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| Glossary of real estate terms | |
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| There are 942 entries in the glossary. | ||
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| Term | Definition | |
| Housing for the Elderly and Handicapped | Program authorized by Section 202 of the National Housing Act. This program provides direct Federal loans to nonprofit sponsors for construction and mortgage financing of housing for elderly and handicapped. | |
| HUD | U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration within insures home mortgage loans made by lenders and sets minimum standards for such homes. | |
| HUD median income | Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD). | |
| HUD-1 statement | A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet." The HUD-1 Settlement Statement itemizes the amounts to be paid by the buyer and the seller at closing. The (blank) form is published by the U.S. Department of Housing and Urban Development (HUD). | |
| HVAC | Heating, Ventilation, and Air Conditioning. | |
| Impound account | See Escrow. | |
| Improvement | Anything done to a house that increases its value, such as adding a sun porch or modernizing the kitchen. | |
| In-File Credit Report | An objective account, normally computer-generated, of credit and legal information obtained from a credit repository. | |
| Income approach | A valuation method that capitalizes or converts the current benefits of the property into an estimated value. | |
| Income capitalization | A way to determine the market value of an income-producing property by approach converting its future income stream into a single capital value. | |
| Income Property | Real estate developed or improved to produce income. | |
| Index | A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps that are associated with the mortgage. | |
| Index Lease | A lease in which the rental amount adjusts according to changes in a price index, commonly the consumer price index. | |
| Individual Retirement Account | A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds. | |
| Industrial revenue bond | Bonds issued to raise funds for developing commercial buildings for lease or industrial parks. | |
| Inflation | An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less. | |
| Ingress | A means of entry to a property. (See egress.) | |
| Initial Interest Rate | The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser." | |
| Inspection | When a house is remodeled or rehabbed it must be inspected by an inspector from the local government to be sure all work is done properly. | |
| Installment | The regular periodic payment that a borrower agrees to make to a lender. The regular periodic payment that a borrower agrees to make to a lender. The installment is more often referred to as your monthly mortgage payment. Installments, or monthly payments, can be made either monthly or biweekly, depending on your mortgage type. Your approved lender may also offer additional payment plans tailored to fit your needs. | |
| Installment debt | Debts or accounts that are paid off in monthly payments, or install-ments, such as credit-card accounts. | |
| Installment Loan | Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan. | |
| Installment sale contract (land contract | A contract in which a seller of real estate promises to deliver a deed to the buyer at some time in the future after the buyer has, in an agreed upon num ber of payments of principal and interest, paid the purchase price in full. | |
| Insurable interest | A person's interest in property such that an occurrence of a peril would cause financial loss to that person. | |
| Insurable Title | A property title that a title insurance company agrees to insure against defects and disputes. | |
| Insurable value | The value of the portions of the property that are physically destructible. | |
| Insurance | A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium. | |
| Insurance Binder | A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date. | |
| Insured Mortgage | A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount. | |
| Interest | The fee charged for borrowing money. Simply put, this is the fee that is charged for borrowing money from lenders. The interest rate is the rate of interest that is in effect when the monthly payment is due. An interest rate ceiling for an adjustable-rate mortgage (ARM) is the maximum interest rate, as specified in the mortgage note; the interest rate floor is the minimum interest rate, as specified in the mortgage note. | |
| Interest Accrual Rate | The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations. | |
| Interest escalation clause | Provides for variable rate of interest according to a standard index. | |
| Interest Rate | The rate of interest in effect for the monthly payment due. | |
| Interest Rate Buydown Plan | An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specified period, the mortgagor's effective interest rate is "bought down" below the actual interest rate. | |
| Interest rate cap | A provision of an ARM limiting how much interest rates may increase or decrease per adjustment period or over the life of a mortgage. See also Lifetime cap. | |
| Interest Rate Ceiling | For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note. | |
| Interest Rate Floor | For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note. | |
