illinois Land
Trust or Nominee Trust. The land trustee is a nominal title holder, with
the beneficiaries having the exclusive right to direct and control the
actions of the trustee.

*Landlocked* – condition of a lot that has no access to public
thoroughfare except through an adjacent lot.

*Lease* – a contract in which, for a rent payment, the one entitled to
the possession of the real property (lessor) transfers those rights to
another (lessee) for a specified period of time.

*Lease Option* – a lease combined with an option agreement that gives
the lessee (tenant) the right to purchase the property under specified
conditions.

*Lease Purchase* – a lease combined with a purchase agreement that
obligates the lessee (tenant) to purchase the property under specified
conditions.

*Leasehold* – the interest or estate on which a lessee (tenant) of real
estate has a lease.

*Leasehold Estate* – A way of holding title to a property wherein the
mortgagor does not actually own the property but rather has a recorded
long-term lease on it.

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

*Legal Description* – legally acceptable identification of real estate
by government survey, metes and bounds, or recorded plat.

*Lessee* – a person to whom property is rented under a lease.

*Lessor* – one who rents property to another under a lease.

*Let* – to rent a property to a tenant.

*Letter of Intent* – written expression of desire to enter into a
contract without actually doing so.

*Liabilities* – a person’s debts or financial obligations. Liabilities
include long-term and short-term debt, as well as potential losses from
legal claims.

*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. See also homeowners insurance.

*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 Estate* – an interest in property that terminates upon the death
of a specified person.

*Life Tenant* – one who is allowed to use property for life or the
lifetime of another designated person.

*Lifetime Cap* – The highest amount over the initial interest rate that
an adjustable mortgage can be raised. Lifetime caps are typically in the
range of 5.0% – 7.0%. If the initial interest rate is 5.25% and the
lifetime cap is 6.0%, the highest interest rate a borrower could pay
during the course of the loan would be 11.25% (5.25% + 6.0%).

*Like-Kind Property* – property having the same nature.

*Limited Partnership* – one in which there is at least one partner who
is passive and limits liability to the amount invested and at least one
partner whose liability extends beyond monetary investment.

*Line Of Credit* – an agreement by a lender to extend credit up to a
certain amount for a certain time without the need for the borrower to
file another application.

*Liquidated Damages* – an amount agreed upon in a contract that one
party will pay the other in the event of a breach of contract.

*Liquidity* – ease of converting assets to cash.

*Lis Pendens* – Latin for “suit pending”, recorded notice of the filing
of a lawsuit, the outcome of which may affect title to real property.

*Listing* – written agreement between a principal and an agent
authorizing the agent to perform services for the principal involving
the principal’s property.

*Loan Application (1003)* – A loan application that is required for
conforming loans. It has become the standard application for most
residential loans, even non-conforming loans.

*Loan Origination Fee* – Most lenders charge borrowers an origination
fee–or points–for processing a loan. A point is 1 percent of the total
loan amount.

*Loan Package* – The organized group of documents that contains all of
the information required to obtain an underwriting decision of loan
approval or loan denial. Depending on the type of loan and the
particular lender, a package may contain some or all of the following as
well as other documents: loan application, statement of use of funds,
statement of net worth, P & L statements, tax returns, pay stubs,
statements from various types of banking and investment accounts,
property appraisal, letters of explanation, credit report, verification
of employment, verification of housing payments, purchase agreement,
etc. (See definition of “underwriting” below.)

*Loan-to-Value (LTV)* – The ratio of the size of the loan to the value
of the property. If the loan is $80,000 and the value of the property is
$100,000 the LTV is 80% ($80,000 / $100,000).

*Lot and Block* – method of identifying legal description of property,
see *Legal Description*.

*Lot Line* – a line bounding a lot as described in a property survey.

*Low-Documentation Loan* – A mortgage that requires only minimal
verification of income and assets

*Low-Down-Payment loan* – A home loan that requires the borrower to make
only a small down payment before obtaining the financing needed to
purchase a house.

*Management Agreement* – a contract between the owner of property and
someone who agrees to manage it.

