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
D Terms
Damages: An amount of money recoverable by a person or company who has been injured in any manner thought the act or default of another.
Debenture: An unsecured note or bond.
Debit: In a closing settlement, an item that has been charged to a party, versus a credit.
Debt: An obligation that is to be repaid.
Debt Service: Also called Annual Debt Service, it is the annual required principal and interest payments for a loan.
Debt Coverage Ratio (DCR): Also called Debt Coverage Service Ratio or DCSR. The relationship between net operating income and annual debt service. An important criteria for income (commercial) property underwriting. The formula is net operating income / annual debt service = debt coverage ratio. A DCR of 1.3 or higher is commonly needed.
Declaration: Formal pleadings by a plaintiff as to the facts and circumstances that gave rise to the plaintiff cause of action.
Declaration of Trust: A written statement by a Trustee acknowledging that the property is held for the benefit of another.
Decree: An order or decision by a court or one in authority.
Dedication: The gift of land by an owner for public use, and the acceptance of the gift by a unit of government.
Deed: The formal written document that transfers the rights of ownership and possession (that is, the title) from the seller to the buyer.
Deed in Lieu of Foreclosure: A transfer of title to real property, from a delinquent mortgagor to the mortgagee, given voluntarily to satisfy the balance due on a defaulted loan and to avoid foreclosure proceedings. Also called "voluntary conveyance."
Deed of Trust: A legal document, which conveys title to real estate to a disinterested third party (trustee) who holds the title until the owner of the property has repaid the debt. In states where it is used, a deed of trust accomplishes essentially the same purpose as a regular mortgage. Also called trust deed or trust indenture. In some states, this is used in place of a mortgage. Three people are involved in a deed of trust: the borrower, the lender and the trustee. The borrower transfers the legal title for the property to the trustee who holds the property as a security for the debt. If the borrower pays the mortgage as agreed, the trustee gives the legal title to the owner. If the borrower does not pay the mortgage as agreed, the trustee can sell the property. (See Mortgage.)
Deed Restriction: A clause in a deed that limits the use of the land.
Default: 1) A breach or non-performance of the terms of a note or the covenants of a mortgage or deed of trust. 2) The failure to do what is required by law or the terms of a contract. 3) Failure to fulfill an obligation or promise.
Defeasance: A clause in a mortgage that gives the borrower the right to redeem the property after default, usually by paying the full indebtedness and fees incurred.
Defect in Title: Any recorded instrument that would prevent the grantor from giving a clear title.
Defendant: The party being sued.
Deferred Interest: With adjustable-rate mortgages (ARMs), if monthly payments do not cover the interest cost, the interest left unpaid is deferred to later years by adding it to the unpaid principal balance. In subsequent months, charged interest is added to this unpaid interest. Many lenders limit deferred interest. Deferred Interest is common with Option ARM loan products. For example, by not allowing it to go above 125% of the original mortgage loan balance. If the unpaid balance exceeds the limit placed by the lender, the borrower can no longer defer interest and must begin making payments large enough to fully pay what is due over the remaining term. In this case, the payments can increase suddenly and significantly. Deferred interest can occur when choosing a graduated payment option (see Graduated Payments), where the loan starts out below current rates but an agreement to pay the difference (the deferred interest) in later years is made. Deferred interest can also occur when choosing a monthly payment cap. (See Cap.)
Deferred Maintenance: In an appraisal, an type of physical depreciation due to a lack of normal upkeep. For example: broken windows; peeling paint; missing roof shingles; missing siding; etc.
Deferred Payments: Payments made at some future date.
Deficiency Judgment: In the event that the sale of a foreclosed property does not provide an amount of money sufficient to cover the balance due on the loan, a judgment may be sought against the borrower, who is personally liable for the difference. If the deficiency is granted by the court, this judgment can be collected from the borrower from other property, other assets owned or by garnishment.
Delinquent: A loan payment that has not been received 30 days after its due date.
Delivery: Transfer of the ownership from one person to another.
