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Dictionary

80-10-10 
        A type of blended mortgage loan which avoids private mortgage insurance (PMI). It consists of an 80% - 30 year first lien at market rates, a 10% - 15 year second lien at a slightly higher interest rate, and a 10% down payment.  Instead of having to come up with a 20% down payment, a buyer is able to avoid PMI with only 10% down.  While the interest rate on the second note is a bit higher, the total monthly payment is usually lower than a 90% mortgage with PMI. In addition, the extra interest paid for the second lien is tax deductible, whereas PMI is not.  It is also possible to payoff just the second lien, thereby lowering the future monthly payments. Some lenders also offer 75-15-10 and 80-15-5 programs. This type of mortgage also gives the consumer the option of having a non-escrowing loan without a 20% down payment.

Aches
        Delay or negligence in asserting one's rights.

Acknowledgment 
        A declaration made by a person to a notary public, or other public official authorized to take acknowledgments, that the instrument was executed by him and that it was his free and voluntary act. 

Acre 
        A measure of land equal to 43,560 square feet. 

Ad Valorem 
        Designates an assessment of taxes against property. Literally, according to value. 

Additional Principal Payment 
        A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan. 

Adjustable Rate Mortgage
        A mortgage loan whose interest rate fluctuates according to the movements of an assigned index or a designated market indicator--such as the weekly average of one-year U.S. Treasury Bills--over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary. 

Adjusted Basis 
        The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken. 

Adjustment Date 
        The date on which the interest rate changes for an adjustable rate mortgage. 

Adjustment Period 
        The period that elapses between the adjustment dates for an adjustable rate mortgage. 

Adjustments 
        Money that the buyer and sellers credit each other at the time of closing. Often includes taxes and down payment. 

Administrator
        A man appointed by a court to settle the estate of a deceased person when there is no will. Contrast with Executor. 

Administratrix 
        A woman appointed by a court to settle the estate of a deceased person when there is no will. Contrast with Executrix.

Adverse Possession 
        The right of an occupant of land to acquire title against the real owner, where possession has been actual, continuous, hostile, visible, and distinct for the statutory period. The requirements for adversely possessing property vary between states, but usually include continuous and open use for a period of five or more years and paying taxes on the property in question. 

Affidavit 
        Written statement signed and sworn to before some person authorized to take an oath. 

Agency 
        The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal, and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal and owes to that principal the duties of accounting, care, loyalty, and obedience. Also see buyer's broker. 

Agent 
        A person authorized to act for and under the direction of another person when dealing with third parties. The person who appoints an agent is called the principal. An agent can enter into binding agreements on the principal's behalf and may even create liability for the principal if the agent causes harm while carrying out his or her duties. 

Alienation Clause 
        A clause in a mortgage, which gives the lender the right to call the entire loan balance due if the property is sold; due-on-sale clause. 

Amenities 
        Non monetary benefits and satisfactions derived from property ownership, such as a pleasant view, pride in home ownership, etc. 

Amendment 
        A modification to an existing contract, mutually agreed to by all parties. Examples might include a change in the purchase price due to a low appraisal, or a change in the closing date. 

Amortization 
        The operation of paying off indebtedness, such as a mortgage, by installments. The conventional amortization periods are15 or 30 years. (See term) 

Amortized Mortgage 
        A mortgage requiring periodic payments that include both interest and principal. Also see self amortized loan. 

Annual Membership 
        The amount that is charged annually for having a line of credit available. Often charged regardless of whether or not you use the line. 

Antitrust Laws 
        Federal and state laws prohibiting, among other things, monopolies, monopolistic practices, restraint of trade, and price fixing. 

Application 
        An initial statement of personal and financial information, which is required to approve your loan. 

Application Fee 
        Fees that are paid upon application. Charges for property appraisal and a credit report are usually included in the application fee. 

Appraisal 
        A determination of the value of something, such as a house, jewelry or stock. A professional appraiser--a qualified, disinterested expert--makes an estimate by examining the property, and looking at the initial purchase price and comparing it with recent sales of similar property. Courts commonly order appraisals in probate, condemnation, bankruptcy or foreclosure proceedings in order to determine the fair market value of property. Banks and real estate companies use appraisals to ascertain the worth of real estate for lending purposes. And insurance companies require appraisals to determine the amount of damage done to covered property before settling insurance claims. 

Appraised Value 
        An estimate of the present worth. 

Appreciation 
        An increase in value or worth of property. Opposite of depreciation. 

