ACKNOWLEDGEMENT – A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution if of his own volition.

ACQUISITION COSTS – Costs of acquiring property other than purchase price: escrow fees, title insurance, lenders fees, etc.

ADJUSTABLE RATE MORTGAGES (ARMs) – Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan.

AGREEMENT – A general term usually describing a common view of two or more people regarding the rights and obligations of each with regard to a given subject. Not necessarily a contract, although all contracts are agreements.

A.L.T.A. (AMERICAN LAND TITLE ASSOCIATION) – An organization composed of title insurance companies, which has adopted certain insurance policy forms to standardize coverage on a national basis.

AMENDMENT – A change, either to correct an error or to alter a part of an agreement without changing the principal idea or essence.

AMORTIZE – To reduce a debt by regular payments of both principal and interest, as opposed to interest only payments.

ANNUAL PERCENTAGE RATE (A.P.R.) – The yearly interest percentage of a loan as expressed by the actual rate of interest paid, in a uniform manner. For example: 7% add-on interest would be much more than 7% simple interest, even though both would say 7%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes.

APPRAISAL – An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.

APPRAISER – One who is trained and educated in the methods of determining the value of property through analysis of various factors and use of formal appraisal process, which determine said value.

APPRECIATION – An increase in value of property due to either a positive improvement of the area or the elimination of negative factors. Commonly, and incorrectly, used to describe an increase in value through inflation.

“AS IS” CONDITION – Premises accepted by a buyer in the condition existing at the time of sale, including all physical defects.

ASSESSED VALUE – Value placed on property for property tax purposes by the tax assessor.

ASSIGNMENT – A transfer of title to another of any property, real or personal, or of any rights or estates in said property. Common assignments are of leases, mortgages, deeds of trust or notes, but the general term encompasses all transfers of title.

ASSUMPTION OF MORTGAGE - Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor (usually the seller) from liability.

B   
BALLOON NOTE – A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity.

BANKRUPTCY - Proceedings under federal bankruptcy statutes to relieve a debtor (bankrupt) from insurmountable debt. The bankrupt’s assets are distributed by the court to the creditors as full satisfaction of the debts in accordance with certain priorities and exemptions. The debtor petitions for voluntary bankruptcy. Involuntary, is petitioned for by the creditors.

BASIS POINT – A finance term meaning a yield of 1/100th of 1% annually.

BINDER – A notation of coverage on an insurance policy, issued by an agent and given to the insured prior to issuance of the policy.

C   
CAP - A maximum amount of charge. For example: An Adjustable Rate Mortgage with a 5% rate cap could not adjust the interest rate by more than 5%.

CC&Rs (COVENANTS, CONDITIONS AND RESTRICTIONS) – A term used to describe the restrictive limitations, which may be placed, on property.

CLOSING COSTS - Expenses incidental to a sale of real estate such as loan fees, title fees, appraisal fees, etc.

COMMISSION – An amount, usually a percentage, paid to an agent as compensation for his services. The amount to a real estate agent is generally a percentage of the sale price.

COMMUNITY PROPERTY - Property owned in common by, and acquired by joint effort of, a husband and wife, which was not acquired as separate property.

COMPARABLE SALE – Sales, which have similar characteristics as the subject property and are used for analysis in the appraisal process to determine the value of subject property.

CONDOMINIUM – A structure of two or more units, the interior space of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finishes) of the exterior walls, floors and ceiling. The balance of the property is called the common area.

CONTINGENCY – Commonly, the dependence upon a stated event that must occur before a contract is binding. For example: The sale of a house, contingent upon the buyer obtaining financing.

CONVENTIONAL LOAN – A mortgage or deed of trust not obtained under a government insured program (such as FHA or VA).

CONVEYANCE – Transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged or assigned.

COST APPROACH – One of the three methods used in the appraisal process. An analysis in which an estimated value of a property is derived at by estimating the replacement cost of the improvements, deducting for the estimated accrued depreciation, then adding the market value of the land.

D   
DEED – Actually, any one of many conveyancing or financing instruments, but generally a conveyancing instrument given to pass fee title to the property upon sale.

DEED OF TRUST – An instrument used in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and reconveyed upon payment in full.

DEFAULT – Failure to fulfill a duty or promise or the discharge of an obligation; omission or failure to perform any act.

DEFERRED MAINTENANCE – Repairs necessary to put a property in good condition. A concern of a purchaser. An owner may have an account for such maintenance.

DEPOSIT – Money given by the buyer with an offer to purchase. Shows good faith. Also called earnest money.

DEPRECIATION – Loss of value in any asset brought about by age, physical deterioration or functional or economic obsolescence.

DEROG – A slang shortening of the word derogatory. Used in reference to information on a credit report.

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

DISCOUNT – The difference between the face value of a note and deed of trust, and the present cash value.

