Real Estate Glossary

1-year ARM
An adjustable-rate mortgage (ARM) that has an initial interest rate for one year, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate.

3/1 ARM
An adjustable-rate mortgage (ARM) that has an initial interest rate for three years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate.

5/1 ARM
An adjustable-rate mortgage (ARM) that has an initial interest rate for five years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate.

7/1 ARM
An adjustable-rate mortgage (ARM) that has an initial interest rate for seven years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate.

10/1 ARM
An adjustable-rate mortgage (ARM) that has an initial interest rate for 10 years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate.

Abstract of title
A written history of all the transactions that bear on the title to a specific piece of land. An abstract of title covers the time from when the property was first sold to the present. Used by the title company to produce a title binder.

Acceleration clause
The section of a mortgage document that allows the lender to speed up the payment date in the event of a default, making the entire principal amount due.

Acre
An area of land that is 43,560 square feet.

Adjustable Rate Mortgage
Also known as an ARM Mortgage in which the rate of interest is adjusted based on a standard rate index. Most ARMs have caps on how much the interest rate may increase.

Adjustment interval
How often the loan's rate can be changed.

Alternative mortgage products
7/23 and 5/25 mortgages with a one-time rate adjustment after seven years and five years, respectively. Also known as a hybrid mortgage or two-step mortgage.

Amortization schedule
A timetable for the gradual repayment of a mortgage loan. An amortization schedule indicates the amount of each payment applied to interest and principal, and also the remaining balance after each payment is made.

Amortization term
The amount of time required to amortize (repay) a mortgage loan. The amortization term is usually expressed in months. A 30-year fixed-rate mortgage, for example, has an amortization term of 360 months.

Annual Percentage Rate (APR)
A standardized method of calculating the cost of a mortgage, stated as a yearly rate which includes such items as interest, mortgage insurance, and certain points or credit costs.

Appraisal
A written report by a qualified appraiser estimating the value of a property.

Appraised value
An opinion of a property's fair market value, based on an appraiser's inspection and analysis of the property.

Appraiser
A person qualified by education, training and experience to estimate the value of real property.

Appreciation
An increase in the value of a property due to changes in market conditions or improvements to the property.

ARM
See Adjustable rate mortgage.

Assessed value
The value of a property as determined by a public tax assessor for the purpose of taxation.

Assumable mortgage
A mortgage that a buyer can assume, or take over, from the seller of the property.

Balloon mortgage
A loan that has regular monthly payments which amortize over a stated term but call for a final lump sum (balloon payment) at the end of a specified term, or maturity date, such as 10 years.

Basis points
1/100th of 1 percent. If an interest rate changes 50 basis points, for example, it has moved 1/2 of 1 percent.

Binder
See title binder.

Biweekly mortgage
A mortgage that schedules payments every two weeks instead of the standard monthly payment. The 26 biweekly payments are each equal to one-half of the monthly payment. The result for the borrower is a substantial reduction in interest payments because the mortgage is paid off sooner. See also prepayment plan.

Board ("The Board")
The nickname for the local governing body of real estate agents which oversees and maintains the local Multiple Listing Service database.

Bridge loan
A loan that "bridges" the gap between the purchase of a new home and the sale of the borrower's current home. The borrower's current home is used as collateral and the money is used to close on the new home before the current home is sold. Some are structured so they completely pay off the old home's first mortgage at the bridge loan's closing, while others pile the new debt on top of the old. They usually run for a term of six months.

Broker
See mortgage broker or Realtor®.

Broker premium
Premium paid to mortgage broker as the "middleman" in the mortgage process between the lender and the borrower. Lenders offer brokers wholesale rates; brokers add a surcharge to cover the cost of underwriting to arrive at the rates charged to borrowers.

Built-ins
Cabinets, ranges, ceiling fans and other items permanently attached to a structure, and which a buyer may assume will remain with the structure.

Buydown
The process of trading money for a lower mortgage rate. The borrower "buys down" the interest rate on a mortgage by paying discount points up front. It can also be a mortgage in which an initial lump-sum payment is made to temporarily reduce a borrower's monthly payments during the first few years of a mortgage.

Caps
The maximum amount the interest rate can change annually or cumulatively over the life of an adjustable rate mortgage. For example, if the caps are 2 percent annual and 6 percent life of loan, a mortgage with a first-year rate of 10 percent could rise to no more than 12 percent the second year, and no more than 16 percent over the entire loan term.

