Abstract of title: A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record which may affect the marketability of the title.
Amortization: Repayment of a loan in equal installments of principle and interest, rather than interest-only payments. As payments continue, the total payment remains the same but the amount of the payment going toward interest decreases while the amount going toward principle increases.
Annual Percentage Rate (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount, usually higher than the contract interest rate.
Appraisal: A professional opinion of a property’s value based on its style and appearance, construction, quality, usefulness, and the value of comparable properties.
Appreciation: An increase in worth or value of real estate due to economic or related causes.
Assumption of a mortgage: A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage and to be personally liable for the terms and conditions of the mortgage, including payments. Sometimes the lender must approve the buyer in order to release the original borrower (usually the seller) from liability.
Closing: In real estate, the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to consummate a sale or loan transaction.
Closing costs: Expenses incurred in the closing of a real estate or mortgage transaction.
Closing statement: The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposit for taxes, hazard insurance, and mortgage insurance.
Condominium: A system of individual ownership of units combined with joint ownership of common area of the structure and the land.
Contingency: A condition that must be satisfied before a contract is binding. (i.e. A purchase contract may be contingent upon the buyer obtaining a mortgage.)
Contract for deed: A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain portion of the purchase price is paid by the buyer.
Conventional mortgage: A mortgage securing a loan made by investors without governmental underwriting such as a FHA or VA guaranteed loan.
Deed: Written instrument which, when properly executed and delivered, transfers title from the seller to the buyer.
Earnest money deposit: Money deposited by a purchaser of real estate as evidence of good faith. It’s applied toward the purchase price if the sale is closed. It is not an additional charge.
Easement: Created by grant or agreement for a specific purpose, an easement is the right, privilege or interest which one party has in the land of another. (Example: right of way)
Equity: The difference between the market value of property and the mortgage balance.
Escrow payment: That portion of a mortgage’s monthly payments held by a lender or service to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
FHA Loan: A loan that has been insured by the federal government, guaranteeing its payment in the case of default by the borrower.
FMHA Loan: A loan insured by the federal government similar to FHA loan usually used for residential properties in rural areas.
Home inspection report: A qualified inspector’s report on a property’s overall condition. The report usually includes an evaluation of both the structural and mechanical systems.
Interest: Charge paid to a lender for borrowed money.
Joint tenancy: Joint ownership by two or more persons with right of survivorship. All joint tenants own equal interest and have equal rights in the property. On the death of a joint tenant, his/her interest passes to the surviving joint tenants or tenant.
Land contract: A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain portion of the purchase price is paid by the buyer.
Lien: A legal hold or claim on property as security for a debt or charge (for example: judgments, taxes, mortgages).
Loan Commitment: A written promise to make a loan for a specified amount on specified terms.
Loan-to-value ratio: The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.
Marketable title: Also called merchantable title, this is the ability to transfer ownership of a property free and clear of objectionable liens or encumbrances.
Mortgage: Claim that a lender receives on a property as its security for the loan it makes to a homebuyer.
Mortgagee: The lender of money or the giver of the mortgage document.
Mortgagor: The borrower of the money.
Mortgage deed of trust: Pledge of real property to secure a debt by a written instrument given by the mortgagor. Should be recorded in the County Recorder’s Office.
Mortgage broker: Independent third party broker who arranges transactions between borrowers and lenders by streamlining the application and approval process and finding favorable terms for the buyer.
Multiple Listing Service (MLS): MLS is the name given a service performed by the local Board of Realtors®. It provides necessary information to aid in the sale of listings. It is a marketing tool used by members of the Service to expose properties to a wider market base.
Note: A written promise to repay a mortgage loan in regular monthly payments.
Origination fee: A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1% for FHA and VA loans.
PITI: Principle, Interest, Taxes and Insurance; Components of a regular mortgage payment.
Points: An amount equal to one percent of the principle amount of a mortgage. Points are a one-time charge assessed at closing by the lender. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate the market level.
Prepayment penalty: A fee charged for a mortgagor who pays off a loan before it is due. There are no pre-payments penalties in New York State.
Private Mortgage Insurance (PMI): Insurance written by a private company protecting the mortgage lender against financial loss occasioned by a borrower defaulting on the mortgage.
Mortgage Insurance Premium (MIP): Insurance written by the federal government to protect it against financial loss if a borrower should default on the mortgage.
Processing: The preparation of a mortgage loan application and supporting documents for underwriting.
Promissory note: Following a loan commitment from the lender, the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its repayment.
Purchase agreement: A written agreement between a buyer and seller for the purchase of real estate under stated terms and conditions.
Ratio analysis: A residential underwriting procedure used to compute the proposed housing expense plus other long-term debt expenses as a percentage of monthly income.
Real property: Land and whatever by nature or artificial annexation is a part of it.
Realtor®: A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors®.
Regulation Z: The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act. It is commonly called the Truth-in-Lending Act.
Servicing: A mortgage banking function which includes the receipt of payments, customer service, escrow administration, investor accounting, collections, and foreclosures.
SONYMA: Insured by New York State for first time homebuyers. There is sometimes a penalty for resale within the first few years.
Special assessment: Legal charge against real estate by a public authority to pay cost of public improvements such as streetlights, sidewalks, street improvements, etc.
Subdivision: A parcel of land that has been divided into smaller parts (lots, blocks or tracts).
Tenancy in common: Ownership by two or more persons who hold undivided interest; without right of survivorship. Interests need not be equal.
Term of mortgage: The period during which a mortgage must be paid.
Title: Right of ownership and possession of property.
Title insurance policy: A policy that protects the purchaser, mortgagee, or other party against losses.
Underwriting: In mortgage banking, the analysis of the risk involved in making a mortgage loan to determine whether the risk is acceptable to the lender. Underwriting involves the evaluation of the property as outlined in the appraisal report and of the borrower’s ability and willingness to repay the loan.
VA loan: A loan that is partially guaranteed by the Veterans Administration and made by a private lender, available to qualified veterans.
Warranty deed: A deed used to convey real property, which contains warranties of title and quiet possession. The grantor agrees to defend the premises against the lawful claims of third persons.