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Mortgage Definitions


Glossary of mortgage and lending terms

Use this glossary of mortgage terms to better understand the overall mortgage process as well as any specific mortgage terms that may be unfamiliar to you.


A summary; an abridgment. Before the use of photostatic copying public records were kept by abstracts of recorded documents.

Abstract of Title

A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an opinion as to the condition of title. Still in use in some states, but giving way to the use of title insurance.


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


Formal declaration before a public official that one has signed a document. Prior to recording real estate legal documents such as grant deeds and deeds of trust, a Notary Public acknowledges the person's signature on the document.

Action to Quiet Title

A court action to establish ownership to real property. Although technically not an action to remove a cloud on a title, the two actions are usually referred to as "Quiet Title" actions.

Adjustable-Rate Mortgage (ARM)

A mortgage where the interest rate is not fixed for the life of the loan. These mortgages adjust periodically based on an index that changes with market conditions. The rate of interest is the sum of the index plus a margin ( the margin remains fixed for the life of the loan). Most ARMs have periodic interest rate and payment caps as well as life cap. ARM's may also be referred to as AML's or VRM's.


Person authorized to act on behalf of another in dealings with third parties.

Agreement of Sale

An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement or Land Contract. In Texas it is known as an Earnest Money Contract.

Alienation Clause

Provision in a mortgage document stating that the loan must be paid in full if ownership is transferred, sometimes contingent upon other occurrences such as transfer of ownership of secured property.

American Land Title Association

Title policy that assures lenders have the proper rights as the beneficiary on a mortgage loan.


Gradual payment of a debt through regular installments that cover both interest and principal.

Annual Percentage Rate (APR)

A measure of the cost of credit expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.

Appraisal and Credit Report Fees

These fees are generally collected by the lender and paid to outside companies performing these services.

Appraised Value

The value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.

Appraisal Report

Estimate of real estate value, presumably by an expert. An appraisal evaluates the property at a given time, based on facts regarding the location, improvements, neighborhood and comparable sales. Generally, the value is based on three approaches: cost, market and income.


Increase in value or worth of property.


Payment made after a loan's due date is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment.

"As Is"

A clause that is used sometimes in the transfer of property. It means that the present property is being transferred with no guarantee or warranty provided by the seller.

Assessment Base

The total assessed value of all property in a given assessment district.

Assessed Valuation

Value placed on property as a basis for levying property taxes; not identical with appraised or market value.


Transfer of a contract from one party to another.


When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to the new buyer. Instead, the lender may require you to pay the entire balance due when you sell the home. Assumability may help you attract buyers when you sell your home.


New owner takes over an the responsibility of repaying an existing mortgage. Both FHA and VA loans are fully assumable. Some adjustable-rate mortgages may be partially assumable, but the new owners may be required to re-qualify for the loan.

Assumption of Mortgage

Agreement by a buyer to assume liability under an existing note secured by a mortgage or deed of trust.

Attached Home

A home that has one or more common walls adjoining another home. Condominiums and row houses are attached homes.

Balloon Note

A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity. The principal sum, known as a "Balloon", is due at maturity.

Balloon Payment

The final payment of a mortgage which is larger than the regular payment; it usually pays off the debt.


A court action to restructure debt.


The lender named on the mortgage note.


Preliminary agreement of sale, usually accompanied by earnest money. (This term is also used with property insurance.)

Blanket Mortgage

A mortgage covering more than one property of the mortgage.


A debt instrument in the capital markets. The US government, corporations, and municipalities use bonds to raise money. Bonds can also be backed by real estate loans and payments from mortgages.

Bridge Financing

A form of interim short term loan made prior to a long term loan, when the borrower needs more time before taking on long-term financing.

British Thermal Unit (B.T.U.)

Unit of heat required to raise one pound of water one degree Fahrenheit.


A person that represents another for a fee in real estate transactions. Mortgage brokers help consumers locate suitable real estate loans and are paid a fee for their services.


An interest rate buydown is the temporary reduction of the rate of interest or the monthly payments borrowers pay to the lender. The shortfall between the rate on the note and initial payment made by the borrower is usually paid by a third party, such as a seller or builder.

Buyer's Broker

Agent who takes the buyer as a client, is obligated to represent their interest above all others, and owes specific fiduciary duties to the buyer.


