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Mortgage Glossary

Glossary A-B | Glossary C-L | Glossary M-R | Glossary S-X

A limit on how much the interest rate or monthly payment of an ARM can change, either at each adjustment or during the life of the mortgage. Payment CAPs don't limit the amount of interest the lender is earning so the may cause negative amortization.

Certificate of Eligibility
A certificate obtained by a veteran from a Veteran's Administration office which states that the veteran is eligible for a V.A. insured loan.

Certified Copy
A true copy, attested to be true by the officer holding the original.

Cestui que trust
One having an equitable interest in property, legal title being vested in trustee.

Chain of Title
The chronological order of conveyancing of a parcel of land, from the original owner to the present owner.

Closing Statement
The statement which lists the financial settlement between buyer and seller, and also the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

Cloud on Title
An invalid encumbrance on real property, which if valid, would affect the rights of the owner.

Equally responsible for repayment as the borrower.

A written promise to make or insure a loan for a specified amount and on specified items.

Properties used as comparisons to determine the value of a specified property.

A structure of two or more units, the interior space of which are individually owned.

Construction Loan
Short term financing of real estate construction. Generally followed by the long term financing called a "take out" loan, issued upon completion of improvements.

The dependence upon a stated event which must occur before a contract is binding.

Contract of Sale
Depending on area of country it may be a Land Contract or a Purchase Agreement.

Closing Cost
Expenses incurred in the closing of a real estate or mortgage transaction.

Conventional Mortgage
A loan neither insure by the FHA nor guaranteed by the VA.

Conversion Clause
A provision in some ARMs that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually the conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rate then prevailing for fixed-rate mortgages. The conversion feature may be available at extra cost.

Cost Plus Contract
A building contract setting the builder's profit at a set percentage of actual cost of labor and materials.

Contract Sales Price
The full purchase price as stated in the contract.

Certificate of Reasonable Value(CRV)
An appraisal of property for the purpose of insurance by the Veteran's Administration.

Declaration of Restriction
s A set of restrictions filed by a subdivider to cover an entire tract or subdivision.

Defective Title
Title to a negotiable instrument obtained by fraud. Title to real property which lacks some of the elements necessary to transfer good title.

Decrease in value to real property improvements caused by deterioration or obsolescence.

Real estate left by will.

One to whom real estate is given by will.

A testator who leaves real estate.

Direct Reduction Mortgage
An amortized mortgage. One on which principal and interest are being computed on the remaining balance.

Payments made during the course of an escrow or at closing.

Is an ARMwith an initial discount, the lender gives up a number of percentage points of interest to give you a lower rate and lower payments for part of the mortgage term. After the discount period, the ARM rate will probably go up depending on the index rate.

Documentary Tax Stamps
Stamps, affixed to a deed, showing the amount of transfer tax.

Dragnet Clause
A clause in a mortgage or deed or trust which places the real estate as security for existing debts between the parties.

A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another.

Eminent Domain
A Government right to acquire private property for public use by condemnation, and the payment of just compensation.

Construction onto the property of another, wall, fence, etc.

A claim, line charge, attached to and binding real property.

The difference between the market value of the property and the homeowners mortgage debt.

Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event.

Escrow Payment
That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes mortgage insurance, hazard insurance, lease payments, and other items as they become due, also known as "impounds" in some states.

Escrow Reimbursement
An assumptions or wrap loan transactions, the buyer reimburses the seller for the current balance of his escrow (or impounded) funds.

Federal Home Board
The board which charters and regulates federal savings and loan associations, as well as controlling the system of Federal Home Loan Banks.

Federal Tax Lien
A lien attached to property for nonpayment of a federal tax.

Fee Simple
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited.

Federal Home Loan Board
The board which charters and forbids discrimination in the sale.

Federal Housing Administratio
n A federal Agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A federal Agency purchasing first mortgages, both conventional and federally insured, from members of the Federal Reserve System, and the Federal Home Loan Bank System.

A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.

Full Disclosure
Revealing all the known facts which may affect the decision of a buyer or tenant.

General Lien
A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property.

Ginnie Mac (GNMA)
Government National Mortgage Association. A federal association working with FHA which offers special assistance in obtaining mortgages, and purchases mortgages in a secondary capacity

Grandfather Clause
The clause in a law permitting the continuation of a use, business, etc., which, when was permissible but, because of a change in the law is now not permissible.

Ground Rent
Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only.

Heir and Assigns
Words usually found in a deed, showing the interest the grantee is receiving.

Home Owner Association
An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.

Impound Account
Account held by a lender for payment of taxes, insurance, or other Index
The index of the measure of interest rate changes that the lender uses to decide how much the interest rate on an ARM will change over time. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.

Independent Contractor
The term is most important as used to describe the relationship of broker and salesperson, employee or independent contractor. If employee, the broker must withhold income tax and pay social security, provide workmen's compensation, and may be liable for some negligent acts of the salesperson while on the job. All of this is avoided by the broker if salesperson is an indepent contractor.

Installment Sale
A tax term used to describe a sale which is usually accomplished by use of a land contract.

Insured Mortgage
A mortgage insured against loss to the mortgagee in the event of default and failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure.

Interest Rate
The percentage of an amount of money which is paid for its use for a specified time.

Joint and Several
A liability which allows the creditor to sue any one of the debtors or sue all together.

Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. The interests must equal, accruing under the same conveyance, and beginning at the same time. Upon death of a joint tenant the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Late Charge
A penalty for failure to pay an installment on time.

Lease with Option to Purchase
A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of the lease period.

A general term encompassing all mortgages, and beneficiaries under deeds of trust.

Letter of Intent
A formal method of stating that a prospective developer, buyer or lessee, is interested in property.

An encumbrance against property for money, either voluntary or involuntary.

Life Estate
An estate in real property for the life of a living person. The estate then reverts back to the grantor or on to a third party.

Limited Partnership
A partnership consisting of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, contributing capital and liable only to the amount contributed.

Lis Pendens
A legal notice recorded to show pending litigation relating to real property and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.

Loan Package
The information given to the lender regarding the borrower and the property necessary to decide to give or not to give the loan.

Loan Ratio
The amount of a loan to the value or selling price of real property.

Loan-to-Value Ratio
The ratio of the mortgage loan amount to the properties appraised value (or the selling price whichever is less).

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