We hope this Glossary of Mortgage and Real Estate Terms helps you understand the home buying and financing process. Should you have any further questions, please do not hesitate to contact your Loan Officer for answers.
Additional Terms: # A B C D E F G H I J K L M N O P Q R S T U V W XYZ
A Terms
Abatement: A reduction in amount or intensity. In real estate, a homeowner may file for an abatement with their town to reduce the taxes on their property.
Absentee Owner: An owner who does not personally manage or live at the property owned.
Abstract of Title: A written history of the title transactions or conditions affecting the title to a designated parcel of land. It covers the period from the original source of title to the present and summarizes all subsequent instruments (recordings) of public record stating their relevance. For example, a title insurance company will have an attorney prepare an abstract of title before it issues title insurance.
Abut: Adjoining. For example, two parcels of land that share a common border abut each other.
Acceleration Clause: A common provision of a mortgage or note that provides the Lender with the right to demand that the entire outstanding balance immediately due and payable in the event of default.
Acceptance: The act of agreeing to the terms of an offer.
Access Right: The right of owners to get to and from their property through another's property.
Accretion: The addition to a parcel of land through a nature process. For example, deposits of soil carried by a river or stream and deposited on the land.
Accrual Rate: The stated annual rate at which interest is calculated. On an adjustable-rate mortgage (ARM), the accrual rate is based on a combination of an index, which fluctuates, plus a margin, which is fixed, and is established by the Lender. The accrual rate is also called the "note rate", the "coupon rate", or the "contract rate."
Accrued Interest: The interest that has been earned or owed, but not yet paid.
Actuarial Risk: Risk due to the uncertainty about how long borrowers will live.
Acknowledgement: A declaration by a person who has signed a document before a duly authorized person, such as witnesses or a notary public.
Acquisition Cost: The price, all fees, and costs, required to purchase a property. For example, the acquisition costs were $110,000 as the purchase price at auction was $100,000 plus $10,000 in back taxes.
Acquisition Loan: Money borrowed for the purchase of purchasing a property.
Acre: A two-dimensional measurement of land equaling 43,560 square feet.
Act of God: An unpreventable and destructive occurrence of nature. For example, earthquakes; floods; hurricanes; lightening; and tornados.
Addendum (plural: Addenda): Something added as an attachment to a contact, document, or letter. For example, an addendum to a Purchase and Sales Agreement may specify items to be left by the Seller with the sale of the property, or mortgage contingencies.
Add-On Interest: Interest, which is calculated on the original principal and then added to the original amount borrowed. This sum is then divided into a number of equal payments. For example, a $1,000 loan with 8% add-on interest for four years to be paid monthly, would be $1,000 plus $400 (8% of $1,000 for 4 years) for a total of $1,400, paid in 60 monthly payments of $23.33 each month. (See Interest.)
Adjacent: Nearby, but not necessarily adjoining. For example, two parcels that are adjacent or close to each other but may not abut or be adjoining.
Adjoining: Contiguous; attached; sharing a common border. For example, the two parcels were adjoining.
Adjusted Property Value: The lesser of the appraised value of a property and the FHA Lending Limit; this value is used in calculating the borrower's Principal Limit in FHA insured reverse mortgages.
Adjustable Rate Mortgage: A general term for any mortgage in which the interest rate, and generally payments, that change over the life of the loan. The interest rate is adjusted to match the rise or fall of a pre-selected interest rate index and the borrower's regular payments will increase or decrease accordingly. Different types of adjustable-rate mortgages (ARMs) have different frequencies for these adjustments. Some ARMs have limits on payment and interest rate changes and the maximum interest rate over the life of the loan. To the borrower's advantage, the initial rate of an ARM is usually low, permitting the purchase of real estate that otherwise would be unaffordable with a fixed-rate mortgage. But, there is a risk of higher payments later on. Also see Index, Initial Interest Rate.
Adjustment Interval: When an adjustable-rate mortgage (ARM) is negotiated, provision is made for the intervals of interest rate adjustment. This allows the lender to adjust the interest rate charged and the payments required from the borrower at prescheduled times.
Adjustment: In an appraisal, the amounts added to or subtracted from the sales price of comparable properties to obtain an adjusted sales price, that more accurately reflects the subject property's value.
Administrator: A person appointed by a court to administer the estate of a deceased person who died without a will (intestate).
Adverse Possession: A means of acquiring title to real estate, where an occupant has been in actual, open, and continuous use, for the period require by state law to receiving title.
Affidavit: A sworn statement, in writing, usually made before a notary and or witnesses.
Affirm: To confirm; verify; or ratify. For example, the parties to the Purchase and Sales Agreement, affirmed the terms of the agreement.
Agent: One who undertakes to transact some business or to manage some affair for another (the principal), with the principal's authority.