*Margin* – A constant (fixed) amount over an index that determines a
lender’s yield on an adjustable rate loan. The interest rate of an
adjustable rate loan is determined by adding a margin to an index. The
size of the margin is typically a function of the index used and the
credit worthiness of the borrower. Typical margins on a Prime Rate based
loan would be 0.0 to 5.0 so that if the Prime Rate were 8.25% and the
margin were 2.0 (typical for an “average” borrower), the interest rate
would be 10.25% (8.25 + 2.0). (See definition of “index” above.).

*Marketable Title* – a title free from defect.

*Master Lease* – a controlling lease.

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

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

*Mechanic’s Lien* – a lien given by law upon a building or other
improvement upon land as security for the payment of labor and materials
furnished for improvement.

*Merged Credit Report* – A report that draws information from the Big
Three credit-reporting companies: Equifax, Experian, and Trans Union Corp.

*Minimum Payment* – the minimum amount that must be paid monthly on an
account. On the HELOC product, the minimum payment is interest only
during the draw period. On the Fixed Rate Second products, the minimum
payment is principal and interest.

*Monthly Mortgage Insurance (MI) Payment* – portion of monthly payment
that covers the cost of Private Mortgage Insurance.

*Monthly Payment (P&I)* – this is the monthly mortgage payment on a home
loan, this includes principal and interest, but excludes any amounts
that are applied to taxes and insurance.

*Monthly Principal & Interest (P&I) Payment* – portion of monthly
payment that covers the principal and interest due on the loan.

*Monthly Taxes & Insurance (T&I) Payment* – portion of monthly payment
that funds the escrow or impound account for taxes and insurance.

*Mortgage* – A lien against real property given by a borrower to a
lender as security for money borrowed.

*Mortgage (Open-End)* – A mortgage that allows additional money to be
borrowed (up to the original loan amount) without refinancing the loan
or paying additional financing charges .

*Mortgage Balance* – see *Principal Balance.*

*Mortgage Insurance Premium (MIP)* – The payment made by a borrower of
FHA insured mortgages to provide a reserve that protects lenders against
losses from very high loan-to-value loans.

*Mortgage Loan* – A loan which is secured by a mortgage lien filed
against real property.

*Mortgage-Interest Deduction* – The tax write-off that the Internal
Revenue Service allows most owners to claim for annual interest payments
made on real estate loans. mortgagee

*Mortgagee* – The entity to whom the mortgage is given; i.e., the lender.

*Mortgagor* – The entity who gives the mortgage; i.e., the borrower.

*Multi-Dwelling Property* – A property that contains individual units
for several households but carries only one mortgage.

*Needs-Based Pricing* – A seller’s asking price that is based on
factors such as the required funds to pay off the mortgage, the cost of
remodeling or the purchase of another house.

*Negative Amortization* – Some adjustable rate mortgages allow the
interest rate to fluctuate independently of a required minimum payment.
If a borrower makes the minimum payment it may not cover all of the
interest that would normally be due at the current interest rate. In
essence, the borrower is deferring the interest payment, which is why
this is called ”deferred interest.” The deferred interest is added to
the balance of the loan and the loan balance grows larger instead of
smaller, which is called negative amortization.

*Negotiation* – The process of bargaining that precedes an agreement.

*Net Cash Flow* – Investment property that generates income after
expenses such as principal, interest, taxes and insurance are subtracted

*Net Operating Income (NOI)* – From income producing property, the gross
income minus the total of all expenses except for debt service. /Cash
flow/ is defined as NOI minus the total of all debt service payments.

*No Cash-Out Refinance* – The amount of the new mortgage covers the
remaining balance of the first loan, closing costs, any liens and cash
no more than 1 percent of the principal on the new loan.

*No Income Verification Loan (NIV)* – A type of loan generally limited
to the self-employed that is underwritten based on the borrower’s
written representation of their annual income as stated on the loan
application. No tax returns, operating statements or other verification
of the income is required. Debt ratios are computed based on the stated
income. The primary intent of these programs is to allow owners of small
businesses to use their actual cash flows rather than the net incomes
normally reported in tax filings. Higher interest rates on these
products compensate lenders for their higher risks. (See definition of
“debt ratio” above.)

*Non-Assumption Clause* – A loan provision that prohibits the transfer
of a mortgage to another borrower without lender approval.

*Non-conforming Loan* – A loan not meeting the underwriting requirements
of Fannie Mae and Freddie Mac. I.e., the vast majority of loans.

