Real Estate Glossary

Acceptance: The date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract.

Adjustable Rate Mortgage (ARM): A mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index.  Interest rates may move up or down, as market conditions change.

Amortized Loan: A loan that is paid in equal installments during its term (usually a 15 or 30 year term).

Appraisal: An estimate of real estate value, usually issued to standards of FHA, VA and FHMA.  Recent comparable sales in the neighborhood is the most important factor in determining value.  However, this is not an inspection.

Appreciation: An increase in the value of a property due to changes in market conditions or other causes.  The opposite of depreciation.

Arena: An area with footing designated for riding a horse.  Indoor or outdoor arena can be found, but drainage must be considered if you live where there can be alot of rain or ground water.

Assumable Morgage: Purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the loan.

Barn: An outbuilding typically used for animals.

Bill of Sale: Documet used to transfer title of PERSONAL property.

Cloud on Title: Any condition that affects the clear title to real property.

Consideration: Anything of value to induce another to enter into a contract- money, services, a promise, etc.

Deed: A written instrument, which when properly executed and delivered, conveys title to real property.

Discount Points: A loan fee charged by a lender of FHA, VA or Conventional loans to increase the yield on the investment.  One point=1% of the loan amount.

Easement: The right to use the land of another.

Encumbrance: Anything that burdens (limits) the title to property, such as a lien, easement or restriction of any kind.

Equity: The value of real estate over and above the liens against it.  It is obtained by subtracting the total liens from the value.

Escrow Payment: That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, hazard insurance and other items as they become due.

Fannie Mae: Nickname for Federal National Mortgage Corporation (FNMA), a tax-paying corporation created by congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional loans.

Federal Housing Administration (FHA): An agency of the US Department of Housing and Urban Development (HUD).  It's main activity is the insuring of residential mortgage loans made by private lenders.  The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

FHA Insured Mortgage: A mortgage under which the Federal Housing Administration insures loans made, according to it's regulations.

Fixed Rate Mortgage: A loan that fixes the interest rate at a prescribed rate for the duration of the loan.

Foreclosure: Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.

Freddie Mac: Nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market.  It purchases and sells residential conventional home mortgages.

Gallons Per Minute (GPM): Flow test performed on a well to determine the amount of water per minute produced.

Graduated Payment Mortgage: Any loan where the borrower pays a portion of the interest due each month during the first few years of the loan.  The payment increases gradually during the first few years to the amount neceassary to fully amortize the loan during its life.

Inspection: Often confused with an appraisal.  An inspector is hired to thoroughly inspect the home (and other buildings if requested) for electrical, plumbing, structural, roof, pest, dry rot and other problems.

Lease Purchase Agreement: Buyer makes a deposit for future puchases of a property with the right to lease property in the interim.

Lease with Option: A contract which gives one the right to lease property at a certain sum with the option to puchase at a future date.

Loan to Value Ratio (LTV): The ratio of the mortgage loan principle (amount borrowed) to the property's appraised value (selling price).  Example-on a $100,000 home, with a mortgage loan principle of $80,000, the LTV is 80%.

Mortgage: A legal document that pledges a property to the lender as security for payment of a debt.

Mortgage Insurance Premium (MIP): The amount paid by a mortgagor for mortgage insurance.  This insurance protects the investor from possible loss in the event of a borrower's default on a loan.

Note: A written promise to pay a certain amount of money.

Origination Fee: A fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan.

Paddock: A smaller, fenced area used for turnout

Pasture: A larger, fenced area used for turnout, usually grazing.

Round Pen: A round, usually fenced or paneled area to work or lunge a horse.  Usually has very secure footing, 50 or 60 feet in diameter.

Second Mortgage/Second Deed of Trust: An additinal loan impposed on a property with a first mortgage.  Generally, a higher interest rate adn shorter term than a "first" mortgage.

Septic System: system to remove plumbing waste from a house where public sewer systems are not available.  Standard septic systems usually include a main line from the house to a septic tank where solids are separated from the liquids. The liquids then flow out the leech lines and are filtered back into the ground.

Settlement Statement (HUD-1): A financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.

Severalty Ownership: Owenrship by one person only, sole ownership.

Stalls: For horses, usually a 10x10 minimum enclosed area, solid walls are best.  12x12 is standard, larger is better of course.

Tack Room: Enclosed, insulated, preferably heated to store leather, tack, grooming supplies, vet equipment, etc.

Tenancy in Common: Ownership by two or more persons who hold an undivided interest without right of survivorhship.

Title Insurance: An insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title.

Well: Domestic water source for house/yard.  Typically a hole drilled in the ground 100-400 or more feet, lined and a pump is installed to draw the water out.

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