Certificate of title
A statement provided by a title company or attorney stating that the title to the real estate is legally held by the current owner.

Chattel
Personal property.

Clear title
A title that is free of liens or legal questions as to ownership of a piece of property.

Closing
The meeting at which the sale of a property is finalized. The buyer signs the lender agreement for the mortgage and pays closing costs and escrow amounts. The buyer and seller sign documents to transfer ownership of the property. Also known as the settlement.

Closing costs
Expenses incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, escrow payments, and charges for title insurance. Lenders or Realtors® provide estimates of closing costs to prospective home buyers.

Closing statement
A financial disclosure accounting for all funds changing hands at the closing. See also HUD-1 statement.

Cloud on title
Any fact or condition that could adversely affect the title.

Combined Loan-To-Value Ratio (CLTV)
The ratio of all loans, including the first mortgage and second mortgage, to the total value of the property. See also LTV.

Commission
In real estate, the broker or salesperson's fee for assisting the transaction, usually expressed as a percentage of the total price paid for the house. The commission is usually paid for by the seller, and is negotiated to pay both the buyer's agent and the seller's agent.

Commitment letter
A formal offer by a lender stating the approved terms for lending money to a home buyer.

Common area assessment
A levy against individual unit owners in a condominium or planned unit development to pay for upkeep, repairs and improvements to the property's common areas, such as corridors, elevators, parking lots, swimming pools and tennis courts. Also called "association fees" or "condo fees."

Comparables or "comps"
Refers to "comparable properties," which are used for comparative purposes in the appraisal process. Comps are recently sold properties that are similar in size, location and amenities to the home for sale. Comps help an appraiser determine the fair market value of a property.

Comparative Market Analysis (CMA)
A formal analysis for determining the fair market value of a property. The procedure combines such factors as property condition and location, and compares these factors with similar properties currently on the market. A CMA helps pinpoint the price a seller should ask to sell their property.

Condominium
A real estate project in which each unit owner has title to a unit of the project, and sometimes an undivided interest in the common areas.

Conforming loan
A loan that conforms to the standard rules for purchase by Freddie Mac or Fannie Mae.

Contiguous
Adjoining or touching.

Contingency
A condition that must be met before a contract is legally binding. For example, home buyers often include a contingency that specifies that the contract is not binding until after a satisfactory report from a qualified home inspector. See home inspection.

Contract
In real estate parlance, the contract is the legal document by which buyer and seller make offers and counteroffers. The real estate contract describes the property, includes or excludes items in the property, names the price, apportions the closing costs between the parties and sets forth a closing date. When buyer and seller agree on terms and sign the same document, the property is said to be "under contract." More formally known as agreement for sale, purchase agreement or earnest money contract.

Conventional mortgage
Usually refers to a fixed-rate, 30-year mortgage that is not insured by the FHA, Farmers Home Administration (FmHA) or Veterans Administration.

Convertible ARM
An adjustable rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative, or 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.

Cost-of-funds index, or COFI
A yield index based upon the cost of funds to savings & loan institutions in the San Francisco Federal Home Loan Bank District. It is one of the indexes commonly used to set the rate of adjustable rate mortgages.

Covenant
A written restriction on the use of land, most commonly in use today in homeowners associations.

Credit report
A report on a person's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's record for paying debts in a timely manner.

Debt-to-income ratio, or DTI
The percentage of a person's monthly earnings used to pay off all debt obligations. Lenders consider two ratios, constructed in slightly different ways. The first, called the front-end ratio, the ratio of the monthly housing expenses --- including principal, interest property taxes and insurance (PITI) is compared to the borrower's gross, pretax monthly income. In the back-end ratio, a borrower's other debts, such as auto loans and credit cards, are also figured in. Lenders usually take both into account and set an acceptable ratio, which might be expressed as 33/39. Some lenders, and some lending qualifying agencies such as FHA, take only the back-end ratio into account.

Deed
The legal document conveying title to a property.

Depreciation
A decline in the value of property; the opposite of appreciation.

Discount points
A type of point (1 percent of a loan) paid by the borrower to reduce the interest rate.

Documentary Stamps, or Doc Stamps
A tax paid to the local government for registration of a document (a deed or mortgage) in the public records, often calculated as a percentage of the purchase price or the value of the mortgage.

Down payment
The amount of a property's purchase price that the buyer pays in cash and does not finance with a mortgage.