Architectural Styles
        California Ranch (same as Ranch)
        Cape Cod (same as Colonial American)
        Colonial American (same as Cape Cod)
        Contemporary
        Dutch Colonial
        English Tudor
        French Provincial
        Garden Home (same as Patio Home)
        Patio Home (same as Garden Home)
        Ranch (same as California Ranch)
        Row House (same as Town House)
        Southern Colonial
        Spanish
        Town House (same as Row House)
        Victorian

Asking Price 
        The price placed on property for sale. 

Assessor 
        A local government official who determines the value of the property for taxation purposes. 

Assignee 
        A person to whom a property right is transferred. For example, an assignee may take over a lease from a tenant who wants to permanently move out before the lease expires. The assignee takes control of the property and assumes all the legal rights and responsibilities of the tenant, including payment of rent. However, the original tenant remains legally responsible if the assignee fails to pay the rent. 

Assignment 
        A transfer of property rights from one person to another, called the assignee. 

Assumable Mortgage 
        An existing mortgage that can be taken over by the buyer on the same terms given to the original borrower. 

Assumption of Mortgage 
        The transfer of title to property to a grantee wherein he assumes liability for payment of an existing note secured by a mortgage against the property; should the mortgage be foreclosed and the property sold for a lesser amount than that due, the grantee-purchaser who has assumed and agreed to pay the debt secured by the mortgage is personally liable for the deficiency. Before a seller may be relieved of liability under the existing mortgage, the lender must accept the transfer of liability for payment of the note. Also known as simple assumption. Contrast with subject to mortgage. 

Attachment 
        Method by which a debtor's property is placed in the custody of the law and held as security pending outcome of a creditor's suit. 

Attorney's Opinion of Title 
        An instrument written and signed by the attorney who examines the abstracts of title, stating his opinion as to whether a seller may convey good title. 

Attractive Nuisance 
        Something on a piece of property that attracts children but also endangers their safety. For example, unfenced swimming pools, open pits, farm equipment and abandoned refrigerators have all qualified as attractive nuisances. 

Auction 
        A public sale of property to the highest bidder.

BTSA
        See Bonus to Selling Agent.

Balloon Mortgage 
        A mortgage where the final payment is considerably larger than the preceding payments. Contrast with amortized mortgage. 

Balloon Payment 
        A large final payment due at the end of a loan, typically a home or car loan, to pay off the amount your monthly payments didn't cover. Many states prohibit balloon payments in loans for goods or services that are primarily for personal, family or household use, or require the lender to let you refinance the balloon payment before forcing collection. 

Base Line
        A method used by the United States Surveyor General to survey public lands.  This system bases descriptions of land on its distance from a baseline that runs east-west.  See also Meridian Line.

Bill of Sale 
        A written instrument given to pass title to personal property. 

Blanket Mortgage 
        One mortgage on a number of parcels of real property. 

Blockbusting 
        The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective entry, of members of a minority group; panic peddling. See Fair Housing. 

Bond 
        (1) A written agreement purchased from a bonding company that guarantees a person will properly carry out a specific act, such as managing funds, showing up in court, providing good title to a piece of real estate or completing a construction project. If the person who purchased the bond fails at his or her task, the bonding company will pay the aggrieved party an amount up to the value of the bond. 

        (2) An interest-bearing document issued by a government or company as evidence of a debt. A bond provides pre-determined payments at a set date to the bond holder. Bonds may be "registered" bonds, which provide payment to the bond holder whose name is recorded with the issuer and appears on the bond certificate, or "bearer" bonds, which provide payments to whomever holds the bond in-hand. Mortgage interest rates are closely related to long term bond interest rates. 

Bonus to selling agent (BTSA) 
        Compensation, above and beyond the sales commission, offered to the real estate agent who brings the buyer to the transaction. A BTSA is used to provide an extra incentive for real estate agents to show a particular listing. Often the bonus is tied to closing within a certain time period or the property selling for a certain price. A buyer's agent should not consider the BTSA a factor in any negotiations between buyer and seller. Realistically, most BTSA's tend to disappear during initial negotiations, even though they should never be considered as negotiable after they have been offered. Any bonus to selling agent should be contained in a written agreement between the seller and listing broker. The BTSA is technically offered by the listing broker, not the seller, and thus should not be a subject of negotiation. 

Breach of Contract 
        Failure, without legal excuse, of one of the parties to a contract to perform according to the contract. 

Brokerage 
        For a commission or fee, bringing together parties interested in buying, selling, exchanging, or leasing real property. 

Building Line 
        A line fixed at a certain distance from the front and/or sides of a lot beyond which no structure can project. See set back. 

