The Voice for Local Real Estate


Glossary

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Abstract (of title) - A historical summary of all the recorded transactions that affect the title to the property.

Acceleration Clause - A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

Actual Cash Value - An amount equal to the replacement value of damaged property minus depreciation.

Adjustable-Rate Mortgage(ARM) - Also known as a variable-rate loan, usually offers a lower initial rate than fixed-rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, the monthly payments will increase and when the interest rate on an ARM decreases, the monthly payments will be lower.

Adjustment Period - The time between interest rate adjustment dates for an ARM. They are usually the initial period between the time the ARM is originated and the first interest rate change date, and subsequent adjustment periods between each interest rate change after the first interest rate change.

Amortization - A term used to describe the process of paying off a loan over a predetermined period of time at a specific interest rate. The amortization of a loan includes payment of interest and a portion of the outstanding principal balance during each payment cycle.

Amortization Schedule - Provided by mortgage lenders, the schedule shows how over the term of your mortgage the principal portion of the mortgage payment increases and the interest portion of the mortgage payment decreases.

Annual Percentage Rate (APR) - The cost of credit expressed as an annual rate. It must be calculated by using a formula set by federal law and disclosed to the borrower to aid in comparing different credit plans. All finance charges imposed by a lender are included in this calculation, and an APR is always higher than the simple interest rate when such finance charges like points, origination fees or mortgage insurance are charged by a lender.

Application Fee - The fee that a mortgage lender charges to apply for a mortgage to cover processing costs.

Appraisal - A professional analysis, including references to sales of comparable properties, used to estimate the value of the property.

Appraiser - A professional who conducts an analysis of the property, including references to sales of comparable properties in order to develop an estimate of the value of the property. The appraiser's report is called an "appraisal."

Appreciation - An increase in the market value of a home due to changing market conditions and/or home improvements.

AR (Account Review) Inquiries – Credit grantors reviewing their customer’s credit file. Companies review their “loan portfolio” in order to determine if they should close the account (decreased score) or increase the credit limit (increased score).

Arbitration - A process where disputes are settled by referring them to an impartial third party (arbitrator) chosen by the disputing parties who agree in advance to abide by the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator issues the decision.

Area Median Income (AMI) - The AMI is determined by HUD. The AMI for Shelby (including Memphis), Fayette and Tipton counties is $54,100.

Asbestos - A toxic material that was once used to make insulation and fireproofing material in homes. Because some forms of asbestos have been linked to certain lung diseases, it is no longer used in new homes. However, some older homes may still have asbestos in these materials.

Assessment - The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assets - Everything of value an individual owns.

Assumable Mortgage - A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

Assumption - A homebuyer's agreement to take on the primary liability for paying an existing mortgage from a home seller.

Attorney-in-Fact - One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.

Balloon Mortgage - This is a short-term loan with low monthly payments that are not enough to pay off the entire loan amount, so a balloon, or lump-sum payment, is due at the end of the loan term. This type of loan may have a provision to refinance when the balloon payment is due.

Balloon Payment - The final lump sum payment that is made at the maturity date of a balloon mortgage.

Bankruptcy - A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

Beneficiary - The person designated to receive the income from a trust, estate or a deed of trust.

Binder - A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

Biweekly Payment Mortgage - A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower’s bank account. The result for the borrower is a substantial savings in interest.

Blanket Mortgage - The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

Bond - An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Borrower - One who applies for a loan secured by real estate and is responsible for repaying the loan.

Bridge Loan - A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."

Broker - A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. See “Mortgage Broker”

Buydown Mortgage - Obtaining a lower interest rate (buying down the rate) by paying additional points to the lender. The lower rate may apply for the full duration of the loan or for just the first few years. A buydown may be used to qualify a borrower who would otherwise not qualify. This is because a buydown results in lower payments, which are easier to qualify for.

Capacity - Your ability to make your mortgage payments on time. This depends on your income and income stability, your assets and reserves, and the amount of your income each month that is available after you have paid for your housing costs, debts and other obligations.

Certificate of Eligibility - A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.

Certificate of Reasonable Value (CRV) - A document issued by the Veterans Administration (VA) that establishes the maximum value and loan amount for a VA mortgage.

Certificate of Title - A statement provided by an abstract company, title company or attorney stating that the title to real estate is legally held by the current owner.

Chain of Title - The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Clear Title - A title that is free of liens or legal questions as to ownership of the property.

