Home Buyer Home Seller
Glossary

A  

Abandonment
Voluntarily relinquishing  rights of ownership  with an intent to abandon (give up the  interest).
Abatement
A reduction or decrease. Usually applies to taxes.
Abstract Of Title
A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an opinion as to the validity and legality of title.
Acceleration Clause
Clause used in a mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as a payment default by a first time home buyer.
Accretion
The gradual addition of land to the shore or bank of a waterway.
Acknowledgement
A declaration, usually in writing,  by a person executing an instrument, given before a person authorized to give an oath (usually a notary public), stating that the execution is of his own free will.
Acquisition Costs
Costs of acquiring property beyond the purchase price: escrow fees, title insurance, lenders fees, etc. Some of these costs for the first time home buyer can be paid for with grants.
Act Of God
Damage caused by nature (hurricanes. ice. etc.) rather than destruction by man.
Adjustable Rate Mortgages (ARM's)
Second mortgage loans in which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the creation of the loan. Also called: Adjustable Rate Loans, Adjustable second mortgage loans, Flexible Rate Loans, Variable Rate Loans.
Agency
A relationship created when one person (the principal) delegates to another (the agent) the right to act on his or her behalf in business transactions.
American Land Title Association (ALTA)
A national association of title insurance companies, abstractors, and agents. The association adopts standard title policy forms.
Amortization
Payment of a debt in equal installments of principal and interest, rather than interest only payments, so that in a specified period of time the outstanding balance will be completely paid off.
Annual Percentage Rate 
The yearly interest percentage of a loan, expressed by the actual rate of interest paid. The APR will factor in all interest costs, including prepaid interest in the form of points. The APR is disclosed as a requirement of federal truth in lending statutes.
Appraisal
An opinion of value based upon a factual analysis compiled by a person of suitable qualifications. Especially important for first time home buyers.
Arrears
If a mortgage payment is late, it is said to be in arrears.
Assumable
A mortgage loan which can be transferred to another person without a change in the terms of the loan.
Assumption of Note
Agreement by a buyer to assume the liability under an existing mortgage note secured by a mortgage deed. The lender usually must approve the new debtor in order to release the existing debtor from liability.

B                  

Balloon Note
A note calling for the principal sum, or a large portion thereof, (known as a "balloon") is due at maturity. Sometimes used in creative financing for first time home buyers.
Balloon Payment
The unpaid principal balance of a loan due on a specific date in the future. Usually the amount that must be paid in a lump sum at the end of the term.
Bankruptcy
Proceedings under federal bankruptcy laws to relieve a debtor from insurmountable debt.  Voluntary bankruptcy is petitioned by the debtor, involuntary by the creditors.
Beneficiary
The Person who is entitled to receive funds of property under the terms and provisions of a will, trust, insurance policy or security instrument. Many first time home buyers are beneficiaries of money for the down payment.
Biweekly
A mortgage note that establishes a payment period of every two weeks, instead of once per month, resulting in the equivalent of 13 payments per year, rather than 12.
Blanket Mortgage
A mortgage covering more than one property of the mortgagor, such as a mortgage covering all the lots of a builder in a subdivision.
Borough
A part of a city, having legal authority over certain local matters. The most famous boroughs are the five boroughs of New York City.
Breast Height
The height at which the diameter of a tree is measured. A height of 4 1/2 feet above the ground level. The abbreviation D.B.H. (diameter-breast-height) is usually used.
Broker, Real Estate
One who is licensed by the state to carry on the business of dealing in real estate owned by others for monetary compensation. A broker may receive a commission for his or her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange.
Buy-down
A payment to the lender from the seller, buyer, builder, other third party, or some combination of these, causing the lender to reduce the interest rate of a first time home buyer loan. The buy-down is usually for the first 1 to 5 years of the loan.