| Interest Rate for HECMs | The interest rate on a Home Equity Conversion Mortgage (HECM) adjusts monthly or yearly. It is tied to the weekly average yield of U.S. Treasury securities adjusted to a constant maturity of one year. The interest charged on the HECM loan will be payable to your lender when the loan terminates. | |
| Interest-only loan | A method of loan amortization in which interest is paid periodicaly over the term of the loan and the entire original loan amount is paid at maturity. | |
| Internal Rate of Return (IRR) | The percentage rate earned on each dollar that remains in an investment each year. The IRR of an investment is the discount rate at which the sum of the present value of future cash flows equals the initial cap ital investment. | |
| Intestate | Without a last will and testament. | |
| Investment | An item, such as a house, on which money is spent in the hope of getting money or other benefits back in return. | |
| Investment Property | A property that is not occupied by the owner. | |
| Investment value | The value to a specific investor, based on that investor's requirements, tax rate, financing, etc. | |
| Involuntary lien | A lien such as taxes or mechanic's lien imposed without consent of the property owner. | |
| Joint Tenancy | A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship. | |
| Joint venture | An equity participation in which a lender puts up funds and others, such as developers, contribute expertise. Other examples include the participation of non-profits agencies with for-profit agencies where one provides the debt and the other the equity. | |
| Joists | Wood beams in a house to which the floor is nailed and the ceiling lath of the floor below is nailed. | |
| Judgment | A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor. | |
| Judgment Lien | A lien on the property of a debtor resulting from the decree of a court. | |
| Judicial Foreclosure | A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. | |
| Jumbo Loan | A loan that exceeds mortgage amount limits. Also called a nonconforming loan. | |
| Junior mortgage | Any mortgage on a property that is subordinate to a senior mortgage in priority. | |
| Kicker | A benefit to the lender beyond ordinary interest, such as the increased appreciation of the property. | |
| Land Contract (Land Sales Contract) | Method of conveying title to a real property in which title does pass to the buyer until the contract for Deed is fulfilled. The contract for deed usually requires that the purchase price is paid in installments. (Cal-Vet loans are the most common occurrence of this in California) | |
| Landlocked | Surrounded by adjacent land with no means of access. | |
| Late Charge | The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date. | |
| Latent defect | Concealed defect not easily determined from an inspection of the property. | |
| Lease | A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent. | |
| Lease-Purchase Mortgage Loan | An alternative Fannie Mae financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payments consists of PITI payments on the first mortgage, plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate. | |
| Lease-purchase Option | Nonprofit organizations may use the lease-purchase option to purchase a home that they then rent to a consumer, or "leaseholder." The leaseholder has the option to buy the home after a designated period of time (usually three or five years). Part of each rent payment is put aside toward savings for the purpose of accumulating the down payment and closing costs. | |
| Leased fee | The landlord's interest. | |
| Leasehold | A possessory legal interest in real property acquired by a tenant (lessee) when she enters into a rental agreement with the owner of the property (landlord or lessor). | |
| Leasehold Estate | A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it. | |
| Legal Description | A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony. | |
| Lessee | The tenant in a lease agreement. | |
| Lessor | The landlord in a lease agreement. | |
| Letter of Credit | Line of credit to a grant recipient established at time of approval of application. | |
| Leverage | The use of borrowed funds to increase the effective rate of return on an investment. | |
| Liabilities | A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others. | |
| Liability | Assets owed for items received, services received, assets acquired, construction performed (regardless of whether invoices have been received), an amount received but not yet earned, or other Expenses incurred. (GAO) HUDCAPS Core Financial System Standard Accounting Interface, dated 9/30/97 | |
| Liability Insurance | Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. | |
| LIBOR-based ARMs | The London Interbank Offered Rate (LIBOR) is based on the interest rate that major international banks are willing to lend and borrow funds for a specified period of time in the London interbank market. The LIBOR is similar to the prime-lending rate posted by major U.S. banks. You can select an adjustable rate mortgage (ARM) that adjusts to the LIBOR at specified periods, usually every six months. This type of ARM typically has a per-adjustment period cap of 1 percent and is offered with either a 5 percent or a 6 percent lifetime rate cap. | |
| Lien | A legal claim against a property that must be paid off when the property is sold. | |