Closing - A meeting at which the buyer signing the mortgage documents and paying closing costs finalizes a sale of a property. Also called "settlement."

Closing Agent - A person that coordinates closing-related activities, such as recording the closing documents and disbursing funds.

Closing Costs - Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow and charges for obtaining title insurance and a survey. Closing costs are usually about 1% to 2% of the mortgage amount.

Closing Statement - See “HUD-1 Statement”

Cloud on Title - Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release or court action.

Collateral - Property which is pledged as security for a debt. In the case of a mortgage, the collateral would be the land, the house and other buildings and improvements.

Commitment Letter - An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork and compliance with stated conditions.

Concession - Something yielded or conceded in negotiating a transaction.

Condemnation - The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.

Condominium - A unit in a multiunit building. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas but does not own the common elements such as the exterior walls, floors and ceilings or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for maintenance for building and property upkeep, taxes and insurance on the common areas and reserves for improvements.

Construction Loan - A short-term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

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

Contract - An oral or written agreement to do or not to do a certain thing.

Conventional Mortgage - A mortgage that is not insured or guaranteed by the federal government.

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

Cooperative (co-op) - A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Counter-offer - An offer made in return by the person who rejects the previous offer.

CRA – consumer or credit reporting agency

Credit - The ability of a person to borrow money, or obtain goods with payments over time, as a consequence of the favorable opinion held by a lender as to the person's financial situation and reliability.

Creditworthy - Your ability to qualify for credit and repay debts.

Credit Bureau - A company that gathers information on consumers who use credit and sells that information in the form of a credit report to credit lenders.

Credit History - A credit history is a record of credit use. It comprises a list of individual consumer debts and an indication as to whether these debts were paid back in a timely fashion or "as agreed." Credit institutions have developed a complex recording system of documenting your credit history. This is called a credit report.

Credit Report - A document used by the credit industry to examine an individual's use of credit. It provides information on money that individuals have borrowed from credit institutions and a history of payments.

Credit Score - A computer-generated number that summarizes an individual's credit profile and predicts the likelihood that a borrower will repay future obligations.

Debt - A sum of money owed from one person or institution to another person or institution.

Debt-to-Income Ratio - The percentage of gross monthly income that goes toward paying for your monthly housing expense, installment debts, alimony, child support, car payments and payments on revolving or open-ended accounts such as credit cards.

Deed - The legal document conveying title to a property.

Deed of Trust - A legal document in which the borrower conveys the title to a 3rd party (trustee) to hold as security for the lender. When the loan is paid in full the trustee returns the deed to the borrower. If the borrower defaults on the loan, the trustee will sell the property and pay the lender the mortgage debt.

Default - Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

Deposit - The amount of money you put down on a house to hold it.

Depreciation - A decline in the value of a house due to changing market conditions, decline of a neighborhood or lack of upkeep on a home.

Discount Points - Fees paid to lenders. Each point is equal to 1% of the loan amount. On a $100,000 loan 1 point is $1000. Points may be further classified into origination points or discount points.

Dower - The rights of a widow in the property of her husband at his death.

Down Payment - The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. Down payments are usually 3% to 20% of the sales price.

Due-on-Sale Clause - A provision in the Deed of Trust or mortgage that states the entire loan is due upon the sale of the property.

Earnest Money Deposit - The deposit you make to show that you are committed to buying the home. This money is typically held by the real estate brokers or the escrow company. The deposit will not be refunded to you after the seller accepts your offer, unless one of the sales contract contingencies is not satisfied. Earnest money becomes part of the down payment.

Easement - The right to use the land of another for a specific purpose. Easements may be temporary or permanent. Example : The utility company may need an easement to run electric lines.

Eminent Domain - The right of the government or a public utility to acquire property for necessary public use by condemnation, with proper compensation to the owner.

EMP (Employment) Inquiries – Credit report pulled for employment purposes.

Encroachment - A building, a part of a building or an obstruction (e.g.. a fence or a wall) that physically intrudes upon or overlaps into the property of another.

Encumbrance - A legal right or interest in land that affects a good or clear title and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance or what can be done to remove it.

Equity - The difference between the current market value of a property and the amount the homeowner owes on the property.

Escrow – the holding of funds, securities or other property by an impartial, trusted third party for the two participants in a business transaction. When the transaction is completed, the escrow agent releases the entrusted property.