C                

California Land Title Association (CLTA)
An association in California of tide insurers and underwritten title companies. The association adopts standard title policy forms.
Call
In a metes and bounds legal description of a property, the angle and distance of a given line or arc.
Cancellation Clause
A clause in a lease, purchase and sale agreement,  or other contract, setting forth the conditions under which each party may cancel or terminate the agreement. The conditions may be as simple as giving notice or complex and require payment by the party desiring to cancel.
Cap
The maximum which an adjustable rate first or second mortgage may increase, regardless of index changes. Cap can describe yearly changes as well as total change over the life of the loan.
Capital Gains
Gains realized from the sale of property. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.
Carrying Charges
The costs involved in retaining a property which is intended to produce income (either by sale or rent) but has not yet done so. Primarily amongst carrying charges are principal and interest charges on the first or second mortgage.
Caveat Emptor
Latin for "Let the buyer beware." Legal maxim stating that the buyer takes the risk regarding quality or condition of the item purchased, unless protected by warranty or there is misrepresentation.
Covenants, Conditions and Restrictions (CCR's)
Limitations placed on the use and enjoyment of real property. These are found most often in condominium projects, subdivisions and planned unit developments. The intent of CCR's is to protect the beauty of the development by disallowing various uses such as storing old, unregistered vehicles, etc.
Certificate Of Title
A legal document, usually written by an attorney, stating that title is vested as stated in the abstract. Certificates of title are one of the required elements in the paperwork at closing of a first time home buyer loan.
Chain of Title
A chronological list of publicly recorded instruments tracing title to land, from the original owner to the present owner.
Clear Title
Title to real property which is free from liens, defects or other encumbrances.
Closing
(1) In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale between buyer and seller, or when a loan refinancing is completed. (2) The final call in a metes and bounds legal description which "closes" the boundaries of the described property.
Closing Costs
Expenses, beyond the selling price, such as loan fees, title fees, etc. Paid when documents are executed and/or recorded and the sale is complete. This process usually happens when signing all the papers at the closing of the loan for first time home buyers.
Closing Statement
A summary, in the form of a balance sheet, showing the amounts of debits and credits to which the seller is entitled to receive and the first time home buyer is required to pay upon closing of a mortgage.
Coinsurance
A sharing of the risk of an insurance policy by more than one insurer. Usually one insurer is liable up to a certain amount, the other liable above and beyond that amount.
Commercial Property
Property which is zoned "commercial" (for business use), but not industrial.
Commission
Compensation due a real estate broker for working on behalf of the first time home buyer.
Community Property
Property acquired during a marriage by either a husband or wife, or both, which is not separate property.
Comparables (Comps)
An abbreviation for comparable properties used for comparative purposes to determine value in the appraisal process. Appraisals are required before any lender will grant a first or second mortgage.
Condominium
A structure of two or more units, the interior space of which are individually owned: the balance of the property (both land and building) is owned in common by the owners of the individual units and is called the common area. Condominiums are less costly for builders to build, and can be affordable is designed to be. As such, they are very popular with first time home buyers.
Consideration
A required element in all contracts by which some-thing of value is exchanged for the act or promise of another (usually to purchase property).
Contingency
Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met, such as contingent upon borrower obtaining first or second mortgage financing..
Conveyance
The transfer of title or an interest in real property to the first time home buyer by means of a written instrument such as a warranty deed.

D   

             
Deed
An instrument to convey property from one person to the home buyer.
Deed Of Trust
An instrument used in many states in place of a first or second mortgage. Property is transferred to a trustee by the borrower in favor of the lender. Upon payment in full property is conveyed to the borrower from the trustee.
Delivery
The granting of a deed transferring ownership. Usually accomplished by delivery of a deed to the first time home buyer.
Demand Note
A note having no date for repayment, but due on demand by the lender.
Deposit
Money given by the buyer with an offer to purchase. Shows good faith. Also called earnest money. When a broker is involved, the first time home buyer's deposit money is held in an escrow account until the transaction takes place.
Depreciation
Decrease in value to real property caused by deterioration or obsolescence, usually used for tax purposes. In the real world, continuous monetary inflation masks depreciation.
Discount Points
A prepaid interest fee associated with the note rate on the first time home buyer's loan, the more discount points you pay, the lower interest rate you can obtain on your mortgage.
Documentary Transfer Tax
The tax, based on sales price, less loans which are being assumed, which is charged by the city and/or county on the transfer of real property to the home buyer.
Dual Agency
The representation of opposing principals (first time home buyer and seller) at the same time.
Due on-Sale-Clause
A clause in a mortgage loan which gives the lender the right to demand payment in full upon the sale of property.