DONEE – One who receives a gift.

DONOR – One who gives a gift.

DOWN PAYMENT – Cash portion paid by a buyer from his own funds as opposed to that portion of the purchase price, which is financed.

E   
EARNEST MONEY – Good faith money given by the buyer with an offer to purchase.

EASY DOC LOANS – Loans requiring less documentation than is usually required from the borrower. For example: The borrower would provide a statement of income but not be required to provide tax returns to prove it.

E.C.O.A. (EQUAL CREDIT OPPORTUNITY ACT) – Regulation “B” of Federal Regulations, prohibits the lender from discriminating in lending policies.

EQUITY – The value, which an owner has in property over and above all liens held against it.

ESCROW – The deposit of instruments and funds with instructions to a neutral third party to carry out the provisions of a set agreement or contract; when everything is deposited and recorded to carry out the instructions, it is called a completed escrow.

ESCROW OFFICER – An escrow agent. One who has, through experience and education, gained a certain degree of expertise in escrow matters.

F    
FAIR CREDIT REPORTING ACT – A federal law giving one the right to see their credit report so that errors may be corrected. A lender refusing credit based on a credit report must inform the buyer which company issued the report and the buyer may see the report without charge if refused credit.

FAIR MARKET VALUE – The price that would be negotiated by a willing buyer and a willing seller in a reasonable time.

FEDERAL FAIR HOUSING LAW – Title VIII of the Civil Rights Act, which forbids discrimination in the sale or rental of residential properties because of race, color, sex, religion or national origin.

FEE SIMPLE – An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.

F.H.A. (FEDERAL HOUSING ADMINISTRATION) – A federal agency, which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

F.H.L.M.C. (FEDERAL HOME LOAN MORTGAGE CORPORATION) (FREDDIE MAC) – A semi-governmental purchaser of mortgages in the secondary market.

F.I.C.O. – Fair, Isaac and Company. A company, which has developed statistical evaluations of credit reports and assigned a corresponding "Risk Score" to each based on information contained in the credit report.

FIRE INSURANCE – Insurance against loss or damage by fire, which may also include other coverage.

FIRST MORTGAGE – A mortgage having priority over all other voluntary liens on a specific property.

FIXED RATE MORTGAGE – A mortgage having a rate of interest, which remains the same for the term of the mortgage.

F.N.M.A. (FEDERAL NATIONAL MORTGAGE ASSOCIATION) (FANNIE MAE) – A private corporation dealing in the purchase of first mortgages, at discounts.

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

FULLY AMORTIZED LOAN – A loan of equal, regular payments, which cause the principal and interest to be completely paid by the due date.

G    
GOOD FAITH – Something done with good intentions, without knowledge of fraudulent circumstances or reason to inquire further.

GRANT DEED – Also, sometimes, called a “Warranty Deed”. One of the many types of instruments used to transfer real property. Contains warranties against prior conveyances or encumbrances.

H    
HARD MONEY MORTGAGE (HARD MONEY LOAN) – A loan given based on the property value regardless of the borrower’s ability or willingness to repay.

HAZARD INSURANCE – Insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

HIGHEST AND BEST USE – The use of property, which will result in its highest value. In an appraisal this cannot be merely theoretical but must be realistic in that the use must be legal (proper zoning, etc.), physically achievable and financially feasible.

HOMEOWNER’S ASSOCIATION – An association of people who own homes in a given area, usually formed by the builder, for the purpose of maintaining or improving the quality of the area. Required by statute in some states for Condominiums, Townhouses and Planned Unit Developments and the builder’s as well as the duties of the association are controlled by statute.

HOME WARRANTY INSURANCE – Private insurance insuring the buyer against defects (usually in air conditioning, plumbing, heating and electrical) in the home he has purchased. The period of insurance varies and both new and re-sale home may be insured.

HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF (HUD) – The federal department responsible for the major housing programs in the United States, such as F.H.A.

I    
IMPOUND ACCOUNT – A trust type account held by a lender for payment of taxes, insurance premiums, mortgage insurance premiums or other periodic debts against real property in order to protect their interests. Funding the impound account is done at loan closing and accumulation included in the monthly mortgage payments.

INCOME APPROACH – An analysis used in appraisals whereby value is estimated by using the estimated gross income from the subject property along with gross rent multipliers derived. One of the three methods used in the appraisal process.

INTEREST RATE – The percentage of a sum of money, which is charged for its use for a specified period of time.

INTEREST RATE CAP – The maximum interest rate increase of an Adjustable Rate Mortgage. For example: a 7% loan with a 5% interest rate cap would have a maximum interest rate for the life of the loan, which could not exceed 12%.

J    
JOINT NOTE – A promise to pay, executed by two or more persons, each having equal liability.

JOINT TENANCY – An undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenant(s), rather than to the heirs of the deceased.