Caps are used on Adjustable-Rate Mortgages (ARMs) to limit the interest rate and/or the payment. Most ARMs have a periodic cap that is around 2% per year and a life cap of around 5%-6% over the life of the loan. Payment-only caps sometime create negative amortization, where the principal balance of the loan increases rather than decreases over time.

Capital Gain

Taxable profit on the sale of an appreciated asset.

Caveat Emptor

A legal term meaning "let the buyer beware."

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.

Certificate of Occupancy

Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

Certificate of Reasonable Value (CRV)

An appraisal of property for the purpose of insurance by the Veterans Administration.

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.


Personal property.


Conclusion of a real estate sale, where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties (seller, old lender, real estate broker, etc.).

Closing Agent

A third neutral party who facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company or attorney.

Closing Cost

Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring costs which include points, appraisal fees, etc., and are a oe-time charge or recurring cost, such as taxes and insurance, which incur while the new buyer/borrower owns the real estate.

Closing Statement

Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.

Cloud on Title

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


Person who is equally responsible for repayment of the loan as the borrower.


Fee paid to a broker or other entity for services rendered. Real estate and mortgage brokers receive commissions for the services they provide. A real estate broker secures a buyer for a property that is for sale and a mortgage broker secures a mortgage loan for the buyer in order to finance the purchase of a property. Commissions are generally paid as a percentage of the sales price in a real estate transaction, or the loan amount in mortgage transaction.


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


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

Conditional Commitment

A lender's promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.

Conditional Offer

Purchase offer in which the buyer proposes to purchase only after certain occurrences (sale of another home, finding a loan commitment, etc.)


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


Anything of value given to induce another to enter into a contract. Earnest money deposited on a sales contract is consideration.

Construction Loan

Short-term financing of real estate construction. This is generally followed by long-term financing called a "take out" loan, issued upon completion of improvements.


Condition which must be satisfied before the buyer can consummate the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller.

Contract of Sale

A purchase transaction in which the buyer receives possession of the property, but the seller retains title.

Conventional Loan

A mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans.

Conventional Mortgage

A loan neither insured 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 then prevailing rates for fixed-rate mortgages. The conversion feature may be available at extra cost.

Convertible ARMs

ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.

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.

Cost Basis

Accounting figure that includes the original cost of property, plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any depreciation claimed on tax returns in previous years.


A division within a state, usually encompassing one or more cities or towns.


Typically the buyer, as opposed to the principal (seller).

Declaration of Restrictions

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

Deed of Trust/Mortgage

An instrument given by the borrower to a third party (trustee), vesting title to the property in the trustee, as security for the borrower's repayment of the mortgage loan.

Deed of Trust Rider

The document required by the lender to be recorded, along with the security instrument for an ARM.

Deed Restriction

Provision placed in a deed to control use and occupancy of the property by future owners.


Failure to make mortgage payment or violation of another provision of the mortgage note.

Deficiency Judgment

Personal claim against the debtor, when foreclosed property does not yield enough at the sale to pay off the loans, including interest against it.

Defective Title

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


Decrease in value of real property caused by deterioration or obsolescence.


Real estate left by a will.


One to whom real estate is given by a will.


A testator who leaves real estate in a will.

Direct Endorsement

A lender that can complete the processing and closing of an FHA loan without prior approval from FHA.

Direct Reduction Mortgage

An amortized mortgage — one in which principal and interest are computed on the remaining balance.


A loan funded below par (100%). Lenders or investors will fund loans at a discount in order increase the overall yield on the note.

Discount Period

In an ARM with 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 generally go up based on the index rate.


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

Documentary Tax Stamps

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


The rights of a widow to a portion of her deceased husband's property.

Down payment

Cash to be paid by the buyer at loan closing to consummate a real estate transaction.

Dragnet Clause

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

Earnest Money

Cash to be paid by the buyer at closing.


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

Eminent Domain

A government right to acquire private property for public use by condemnation, and the payment for just compensation.


Construction onto the property of another, such as a wall, fence, etc.


Unauthorized intrusion of a building or improvement on another's land. A claim, line charge, attached to and binding real property.


The difference between the market value of the property and the homeowner's mortgage debt.


The delivery of a deed by a grantor to a third party for delivery to the grantee upon the occurrence of a contingent event. Escrows include funds given to a third party to be held until a specific occurrence, such as earnest money deposit or collection and payment of the taxes and insurance on behalf of the borrower.

