REAL ESTATE TERMS
EVIDENCE OF TITLE: Documentation proving ownership of a property, typically including a title certificate, abstract, or title insurance. FEDERAL HOUSING ADMINISTRATION (FHA) LOAN: A government-backed mortgage insured by the Federal Housing Administration, designed to help eligible buyers purchase homes. FORECLOSURE: A legal process in which a property is sold to repay a debt after the homeowner defaults on their mortgage payments or other loan terms. Ownership is transferred to the mortgage holder or a third-party buyer through a foreclosure sale. HOMEOWNER’S INSURANCE POLICY: A standardized insurance plan that protects a homeowner from financial losses due to fire, theft, public liability, and other risks. HOUSING EXPENSE RATIO: A calculation that compares the monthly housing expenses to the borrower’s gross monthly income. HUD-1 STATEMENT: A detailed breakdown of all costs and fees involved in a real estate transaction, typically provided at closing. LEVERAGE: The practice of using borrowed money to finance an investment, such as purchasing property. LIEN: A legal claim against a property, giving creditors the right to collect debts owed by the property owner through a court sale if necessary. LIMITED AGENCY: A situation where an agent represents both parties in a transaction, ensuring fair treatment for both sides.
LOAN ORIGINATION FEE: A charge by a lender for processing a mortgage loan, usually calculated as a percentage of the loan amount. LOAN-TO-VALUE RATIO: A measure of the loan amount compared to the property’s appraised value, used to assess risk in lending.. MORTGAGE: A legal agreement where a borrower pledges real estate as security for a loan, allowing the lender to claim the property in case of default. MORTGAGE LIEN: A legal claim placed on a property by a lender to secure repayment of a loan. NEGATIVE AMORTIZATION: A situation where a borrower’s monthly payments are insufficient to cover the interest, causing the loan balance to increase over time. PAYMENT CAP: A limit on how much a monthly payment can increase for an adjustable-rate mortgage when the interest rate changes. PREPAID ITEMS: Costs paid in advance by the seller, such as property taxes or insurance premiums, which the buyer must reimburse at closing. PREPAYMENT PENALTY: A fee charged to borrowers for paying off their loan ahead of schedule, compensating the lender for lost interest. PRINCIPLE: The original loan amount, excluding interest, that must be repaid by the borrower. PRIVATE MORTGAGE INSURANCE (PMI): Insurance provided by a private company to protect the lender from losses if the borrower defaults on a loan.
PRORATIONS: Shared expenses between the buyer and seller, such as property taxes or utility bills, calculated based on the closing date. RATE CAP: The maximum amount an interest rate can increase during an adjustment period for an adjustable-rate mortgage. REAL ESTATE: Land, including any permanent structures or improvements attached to it, whether natural or man-made. REALIST: A term used by members of the National Association of Real Estate Brokers. REALTOR®: A licensed real estate professional who is a member of the National Association of REALTORS®. SURVEY: A process to determine land boundaries, dimensions, and positions of structures on a property. Surveys can identify encroachments or easements and are typically prepared either from public records (location surveys) or by professional surveyors on-site (site surveys). TITLE: Refers to both the legal right to own a property and the document that proves ownership. TITLE INSURANCE: Protection for property owners or lenders against financial loss due to title defects, such as liens, encumbrances, or other claims. VETERANS AFFAIRS (VA) LOAN: A government-backed mortgage available to qualified veterans, designed to help them purchase homes with favorable terms. ZONING: Local regulations that divide land into specific areas, or zones, for different uses such as residential, commercial, or industrial purposes.
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