*Non-Qualifying* – buyer is not required to qualify through traditional
bank financing requirements

*Non-Recurring Closing Costs* – Costs that are one-time only fees for
such items as an appraisal, loan points, credit report, title insurance
and a home inspection

*Note* – A written promise to repay a certain sum of money on specified
terms.

*Note Broker* – An individual who acts as an intermediary between a
holder of an existing note and a prospective purchaser of the note.

*Notice of Default* – A lender’s initial action when a mortgage payment
is late and attempts to reconcile the issue out of court have failed.

*Obligee* – The person in whose favor an obligation is entered into.

*Obligor* – The person who binds himself or herself to another.

*Option* – the right to purchase or lease a property upon specified
terms within a specified period of time

*Ordinances* – municipal rules governing the use of land

*Origination Fee* – A fee paid to either a broker or a lender for
originating a loan. It may be the only compensation for their work in
arranging and/or processing the loan or it may be only a portion of the
compensation. Not every loan has an origination fee.

*Originator* – An individual who works with a borrower to start a loan.
Usually an employee of a financial institution, an employee of a broker
or an independent contractor affiliated with several brokers, the
originator determines the type of loan a borrower probably qualifies
for, helps complete an accurate application, gathers documents necessary
to get an approval and acts as an intermediary between the borrower and
the underwriter.

*Penalty* – Money one will pay for breaking a law or violating part or
all of the terms of a contract.

*PITI* – The shorthand way of stating the most usual elements of a
residential mortgage payment which may consist not only of the Principal
and Interest (PI) but the property taxes (T) and hazard insurance (I) as
well. In the case where all four elements are part of the payment, the
lender escrows the T and I and pays them on behalf of the borrower when
they come due. Some loans are written such that the payment to the
lender consists only of the P and I in which case the borrower pays the
taxes and insurance directly.

*Planned Unit Development (PUD)* – A highly designed residential project
that features relatively dense clusters of houses, which are usually
surrounded by areas of commonly owned open space maintained by a
nonprofit community association.

*Portfolio Loan* – A non-conforming loan that is held by the original
lender rather than being sold on the secondary market.

*Prepayment Penalty* – fee charged for paying off a loan within a
relatively short period of time after the loan has closed, provision is
currently found only in non-conforming products, time period during
which it applies is usually one to three years

*Principal Balance* – outstanding dollar amount owed on a loan exclusive
of accrued interest

*Principal, Interest, Taxes, Insurance (PITI)* – monthly payments
required by an amortizing loan that includes escrow deposits for taxes
and insurance in addition to the principal and interest

*Private Mortgage Insurance (PMI)* – insurance premium paid by a
borrower to protect lenders against losses from loans with loan-to-value
ratios higher than 80%, default insurance for lenders

*Pro Forma* – refers to the presentation of data, such as a balance of
income statement, where certain amounts are hypothetical. For example, a
pro forma balance sheet might show a debt issue that has been proposed
but has not been consummated.

*Probate* – The process of establishing the validity of a will before a
duly authorized court or person. Once validity is confirmed, the probate
court then administers the sale of property as directed by the will or
as authorized by the court to settle any financial obligations

*Promissory Note* – promise to pay a specified sum to a specified person
under specified terms

*Purchase Money Mortgage* – a mortgage which secures a note written on a
loan used in the purchase of real estate

*Purchase Subject to Mortgage* – a purchase in which a buyer agrees to
make the monthly mortgage payments on an existing mortgage and the
original borrower remains liable if the purchaser fails to make the
payments as agreed.

*Purchase-Money Mortgage (PMM)* – A mortgage obtained by a borrower as
partial payment for a property.

*Qualifying Ratio* – A ratio calculated by a lender to determine how
much a potential buyer can borrow.

*Quiet Enjoyment* – right of an owner or any other person legally
entitled to possession to the use of the property without interference.

*Quiet Title Action* – a suit in court to remove a defect or cloud on
the title, establishes legal ownership.

*Quitclaim Deed* – a deed that conveys only the grantor’s rights or
interest in a property, without stating the nature of the rights or
interest and with no warranties of ownership.

*Quitclaim Deed* – A deed that transfers without warranty whatever
interest or title a grantor may have at the time the conveyance is made.

*Rate Cap* – The maximum interest rate charge allowed on the monthly
payment of an adjustable rate mortgage during an adjustment period.