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 assumption or wrap-loan transaction in which the buyer reimburses the seller for the current balance of his escrow (or impounded) funds.

Estimated Closing Cost Statement

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

Exclusive Agency

Listing agreement in which only the listing real estate office can sell the property and keep the commission. If the owner sells the house, the listing office would not receive commission. Exclusive Right-to-Sell Listing agreement under which the owner promises to pay a commission to the real estate agent if the property is sold during the listing period by anyone, even the owner.

Fannie Mae (FNMA)

Fannie Mae (Federal National Mortgage Association/FNMA). FNMA is one of the major secondary market investors which purchases loans from mortgage companies and other depository institutions. The company is a private corporation and its stock is traded on the New York Stock Exchange.

Federal Home Board

The board which oversees the Federal Home Loan Bank systems.

Federal Home Loan Bank

Provides liquidity to supervised financial service companies, such as Savings and Loans and Credit Unions. The bank system has several districts.

Federal Home Loan Board

The board, which charters and forbids discrimination in the sale.

Federal Home Loan Mortgage Corporation (FHLMC/Freddie Mac)

A government sponsored agency that is also a publicly traded company on the New York Stock Exchange, which purchases mortgage loans from mortgage bankers and financial depository institutions. FHLMC is a major secondary-market investor.

Federal Housing Administration

A federal agency which insures first mortgages and enables lenders to loan a high percentage of the sale price.

Federal National Mortgage Association

See Fannie Mae.

Federal Reserve Bank

The regulatory agency for many commercial banks and bank holding companies. Sets monetary policy for the country and provides liquidity for supervised financial institutions.

Federal Tax Lien

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

Federal Tax Return

The U.S. government's method to identify individual and company's annual tax responsibility. The tax returns identify the income and taxes.

Fee Simple

Highest possible degree of ownership of land. The estate gives owners unrestricted power to dispose of property, including will or inheritance.


A person in a position of trust or responsibility with specific duties to act in the best interest of the client. Real estate brokers and mortgage brokers are fiduciaries.

Financial Depository Institutions

Banks, Savings and Loans and credit unions.

First Mortgage

Mortgage-holders priority over the claims of subsequent lenders against the same property.


Personal property that has become part of the real estate.


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

Freddie Mac

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.

Full Disclosure

Revealing all the known facts that may affect the decision of a buyer or tenant.

General Lien

A lien, such as a tax lien or judgement lien, which attaches all property of the debtor, rather than a trust deed lien, which attaches only to a specific property.

Government National Mortgage Association (GNMA/Ginnie Mae)

A government owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA guarantees timely principal and interest payments to investors.

Grandfather Clause

The clause in a law that will permit the continuation of a use, business, etc., which, was at one time 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.

Hazard Insurance

Insurance on a property for fire or a similar risk.

Heirs and Assigns

An association of people who won homes in a given area for the purpose of improving or maintaining the quality of the area.

Homeowners' Association

An association of people who own homes in a given area. The purpose of the association is improving or maintaining the quality of the area.

Homeowner's Policy

Policy which expands the insurance for a homeowner. It may include theft, liability, earthquake, etc.

Homeowners' or Maintenance Fees

Payments made by property owner(s) of a condominium or a unit in PUD to the homeowners' association for expenses incurred in the upkeep of common areas.

Housing and Urban Development (HUD)

The federal government agency that oversees FHA.


A closing document required by HUD, which outlines the settlement costs of a loan. The closing agent generally prepares the document and buyer receives it shortly after the loan is closed.

Impound Account

Account held by a lender for payment of taxes, insurance or other.

Incidental Recording, Delivery, Wire, etc. Fees

Other costs that are incurred when a real estate loan is closed.

Independent Contractor

The term is most important when used to describe the relationship of a broker and salesperson as an employee or independent contractor. If the sales person is an 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 sales person while on the job. All of this is avoided by the broker if the salesperson is an independent contractor.


A published rate or benchmark measure of current interest rate levels used to calculate periodic changes in rates charged on adjustable-rate mortgages (ARM). You should ask your lender how the index for any ARM you are considering has changed in recent years and where the rate it is reported.

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 cost of foreclosure.

Interest Payment Notification (1098)

A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year.