Earnest money deposit
A deposit made by potential home buyers during negotiations with the seller. The sum shows a seller that a buyer is serious about purchasing the property.

Easement
The right of another to use property. The most common easements are for utility lines.

80-10-10 loan
A combination of an 80 percent loan-to-value first mortgage, a 10 percent down payment and a 10 percent home equity loan. It would eliminate the need for private mortgage insurance, and for expensive homes it could eliminate the need for a jumbo mortgage by reducing the first mortgage to the conventional $300,701 limit.

Encumbrance
A lien, charge or liability against a property.

Equal Credit Opportunity Act
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.

Eminent domain
The right of public agencies to take land for public use.

Equity
The value of a homeowner's unencumbered interest in real estate. Equity is the difference between the home's fair market value and the unpaid balance of the mortgage and any outstanding liens. Equity increases as the mortgage is paid down or as the property enjoys appreciation.

Escrow
Escrow is a way to put things in the neutral zone while the closing of the house takes place. Escrow is the deposit of documents and funds with a neutral third party. This third party person, or the "escrow agent," is given specific instructions as to how the documents and funds should be disbursed. An escrow agent acts as a referee for the exchange and distribution of those documents in connection with transfer or financing of real property. Because an escrow agent represents neither the seller nor the buyer, the escrow agent can act on each party's behalf according only to the written instructions received.

Escrow payment
The portion of a homeowner's monthly mortgage payment that is held by the loan servicer to pay for taxes and insurance. Also known as reserves. The loan servicer holds the escrow funds separately from money meant to pay off principal and interest.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by credit reporting agencies and establishes procedures for correcting mistakes on a person's credit record.

Fair market value
A fair price for a home based on recent sales of properties of similar size and quality in the neighborhood.

Fannie Mae
Nickname for Federal National Mortgage Association. It is a government-chartered non-bank financial services company and the nation's largest source of financing for home mortgages. It was started to make sure mortgage money is available in all areas of the country.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD) that insures residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money.

FHA mortgage
A mortgage insured by the Federal Housing Administration (FHA).

First mortgage
A mortgage that is the primary lien against a property.

Fixed-rate mortgage
A mortgage in which the interest rate does not change during the entire term of the loan, most often 15 years or 30 years.

Flood insurance
Insurance that compensates for physical property damage resulting from rising water. It is required for properties located in federally designated flood areas.

Foreclosure
The legal process by which a homeowner in default on a mortgage is deprived of interest in the property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Freddie Mac
Nickname for Federal Home Loan Mortgage Corp. A financial corporation chartered by the federal government to buy pools of mortgages from lenders and sell securities backed by these mortgages.

Full Doc
Mortgage terminology which means that you must provide third-party documentation to support statements that you have made on a loan application, such as pay stubs, bank statements and IRS tax filings.

Ginnie Mae
Nickname for the Government National Mortgage Association (GNMA).

Good Faith Estimate
A written estimate of closing costs that a lender must provide a prospective home buyer within three days of submitting a mortgage loan application. The best approach is to request this list before choosing a loan.

Government National Mortgage Association (GNMA)
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress in 1968, GNMA has responsibility for the special assistance loan program known as Ginnie Mae.

Hazard insurance
Insurance coverage that compensates for physical damage to a property from natural disasters such as fire or other hazards. Depending where a piece of property is located, lenders may also require flood insurance or policies covering windstorms (hurricanes) or earthquakes.

Home inspection
An inspection by a building professional that evaluates the structural and mechanical condition of a property. The inspection may reveal the need for repairs that the seller may have to complete before the sale of the house will go through. The buyer may also make the house sale contingent on a satisfactory inspection.

Homeowners association
A nonprofit association that manages the common areas of a condominium or planned unit development (PUD). Unit owners pay to the association a fee to maintain areas owned jointly. See common area assessment.

Homeowner's insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a residence and its contents.

Housing expense ratio
The percentage of gross monthly income that goes toward paying a mortgage or rent on a home.

HUD-1 Statement
A document with an itemized listing of closing costs payable at the closing or settlement meeting when buying property. The closing costs can include a commission, loan fees and points, and sums set aside for escrow payments, taxes and insurance. It is signed by both the buyer and the seller, who may be paying some of the closing costs. The statement form is published by the Department of Housing and Urban Development (HUD).

Hybrid mortgage
See alternative mortgage products.

Index
A published measure of the cost of money that lenders use to calculate the rate on an adjustable rate mortgage (ARM). The most common indexes are the one-year Treasury Constant Maturity Yield and the FHLB 11th District Cost of Funds.