Bundle of Rights 
        Ownership in real property implies a group of rights, such as the right of occupancy, use and enjoyment, the right to sell in whole or in part, the right to control  the use, the right to bequeath, the right to lease any or all of the rights, the right to the benefits derived by occupancy and use of the property, etc. 

Buy Down 
        A cash payment, usually measured in points, to a lender in order to reduce the interest rate a borrower must pay. 

Buyer's Broker 
        A licensee who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid by the buyer or the listing broker through a commission split. Some brokers conduct their business by representing buyers only.

CAR
        California Association of Realtors.

CC&R 
        Covenants, conditions & restrictions. 

CCCS 
        Consumer Credit Counseling Service. 

CVAR
        Central Valley Association of Realtors.

Calendar Year 
        A year using the actual number of days in each month for a total of 365 days in a year (366 days in a leap year). 

Cap 
        The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage. 

Capital Gains 
        The profit on the sale of a capital asset, such as stock or real estate. If you sell your primary residence, you can exclude $250,000 in profit from capital gains tax. A couple can exclude $500,000. 

Capitalization 
        The estimation of the value of income producing property by dividing the annual net income by the capitalization rate. 

Capitalization Rate 
        The rate of expected return on investment property. A ratio of income to value. 

Ceiling 
        The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage. 

Census 
        An official count of the number of people living in a certain area, such as a district, city, county, state, or nation.  The United States Constitution requires the  federal government to perform a national census every ten years.  The census includes information about the respondents' sex, age, family, and social and economic status. 

Certificate of Eligibility 
        The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility). 

Chain of Title 
        A history of conveyances and encumbrances of a property from some starting point, whereby the present owner derives title. 

Channeling 
        The illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status; Steering. See Fair Housing. 

Chattel 
        Personal property. 

Cleaning Fee 
        A nonrefundable fee charged by a landlord when a tenant moves in. The fee covers the cost of cleaning the rented premises after you move out, even if you leave the place spotless. Cleaning fees are illegal in some states and specifically allowed in others, but most state laws are silent on the issue. Landlords in every state are allowed to use the security deposit to clean a unit that is truly dirty. 

Clear Title 
        A land title that doesn't have any liens (including a mortgage) against it. 

Closing Costs 
        Costs the buyer must pay at the time of the closing in addition to the down payment which may include points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance. Closing costs can vary considerably from one financial institution to another. 

Closing Statement 
        A detailed written summary of the financial settlement of a real estate transaction, showing all charges and credits made, and all cash received and paid out. 

Cloud on Title 
        A claim or encumbrance that may effect title to land. 

Co-Op 
        See Cooperative Housing or Cooperative Sale. 

Co-Tenants 
        Two or more tenants who rent the same property under the same lease or rental agreement. Each co-tenant is 100% responsible for carrying out the rental agreement, which includes paying the entire rent if the other tenant skips town and paying for damage caused by the other tenant. 

Collateral 
        Something of value deposited with a lender as a pledge to secure repayment of a loan. 

Commingling 
        The illegal practice of combining or mixing clients' funds with the agent's own funds. 

Commission 
        The compensation paid to a licensed real estate broker or by the broker to the salesman for services rendered. Usually a percentage of the selling price of the property. 

Community Reinvestment Act 
        The federal law which requires federally regulated lenders to describe the geographical market area they serve. Deposits from that area are to be reinvested in that area whenever practical. 

Comparables 
        Properties which are similar to a particular property and are used to compare and establish a value for that property. 

Compound Interest 
        Interest which is computed on the principal and any unpaid accumulated interest. Contrast with simple interest.

Condemnation 
        The act of taking private property for public use, through due process under the right of eminent domain, with compensation to the owner. 

Condominium 
        A form of real estate, usually a dwelling with individual ownership of separate portions of the building plus shared ownership of the common areas. 

Consideration 
        The price or subject matter, which induces a contract; may be in money, commodity, exchange, or a transfer of personal effort. 

Constructive Eviction 
        The provision of housing that is so substandard that, for all intents and purposes, a landlord has evicted the tenant. For example, the landlord may refuse to provide light, heat, water or other essential services, destroy part of the premises or refuse to clean up an environmental health hazard, such as lead paint dust. Because the premises are unlivable, the tenant has the right to move out and stop paying rent without incurring legal liability for breaking the lease. Usually, the tenant must first bring the problem to the landlord's attention and allow a reasonable amount of time for the landlord to make repairs. 