Executor - A person named in a will to carry out its provisions for the disposition of the estate.

Federal Home Loan Mortgage Corporation (FHLMC) - Also known as “Freddie Mac.” Quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA) - An agency within the U.S. Department of Housing and Urban Development (HUD) that administers loan programs, issues loan guarantees to make more housing available.

Federal National Mortgage Association - Also known as "Fannie Mae". Corporation created by Congress those purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA.

Fee - Any charge added to a loan.

Fee Simple - Absolute ownership of real property; owner is entitled to the entire property with unconditional power of disposition during the owner’s life and upon his death the property descends to the owner's designated heirs.

FHA – Federal Housing Administration

FHLMC – “Freddie Mac,” Federal Home Loan Mortgage Corporation

FICO Score – see “Credit Score”

Fiduciary - A person in a position of trust or responsibility with specific duties to act in the best interest of a client. A real estate broker is a fiduciary for his/her clients.

First Mortgage - A mortgage that has priority as a lien over all other mortgages. In the case of foreclosure the first mortgage will be satisfied before other mortgages. See also second mortgage.

Fixed-Rate Mortgage - A mortgage on which the interest rate is set for the term of the loan.

Fixture - Personal property that becomes real property when attached in a permanent manner to real estate.

Flood Insurance - An insurance policy that covers property damage due to natural flooding. Flood insurance may be required on properties in a flood zone.

FNMA – “Fannie Mae,” Federal National Mortgage Association

Foreclosure - A legal action that terminates all ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.

Gift Letter - A letter that a family member writes verifying that he/she has given you a certain amount of money as a gift and that you do not have to repay it. You can use this money toward a portion of your down payment through some mortgage products.

Good-Faith Estimate - A written statement itemizing the approximate costs and fees for the mortgage.

Government National Mortgage Association - Also known as “Ginnie Mae.” A government owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae.

Grantee - The person to whom an interest in real property is conveyed.

Grantor - The person conveying an interest in real property.

Gross Monthly Income - The income you earn in a month before taxes and other deductions. Under certain circumstances, it may also include rental income, self-employed income, income from alimony, child support, public assistance payments and retirement benefits.

Hazard Insurance - Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism or other hazards.

Home-equity Loan - A loan based on the equity that a borrower has in his or her home.

Home Inspection - A professional inspection of a home to review the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

Homeowner's Insurance - A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes or appliances.

Homeowners Association - A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Housing Expense Ratio - The percentage of your gross monthly income that goes toward paying for your housing expenses.

HUD-1 Statement - A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points and initial escrow amounts. A separate number within a standardized numbering system represents each item on the statement. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The Department of Housing and Urban Development (HUD) publishes the blank form for the statement. The HUD-1 statement is also known as the "closing statement" or "settlement sheet."

Income Property - Real estate developed or improved to produce income.

Index - A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps that are associated with the mortgage.

Individual Retirement Account (IRA) - A tax-deferred plan that can help build a retirement nest egg.

Inflation - An increase in the general level of prices.

Inquiry - A request for a copy of your credit report. An inquiry occurs every time you fill out a credit application and/or request more credit. Too many inquiries on a credit report can lower your credit score.

Interest - The cost you pay to borrow money. It is the payment you make to a lender for the money it has lent to you. Interest is usually expressed as a percentage of the amount borrowed.

Joint and Several Liability - A creditor can demand full repayment from any and all of those who have borrowed. Each borrower is liable for the full debt, not just the prorated share.

Joint Tenancy - A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.

Judgment - The decision of a court of law stating that one individual is indebted to another and fixing the amount of indebtedness. Judgments, when recorded, become a lien on real property owned by the defendant.

Judgment Lien - The claim on the property of a debtor resulting from a judgment.

Jumbo Loan - Loan size that is larger than the limit established by Fannie Mae or Freddie Mac.

Junior Mortgage - A mortgage subordinate to another mortgage. In the case of a foreclosure a senior mortgage will be paid prior to a junior mortgage.

Keogh Funds - A tax-deferred retirement-savings plan for small business owners or self-employed individuals who have earned income from their trade or business. Contributions to the Keogh plan are tax deductible.

Land Contract - A real estate installment selling arrangement whereby the buyer may use and occupy land, but no deed is given by seller until the sales price has been paid.

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

Legal Description - A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

Liabilities - Your debts and other monetary obligations.