Demand Letter: A notice issued to a borrower, warning of the imminent danger of foreclosure.
Demand Loan: A loan that can be called by the lender at any time.
De Minimus PUD: A planned unit development (PUD) in which the common areas are of minimal value and have little influence on the enjoyment of the premises or the value of the property.
Demised Premises: A property subject to a lease.
Demolition: Destruction and removal of an existing structure from a site.
Density: The intensity of land use.
Density Zoning: Laws that restrict the intensity of land use.
Department of Housing and Urban Development: A department within the government that is responsible for the implementation and administration of government housing and urban development programs. FHA is a department of HUD.
Deposit: A sum of money given to either bind a sale of real estate or assure payment or an advance of funds in the processing of a loan. Also known as earnest money deposit.
Depreciation (Appraisal): In an appraisal, a charge against the reproduction cost of an asset for the estimated wear and obsolescence of a property.
Depreciation (Accounting): A lowering of value based on physical deterioration or functional or economic obsolescence.
Depth of Coverage: The percentage of the loan balance that is protected by mortgage guaranty insurance.
Descent: The acquisition of property by an heir when the deceased leaves no will.
Description: A formal depiction of the dimensions and location of a property. Commonly found in deeds, leases, sales contracts, and mortgages for real property.
Detached Housing: Residential buildings in which each unit is surrounded by freestanding walls or land. The opposite of attached housing.
Developer: A person or entity that prepares undeveloped land for building sites and sometimes builds on the sites.
Development: The process of placing improvements on or to a parcel of land. These improvements may included drainage, utilities, subdividing, buildings, etc.
Development Loan: A short-term loan, advanced before a construction loan, obtained by developers from lenders to acquire land and install basic utilities such as roads, sewers, water supply systems, etc.
Devise: A gift of real estate by will or last testament
Devisee: One who inherits real estate through a will.
Direct Reduction Mortgage: A loan that requires both interest and principal with each payment such that the payments will amortize over the loan's term.
Disbursements: Payments made during the course of an escrow or at closing.
Discharged: In bankruptcy, the release of the bankrupt party from overview by the court, or debts that have that the bankrupt party has been "discharged" by the court from an obligation to repay.
Disclaimer: 1) A statement whereby responsibility is rejected. 2) Renunciation of ownership of a property.
Discount: The amount of money, usually stated as a percentage, deducted from the face value of a note. The borrower receives the net amount after the discount has been deducted. The discount is computed to give the rate of interest agreed upon.
Discount Point: An amount paid to a lender at the time of closing a loan, to lower the face rate of a loan from its market rate.
Disintermediation: The flow of funds out of savings institutions into short-term investments in which the interest rates are higher. This shift normally results in a net decrease in the amount of funds available for long-term real estate financing. Also used to describe the market condition that exists when the shift occurs.
Dispossess Proceedings: The legal process by which a landlord removes a tenant and regains possession of the property. Eviction.
Distrait: The legal right of a landlord to seize a tenant's personal property to satisfy back rent.
Distressed Property: Real estate that under under foreclosure or impending foreclosure.
Domicile: The state/address in which one makes their principal residence.
Dominant Tenement: Land that benefits from an easement on another property.
Donee: One who receives a gift.
Donor: One who gives a gift.
Dower: Under common law, the legal right of a wife or child to a part of a deceased husband's or father's estate.
Down Payment: The amount one pays for a property minus the mortgage.
Draw: A periodic advance of funds from a construction loan to a contractor based on a specific segments of completion.
Dual Contract: The illegal and fraudulent practice of providing two different contracts or agreements for the same transaction. Such as one agreement for the true purchase terms and another with different terms used for a mortgage application.
Due-On-Sale Clause: A provision in a mortgage that states the loan is due upon the sale of the property.
Dummy: An individual or entity that stands in the place of the principal to the transaction. Sometimes called a "straw".
Duress: Compulsion to do something because of a threat. A contract is consider void if signed under duress.
Dwelling Unit: The living quarters occupied, or intended for occupancy, by a household.