JUDGEMENT – The final decision of a court of law with competent jurisdiction. Money judgments, when recorded, become a lien on the real property of the defendant.

JUMBO LOAN – A loan on residential property for an amount greater than that allowable under conventional loan limits as set by FHLMC and FNMA.

L    
LAND CONTRACT – A contract ordinarily used when property is sold with a small down payment and the seller does not wish to convey title until all of a certain part of the purchase price is paid by the buyer.

LATE CHARGE – A penalty charged for failure to pay an installment payment on time. The amount is usually set by statute or must be “reasonable”.

LEASE – A contract between an owner of real property (lessor) and a tenant (lessee) setting forth conditions upon which the tenant may occupy and use the property and the term of occupancy.

LEGAL DESCRIPTION – A method of geographically identifying a parcel of land, which can be definitely located by reference to government surveys or approved, recorded maps and is acceptable in a court of law.

LIEN – An encumbrance against property for money, either voluntary or involuntary. Example: Deed-of-Trust, Judgment, Taxes, etc.

LIVE SIGNATURE – Also called “WET SIGNATURE” - an actual, genuine signature as opposed to a Photostat or faxed copy.

LOAN APPLICATION – The form used to obtain the borrower’s information and define the terms of the loan for which they are applying in a uniform manner. It gives the name(s) of the borrower, place of employment, salary, bank accounts, credit references, assets, etc. It is the source of information on which the lender makes his decision on whether or not to approve the loan.

LOAN CLOSING – When all conditions have been met, the escrow officer authorizes the recording of the trust deed and the disbursal of loan funds. This process is sometimes called “funding” the loan.

LOAN PACKAGE – The complete file of all items necessary for the lender to decide to approve, or disapprove, the loan. These items would include the information on the prospective borrower (loan application, credit report, financial statement, pay stubs, employment letters, etc.) and information on the property (appraisal, sales contract, survey, etc.).

LOAN SERVICING – The collection, bookkeeping and follow-up of a loan while in repayment.

LOAN TO VALUE – The ratio, expressed as a percentage, of the loan amount to the lesser of the sales price or appraised value (value) of real property.

LOSS PAYABLE CLAUSE – A clause in a Hazard Insurance policy listing the priority of claims in the even of loss of the property insured.

M    
MARKET DATA APPROACH – Appraising the value of a property by comparing the sales price of similar properties recently sold in the area. The degree of similarity of the properties, distance from the subject property and terms of the sale are important considerations. One of the three methods used in the appraisal process and usually the most reliable on residential properties.

MARKET PRICE – The price a property brings in a given market regardless of pressures, motives or intelligence.

MARKET VALUE – The highest price that a willing buyer would pay and a willing seller accept, both being fully informed, and the property exposed for a reasonable period of time on the open market.

MORTGAGE – The instrument by which real property is hypothecated as security for the repayment of a loan.

MORTGAGE BROKER – One who, for a fee, brings together a borrower and lender and handles the necessary applications and paperwork for the borrower to obtain the loan against real property. As defined by Nevada Statutes, handles “private investor” loans.

MORTGAGE COMPANY – As defined by Nevada Statutes: the same as above only does not handle “private investor” loans, only institutional investor loan products.

MORTGAGEE – The party lending the money and receiving the mortgage.

MORTGAGE INSURANCE – Insurance written to protect the mortgage lender against loss due to default, thus enabling the lender to lend a higher percentage of the sales price.

MORTGAGOR – The party who borrows the money and gives the mortgage.

N    
NONRECURRING CLOSING COSTS – The one-time costs of obtaining the loan (i.e.: title policy, appraisal, recording, etc.), which are not recurring.

NOTE – A unilateral written agreement acknowledging the debt and containing an express and absolute promise of the signer to repay the debt under specified terms, amounts and conditions.

NOTICE OF DEFAULT – A notice filed with the county recorder to show that the borrower is in default (usually, behind in payments) under a deed of trust or mortgage.

O    
ORIGINATION FEE – A lender fee charged to the borrower for handling and making a real estate loan. Usually a percentage of the loan amount.

OWNER OCCUPIED – Property physically occupied by the owner(s) of record.

P    
PI (PRINCIPAL AND INTEREST) – Used to indicate that only principal and interest are included in a quoted monthly payment on real property.

PITI (PRINCIPAL, INTEREST, TAXES AND INSURANCE) – Used to indicate that the four major portions of a monthly payment on real property are included in the quoted payment.

PLANNED UNIT DEVELOPMENT (PUD) – A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.

PRELIMINARY TITLE REPORT – A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title policy is issued.

PREPAYMENT PENALTY – A penalty specified under a note, mortgage or deed of trust and imposed when the loan (or a percentage thereof) is paid before it is due. These are usually for a set period of time from loan inception (i.e.: one year, three years, five years, etc.).

