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Glossary of Terms

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Down Payment

percentage of the purchase price that the Buyer must pay in cash and may not borrow from the lender.

Earnest Money

a large deposit paid when the sales contract is signed before the closing.


the value of the property actually owned by the homeowner: purchase price plus appreciation plus improvements, less mortgages and liens.


a fund or account held by a third-party custodian until conditions of a contract are met.

Federal Home Loan Mortgage Corporation (Freddie Mac)
Federal National Mortgage Association (FNMA, Called Fannie Mae)

privately owned corporations created by Congress that buy mortgage notes from local lenders and are responsible for the guidelines a majority of lenders use to qualify borrowers.

Finance Charge

the total cost, including payments a borrower pays to obtain credit.

Fixed Rate Mortgage

interest rates on this type of mortgage remain the same over the life of the loan term. Compare to "Adjustable Rate Mortgage."


a recognizable entity (such as a toilet bowl, kitchen cabinet, or light unit) that is permanently attached to property and belongs to the property when it is sold.

Hazard Insurance

compensates for property damage from specified hazards such as fire and wind. More complete coverage is given by all-risk home owner's insurance.

Home Inspection Report

prepared by a qualified inspector; it evaluates a property's structure and mechanical systems.


A precise breakdown of closing costs for both Sellers and Buyers (also known as HUD-1 Settlement Statement) required by the Real Estate Settlement Procedures Act.


The cost of borrowing money, usually expressed as a percentage over time.


a document filed in the courthouse which states that certain monies must be paid to the person who placed the lien on the property before clear title can be transferred to another person.


an agreement between an owner of property and a real estate broker whereby the broker agrees to market the property for sale and the seller agrees to pay the broker a fee or commission when the proeprty is sold.

Master Plan

the local government's plan for building in a certain area. It would tell you where any new roads or other construction is planned.

Market Value

the price that is established by present economic conditions, locations, and general trends.

Market Price

the actual price at which the property sold.


security claim by a lender against property until the debt is paid.

Metropolitan Regional Information System (MRIS)

a system that provides to its members detailed information about properties for sale.

MLS (Multiple Listing Services)

a system by which all real estate agents that belong to a local board of realtors can show all the properties listed in the system to prospective purchasers regardless of which company's sign is in front of the property.

Negative Amortization

A method of calculating fixed monthly payments in combination with a variable interest rate. When monthly payments are not enough to cover interest costs, unpaid interest is added to the principal balance.


an I.O.U.

Origination Fee

application fee(s) for processing a proposed mortgage loan.


principal, interest, taxes, and insurance, forming the basis for monthly mortgage payments.


one percentage of the loan principal. It may be charged by the lender in addition to interest and fees.

Prepayment Penalty

a fee paid by a borrower who pays off the loan before it's due.


informal estimate of how much financing a potential borrower might expect to obtain, done before paying substantial loan application fees.


one of the parties to a contract; or the amount of money borrowed, for which interest in charged.


divide or assess proportionately.

Realtor ®

a member of the National Association of Realtors ®

RESPA Statement (see HUD-1)

Real Estate Settlement Procedures Act, a precise breakdown of closing costs for both buyers and sellers. (Also known as HUD-1 Settlement Statement.)


all financial transactions required to complete contract performance/obligations.


document that indicates ownership of a specific property.

Title Insurance

protects against loss from defects in the title.

Title Search

detailed examination of the entire document history of a property title to make sure there are no encumbrances.

Types of Ownership

there are four types of ownership. They are...

  • Sole Ownership: only one person owns the property.
  • Tenants in Common: two or more persons have a divided ownership in the property. The percentage of ownership need not be equal, each party has a right to sell their interest, and upon the death of any of the owners, that owner's interest in the property goes to whomever they designate in their will.
  • Joint Tenants: ownership taken by two or more persons at the same time with an undivided right to possession. If one owner dies, their interest automatically goes to the remaining owners.
  • Tenants by Entirety: owners are husband and wife and each own the entire property. If one dies, the other automatically gets the property and neither husband nor wife can sell their interest to the property without the other.

Unreleased Trust

a mortgage or lien recorded in the Court records that appears to be outstanding (where no Certificate of Satisfaction/release has been recorded).

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