Alienation: To convey or transfer title and possession of a property either voluntary (by the owner), or involuntary (without the owners consent).
Alternative Mortgage Instruments: Mortgage instruments that may help qualify borrowers who otherwise may not be able to qualify for a standard 30-year, fixed-rate mortgage loan. For example, adjustable rate mortgages, variable rate mortgages, rollover loans.
Amenity: An aspect of a property that enhances its value. For example, off-street reserved parking within a condominium community, the nearness of good public transportation, tennis courts or a swimming pool.
American Land Title Association: A national association of title insurance companies, title abstractors and attorneys who specialize in real estate law. The American Land Title Association (ALTA) establishes standard procedures and uniform title abstract and insurance policy forms.
Amortization: The systematic and continuous repayment of an obligation through periodic installments until the debt has been paid off in full.
Amortization Period: That period of time over which a calculated mortgage payment will fully repay a set loan amount at a set interest rate. For example, the loan was amortized over 30 years.
Annual Cap: A limit on the amount of adjustment in the interest rate on an adjustable rate mortgage over a twelve month period.
Annual Percentage Rate (APR): The actual interest rate the borrower pays when all the costs of obtaining credit are included. Commonly called APR.
Annuity: An amount paid at regular intervals for a set period of time. Mortgage payments are a form of an annuity paid to the lender.
Applicant: One who applies for a real estate loan (the prospective borrower/mortgagor).
Application: A form used by a borrower to submit pertinent financial and property information concerning a borrower and the proposed security (property). The standard residential mortgage application is Form HUD-1003.
Appraisal: A report made by a qualified appraiser setting forth an opinion or estimate of value. The term also refers to the process by which this estimate is obtained.
Appraised Value: An estimation of property value made by a licensed expert in an appraisal report, based on one or more methods: cost approach, income approach, and market comparison approach.
Appraiser: A licensed expert qualified by education, training and experience who sets forth an opinion or estimate of value of a property, based on available facts and an inspection of that property.
Appreciation: An increase in the value of a property. Appreciation may be the result of an increased demand for a property, any improvements or additions made, improvements to the neighborhood, etc.
Appurtenance: Anything that is or becomes part of the property because it is attached or closely related to the land. It may be a structure such as a well, barn or garage; or it may be a right or interest enjoyed by the previous owner, such as an easement.
APR: Annual Percentage Rate. The actual interest rate the borrower pays when all the costs of obtaining credit are included.
ARM: Adjustable-Rate Mortgage. A general term for any mortgage in which the interest rate and, generally, the payments change over the life of the loan. The interest rate is adjusted to match the rise or fall of a pre-selected interest rate index and the borrower's regular payments will increase or decrease accordingly. Different types of adjustable-rate mortgages (ARMs) have different frequencies for these adjustments. Some ARMs have limits on payment and interest rate changes and the maximum interest rate over the life of the loan. To the borrower's advantage, the initial rate of an ARM is usually low, permitting the purchase of real estate that otherwise would be unaffordable with a fixed-rate mortgage. But, there is a risk of higher payments later on. (See Index, Initial Interest Rate.)
Arm's Length Transaction: A transactions among parties where each party acts in his or her own best interest. Examples of non-arm's length transactions are transaction between a husband and a wife, or a father and a son, etc.
Arrearages: The total, accumulated, delinquent principal, interest, taxes and insurance (PITI) amount that a borrower is behind and owes a lender.
As is: A sale without guarantees as to condition of the property.
Assessed Valuation: The value a taxing authority places upon real or personal property for the purpose of collecting payment of taxes on the property.
Assessment: Tax on real property either by an annual property tax based on assessed value and special assessments for sewers, public improvements, etc.
Assessment Ratio: The ratio of assessed value to market value. For example, a town has a 50% assessment ratio, thus a property worth $300,000 is assessed at $150,000.
Assessor: A public official who evaluates property for the purpose of taxation.
Asset: Something of value. For example, a house, car, cash, bank deposits, retirement fund, cash value of life insurance policy, etc.
Assignee: The person to whom an agreement or contract is sold or transferred to by and assignor.
Assignment of Rents: A legal document, normally included in the mortgage, that assigns all rents and income from a property to the mortgagee. If properly invoked after default, the mortgagee has a right to assume management of the property and collection of the rents from the subject property.
Assignor: A party who sells or transfers an agreement or contract to another called the assignee.
Assumption: A means by which the title/mortgage may be transferred to another party with or without release of liability on the note. The new owner assumes the Seller's mortgage.
Attorney-in-Fact: One who is authorized to act for another under a power of attorney.
Attornment: A tenant's formal agreement to be a tenant of a new landlord.
Auction: A way of marketing property to the highest bidder. In many states an auction is part of the foreclosure process.
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