amenity
a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (such as location, woods, water) or man-made (such as a swimming pool or garden)

amortization
repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)

annual percentage rate (APR)
calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan

application
the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process

appraisal
a document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property

appraiser
a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate

arm
adjustable rate mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap

assessor
a government official who is responsible for determining the value of a property for the purpose of taxation

assumable mortgage
a mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage

balloon mortgage
a mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower

bankruptcy
a federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay

borrower
a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms

building code
based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building

budget
a detailed record of all income earned and spent during a specific period of time

buyer's market
a buyer's market is one in which there are too many homes on the market for the number of buyers; homes take longer to sell and prices fall

cap
a limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease

cash reserves
a cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

certificate of title
a document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims

closing
also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller

closing costs
customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application

commission
an amount, usually a percentage of the property sales price, that is collected by a real estate professional as a fee for negotiating the transaction

condominium
a form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas

conventional loan
a private sector loan, one that is not guaranteed or insured by the U.S. government

cooperative (co-op)
residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan

credit history
history of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan

credit report
a record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history

credit bureau score
a number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan

debt-to-income ratio
a comparison of gross income to housing and non-housing expenses. With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income

deed
the document that transfers ownership of a property

deed-in-lieu
to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure

default
the inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms

delinquency
failure of a borrower to make timely mortgage payments under a loan agreement

discount point
normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan

down payment
the portion of a home's purchase price that is paid in cash and is not part of the mortgage loan

earnest money
money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal

EEM
Energy Efficient Mortgage; an FHA program that helps home buyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase

equity
an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loan(s)from the fair market value of the property

escrow account
a trust account created by a third party to hold money; a mortgage escrow account is an account set-up to pay taxes and insurance. Monthly mortgage payments may include 1/12 of annual property taxes and insurance. When the bills comes due, lenders use the money in the escrow account to pay them

fair housing act
a law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability

fair market value
the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation

Fannie Mae
Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential home buyers

federal housing administration (FHA)
Federal Housing Administration; established in 1934 to advance home ownership opportunities for all Americans; assists home buyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages

fixed-rate mortgage
a mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change

flood insurance
insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan

foreclosure
a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower

freddie mac
Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, scrutinizes them, and sells them to investors; this provides lenders with funds for new home buyers

ginnie mae
Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders

good faith estimate
an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application

HELP
Home buyer Education Learning Program; an educational program from the FHA that counsels people about the home buying process; HELP covers topics such as budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the home buyer to a reduced initial FHA mortgage insurance premium-from 2.25% to 1.75% of the home purchase price

home inspection
an examination of the structure and mechanical systems to determine a home's safety; makes the potential home buyer aware of any repairs that may be needed

home warranty
offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance; overage extends over a specific time period and does not cover the home's structure

homeowner's insurance
an insurance policy that combines protection against damage to a dwelling and it's contents with protection against claims of negligence or inappropriate action that results in someone's injury or property damage

housing counseling agency
provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying

HUD
The U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws

HUD1 statement
also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing

HVAC
Heating, Ventilation and Air Conditioning; a home's heating and cooling system

index
a measurement used by lenders to determine changes to the interest rate charged on an adjustable rate mortgage

inflation
the number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value

interest
a fee charged for the use of money

interest rate
the amount of interest charged on a monthly loan payment; usually expressed as a percentage

insurance
protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium

judgment
a legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source

key lot
a lot in such a position that one side is adjacent to the back of other lots. It is considered to be the least desirable of the lots in a subdivision

lease purchase
assists low to moderate income home buyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment

lien
a legal claim against property that must be satisfied when the property is sold

loan
money borrowed that is usually repaid with interest

loan fraud
purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties

loan-to-value (LTV) ratio
a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment

lock-in
since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time

loss mitigation
a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan

margin
an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage

mortgage
a lien on the property that secures the promise to repay a loan

mortgage banker
a company that originates loans and resells them to secondary mortgage lenders such as Fannie Mae or Freddie Mac

