1031 ExchangeA tax-deferred exchange that allows for the disposal of an asset and the acquisition of another similar asset without generating a capital gains tax liability from the sale of the first asset.
Adjustable Rate Mortgage (ARM)A type of mortgage where the interest rate can change, usually in relation to an index, and payments go up or down accordingly.
AmortizationThe gradual reduction of a debt over a given period.
Balloon MortgageA mortgage which does not fully amortize over the term of the loan, thus leaving a balance due at maturity.
Bridge LoanA short term loan that is used until a person or company secures permanent financing or removes an existing obligation.
Chain of TitleThe history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Closing CostsExpenses over and above the price of the property that are incurred by buyers and sellers when transferring ownership of a property.
Closing StatementA document which provides itemized listing of the funds that were paid at closing.
ContingencyConditions that must be met in order to close. Contingency clauses are written into home purchase contracts to specify conditions that must be met before the home sale can close.
Conventional MortgageA type of mortgage in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac.
DeedThe legal document conveying title to a property.
Down PaymentThe part of the purchase price that the buyer pays in cash and does not finance with a mortgage.
Due DiligenceThe process of gathering information about the condition and legal status of assets to be sold.
Earnest MoneyA deposit made by the potential home buyer to show that they are serious about buying the house.
EquityThe difference between the fair market value of the property and the amount still owed on its mortgage.
EscrowAn account held by the lender into which the home buyer pays money for tax or insurance payments.
Fair Market ValueThe estimated price of a property based on what a buyer would probably pay and a seller would accept, assuming that both parties are informed and that the property has been on the market for a reasonable period of time.
Fannie Mae (FNMA)A government-sponsored enterprise that purchases and securitizes mortgages in order to ensure that funds are consistently available to the institutions that lend money to home buyers.
Fixed-Rate MortgageA mortgage in which the interest rate does not change during the entire term of the loan.
ForeclosureA legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
Freddie Mac (FHLMC)A government agency that buys mortgages from banks and resells them as securities on the secondary mortgage market.
Good Faith Estimate (GFE)A form that lists basic information about the terms of a mortgage loan for which the applicant has applied.
Home InspectionAn examination of a real estate property's condition, usually performed by a professional home inspector, before the property's sale.
Homeowners Association (HOA)An organization in a subdivision, planned community, or condominium complex that makes and enforces rules for the properties and their residents.
HUD-1 Settlement StatementA standard form used to disclose costs at closing in a real estate transaction, as required by the U.S. Department of Housing and Urban Development (HUD).
Jumbo LoanA mortgage that is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
Loan Estimate (LE)A form that provides important information about the mortgage loan for which the applicant has applied.
Loan-to-Value (LTV) RatioA 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.
Mortgage InsuranceMoney paid to insure the mortgage when the down payment is less than 20 percent.
Origination FeeA fee charged by a lender for processing a new loan application.
PointsCharges that are paid to a lender or broker for the loan and are often linked to the interest rate; usually, the more points you pay, the lower the rate.
Pre-QualificationAn informal determination by a lender or mortgage broker stating how much mortgage you can afford.
Prepayment PenaltyA charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.
PrincipalThe amount of debt, not counting interest, left on a loan.
Private Mortgage Insurance (PMI)Insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan.
Rate LockA commitment issued by a lender to a borrower guaranteeing a specific interest rate for a specified amount of time.
RefinanceObtaining a new mortgage to replace an existing one. This is often done to get a better interest rate, convert your mortgage type, or to tap into home equity.
Reverse MortgageA loan available to homeowners 62 years or older allowing them to convert part of the equity in their homes into cash.
Right of First RefusalA provision in an agreement that gives a party the right to be the first to purchase a particular property if it's ever sold.
Seller Carry BackAn agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
Short SaleA property sale negotiated with a mortgage lender or servicer to accept less than the full amount owed on the mortgage loan.
Subprime MortgageA type of mortgage that's offered to homebuyers with poor credit. These homebuyers are not able to take advantage of conventional mortgages and must pay higher interest rates.
TitleA legal document evidencing a person's right to or ownership of a property.
Title InsuranceInsurance that protects the holder from financial loss sustained from defects in a title to a property.
Truth in Lending Act (TILA)A federal law enacted to help protect consumers in their dealings with lenders and creditors.
Underwater MortgageA mortgage on a property that is worth less than what is owed on the mortgage.
UnderwritingThe process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
UsuryThe illegal action or practice of lending money at unreasonably high rates of interest.
VA LoanA mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA).
Yield Spread Premium (YSP)The difference between the lowest available interest rate and the higher rate a borrower agrees to pay. The lender provides a loan at the higher interest rate, and the lender or broker collects the YSP as commission.
ZoningMunicipal or local government laws that dictate how real property can and cannot be used in certain geographic areas.