Indexed rate
The sum of the published index plus the margin. For example, if the index were 9 percent and the margin 2.75 percent, the indexed rate would be 11.75 percent. Often, lenders charge less than the indexed rate the first year of an adjustable rate mortgage (ARM).

Inflation
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Initial interest rate
Starting rate of an adjustable rate loan.

Intangibles tax
A Florida property tax assessed to a property owner for non-physical assets such as stocks, bonds and mutual fund shares.

Interest
Interest is an amount charged to the borrower for the privilege of using the lender's money. Interest is usually calculated as a percentage of the principal balance of the loan. The percentage rate may be fixed for the life of the loan, or it may be variable, depending on the terms of the loan. As of October 1, 1992, all new federal loans use variable interest rates that are pegged to the cost of U.S. Treasury Bills.

Interest Only Mortgage
Unlike a traditional mortgage payment, which is composed of interest and principle, an Interest Only Mortgage requires that only the interest portion of the payment be submitted each month, thereby leaving the balance of the loan unchanged.

Interest tax deduction
Most mortgage holders can deduct all the interest paid on the loan in filing income tax. The deduction applies to people with just one mortgage on a primary residence, as well as those with a combination of loans. Within certain limits set by the IRS, points paid up front on a mortgage are usually deductible in the year the house was purchased.

Jumbo mortgages
Mortgages larger than the limits set by Fannie Mae and Freddie Mac ($417,000 this year in Florida). A jumbo mortgage will carry a higher interest rate than a conventional mortgage.

Lease-purchase mortgage
A financing option that allows a potential home buyer to lease a property with the option to buy. Often constructed so the monthly rent payment covers the owner's first mortgage payment, plus an additional amount as a savings deposit to accumulate cash for a down payment. A seller may agree to a lease-purchase option if the housing market is saturated and the seller is having difficult selling the property.

Lender
The lender is the originated source of the mortgage loan; the one making the loan directly and closing the loan.

Lien
A legal hold or claim from one person on the property of another. The lien placed by a first mortgage is special; it is called the first lien and takes precedence over others.

Lifetime rate cap
In an adjustable rate mortgage (ARM), it limits the amount that the interest rate can increase or decrease over the life of the loan. See also caps.

Liquid Asset Reserves
Cash assests on deposit in a financial institution, or those readily available out of a 401k, IRA, or left-over after the closing. Liquid asset reserves are those which can be easily turned into cash, rather than an asset which has to be sold (like stocks). This money is calculated as the number of months of your PITI. For example, if your PITI is $1,000 per month, and you have $3,000 on deposit in a savings account after closing, then you have 3 months liquid asset reserves available.

Lis pendens
A pending lawsuit; in real estate, the constructive notice filed in public records that a legal dispute exists over a piece of property.

Livery of seizin
Under common law, the process of transferring title.

Loan origination
The process by which a mortgage lender obtains a mortgage secured by real property. An origination fee is charged by the lender to process all the forms involved in obtaining a mortgage.

Loan-to-value (LTV) ratio
The ratio of the mortgage loan amount to the property's appraised value or selling price, whichever is less. For example, if a home is sold for $100,000 and the mortgage amount is $80,000, the house has an 80 percent LTV.

Lock or lock-in
Lender's guarantee that the mortgage rate quoted will be good for a specific amount of time. The home buyer usually wants the lock to stay in effect until the date of the closing.

Lock-and-float
Rate programs offered by companies that allow borrowers to lock in the current interest rate on a mortgage for a specified period of time, while also letting them "float" the rate down if market conditions improve before closing.

Low-down mortgages
Mortgages with a low down payment, usually less than 10 percent. Fannie Mae and Freddie Mac design loan programs that spell out a set of standards for lenders. In recent years these government-chartered agencies have made low-down mortgages more available through programs such as Fannie Mae's Flexible 97 and Freddie Mac's Alt 97. The "97" refers to the amount of the home's value a lender will cover in a mortgage, leaving a low 3 percent down payment required.

Margin
The number of percentage points added to the index on a one-year adjustable rate mortgage (ARM). For example, if the index rate is 9 percent and the margin is 3 percent, then the fully indexed rate is 12 percent.

Maturity
The date on which the principal balance of a loan becomes due and payable.

Mortgage
A legal document that uses property as collateral to secure payment of a debt.