| Lifetime cap | A provision of an ARM that limits the highest rate that can occur over the life of the loan. | |
| Lifetime Payment Cap | For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage. | |
| Lifetime Rate Cap | For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. | |
| Line of Credit | An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower. See home equity line of credit. | |
| Liquid Asset | A cash asset or an asset that is easily converted into cash. | |
| Liquid assets | Cash or other assets that can be quickly converted to cash with little or no sacrifice in value. | |
| Liquidated damages | A specified sum of money agreed upon by contracting parties that will be received by the other or others if one of the parties commits a breach of the contract. | |
| Listing agent | A real estate agent who lists a house for sale. The listing agent represents the seller of the house. | |
| Listings | A computerized pool of information, shared by real estate agents, that list houses for sale. Also called Multiple Listing Service or MLS. | |
| Loan | A sum of borrowed money (principal) that is generally repaid with interest. | |
| Loan Application | The loan application is a detailed form designed to provide information from you that your lender will need. Lenders use the application to evaluate whether or not they can give you a loan, and if so, the amount of money they can lend you. The "four Cs" of credit come into play when filling out an application -- they are capacity, credit history, capital and collateral. The loan application form requests information such as: | |
| Loan balance | The amount of money remaining to be paid on an amortizing loan at a given time. | |
| Loan Commitment | The commitment letter states the dollar amount of the loan being offered, the number of years you have to repay the loan, the loan origination fee, the points, the annual percentage rate, and the monthly charges. The letter also states the time you have to accept the loan offer and to close the loan. Make sure you understand all aspects of the commitment letter because by signing it, you indicate your acceptance of its terms and conditions. | |
| Loan Limit | Loan limit | |
| Loan or mortgage value | That portion of the value of real property recognized by the lender when used to secure a loan. | |
| Loan Origination | The process by which a mortgage lender brings into existence a mortgage secured by real property. | |
| Loan Origination Fee | The loan origination fee covers the administrative costs of processing the loan. It is often expressed in points. One point is 1 percent of the mortgage amount. For example, a $100,000 mortgage with a loan origination fee of 1 point would mean you pay $1,000. | |
| Loan point | A charge prepaid by the borrower upon the origination of a loan. One point equals one percent of the loan amount. | |
| Loan servicing | The collection of mortgage payments from borrowers and related responsibilities of a loan servicer. | |
| Loan Terms and Conditions | With a reverse mortgage, a lender can call in your loan under certain conditions. But, if you occupy the property as your primary residence, are not absent from the property for 12 consecutive months. You may instruct the lender to pay the taxes and insurance on your behalf from your reverse mortgage funds. The lender will set aside funds from your reverse mortgage to pay for future taxes and insurance, as long as funds are available. Furthermore, as long as you comply with the terms noted above, you can't be forced to sell your home to pay off the reverse mortgage, even if the loan balance grows to exceed the value of your property. | |
| Loan To Value Ratio (LTV) | The loan balance on a house compared to the appraised value of a house. In making a mortgage loan, a lender uses the LTV to show that a house is worth more than the loan amount. This is important because, if the ho meowner does not make pay-ments on the mortgage loan, the bank gets the house in return, as payment. | |
| Loan-to-value ratio | The ratio of amount borrowed to the property market value, usually expressed as a percentage. | |
| Lock-in | A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing. | |
| Lock-in Period | The time period during which the lender has guaranteed an interest rate to a borrower. | |
| Low Income | Income that does not exceed 80 percent of area median income. | |
| Low Income Housing Tax Credits (LIHTC) | A way of obtaining financing to develop low-income housing. Government programs provide dollar-for-dollar credit toward taxes owed by the housing owner. These tax credits can be sold, or used to back up bonds that are sold, to obtain financing to develop the housing. | |
| Managing risk | The steps taken by an investor or manager to control or reduce investment risk. | |
| Manufactured Housing | Homes and dwellings that are not built at the home site and are moved to the location are considered manufactured housing. Manufactured housing units must be built on a permanent chassis at a factory and then transported to a permanent site and attached to a foundation. All manufactured homes must be built to meet standards set forth by the U.S. Department of Housing and Urban Development (HUD). The standards focus on such aspects as design, strength, energy efficiency, and fire resistance. Manufactured housing represents one of the fastest-growing housing markets in the United States. Nearly all of the mortgage products are available for owners of manufactured housing. | |