E                

Easement
A right created by grant, agreement, or necessary implication, which one has in the land of another, such as right to cross A to get to B.
Egress
A term concerning a right to come and go across the land (public or private) of another. Usually part of the term ingress and egress.
Encumbrance
A claim, lien, charge, or liability attached to and binding real property.
Equity
The value of a first time home buyer's interest in real property after any and all liens, first or second mortgages, and charges have been deducted.
Equity Line Of Credit
A combination of a line of credit and equity loan. A mortgage note is recorded against the potential first time home buyer's property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the first or second mortgage note.
Escalation Clause
A clause in a lease providing for an increased rental payment at a future time.
Escrow
Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event or events.
Exclusive Listing
A written contract between a property owner and a real estate broker, giving the broker the exclusive right to sell the property for a commission. The owner promises to pay a fee or commission (typically a percentage of the selling price) to the broker if certain real property of the owner is sold during a certain period, regardless of whether the broker causes the sale.
Expert Testimony
Testimony in court by one acknowledged to have special training and knowledge in a particular field. Only testimony pertaining to the field in which the witness is "expert" is considered expert testimony. For example, and loan officer at a bank could provide expert testimony on second mortgages, but not on auto repair.
Exposure
(1) The degree to which a property for sale, lease, etc., is made noticeable (exposed) to potential buyers, tenants, etc., through advertising, multiple listing groups, word of mouth, etc. (2) The direction in which a property faces.

F                   

Fair Market Value
An appraisal term for the price which a property would bring in a competitive market providing a willing seller and willing first time home buyer, each of whom has a reasonable knowledge of all pertinent facts, and neither being under any duress to buy or sell.
Federal Deposit Insurance Corporation
The federal corporation which insures against loss of deposits in participating banks, up to a maximum amount.
Federal Home Loan Banks
Banks created under the Federal Home Loan Bank Act of 1932, in order to keep a permanent supply of money available for home financing. The banks are controlled by the Federal Home Loan Bank Board. Savings and loans, insurance companies, and other similar companies offering long term first or second mortgage financing to first time home buyers and others may become members of the Federal Home Loan Bank System, and thus may borrow from one of the regional banks throughout the country.
Federal National Mortgage Association (Fannie Mae)
A for-profit corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA as conventional home mortgages.
FHA (Federal Housing Administration)
A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price, and borrowers to qualify for a second mortgage loan with very little down payment. FHA loans are used often by first time home buyers because smaller down payments are needed.
FHLMC (Freddie Mac)
Federal Home Loan Mortgage Corporation - A federal agency purchasing first mortgages from members of the Federal Reserve System, and the Federal Home Loan Bank System.
Finance Charge
A total of all costs imposed (primarily mortgage interest, but other costs are included as well) directly or indirectly by the creditor and payable either directly or indirectly by the first time home buyer, as defined by the federal Truth-In-Lending laws.
Financial Statement
An accounting statement showing assets and liabilities of the first time home buyer, or any person or company. Used generally for large mortgage loans or other instances when the credit report (history of payment of debts) in itself is not sufficient.
Finder's Fee
A fee paid to someone who finds a buyer or property for a broker, buyer, etc. The term is sometimes used to attempt to pay a commission to an unlicensed person. In most sates, a finder's fee is considered a commission and may only be paid to one who holds a real estate license.
First Mortgage
A mortgage on property that is superior in position (first) to any other mortgage (second, third, etc).
First Refusal Right
A right, granted by an owner, which gives another person a first chance to buy the property if the owner decides to sell. The owner must have a legitimate offer which the person can match or refuse.
Fixed Rate Loan
A mortgage loan on which the same rate of interest is charged for the life of the loan.
Fixture
Personal property which is permanently attached to the property (such as a built-in oven), and, as such, becomes part of the real property.
FNMA Buydown
FNMA (Federal National Mortgage Association) accepts first and second mortgage loans containing a buy down provision on single family residential, owner occupied properties. A prepayment (points) will buy a lower rate of interest during the first one to five years of the loan for the first time home buyer.
Forfeiture
The taking of an individual's properly by a government, because the individual has committed a crime. In the United States, private property cannot be taken, except by eminent domain upon payment of just compensation, or for nonpayment of taxes. All outstanding mortgage balances are still due.
Full Disclosure
In real estate, revealing all the known facts (good or bad, but primarily bad) which may affect the decision of the home buyer or tenant. A broker must disclose known defects in the property for sale or lease. A builder must give to a potential buyer the facts of his new development.