Interest Rate

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

Investment Property

A property that is a not occupied by the owner and, in most cases, generates income.

Joint and Several

A liability which allows the creditor to take legal action against any one of the debtors or all.

Joint Tenancy

An undivided interest in property of two or more joint tenants. The interests must be equal, accrue under the same conveyance and begin 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 judgements, when recorded, become a lien on real property owned by the defendant.

Junior Mortgage

A mortgage that is subordinate to another mortgage.

Land Contract

Installment plan for buying a house. It is used as an alternative to obtaining a loan from a traditional source, such as a mortgage banker, Savings and Loan or Credit Union.

Late Charge

A penalty for failure to pay an installment payment 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.

Legal Description

An expanded and unique description of a property, which is used on legal documents such as deeds and deeds of trust. Recorded documents generally require a legal description.


The bank, credit union, mortgage company or mortgage broker offering the loan.

Lender's Instructions

A document that the lender prepares for the closing agent, which outlines the requirements for loan closing.

Letter of Intent

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


A latin word for book.


An encumbrance against a property for money owed, 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 run a business and are responsible for losses, and one or more investing partners, who contribute capital, but are liable only to the amount of their financial contribution.

Lis Pendens

A notice that litigation is pending on a property.

Listing Agreement

Agreement between a property owner and a real estate broke. The agreement authorizes the broker to find a buyer for the property. If the sale is consummated, the listing broker will be paid a fee.

Loan Discount/Premium Fees

Fees that borrowers pay (or sometimes a seller will pay the fees for borrower) which adjusts to the yield requirement of the investor. A loan discount indicates an investor yield requirement higher than the note rate. A loan premium indicates an investor yield requirement lower than the note rate.

Loan Lock

Guarantees the borrower the rate that is in effect at the time of loan application.

Loan Officer

A person who helps borrowers through the mortgage loan selection, processing and closing. Loan officers may be paid a commission or a salary for their services and may work for a mortgage broker, mortgage banker or depository institution.

Loan Origination Fees

The costs to obtain a mortgage loan, and are paid to the originating lender or broker.

Loan Package

The financial information given to the lender about the borrower, plus the property information needed to evaluate the loan for approval.

Loan Ratio

The amount of the loan compared to the value or selling price of the real property.

Loan Servicing

Loan servicing is the function of collecting loan payments, managing the property tax and insurance escrows, foreclosing on defaulted loans and remitting payments to the investor/beneficiary.

Loan-to-Value Ratio

The ratio of the mortgage loan balance to the appraised value of the property (or the property selling price, whichever is less).Market Value
The most likely price for which a given property will sell if widely exposed on the market and assuming a fully informed buyer and seller.

Marketable Title

Title that is free of liens, clouds on title and legal defects affecting the property

Mechanics Lien

A lien created by statute for the purpose of securing priority of payment for the price of work performed and materials furnished in construction for repair or improvements to land, and is attached to the land as well as the improvements.


A lien or claim against real property given as security for a loan.

Mortgage Broker

A professional that helps consumers through the loan selection, processing and closing of a mortgage loan. Most mortgage brokers have access to a wide range of mortgage products through many mortgage lenders. Mortgage brokers are paid a fee by the borrower when a suitable loan is found and closed.

Mortgage Guaranty Insurance Corporation (MGIC)

A private corporation which, for a fee, insures mortgage loans similar to but for amounts lesser than FHA and VA insurance, although not insuring as great a percentage of the loan.

Mortgage or Deed of Trust

Written pledge on real property given by the mortgagor to secure a debt. Should be recorded in the County Recorders Office.


The lender of money or the receiver of the mortgage document.

Mortgage Insurance

Insurance required on loans with a loan-to-value ratio above 80.01%.

Mortgage Note

The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps for ARMs, the name of the lender and the borrower, and any other material item required by the lender.

Mortgage Warehousing

A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans which are then sold to an investor shortly thereafter. The mortgage notes are used as collateral for this interim financing.


The borrower of money or the giver of the mortgage document.

Negative Amortization

Negative amortization occurs when the monthly payments do not cover all of the interest due. The interest not covered by the payment is added to the unpaid principal balance. This means that even after making regular payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments do not cover the interest due.

Non-Conforming Loan

Also known as a jumbo loan, the loan balance exceeds the limits set by FNMA and FHLMC.