*Rate-Improvement Mortgage* – A loan with a clause that entitles a
borrower to a one-time interest rate cut without going through refinancing.

*Real Estate Owned (REO)* – property acquired through a lender through
foreclosure and held in inventory.

*Real Property* – the rights to use real estate.

*Realtor* – designation given to licensed real estate agents who are
members of the National Association of Realtors.

*Recission Period* – a federally mandated period of three business days
(beginning on the day after a loan closes) during which the borrower may
cancel the new loan, waiting period only applies to loans which are to
be secured by a mortgage on a personal residence for which the borrower
is in title at the time of loan origination, right to cancel does not
apply to loans used for the purchase of property.

*Recourse* – ability of lender to make claims against borrower
personally in addition to the collateral.

*Redemption Period* – period during which a former owner can reclaim
foreclosed property.

*Refinance* – process of a borrower paying off one loan with the
proceeds from another.

*Regression* – The principle that the value of a better-quality property
is adversely affected by the proximity of a lesser-quality property.

*Regulation Z* – federal regulation requiring creditors to provide full
disclosure of the terms of a loan.

*Residential Service Contract* – home warranty or insurance contract,
generally for one year, covering plumbing, electrical, and mechanical
systems of the home.

*Residual* – Value or income remaining after deducting an amount
necessary to meet fixed obligations.

*Reverse Mortgage* – A type of mortgage designed for elderly homeowners
with substantial equity by which a lender pays a periodic payment to the
borrower; the loan balances increase with interest and payments causing
negative amortization.

*Right of First Refusal* – opportunity of a party to match the terms of
a proposed contract before the contract is executed.

*Sale Leaseback* – sale of property by seller and simultaneous leasing
of the same property by seller.

*Sandwich Lease* – lease held by a lessee (tenant) who becomes a lessor
(landlord) by subletting to another lessee (subtenant), typically the
sandwich leaseholder is neither the owner nor the user of the property.

*Seasoning* – loan which has been in force for a period of time thus
establishing the borrower’s payment history, loans are tyically deemed
to be seasoned after either six months or one year.

*Second Mortgage* – mortgage recorded after another mortgage has already
been recorded and not yet released, subordinated lien.

*Section 1031* – section of the Internal Revenue Code dealing with
tax-free exchanges of like-kind property.

*Section 8* – privately owned rental dwelling units participating in the
low-income rental assistance program created by 1974 amendments to
Section 8 of the 1937 Housing Act.

*Security Deposit* – cash payment required by landlord to be held during
the term of the lease to offset damages incurred due to actions of the
tenant.

*Seller Financing* – also known as Owner Financing.

*Settlement Statement* – also known as Closing Statement or HUD-1.

*Short Sale* – 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

*Special Warranty Deed* – deed in which the grantor limits the title
warranty given to the grantee, does not warrant against title defects
arising from conditions that existed before grantor owned the property.

*Specific Performance* – legal action in which the court requires a
party to a contract to perform the terms of the contract.

*Subject To* – buyer takes title to mortgaged real property but is not
personally liable for the payment of the amount due, buyer must make
payments in order to keep the property.

*Subordination* – a clause or document that permits a mortgage recorded
at a later date to take priority over an existing lien.

*Survey* – process by which a parcel of land is measured and its area
ascertained.

*Tax and Insurance Escrow* – account required by a mortgage lender to
fund annual property tax assessments and hazard insurance premiums,
funded through monthly contributions by the mortgagor

*Tax Lien* – a debt attached to the property for failing to pay taxes

*Teaser Rate* – contract interest rate charged on an adjustable rate
mortgage for the initial adjustment interval that is significantly lower
than the fully indexed rate at the time

*Terms* – conditions and arrangements specified within a contract

*Time is of the Essence* – a phrase that, when inserted in a contract,
requires that all references to specific dates and times of day noted in
the contract be interpreted exactly, in its absence extreme delays might
be acceptable

*Title* – evidence of ownership, evidence of lawful possession

*Title Defect* – an unresolved claim against the ownership of property,
prevents seller from providing buyer clear title to the property

*Title Insurance* – an insurance policy that protects the holder from
loss sustained by defects in the title

*Title Search* – an examination of the public records to determine the
ownership and encumbrances affecting real property

*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 with lien theory state.