Mortgage banker
The lender that originates the mortgage loan; the one making the loan directly and closing the loan.

Mortgage broker
An individual or company that brings borrowers and lenders together for the purpose of loan origination. Unlike a mortgage banker, brokers do not fund the loan but work on behalf of several lenders. Brokers typically require a fee or a commission for their services. See broker premium.

Mortgage insurance
A policy that insures the lender against loss should the homeowner default on a mortgage. Depending on the loan, the insurance can be issued by a government agency such as the Federal Housing Administration (FHA) or a private company. It is part of the monthly mortgage payment. See also private mortgage insurance (PMI).

Multi-Family Home
A multi-family home is a type of rental property that holds more than one residential unit. A duplex is considered a multi-family home, as are some of the more historic four-unit buildings found in older neighborhoods.

Multiple Listings Service (MLS)
The Multiple Listings Service (MLS) is the master database of all properties for sale by licensed Realtors®, and is sub-divided into regional sections by local governing boards. The MLS for Pinellas County is administered by the Pinellas Suncoast Association of Realtors® and the Pinellas Realtor® Organization. Real estate agents rely on the MLS to inform them about homes for sale on a daily basis, and use the agent-only version of the MLS to determine which houses they will show their clients. The MLS is made available to the public in the MLS/IDX format.

Negative amortization
A gradual increase in mortgage debt that happens when the monthly payment does not cover the entire principal and interest due. The shortfall is added to the remaining balance to create "negative" amortization.

No-doc or low-doc loan
These no-documentation or low-documentation loans are designed for the entrepreneur or self-employed, for recent immigrants with money in foreign countries or for borrowers who cannot or choose not to reveal information about their incomes. You need a substantial down payment, excellent credit history and will usually pay a higher interest rate.

Non-conforming loan
A loan that does not meet the standard rules for purchase by Freddie Mac or Fannie Mae This mortgage is a catch-all for any loan that does not fall into a government-backed mortgage category.

Note
The document giving evidence of mortgage indebtedness, including the amount and terms of repayment.

Origination fee
A fee paid to a lender for processing a loan application.

Owner financing
A transaction in which the seller of a house provides all or part of the financing. Sellers may provide financing because they need to sell the property right away or they are having difficulty selling the house and want to provide financing as an incentive to a buyer. The seller must have enough equity in the property in order to provide this kind of financing.

Periodic rate cap
In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease during any one adjustment period. See caps.

PITI
Stands for principal, interest, taxes, and insurance, which are the usual components of a monthly mortgage payment.

PITI reserves
A cash amount that a home buyer must have on hand after making a down payment and paying all closing costs. The reserves required by the lender must equal the amount a home buyer would pay for PITI for a specified number of months.

Planned Unit Development (PUD)
A type of real estate project that gives each unit owner title to a residential lot and building and a nonexclusive easement allowing access to the project's common areas. See common area assessment.

Plat
A map that shows a parcel of land and how it is subdivided into individual lots. Plat maps also show the locations of streets and easements.

PMI
See private mortgage insurance.

Points
A point equals 1 percent of a mortgage loan. Lenders charge points as a way to make a profit. Borrowers may pay discount points to reduce the loan interest rate. Buyers are prohibited from paying points on HUD or VA guaranteed loans. On a conventional mortgage, points may be paid by either buyer or seller or split between them. Within limits, points are usually tax deductible. Also see interest tax deduction.

Pre-approval
This process goes a step further than pre-qualification. It means the lender has contacted the borrower's employer, bank and other places to verify all claims of earnings and assets. In return, the borrower receives a letter stating the lender is willing to grant a mortgage for a specified amount, within a limited period of time.

Prepayment penalty
A fee imposed by certain lenders if the first mortgage is paid off early.

Prepayment plan
Similar to a biweekly mortgage, but operated by a third party. In it, the borrower pays to the third party half the monthly mortgage payment every two weeks. At the end of the year, the plan operators typically take the extra money that results from the process and send lump sum payments to the participants' lenders. Instead of 12 monthly payments of $665, or $7,980 a year, on the 30-year mortgage, the borrower would make 26 biweekly payments of $332.50, or pay $8,645 annually. As a result, total interest would shrink by $34,130 and the loan term would shorten to less than 24 years.

Pre-qualification
An early evaluation by a lender of a potential home buyer's credit report plus earnings, savings and debt information. The home buyer gets a nonbinding estimate of the mortgage amount the borrower would qualify for, or how much house the borrower can afford. Buyers who pre-qualify can go a step further and seek pre-approval.