Consumer Credit Counseling Service
        A national non-profit agency that, at no cost, helps debtors plan budgets and repay their debts. One major criticism of CCCS is that each office is primarily funded by voluntary donations from the creditors that receive payments from debtors repaying their debts through that office. The goal of CCCS is to insure that consumers repay the debts that they owe. CCCS may arrange easy payment plans that increase the chances for repayment, but harm a consumer's credit in the process. Agreeing to a payment plan and following it to the letter may not stop creditors from reporting delinquent repayment information to credit bureaus for each month the payment falls short of the previous minimum amount. 

Contingency 
        A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event. A common example is a Buyer who enters into the purchase of another home before his current home is sold. The Buyer will usually ask for the Seller to make the sale contingent upon the sale of the Buyer's current home. If the Seller receives another offer for the property, the first Buyer must either agree to buy the home without any contingency, or step aside and let someone else purchase the home. 

Contract 
        A legally enforceable agreement to do, or not to do, a particular thing for a consideration. 

Contract for Deed 
        A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, agreement of sale, conditional sales contract, or installment contract. Buyers should be wary of this type of contract, since they can lose their entire investment if the owner declares bankruptcy, before the deed has been transferred. 

Contract for Exchange of Real Estate 
        A contract for the sale of real estate in which the consideration is paid wholly or partly in real property instead of cash. 

Contract of Sale 
        The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer. 

Conventional Loan 
        A real estate loan, which is not insured by the FHA or guaranteed by the VA. 

Conveyance 
        Written instrument, such as a deed or lease, that evidences transfer of some ownership interest in real property from one person to another. 

Cooperative Housing 
        (1) A form of real estate, usually a dwelling in which residents own shares, but do not directly own the space they inhabit. Rather, owning a share of the building entitles the shareholder with the right to inhabit a certain space within the dwelling, such as an apartment. Shares are usually proportional to the amount of space in each apartment.   

        (2) A living arrangement in which residents must perform certain duties or chores to benefit the entire residence, in addition to paying room and board. A common form of dormitory living. 

Cooperative Sale 
        A sale of property in which the buyer is brought to the transaction by a real estate agent who works for a different real estate broker than the listing agent. Both brokers/companies have agreed to cooperate in closing the property, and typically, splitting the commission. Offers of cooperation and compensation are commonly found in the MLS property listings. 

Cost Approach to Value 
        An estimate of value based on current construction costs, less depreciation, plus land value. Contrast with the income approach to value and the market data approach to value. 

Counter Offer 
        The rejection of an offer to buy or sell that simultaneously makes a different offer, changing the terms in some way. For example, if a Buyer offers $100,000 for a home, and the Seller replies that he wants $105,000, the Seller has rejected the Buyer's offer of $100,000 and made a counter offer to sell at $105,000. The legal significance of a counter offer is that it completely voids the original offer, so that if the Seller decided to sell for $110,000 the next day, the Buyer would be under no legal obligation to pay that amount for the property. 

Covenant 
        A restriction on the use of real estate that governs its use, such as a requirement that the property will be used only for residential purposes. Covenants are found in deeds or in documents that bind everyone who owns land in a particular development. See Covenants, Conditions & Restrictions. 

Covenants, Conditions & Restrictions (CC&Rs) 
        The restrictions governing the use of real estate, usually enforced by a homeowners' association and passed on to the new owners of property. For example, CC&Rs may tell you how big your house can be, how you must landscape your yard or whether you can have pets. If property is subject to CC&Rs, buyers must be notified before the sale takes place. 

Credit Bureau 
        A private, profit-making company that collects and sells information about a person's credit history. Typical clients include banks, mortgage lenders and credit card companies that use the information to screen applicants for loans and credit cards. There are three major credit bureaus, Equifax, Experian and Trans Union, and they are regulated by the federal Fair Credit Reporting Act. 

Credit File 
        See Credit Report. 

Credit Insurance 
        Insurance a lender offers or requires a borrower to purchase to cover the loan. If the borrower dies or becomes disabled before paying off the loan, the policy will pay off the remaining balance. Federal and state consumer protection laws require the lender to disclose to existing and potential borrowers the terms and costs of obtaining credit insurance because it can affect the terms of the loan. 

Credit Limit 
        The maximum amount that you can borrow under a home equity plan. 

Credit Report 
        An account of your credit history, prepared by a credit bureau. A credit report will contain both credit history, such as what you owe to whom and whether you make the payments on time, as well as personal history, such as your former addresses, employment record and lawsuits in which you have been involved. An estimated 50% of all credit reports contain errors, such as accounts that don't belong to you, an incorrect account status or information reported that is older than seven years (ten years in the case of a bankruptcy). 