Non-Conforming Use

A property that does not conform to the zoning in an area.


A written promise to repay a certain sum of money for specific terms.

Office of Comptroller Currency

A federal government regulatory agency that oversees commercial banks.

Office of Thrift Supervision

A federal government regulatory agency that oversees Savings and Loans.

Open-End Mortgage

A mortgage that permits the mortgagor to borrow additional money under the same mortgage loan, with certain conditions, such as the assets of the mortgage.

Origination Fee

A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.

Owner of Record

The owner of a property with a deed indicating his ownership, which has been recorded at the local municipality.

Owner's Policy

Title insurance for the owner of property, rather than the lien-holder.

Package Mortgage

Mortgage covering both real and personal property.


A mortgage, deed of trust or land contract, which is given instead of cash.

Partial Release

A release of a portion of the property covered by a mortgage loan.

Permanent Mortgage

A mortgage on completed construction on the same property under one mortgage or trust deed.


Abbreviation for principal, interest, taxes and insurance, often lumped together in a monthly mortgage payment.


A map or chart of a lot, subdivision or community, showing boundary lines, buildings and easements.


Abbreviation for private mortgage insurance, which is insurance issued by a company, to insure the lender against loss, in the event the borrower defaults on the mortgage.


A point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $100,000, one point is means you pay $1000 to the lender. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages in order to increase the yield of the mortgage and to cover loan closing costs. These points are usually collected at closing and may be paid by the borrower or the home seller, or possibly split between them. Points describe some of the costs of obtaining a loan. They are used to describe the origination fees charged by the originating lender or broker. They are also used to describe the discount fees charged by lenders to increase the overall yield. A point is equal to 1% of the loan amount.

Portfolio Loan

Loans made by a bank, Savings and Loan, or credit union, which are kept as an investment.

Prepaid Interest

Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closed on the 15th of the month and the 1st payment is due 45 days later, the lender will charge 15 days of prepaid interest.


Full payment of the principal before the due date. This occurs when a property is sold or the borrower refinances the existing loan.

Prepayment Penalty

Charge levied by the lender for paying off a mortgage loan before its maturity date.

Primary Mortgage Insurance (PMI)

Insurance that insures the upper portion of a mortgage loan thereby reducing the lenders risk to principal loss in the event of a borrowers default. The insurance coverage allows lenders to make higher loan-to-value ratios (95% LTV).

Primary Mortgage Market

The process of obtaining a real estate loan, including the consumer's completion of a loan application form, validation of the credit and property information, loan underwriting by the lender and closing of the mortgage loan.

Primary Residence

Considered the permanent location of residency.


An entity that hires and pays an agent to perform a service; the seller in a real estate transaction is the principal. Also, the outstanding amount on a loan is the principal.

Private Mortgage Insurance (PMI)

Insurance similar to FHA or VA insurance, insuring part of the first mortgage or deed of trust, enabling a lender to make a conventional loan for a higher percentage of the property value.

Processing, Underwriting and Document Fees

Charges for the lender's services associated with making the loan.

Property and Hazard Insurance

Provides coverage for specific natural hazards, such as fire, wind, earthquakes and vandalism.

Property Tax

A tax levied by the local municipality or county on real and personal property.

Property Tax Prorations

Expenses such as taxes that are divided to the date of settlement between buyer and seller at closing. Interest is sometimes prorated when a mortgage loan is closed.


To divide in proportionate shares expenses, such as taxes, insurance, rent or other items.

Planned Unit Development (PUD)

A housing development in which there is a homeowner's association and common areas owned by the homeowners.

Purchase Money Mortgage

A mortgage given by the buyer to the seller as part of the purchase consideration, as opposed to a hard money mortgage. the broker, escrow agent, or lender, providing a complete breakdown of the costs involved in a real estate transaction.

Quit Claim Deed

A deed operating as a release, intended to pass any title, interest or claim that the grantor may have in the property.

Real Estate

Land and anything permanently affixed to the land or the building.


Registered name for a member of the National Association of Realtors.

Realtor Associate

Salesperson associated with a broker who is member of a Board of Realtors.


Setting forth in a deed or other writing an explanation of a transaction.


The right of the holder of note, secured by a mortgage or deed of trust, to pursue the borrower or endorser for payment.


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


The repayment of a loan from the proceeds of a new loan, using the same property as security.