G                

Garnishment
A legal proceeding under which a person's money in control of another (such as salary) is taken for payment of a debt (usually taxes). The amount which may be taken is set by statute (usually as a percentage), and, in most states, a judgment is necessary before garnishment.
Georgian Architecture
A colonial style of architecture dating back to the eighteenth century and characterized by first floor windows extending to the ground. Architectural details and exterior placements (windows, doors. etc.) are simple and well balanced yet formal in appearance.
Graduated Payment Mortgage
A mortgage loan calling for increasingly higher payments over a portion or entire term of the loan. This allows the buyer low beginning payments. The payments then increase as (theoretically) the first time home buyer's earnings increase.
Grantee
One to whom a grant is made. The buyer of real property.
Grantor
One who has made a grant. The seller of real property.
Gross Income
The scheduled (total) income, either actual or projected, derived from a business or property.
Gross Income Multiplier
A figure which, when multiplied by the annual gross income, will theoretically determine the fair market value of an income producing property. A general rule of thumb which varies with specific properties and areas.
Grout
Thin mortar used in masonry work to fill joints between bricks, stone, blocks, tiles. etc.
Growing Equity Mortgage
A fixed rate, graduated payment second mortgage loan allowing low beginning payments and a shorter term because of higher payments as the loan progress. Based on the theory of increasing income by the first time home buyer and, therefore, ability to make higher future payments.
Guaranty
Agreement to pay the debt or perform the obligation of another in the event the debt is not paid or obligation not performed.

H                 

Hard Money Mortgage
A first or second mortgage given in return for cash, rather than to borrow a portion of the purchase price, as with a purchase money mortgage.
Heir
One who by law receives the estate of a deceased person.
Hidden Defect
An encumbrance on a title that is not apparent in the public records; for example, unknown heirs, secret marriages and previous fraudulent transfers.
Holdback
Portion of a mortgage loan held back by the lender until a contingency is met, generally repairs.
Holding Period
The time period used by the IRS to differentiate between a long or short term capital gain. The period during which the taxpayer owns the capital asset.
Homestead
The dwelling (house and land) of the head of a family. Some states grant statutory exemptions, protecting homestead property (usually to a set maximum amount) against the rights of creditors. Property tax exemptions (for all or part of the tax) are also available in some states.

Home Inspection
The evaluation by a home inspector for the home you are buying or selling. The home inspection should be something that you ensure is done in order to give a more fully disclosure about the home. A home inspection is not a guarantee or warranty, it is the inspector's evaluation of the home and in most cases deemed of great value to all involved in the home transaction.
Home Warranty Insurance
Private insurance insuring a first time home buyer against defects (usually in plumbing, roofing, structural, and electrical) in the home she has purchased. The period of insurance varies and both new and used homes may be insured.
Housing Starts
Government compiled statistics on number of houses on which construction has begun. The figures are used to determine the availability of housing, need for real estate loans, need for labor and materials, etc.
Hypothecate
To mortgage or pledge without delivery of the underlying security to the lender.

I                     

Improvements
Typically buildings, but may include any permanent structures such as a street, utilities. etc.
Industrial Tax Exemption
An exemption from local property taxes granted to encourage industries to come into an area. Has been used successfully in the South. Usually granted for a specified period of time.
Inheritance Tax
A tax on the transfer of property from a deceased person to heirs.
Installment Contract
A method of purchasing by installment payments. When referring to real property, the most common term is a land contract.
Institutional Lenders
Banks, savings and loan associations and other businesses which make first or second mortgage loans to first time home buyers and the public in the ordinary course of business.
Insured Mortgage
A first or second mortgage insured against loss to the mortgagee in the event of default and a failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure.
Interest Cap
The maximum interest rate increase of an adjustable first or second mortgage loan. Can be referred to as a yearly cap or a total cap over the entire life of the second mortgage loan.
Interstate Land Sales
Sales of land to a buyer in another state. Because the buyer is usually totally dependent on the seller for information regarding the property, federal disclosure laws have been passed to aid and protect the buyer. The buyer also has a period (now 3 days) after singing a purchase agreement, in which to rescind.