Credit Score 
        In the mortgage lending world, credit scores either make or break you when it comes to obtaining a home mortgage or getting the best rate you can. There are three different scores available to a mortgage lender each being generated by the three different credit agencies. The most popular, known as a Fico score is from Experian (formally TRW), then there is a Beacon score from Equifax, and finally a Emperica score from Trans Union. This is the "mortgage scoring" system used to get a conventional mortgage. 

        Simply, credit scores are numbers calculated based upon your credit history. The better your credit, the higher your number or score will be, the worse your credit, the lower the score. The number of inquiries or times your credit has been pulled in the past 90 days will also lower your "score". In some instances, lack of credit results in "no score" on your report requiring you to provide "alternative credit" via your rental, utility or telephone payment histories.

        There are some lenders that do not rely on credit scores to the degree that most do. Some times, credit reports contain inaccuracies that lower your score, this is when a lender has to use a common sense approach to approving your loan. In some instances you may have to correct your credit report, wait for your score to improve, then reapply for the loan. Talk with your mortgage broker or lender to understand what your options are.

Creditor 
        A person or entity (such as a bank) to whom a debt is owed. 

Cul-de-sac 
        A dead end street which widens sufficiently at the end to permit an automobile to make a "U" turn.

DBA 
        Doing Business As. Business names or aliases filed with the county. 

DRE
        Department of Real Estate.

Debenture 
        Bonds issued without security. 

Debt Service 
    The total amount of credit card, auto, mortgage or other debt upon which you must pay. 

Debt-Service Ratio 
        The measurement of debt payments to gross household income which may include, in addition to the main wage earner's salary, salaries of other wage earners, commissions, bonuses, overtime, etc. 

Deduction 
        In tax law, an amount that you can subtract from the total amount on which you owe tax. Examples of federal income tax deductions include mortgage interest, charitable contributions and certain state taxes. For example, if Aimee receives an income of $60,000 in 1998 and pays $12,000 in mortgage interest during that same year, she can deduct $12,000 when she fills out her federal tax return, leaving an amount of $48,000 upon which she must pay tax. 

Deed 
        A written instrument by which title to land is conveyed. 

Deed in Lieu (of Foreclosure) 
        A means of escaping an overly burdensome mortgage. If a homeowner can't make the mortgage payments and can't find a buyer for the house, many lenders will accept ownership of the property in place of the money owed on the mortgage. Even if the lender won't agree to accept the property, the homeowner can prepare a quitclaim deed that unilaterally transfers the homeowner's property rights to the lender. 

Deed Restrictions 
        Common name used to denote covenants, conditions & restrictions (CC&R's). Deed restrictions cover allowable land uses and home types and sizes within a neighborhood.

Default 
        Non-performance of a duty arising under a contract or otherwise. 

Defeasance 
        A clause in a deed, lease, will or other legal document that completely or partially negates the document if a certain condition occurs or fails to occur. Defeasance also means the act of rendering something null and void. For example, a will may provide that a gift of property is defeasable - that is, it will be void - if the beneficiary fails to marry before the will maker's death. 

Delivery 
        The actual transfer of the deed, or an act of a seller showing intent to make a deed effective, without which, there is no transfer of title to the property.

Depreciation 
        A loss in value. 

Descent 
        Acquisition of property through inheritance laws when there is no will (when a person dies in testate). 

Devise 
        A transfer of real estate by will or last testament. 

Disclosure 
        The making known of a fact that had previously been hidden; a revelation. For example, in many states you must disclose major physical defects in a house you are selling, such as a leaky roof or potential flooding problem. 

Discount Points (or Points) 
        The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000). 

Discount Rate 
        (1) The rate charged member banks who borrow from the Federal Reserve System. 
        (2) The rate used to convert future income into present value. 

Dispossess 
        To oust from land by legal process. 

Dominant Tenement 
        Property that carries a right to use a portion of a neighboring property. For example, property that benefits from a beach access trail across another property is the dominant tenement. 

Down Payment 
        An amount of money the buyer pays which is the difference between the purchase price and the mortgage amount. 

Dual Agency 
        Representing the buyer and the seller in the same transaction by the same agent. Since there is an inherent conflict in fiduciary obligations to two different principals, dual agency, at best, is a risky undertaking. TRELA requires that all parties to a dual agency have full knowledge and consent (Disclosed Dual Agency). Contrast with intermediary. 

Due on Sale 
        A clause in a mortgage agreement providing that, if the mortgagor (the borrower) sells, transfers, or, in some instances, encumbers the property, the mortgagee (the lender) has the right to demand the outstanding balance in full. 

Duress 
        Forcing action or inaction against a person's will.