Reissue Rate

A charge for a title insurance policy if a previous policy on the same property was issued within a specified period. Reissue is less than the original charge.

REIT (Real Estate Investment Trusts)

A method in investing real estate in a group, with certain tax advantages.

Rescission of Contract

Annulling a contract and placing the parties to it in a position as if there had not been a contract.


An instrument releasing property from the lien of the mortgage, judgment, etc.

RESPA (Real Estate Settlement Procedures Act)

A federal statute requiring disclosure of certain costs in the sale of residential improved property which is to be financed by a federally insured lender.

Revenue Stamps

Formerly federal tax on a sale of real property. Canceled and replaced by state tax stamps.

Reverse Mortgage

A loan program for homeowners 62+ years of age, which provides monthly or lump-sum income from the home's equity. No payments are required until the home is sold.

Second Home

Commonly known as a vacation home. This home is occasionally occupied by the owners.

Secondary Financing

A loan secured by a mortgage or trust deed and has a lien that is junior to another mortgage or trust deed.

Secondary Market

The buying and selling of mortgage notes between sophisticated investors, such as pension funds, commercial banks, Savings and Loans and Wall Street firms.

Secondary Market Investor

An entity, such as FNMA or FHLMC, that buys mortgage loans as investments and may sell them again to another secondary market investor. Secondary market investors do not service loans and do not collect payments from borrowers.

Secondary Mortgage Market

The buying and selling of first mortgages or trust deeds by banks, insurance companies, government agencies and other mortgagees.


Real or personal property pledged by the borrower as additional protection for the lender's interest.

Seller's Broker

Agent who takes the seller as a client, is legally obligated to a set of fiduciary duties and is required to put the seller's interests above all others.

Septic System

A sewage system, in which waste is drained through pipes and a tile field into a septic tank.

Setback Ordinance

Regulates the distance from the lot line to the point where improvements may be constructed.

Settlement Cost, a HUD Guide

This booklet provides an overview of the lending process and is required by HUD. It is given to the consumer after the loan application is completed.

Settlement Statement

A statement prepared by the broker, escrow agent, or lender, providing a complete breakdown of the costs involved in a real estate transaction.

Sheriff's Deed

A deed given at the sheriff's sale in the foreclosure of a mortgage.

Signed, Sealed and Delivered

A phrase indicating that everything necessary to convey has been done by the grantor.

Single Family Detached Home

A residential home that is not attached physically to another home.

Specific Performance

Lawsuit requesting a contract be carried out exactly, usually requiring the seller to convey the property as previously agreed.

Standard Uniform Application

An application developed by FNMA and FHLMC, which is widely used in the mortgage lending industry.

State and Local Housing Programs

Unique housing finance programs which assist first-time homebuyers and low-to-moderate housing groups. Each state and local group utilize different criteria.

Statutory Lien

An involuntary lien, including tax liens, judgement liens, mechanic liens, etc.

Substitute of Trustee

A document that is recorded and changes the trustee under the deed of trust.


Map made by a licensed surveyor, who measures the land and charts its boundaries, improvements and relationship to the property surrounding it.

Tax Lien

Lien against property for non-payment of taxes.

Tax Sale

Public sale of property at auction by governmental authority, after a period of non-payment of property taxes.

Tenancy by the Entirety

A form of ownership by husband and wife whereby each owns the entire property. In event of death of one, the survivor owns the property without probate.

Time Is of the Essence

Legal phrase in a contract that requires punctual performance of all obligations.


Often used interchangeably with the word ownership. It indicates the accumulation of all rights in property by the owner and others.

Title, Escrow and Closing Agent Fees

The various fees charged by these companies for their services.

Title Insurance

An insurance policy, which protects the insured (purchaser and lender) against loss arising from defects in title.

Title Search

A review of public records to ensure no adverse claims affect the value of the property's title.

Truth-in-Lending Statement (Regulation Z)

A federal government regulation that provides details of the cost of obtaining a mortgage loan. Lenders must provide this statement shortly after the loan application has been completed.


The buyer.


The seller.

Veterans Administration

The agency that guarantees a veteran's mortgage loan so the lender is willing to make the loan with little or no down payment.

Warranty Deed

The most valuable type of deed, in which the grantor makes formal assurance of title.

W-2 Form

Income tax form provided by employers to employees, that states the income and taxes paid in a calendar year.
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