*Triple Net Lease* – lease in which the tenant is to pay all operating
expenses of the property so that the landlord receives net rent,
frequently used to mean tenant pays taxes, insurance, and maintenance in
addition to normal operating expenses

*Trust* – an arrangement whereby property is transferred to a trusted
third party trustee by a grantor/trustor, trustee holds the property for
the benefit of the beneficiary

*Trust Deed* – conveyance of real estate to a third party to be held for
the benefit of another, commonly used in some states in place of
mortgages that conditionally convey title to the lender, same as Deed of
Trust

*Trustee* – one who holds property in trust for another to secure
performance of an obligation, the neutral party in a trust deed transaction.

*U.S. Department. of Housing and Urban Development (HUD)* – A federal
agency that oversees the Federal Housing Administration and a variety of
housing and community development programs.

*Underwriting* – The act of applying formal guidelines that provide
qualitative and quantitative standards for determining whether or not a
loan should be approved.

*Undivided Interest* – an ownership right to use and possession of a
property that is shared among co-owners, with no one co-owner having
exclusive rights to any portion of the property.

*Unencumbered Property* – real estate that is owned free and clear.

*Unilateral Contract* – an obligation given by one party contingent on
the performance of another party, but without obligating the second
party to perform.

*Unimproved Property* – land that has received no development,
construction, or site preparation (raw land).

*Unrealized Gain* – excess of current market value over cost for an
asset that is not sold.

*Unrecorded Deed* – instrument that transfers title from one party
(grantor) to another party (grantee) without providing public notice of
the change in ownership.

*Urban Renewal* – process of redeveloping deteriorated sections of the
city, often through demolition and new construction, may be privately
funded, but most often associated with government renewal programs.

*Usufruct* – the right to use property–or income from property–that is
owned by another.

*Usury* – charging a rate of interest greater than that permitted by
state law.

*Utility Easement* – use of another’s property for the purpose of laying
gas, water, electric and sewer lines.

*V.A. Loan* – home loan guaranteed by the U.S. Veterans Administration
under the Servicemen’s Readjustment Act of 1944 and later to compensate
lender in the event of default.

*Valuation* – The estimated worth or price. The act of valuation by
appraisal.

*Variable Interest Rate* – amount of compensation to a lender that is
allowed to vary over the maturity of a loan, typically governed by an
appopriate index.

*Variable Rate Mortgage* – long-term mortgage loan applied to
residences, under which the interest rate may be adjusted on a six month
basis over the term of the loan, according to certain restrictions.

*Vendee* – a buyer of real estate.

*Vendee’s Lien* – a lien against property under a contract of sale to
secure the deposit paid by the purchaser.

*Vendor* – a seller of real estate.

*Veneer* – wood or brick exterior that covers a less attractive and less
expensive surface.

*Warehouse Fee* – A closing-cost fee representing the lender’s cost of
holding a borrower’s loan temporarily before it is sold on the
secondary mortgage market.

*Waiver* – the voluntary renunciation, abandonment, or surrender of some
claim, right or privilege.

*Warranty Deed* – deed that contains a covenant that the grantor will
protect the grantee against any and all claims; usually contains
covenants ensuring good title, freedom from encumbrances, and quiet
enjoyment.

*Wholesale* – to contract a property with the intention of reselling it
quickly at a higher price.

*Wild Deed* – An improperly recorded deed

*Without Recourse* – words used in endorsing a note to denote the note
holder is not to look to the debtor personally in the event of nonpayment.

*Wraparound Mortgage* – loan arrangement in which an existing loan is
retained and an additional loan is made that equals or exceeds the
existing loan.

*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.

*Yield* – measurement of the rate of earnings of an investment.

*Zero Lot Line* – a form of cluster housing development in which
individual dwelling units are placed on separately platted lots, but are
attached to each other.

*Zoning* – legal mechanism for local governments to regulate the use of
privately owned real estate to prevent conflicting land uses and promote
orderly development.

