ABR: Accredited Buyer Representative. Designation offered exclusively through the Real Estate Buyer's Agent Council (REBAC) in recognition of advanced professional training, experience in buyer representation, and commitment to the REALTORS® code of ethics.
Balloon Payment: A lump sum principal payment due at the end of some mortgages or other long-term loans.
Buydown: Permanent-prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary-prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.
Cap: The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.
Cash Reserves: The amount of the buyer’s liquid cash remaining after making the down payment and paying all closing costs.
CC&Rs: Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.
Certificate of Commitment: The lender’s approval of a VA loan, which is usually good for up to six months.
Certificate of Reasonable Value (CRV): A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.
Chattel: Personal property.
Closing Statement: The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.
Commitment Period: the period during which a loan approval is valid.
Contingency: A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing or selling their existing home.
Conversion Clause: A provision in some ARMs that enable home buyers to change an ARM to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra.
CRB: Certified Residential Broker. To be certified, a broker must be a member of the National Association of REALTORS,® have five years experience as a licensed broker and have completed required Residential Division courses.
CRS: Certified Relocation Specialist.
Debt Ratios: The comparison of a buyer’s housing costs to his or her gross or net effective income, and the comparison of a buyer’s total long-term debt to h is or her gross or net effective income. The first ratio is housing ratio; the second ratio is the total debt ratio.
Earnest Money: The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.
Escrow: A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties’ instructions and assuming responsibility for handling all of the paperwork and distribution funds.
Equity: The difference between what is owed and what the property could be sold for.
FHA Loan: A loan insured by the Federal Housing Administration (of the Department of Housing and Urban Development).
Federal Home Loan Mortgage Corporation (FHLMC): Called “Freddie Mac”; a part of the secondary market, particularly used to purchase loans from savings and loan lenders within the Federal Home Loan Bank Board.
Federal National Mortgage Association (FNMA): Popularly known as “Fannie Mae.” A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.
Fee Simple: An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.
Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.
Fixed Mortgage Rate: A conventional loan with a single interest rate for the life of the loan.
Flood Insurance: Insurance indemnifying against loss due to flood. Required by lenders for properties located in federally designated flood plains.
Flood Plain: Land, that because of it's level topography, is prone to flooding.
Fully Indexed Rate: The maximum interest rate on an ARM that can be reached at the first adjustment.
Gift Letter: A letter from a relative stating that an amount will be gifted to the buyer, and that said amount is not to be repaid.
Government National Mortgage Association (GNMA): Called “Ginnie Mae”; a governmental part of the secondary market that deals primarily in recycling VA and FHA mortgages, particularly those that are highly leveraged.
Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.
GRI: Graduate, Realtors Institure. A professional designation granted to a member of the National Association of Realtors® who has successfully completed courses covering Law, Finance and Principles of Real Estate.
Home Inspection Report: A qualified inspector’s report on a property’s overall condition. The report usually includes and evaluation of both the structure and mechanical systems.
Home Warranty Plan: Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.
Index: A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.
Initial Interest Rate: The introductory interest rate on a loan; signal that there may be rate adjustments later in the loan.
Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent’s interest in the property.
Jumbo Loans: Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market; these jumbo loans must be packaged and sold differently to investors and therefore have separate underwriting guidelines.
Payment Cap: The maximum amount the payment can adjust in any given time frame.
PITI: Principal, Interest, Taxes and Insurance.
Planned Unit Development (PUD): A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Use may be residential, comercial or industrial.
Point: An amount equal to one percent of the principal amount of the investment or note. Lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments
Prepayment Penalty: A fee charged to a borrower who pays a loan before it is due. Not allowed for FHA or VA loans.
Principal: The face value of a mortgage not including interest.
Private Mortgage Insurance (PMI): Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.
Purchase Agreement: A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.
Rate Gap: The difference between where the rate is now and where it could adjust to on an ARM. Also used to compare the difference between a current conventional rate and that of an ARM.
REALTOR®: A real estate broker or associate, active in a local real estate board, affiliated with the National Association of REALTORS®.
Regulation Z: The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.
Tenancy in Common: A type of joint ownership of property by two or more persons with no right of survivorship.
Title: A document signed by a title examiner or attorney stating that the seller has a good marketable and insurable title.
Title Insurance: A policy that protects the purchaser, mortgagee or other party against losses.
Title Search: A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims.
VA Loans: A loan, made by a private lender, that is partially guaranteed by the Veterans Administration.
**This glossary represents only a sample of terms commonly used in the purchase or sale of real estate. If you have additional questions, feel free to call or
e-mail. I would be glad to assist you.