Lien - A claim or charge on property for payment of some debt. With respect to a mortgage, it is the right of the lender to take the title to your property if you do not make the payments due on the mortgage.

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

Lis Pendens - Latin for "lawsuit pending." Recorded notice that litigation is pending on a property. Most lenders will require the clearance of the Lis Pendens prior to closing.

Loan Officer/Originator – Initial contact person who performs pre-qualification; person buyer first meets with and takes application.

Loan Origination Fees - The fee paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1% of the mortgage amount.

Loan Processor – Individual who processes all the information for the loan approval.

Loan Servicing - The act of collecting loan payments, handling property tax and insurance escrow funds, foreclosing on defaulted loans and remitting payments to the investors.

Loan to Value Ratio (LTV) - The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

Lock-in rate - A written agreement guaranteeing a specific interest rate when your mortgage closes.

Low-Down-Payment Feature - A feature of a mortgage, usually a fixed-rate mortgage, that helps you buy a home with as little as a 3% down payment.

Margin - For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.

Market Value - The highest price that you would pay and the lowest price the seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Metropolitan Statistical Area - The Memphis MSA includes Shelby, Tipton and Fayette counties.

Mortgage Banker - A company that originates mortgages exclusively for resale in the secondary mortgage market.

Mortgage Broker - An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.

Mortgage Insurance - A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan.

Mortgage Insurance (MI or PMI) - Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).

Mortgage Lender - The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing.

Mortgage Payment – Includes principal, interest, taxes and insurance.

Mortgage Rate - The cost or the interest rate you pay to borrow the money to buy your house.

Mortgage - A loan secured by a lien on your home. In some states the term mortgage is also used to describe the document you sign to show that you have granted the lender a lien on your home; other states use a deed of trust document instead of a mortgage. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage is usually the purchase price of the home minus your down payment.

Mortgagee - The lender in a mortgage agreement.

Mortgagor - The borrower in a mortgage agreement.

Mutual Funds - A fund that pools the money of its investors to buy a variety of securities.

Negative Amortization - A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.

Net Monthly Income - Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.

Note - A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Notice of Default - A formal written notice to a borrower that a default has occurred and that legal action may be taken.

OA – Originating Agent, authorized THDA lender.

Offer - A formal bid from the homebuyer to the home seller to purchase a home.

Open House - When the seller's real estate agent opens the seller's house to the public. You do not need a real estate agent to attend an open house.

Original Principal Balance - The total amount of principal owed on a mortgage before any payments are made.

Origination Fee - A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1% of the mortgage amount.

Partial Release - A provision in a mortgage that allows some of the property secured to be freed from serving as collateral.

PITI - Abbreviation for principal, interest, taxes and insurance, which may be combined in a single monthly mortgage payment.

Planned Unit Development (PUD) - A zoning classification that allows flexibility in the design of a subdivision. PUDs include individually owned units as well as some common space that is jointly owned.

Plat - A plan or map of a specific land area.

PMI – Private Mortgage Insurance

Points - Fees paid to lenders. Each point is equal to 1% of the loan amount. On a $100,000 loan 1 point is $1000. Points may be further classified into origination points or discount points.

Portfolio Loan - A loan that is held as an investment by a bank or savings and loan and NOT sold on the secondary market to investors.

Power of Attorney - A written document authorizing a person to act on the behalf of another person. That person does not have to be an attorney.

Pre-approval Letter - A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you are a serious buyer.

Predatory Lending - Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it or repeatedly refinancing a loan, charging high points and fees each time and "packing" credit insurance on to a loan.

Prepaid Interest - Prepaid interest is the interest charged to borrowers at closing to pay for the cost of borrowing for a balance of the month. For example, if a loan closes on the 19th of the month and the first payment is due on the 1st of the following month, the lender will charge 12 days of prepaid interest.

Prepayment - A privilege in a mortgage permitting the borrower to make payment in advance of the due date. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan.

Prepayment Penalty - A penalty some lenders charge for paying a loan off early. Check to see if a loan has a penalty and how long it will be in effect. If you plan to make payments before they are due or think you might sell your home before the loan is paid off, a penalty could be costly to you.

Pre-qualification Letter - A letter from a mortgage lender that states that you are pre-qualified to buy a home but does not commit the lender to a particular mortgage amount.