J 

Jetty
(1) A pier or other structure (usually of stone), built out into a body of water to protect a harbor. (2) A part of a building which projects out beyond the exterior walls, such as an overhanging upper floor, a balcony, etc.
Joint Appraisal
An appraisal by more than one appraiser, but one which states common conclusions.
Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
Judgment
The decision of a judge in a court of law. Money judgments, when recorded, become a lien on real property of the defendant.
Judgment Lien
An involuntary lien against the property of a judgment debtor.
Jumbo Loan
A first or second mortgage loan of a large amount, usually in excess of $500,000. Does not typically apply to first time home buyers.
Just Compensation
In condemnation the amount paid to the property owner. The theory is that in order to be "just," the property owner should be no richer or poorer than before the taking.

K 

Keyman Insurance
Insurance of loss (through death or disability) of a "key" (critically important) person within a company. The liability is the estimated cost of the loss (in business lost, and replacement of the individual). Some mortgage lenders require this insurance before lending to small companies which rely on one or a few "key" people.
Knot
The hard, irregular shaped defects in boards, caused by cutting at the point where the branch of the tree meets the trunk.

L   

Landowner's Royalty
In oil and gas and mineral leases, the portion of the proceeds which goes to the property owner.
Late Charge
A penalty for failure of the first time home buyer to pay an installment payment (typically a second mortgage loan payment) on time.
Lease With Option To Purchase
A lease under which the lessee has the right to purchase the property for a specified sum. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period.
Legal Description
A description by which property can be definitely and accurately located by reference to surveys or recorded maps.
Legal Owner
The term has come to be used as a technical difference from the equitable owner, and not as opposed to an illegal owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than a lien.
Lien Waiver 
For real estate purposes, a waiver of mechanic's lien rights, signed by a subcontractor so that the owner or general contractor can receive a draw on a construction loan. The mortgage lender usually requires lien waivers to ensure that subcontractors get paid.
Liquidated Damages
A specified amount of damages, set forth in a contract, to be paid by the party breaching the contract. A predetermined estimate of actual damages from a breach.
Loan Ratio
The ratio, expressed as a percentage, of the amount of a second mortgage loan to the appraised value or selling price of real property. Usually, the higher the percentage, the greater the risk to the mortgage lender, thus the more the interest charged. Maximum percentages for banks, savings and loans, or government insured loans, is set by statute.
Loan to Value Ratio
The ratio of the first and second mortgage loan's principal to the property's appraised value or its sales price, whichever is lower.
Long Term Capital Gain
Gain on the sale of a capital asset which has been held for a specified time or longer. Long term capital gain is often taxed at a special rate and not as ordinary income.

M     

Made Land
Land formed by human activity, usually by filling, and not by nature.
Marketable Title
Title which can be readily sold to a reasonably prudent buyer aware of the facts and their legal meaning concerning liens and encumbrances.
Market Value
The highest price a willing first time home buyer would pay and a willing seller accept, both being fully informed, and the property exposed for sale to the public for a reasonable period of time. In times of low interest rates, market value tends to be high because mortgage payments are lower - home buyers can afford more house and bid up prices. In times of high interest rates, payments become expensive and sellers have to lower their prices for buyers to be able to afford the monthly payments.
Market Value Approach
Appraising the value of a property by comparing the price of similar properties (comparables) recently sold.
Maturity
Termination period of a note. For example: A 30 year mortgage has maturity of 30 years. Mechanic's Lien
A lien created by statute for the purpose of securing priority of payment for the cost of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the property as well as the improvements.
Metes and Bounds
A form of land description in which boundaries are described by courses, directions, distances and monuments.