ACRONYMS

Real Estate Investing Abbreviations – From REIClub.com

*REI Abbreviations*

*AFD* – Agreement For Deed

*AITD* – All Inclusive Trust Deed

*APR* – Annual Percentage Rate

*ARM* – Adjustable Rate Mortgage

*ARV* – After-Repaired Value

*BOM* – Back On Market

*BOR* – Board of Realtors

*CAD* – County Appraisal District

*Cap* – Capitalization

*CCIM* – Certified Commercial Investment Member

*CCR* – Conditions, Covenants, and Restrictions

*CFD* – Contract for Deed

*CLTV* – Combined Loan To Value

*CMA* – Comparative Market Analysis

*COCR* – Cash on Cash Return

*COF* – Cost of Funds

*COO* – Certificate of Occupancy

*CRB* – Certified Residential Broker

*CRE* – Creative Real Estate

*CRS* – Certified Residential Specialist

*DBA* – Doing Business As

*DCR* – Debt Coverage Ratio

*DOS* – Due On Sale Clause

*DOT* – Deed of Trust

*DSCR* – Debt Service Coverage Ratio

*FCRA* – Fair Credit Reporting Act

*FFE* – Furniture, Fixture, and Equipment

*FHA* – Federal Housing Administration

*FHLMC* – Federal Home Loan Mortgage Corporation, Freddie Mac

*FMR* – Fair Market Rent

*FMV* – Fair Market Value

*FNMA* – Federal National Mortage Association, Fannie Mae

*FRBO* – For Rent by Owner

*FSBO* – For Sale by Owner

*GMAC* – General Motors Acceptance Corporation

*GRM* – Gross Rent Multiplier

*HELOC* – Home Equity Line of Credit

*HML* – Hard Money Lender

*HOA* – Homeowners Association

*HUD* – Housing and Urban Development

*HVAC* – Heating, Ventilation and Air Conditioning

*IRA* – Individual Retirement Account

*IRC* – Internal Revenue Code

*IRR* – Internal Rate of Return

*IRS* – Internal Revenue Service

*L/O* – Lease Option

*L/P* – Lease Purchase

*L/S* – Landlord Seller

*LIBOR* – London Interbank Offering Rate

*LLC* – Limited Liability Company

*LOC* – Line of Credit

*LOI* – Letter of Intent

*LP* – Limited Partnership

*LPOA* – Limited Power of Attorney

*LTV* – Loan to Value

*MAI* – Member Appraisal Institute

*MAO* – Maximum Allowable Offer

*MIP* – Mortgage Insurance Premium

*MLS* – Multiple Listing Service

*MUD* – Municipal Utility District

*NAR* – National Association of Realtors

*NIV* – No Income Verification

*NNN* – Triple Net Lease

*NOD* – Notice of Default

*NOI* – Net Operating Income

*NOO* – Non-Owner Occupant

*O/F* – Owner Finance

*OO* – Owner Occupant

*P&S* – Purchase and Sale

*PITI* – Principal Interest Taxes Insurance

*PMI* – Private Mortgage Insurance

*POA* – Power of Attorney

*PUD* – Planned Unit Development

*REI* – Real Estate Investing / Real Estate Investor

*REIA* – Real Estate Investors Association

*REIT* – Real Estate Investment Trust

*REO* – Real Estate Owned

*ROI* – Return On Investment

*RTO* – Rent to Own

*SFH* – Single Family House

*SFR* – Single Family Residence

*Sub2* – Buying property subject to existing financing

*T/B* – Tenant Buyer

*TAA* – Texas Apartment Association

*TAR* – Texas Association of Realtors

*TIL* – Truth In Lending

*TREC* – Texas Real Estate Commission

*UBIT* – Unrelated Business Income Tax

*UCC* – Uniform Commercial Code

*VA* – Department of Veterans Affairs / Veterans Administration

FORUM ABBREVIATIONS

*AFAIK* – As Far As I Know

*AFK* – Away From Keyboard

*AKA* – Also Known As

*BBIAM* – Be Back In a Minute

*BFN* – Bye For Now

*BRB* – Be Right Back

*BTW* – By The Way

*CUL* – See You Later

*FYI* – For Your Information

*G2G* – Got to Go

*IMHO* – In My Humble Opinion

*IMO* – In My Opinion

*LMAO* – Laughing My Ass Off

*LOL* – Laughing Out Loud

*NT* – No Text

*ROFL* – Rolling on the Floor Laughing

*ROTFLMAO* – Rolling on the Floor Laughing My Ass Off

*TIA* – Thanks In Advance