Primary Mortgage Market - Companies that originate and service mortgage loans (banks, savings & loans, credit unions, mortgage bankers, institutional lenders) make up the primary mortgage market.

Prime Rate - The lowest commercial interest rate charged by a bank on short term loans to their most credit-worthy customers.

Principal - The amount of money borrowed to buy your house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. It is the original loan amount minus the total repayments of principal you have made to date.

Private Mortgage Insurance (PMI) - May be required by your lender if the loan you apply for cannot be granted because the loan does not meet the normal standards for the lender. The most common reason for this requirement is a smaller down payment than the lender usually requires (around 20%). This insurance protects the lender from loss if the borrower defaults. It does not protect the borrower though it may allow the borrower to qualify for a loan.

PRM (Promotional) Inquiries – Consumers receiving promotional credit card offers in the mail.

Property Tax - A government levy based on the market value (as assessed by the county assessor's office) of the property

PUD – Planned Unit Development

Purchase Agreement - A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Mortgage - A mortgage used to finance the purchase of a property.

Quitclaim Deed - A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.

Radon - A toxic gas found in the soil beneath a house that can contribute to cancer and other illnesses.

Rate Cap - The limit on the amount that the interest rate on an ARM can increase or decrease during any one adjustment period.

Ratified Sales Contract - A contract that shows both you and the seller of the house have agreed to your offer. This offer may include sales contingencies, such as obtaining a mortgage of a certain type and rate, getting an acceptable inspections, making repairs, closing by a certain date and the like.

RD – United States Department of Agriculture, Rural Development

Real Estate Professional - An individual who provides services in buying and selling homes. The real estate professional is paid a percentage of the home sale price by the seller. Unless you have specifically contracted with a buyer's agent, the real estate professional represents the interest of the property seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers but are generally not involved in the lending process.

Real Estate Settlement Procedure Act (RESPA) - A law that states how mortgage lenders must treat those who apply for real estate loans on property with 1-4 units. Example : A lender is required to provide a good faith estimate of closing costs within 3 days of an application being filed.

REALTOR® - A real estate professional who is a member of the National Association of REALTORS®.

Recision - The cancellation of a contract. When refinancing a mortgage on a principal residence the law gives the homeowner three days to cancel the contract.

Recording - The act of entering into a book of public records instruments affecting title to the real property. A lender requires that a deed of trust or a mortgage be recorded to evidence the debt against the property.

Recourse - The right of the holder of a note secured by a mortgage or deed of trust to claim money from the borrower in default in addition to the property pledged as a collateral.

Redlining - The practice of refusing to provide loans or insurance in a certain neighborhood.

Refinancing - The process of paying off one loan with the proceeds from a new loan secured by the same home or property.

Replacement Cost - The cost to replace damaged personal property without a deduction for depreciation.

Reverse Mortgage - A mortgage used by the elderly that provides income as long as they live in exchange. Payments made cause the loan principal to increase.

Second Mortgage - A mortgage that has a lien position subordinate to the first mortgage.

Secondary Mortgage Market - The buying and selling of existing mortgages.

Securities - A financial form that shows the holder owns a share or shares of a company (stock) or has loaned money to a company or government organization (bond).

Security - The property that serves as collateral for a loan.

Servicing - The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Settlement - See “Closing”

Settlement Sheet - See “HUD-1 Statement”

Subdivision - A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Survey - A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments and other physical features.

Sweat equity - Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.

Tenancy by the Entirety - A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.

Tenancy in Common - A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenancy.

THDA – Tennessee Housing Development Agency

Title - A legal document that gives evidence of an individual's ownership of property.

Title Insurance - Insurance policy that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.

Title Search - An examination of municipal or county records to determine the legal ownership of property, usually performed by a title company.

Transfer Tax - State or local tax payable when title passes from one owner to another.

Trustee - A fiduciary who holds or controls property for the benefit of another.

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

Two-Step Mortgage - An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

Underwriter – Person who makes the informed decision to accept or reject the mortgage.

Underwriting - The process a lender uses to determine loan approval. It involves evaluating the property and the borrower's credit and ability to pay the mortgage.

Uniform Residential Loan Application - A standard mortgage application that your lender will ask you to complete. The form requests your income, assets, liabilities and a description of the property you plan to buy, among other things

VA Mortgage - Home loan guaranteed by the Department of Veterans Affairs (VA) enabling a veteran to buy a home with no money down.

Warranties - Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.