Word |
Definition |
| Adjustable-rate mortgage
(ARM) |
home loan in which the interest rate is changed periodically based on a standard financial index. Most ARMs have caps on how much an interest rate may increase. |
| Adjusted gross income
(AGI) |
All the income you received over the course of the year such as wages, interest, dividends and capital gains minus things such as business expenses, contributions to a qualified IRA, moving expenses, alimony and capital losses. The adjusted gross income is used to calculate federal income tax. |
| Abstract of title
|
A written history of all the transactions that bear on the title to a specific piece of land. An abstract of title present. Used by the title company to produce a title binder |
| Ad valorem tax |
A tax based according to item value only, usually property tax based on the just or fair market value of the property. |
| Amortization term |
The time required to amortize (repay) a mortgage loan. The amortization term is usually expressed in months. A 30-year fixed-rate mortgage, for example, has an amortization term of 360 months. |
| Agreement of sale
|
A document in which a property buyer and seller approve the price and other terms of the transfer of title. |
| Appraised value |
An educated opinion of how much a property is worth |
| Assumable mortgage |
A home loan that can be transferred to another borrower |
| Broker |
A person who earns a commission or fee for bringing together buyers and sellers of real estate, or borrowers and lenders of mortgages. |
| Beneficiary |
One who benefits from an insurance policy, will or deed or trust |
| Bankruptcy |
A legal proceeding that protects a debtor from legal action by some creditors. There are two basic ways of filing for personal bankruptcy. A Chapter 7 bankruptcy declaration gets rid of all debts (except some taxes and maybe alimony payments); Chapter 13 allows a borrower with a steady income to pay off bills over a 36- to 60-month period. |
| Balloon payment |
A loan installment that is larger than the other, periodic payments and pays off the remaining principal. |
| Certificate of title
|
A statement provided by a title company or attorney stating that the title to the real estate or vehicle is legally held by the current owner. |
| Chapter 11 |
A reorganization bankruptcy, usually involving a corporation or partnership. (A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11.) |
| Capital gains tax |
A tax on profits from the sale of real estate or investments |
| Capital gains |
The profit that an owner makes when selling real estate or other property. |
| Cash flow |
The money an investment produces after subtracting cash expenses from income |
| Collateral |
Property pledged as security to a debt. If the borrower fails to repay the loan, the lender may gain ownership of the collateral and sell it to recover the money. |
| Closing costs |
Expenses incurred by buyers and sellers when transferring ownership of property. Closing costs normally include an origination fee, attorneys fee, taxes, escrow payments, title insurance and sometimes discount points. |
| Conventional loan / conventional
financing |
A mortgage that is not insured or guaranteed by a government agency such as the Federal Home Administration (FHA) or Veterans Administration (VA). |
| Conventional mortgage
|
Usually refers to a fixed-rate, 30-year mortgage that is not insured by the FHA, Farmers Home Administration (FmHA) or Veterans Administration. |
| Depreciation |
The gradual loss of value of a building or other property because of age or natural wear. Automobiles in particular depreciate steeply in their first few years |
| Equal Credit Opportunity
Act |
A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income or the exercise of any right under the Consumer Credit Protection Act |
| Escrow |
An account in which a neutral third party holds the documents and money in a real-estate transfer until all conditions of a sale are met. |
| Equity |
The value of a homeowners unencumbered interest in real estate. Equity is the difference between the homes fair market value and the unpaid principal balance of the mortgage and any liens |
| FDIC |
Federal Deposit Insurance Corp. An agency of the U.S. government that manages the bank insurance funds, which insure deposits at banks and other qualifying financial institutions up to $100,000 per account in interest and principal. FDIC insurance is mandatory for all nationally chartered banks and all banks that are members of the Federal Reserve System. |
| Fair Credit Reporting
Act |
A federal law that governs what credit bureaus can report and for how long. It outlines procedures for correcting errors in credit reports. It requires credit bureaus to furnish copies of consumers credit reports at their request. |
| Federal Housing Administration
(FHA) |
An agency within the federal Department of Housing and Urban Development that provides mortgage insurance and sets construction and underwriting standards. |
| Fixed-rate mortgage
|
A home loan in which the interest rate will remain the same through the life of the loan |
| FHA loan |
A residential mortgage from an approved lender and insured by the Federal Housing Administration. The down payment on an FHA loan usually is less than that for a conventional mortgage. The FHA does not lend money, but nominates approved lenders. |
| Fully amortized adjustable
-rate mortgage |
A home loan whose interest rate can change, and whose amount is fully paid at the end of the term. |
| Home equity conversion
mortgage |
A special type of mortgage, sometimes called a reverse mortgage, that enables older homeowners to convert the equity in their homes into cash, using a variety of payment options to address their specific financial needs |
| Interest rate |
The amount charged per year on a personal or home loan. The rate varies according to the type of loan. Or, the percentage of interest paid for money in deposit accounts, without regard to compounding, shown as an annual figure. |
| Market value |
The price at which a given property or product sells between a willing, unpressured buyer and seller who know all the pertinent facts about the property or product |
| Mortgage broker |
One who finds lenders for prospective borrowers who meet the lenders’ criteria. A mortgage broker does not make the loan, but receives payment for services. |
| Periodic rate |
The interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day. |
| Property tax |
A levy by a state or local government on real estate and personal property whose amount varies depending on the property’s value. |
| Rate index |
A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans. |
| Variable interest
rate |
Percentage that a borrower pays for the use of money, and which moves up or down periodically based on changes in other interest rates. |
| Warranty |
A document certifying clear title to real estate |