PRINCIPAL – (1) The person giving authority to an agent. (2) The amount of debt, not including interest. The face value of a note, deed of trust, etc.

PRIVATE MORTGAGE INSURANCE (PMI) – Insurance against loss by a lender in the event of default by the borrower. The premium is paid by the borrower and included in the mortgage payment.

PROFIT AND LOSS STATEMENT – A statement showing the income and loss of a business over a stated time, the difference being the profit or loss for the period.

PROMISSORY NOTE – (Also called, simply, “Note”) A promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order or to bearer. Establishes personal liability for repayment of the debt.

PROPERTY TAX – Generally, a tax levied on both real and personal property; the amount of the tax is determined by the assessed value of the property.

PRO RATE – To divide in proportionate shares, such as taxes, insurance premiums, etc. between buyer and seller to time of use or the date of closing.

Q    
QUITCLAIM DEED – A deed operating as a release; intended to pass any title, interest or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.

R    
RATE INDEX (INDEX) – An index used to adjust the interest rate of an Adjustable Rate Mortgage (i.e.: COFI, LIBOR, 6 month T-Bill, etc.)

R.E.O. (REAL ESTATE OWNED) – Most commonly refers to property owned by a lender from foreclosure. This property is usually up for sale.

RECONVEYANCE – An instrument used to transfer title from a trustee to the equitable owner of real estate, when title is held as collateral security for a debt and the debt has been fully discharged. Most commonly used upon payment in full of a trust deed. Also called a “Deed of Reconveyance” or “Release”

RECORDATION (RECORDING) – Filing instruments for official public record (and notice) with the County Recorder’s Office.

REGULATION Z (TRUTH IN LENDING) – Requires that a borrower be advised in writing, prior to signing and in a specific, uniform manner, of the interest rate and all costs and fees incurred in a proposed loan transaction.

REINSTATEMENT – (1) Payment of a note, mortgage, deed of trust, etc. to bring it from default to good standing. (2) Restoring the previously used entitlement of a veteran to enable the veteran to purchase real property under the VA program.

REPLACEMENT COST – The current cost to construct an exact duplicate of the subject property having the same utility, design, layout and quality of workmanship, but using modern materials.

R.E.S.P.A. (REAL ESTATE SETTLEMENT PROCEDURES ACT) – A federal statute effective June 20, 1975, requiring disclosures of certain costs in the sale of residential (one to four family) improved property.

S   
SECONDARY FINANCING – A loan secured by a mortgage or trust deed, which lien is junior (secondary) to another mortgage or trust deed.

SECOND MORTGAGE – A mortgage, which ranks after a first mortgage in priority.

SETTLEMENT STATEMENT (HUD-1) – A statement prepared by broker, escrow or lender giving a complete breakdown of costs and disbursements involved in a real estate sale.

SIMPLE INTEREST – Interest computed on the principal alone, as opposed to compound interest.

SINGLE FAMILY RESIDENCE – A general term originally used to distinguish a house designed for use by one family from an apartment house. More recently, used to distinguish a house with no common area from a planned development or condominium.

SPECIAL ASSESSMENT- Lien assessed against real property by a public authority to pay costs of public improvements (sidewalks, sewers, street lights, etc.), which directly benefit the assessed property.

STATEMENT OF INFORMATION (STATEMENT OF IDENTITY) – A confidential form filled out by either buyer or seller (or both) to determine if any liens are recorded against either. Very helpful when people with common names are involved.

SURVEY – The measurement of the boundaries of a parcel of land, its area, and sometimes its topography.

T   
TAX LIEN – (1) A lien for nonpayment of property taxes. Attaches only to the property upon which the taxes are unpaid. (2) A federal income tax lien. May attach to all property of the one owing the taxes.

TENANCY IN COMMON – An undivided ownership in real estate by two or more persons. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship exists with the other owners.

TITLE – The evidence one has of right to possession of land.

TITLE INSURANCE – Insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects may run to the fee (chain of title) or to encumbrances.

TRUST DEED – An instrument used in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and reconveyed upon payment in full.

TRUSTEE – (1) one who is appointed, or required by law, to execute a trust. (2) One who holds title to real property under the terms of a deed of trust.

U   
UNDERWRITING – The analysis by a lender to determine the borrower’s ability, capability and willingness to repay a proposed loan, the proper structuring of said loan and that the collateral value is there.

V   
VALUATION - The estimating of value. Appraisal.

VALUE – (1) The usefulness of an object. (2) The monetary worth of an object. (3) In real estate lending, the lesser of the sales price or appraised value of a property.

W   
WARRANTY DEED – A deed used to convey fee title to real property, which contains warranties to clear title. (Also see: Grant Deed).

Z   
ZONING – The division of a city or county by legislative regulations into areas (zones), specifying the uses allowable for the real property in these areas.