mortgage broker
a firm that originates and processes loans for a number of lenders

mortgage insurance
a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price

mortgage insurance premium (MIP)
a monthly payment usually part of the mortgage payment paid by a borrower for mortgage insurance

mortgage modification
a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments

offer
indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing

origination
the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal

origination fee
the charge for originating a loan; is usually calculated in the form of points and paid at closing

partial claim
a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date

PITI
Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due

PMI
Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price

pre-approve
the lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase

pre-foreclosure sale
allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure

pre-qualify
a lender informally determines the maximum amount an individual is eligible to borrow

premium
an amount paid on a regular schedule by a policyholder that maintains insurance coverage

prepayment
payment of the mortgage loan before the scheduled due date; may be subject to a prepayment penalty

principal
the amount borrowed from a lender; doesn't include interest or additional fees

radon
a radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems

real estate agent
an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker

realtor
a real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS®, and its local and state associations

refinancing
paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (such as a lower interest rate)

rehabilitation mortgage
a mortgage that covers the costs of rehabilitating (repairing or improving) a property; some rehabilitation mortgages such as the FHA's 203(k) allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan

RESPA
Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

seller's market
such a market exists when the number of qualified buyers seeking homes GENERALLY exceeds the available inventory; in other words, it’s a case of Supply and Demand, with the demand of buyers out-pacing the supply of homes

settlement
another name for closing

special forbearance
a loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments

subordinate
to place in a rank of lesser importance or to make one claim secondary to another

survey
a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.

sweat equity
using labor to build or improve a property as part of the down payment

title 1
an FHA-insured loan that allows a borrower to make non-luxury improvements (such as renovations or repairs) to their home; title I loans less than $7,500 don't require a property lien

title insurance
insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for home buyers

title search
a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property

truth-in-lending
a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan

underwriting
the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value

VA
Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default

vacancy rate
the total amount of available space compared to the total inventory of space and expressed as a percentage

variance
permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship; applicant must prove a need or fault

warranty deed
a deed used to convey real property and contains warranties of title and quiet possession and by which the grantor agrees to defend the property against the lawful claims of third persons; it is commonly used in many states but in others the grant deed has replaced it due to the modern practice of securing title insurance policies which have reduced the importance of express and implied warranty in deeds

write-off
the accounting procedure used when an asset has been determined to be uncollectible and is therefore charged as a loss

warranty of authority
a representation by an agent to third persons that the agent has and is acting within the scope of authority conferred by his or her principal

wrap-around loan
a financing device used when it is not feasible or desirable to pay off the first mortgage whereby a lender assumes the payments on a borrower's existing loan and takes a new junior mortgage from the borrower that has a face value in an amount equal to the amount outstanding on the old mortgages plus the additional amount of money borrowed

writ of attachment
a written order issued in the course of a lawsuit directing the sheriff or other law officer to attach the property of the defendant so it can be used to satisfy the demands of the plaintiff if necessary

writ of execution
a written order issued to carry out the judgment or decree of a court

X
an individual who cannot write may execute a legal document by affixing an "X" - his or her mark - where the signature normally goes and a witness would write the person's name beneath the mark and then sign his or her own name

yard
a unit of measurement that is 3 feet long

yield
the effective return on an investment, as paid in dividends or interest

yield capitalization
an income approach method, that would not be the only method, of estimating value used for commercial property in which the appraiser uses several years' of income and the reversion from the sale that is discounted to present value. See Direct capitalization where only one year's income is considered

yield rate
a rate of return on an investment expressed as a percentage which is arrived at by taking the annual net income from the property and dividing it by the cost or market value of the property

zone
The area set off by the proper authorities for a specific use or in an area subject to certain restrictions or restraints

zoning
The division of a city or town into zones and the application of regulations having to do with the architectural design and structural and intended uses of buildings within such zones

zoning map
a map showing the various sections of the community and the division of the sections into zones of permitted land uses under the zoning ordinance in specific areas

zoning ordinance
The set of laws and regulations controlling the use of land and construction of improvements in a given area or zone

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