Principle
The reduction of a mortgage balance owed, upon which the interest payment is computed.

Private mortgage insurance, or PMI
Insurance that protects mortgage lenders against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure. PMI is usually required if the down payment is less than 20 percent of the sale price. Home buyers pay for the coverage in monthly installments. PMI is usually terminated when the home buyer has built up 20 percent equity in the property.

Purchase Money Loan
A loan used specifically to purchase a property, rather than to refinance.

Quit claim deed
The formal document by which a claim in property is denied. Often used to clear a cloud on title.

Radon
A radioactive gas found in some homes that in sufficient concentrations can cause health problems. Many home inspections check for radon.

Rate lock
A commitment issued by a lender to a home buyer or to the mortgage broker guaranteeing a specific interest rate for a specified amount of time. See also lock.

Real estate agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner. A real estate agent must pass a certification course and state examination which covers the legal aspects of real property, and must pass a background check in order to become licensed. A real estate agent must also satisfy a certain number of hours of additional training each year in order to maintain this license. A real estate agent in Florida is regulated under the jurisdiction of the Florida Real Estate Commission and the Florida Department of Business and Professional Regulation.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give home buyers advance notice of closing costs, which are payable at the closing or settlement meeting.

Realtor®
A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors®.

Refinancing
Securing a new loan in order to pay off the existing mortgage or to gain access to the existing equity in the home.

Reliction
An increase in the amount of land that occurs when a river or sea permanently withdraws.

Restrictive covenant
A clause in a deed that restricts the use of property for a period of time.

Roll-in loans
A refinance loan that rolls any closing costs or fees into the loan. These programs best serve people who have a reasonable amount of equity, want to reduce their overall interest expense and plan to stay in their homes. Most refinance programs also cap the allowable LTV at 97 percent, which means some borrowers won't have the option of rolling their costs in, no matter what.

Rural Housing Service (RHS)
This agency of the U.S. Department of Agriculture provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. It offers low-interest-rate loans with no down payment to borrowers with low-to-moderate incomes who live in rural areas or small towns.

Sale agreement
A written contract signed by the buyer and the seller of a house stating the terms and conditions under which the property will be sold.

Second mortgage
A mortgage on property that has a lien position behind the first mortgage. In case of foreclosure, the second lien receives no money until the primary lien has been satisfied.

Secondary mortgage market
The buying and selling of existing mortgages.

Servicer
An organization that collects monthly mortgage principal and interest payments from home owners and manages escrow accounts for paying taxes and homeowners' insurance premiums. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

Settlement
See closing.

Single Family Home
A type of property that includes only one residence, more commonly referred to as a "house." See also Multi-Family Home.

Stated Income Loan
The borrower is not required to provide verification or documentation to support the income stated on the loan application, so long as it appears reasonable for the occupation stated.

Subprime mortgage
A mortgage granted to a borrower considered subprime, that is, a person with a less-than-perfect credit report. Subprime borrowers have either missed payments on a debt or have been late with payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default.

Time is of the essence
A phrase inserted in contracts to require punctual performance.

Title
A legal document proving a person's right to claim entitlement to a property, including the history of the property's ownership.

Title binder
Written evidence of temporary title insurance coverage.

Title company
A company that specializes in examining and insuring titles to real estate.

Title insurance
Insurance that protects against loss from disputes over ownership of a property. A policy may protect the mortgage lender and/or the home buyer.

Title search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims against the property.

Transfer tax
State or local tax levied when title passes from one owner to another.

Treasury index
An index used to determine interest rate changes for certain adjustable rate mortgages (ARMs). It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

Truth-in-Lending
A federal law that requires lenders to disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.

Two-step mortgage
See alternative mortgage products.

Underwriter
A person trained in evaluating borrower risks and determining what rates and terms will be used for them. The Underwriter makes a decision as to whether the risk is sound based on all the facts known.

VA mortgage
A loan backed by the Veterans Administration. It requires very low or no down payments and has less stringent requirements for qualification. Members of the U.S. Armed Forces are eligible for the loans under certain qualifying conditions.

Warranty deed
The gold standard in deeds for home buyers: It proclaims that the grantor warranties (guarantees) that the property has clear title and is being conveyed free of liens or encumbrances.

Wraparound mortgage
A new mortgage that includes the remaining balance on an old mortgage, plus a new amount.