| Margin | For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change. | |
| Margin (also known as Spread) | The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment. | |
| Market approach | The process of comparing the subject property to equivalent properties sold recently to arrive at an estimate of value for a property being appraised. | |
| Market interest rate | Interest rate currently demanded by lenders and investors. | |
| Market rent | The current rent that real estate would bring if available for rent. | |
| Market Value | You can get a good feel for the market value of a home by asking whether the listing agent compiled a "comparative market analysis" (CMA). This written report on the property examines comparable homes in the area that have recently been sold, are currently on the market, or are currently under contract. The CMA will help you figure out whether the asking price is in line with other comparable houses in the neighborhood. | |
| Marketable title | A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection. | |
| Master Association | A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project. | |
| Maturity | The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable. | |
| Maximum Claim Amount | Your maximum claim amount is the lesser of two figures: (1) Your home's appraised value; (2) HUD 203(b) limit. The HUD 203(b) limit is the maximum loan amount that FHA will insure for residences in your geographical area. Check with your lender to get the latest figures for your area. | |
| Maximum Financing | A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product. | |
| Meander line | The approximate border of a natural body of water. | |
| Meandered | Area such as a lake on which taxes are not paid. | |
| Mechanic's lien | A lien that can be filed by mechanics or material suppliers; it is against real property created by statute for the purpose of securing payments for services performed or materials furnished in the construction or repair of buildings or making other improvements to land. | |
| Merged Credit Report | A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your credit. | |
| Meridian | Map lines running north and south to locate land under the governmental survey system. | |
| Metes and bounds | A method of legal description using measurements, boundaries, and directions. | |
| Mixed-Income | Refers to a resident mix that includes families with various income levels within one development. Mixed-income developments combine public housing families with other residents in order to decrease the economic and social isolation of these families. | |
| Modernization | Program authorized by the Housing Act of 1937 for upgrading low-rent public housing projects. | |
| Modification | The act of changing any of the terms of the mortgage. | |
| Money Market Account | A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account. | |
| Money Market Fund | A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills. | |
| Monthly Fixed Installment | That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction. | |
| Monthly housing costs | The total of a homeowner's mortgage loan pay-ment and expenses for utilities, general home repair, and upkeep. | |
| Monthly Payment Mortgage | A mortgage that requires payments to reduce the debt once a month. Your monthly mortgage payment is composed of four components. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance. All four of these elements are often referred to as PITI. Your monthly mortgage payment due may be mailed to you in a book of coupons each year, or in a separate coupon every month. Ask your lender if the automated underwriting system is used, which may reduce costs associated with your mortgage. | |
| Moratium | A period of time when a lender may waive interest and/or principal payment on a loan. | |
| Mortgage | A legal document that pledges a property to the lender as security for payment of a debt. Simply put, the mortgage is the legal document that gives the lender a legal claim against your house should you default on your loan payments. The mortgage indicates that a specific amount of money will be loaned at a specific interest rate so that you can buy your home. Another way of thinking of the mortgage is that you have possession of the property but the lender has ownership until you have repaid your loan. The items stated in the mortgage include the homeowner's responsibility to: Comments: Need Help? | |
| Mortgage agreement | A document signed by a borrower and a lender giving the lender the right to take the borrower's house if the borrower does not repay the loan. | |
| Mortgage Banker | A company that originates mortgages exclusively for resale in the secondary mortgage market. Mortgage companies originate and service mortgages. In other words, they make loans to consumers. Mortgage companies then typically sell these loans to other lenders and investors. Some mortgage companies may be subsidiaries of depository institutions or their holding companies but do not receive money from individual depositors. | |
| Mortgage Bankers Association of America | National organization which seeks to improve mortgage practices and marketing activities. | |
| Mortgage Banking Companies | Mortgage companies originate and service mortgages. In other words, they make loans to consumers. Mortgage companies then typically sell these loans to other lenders and investors. Some mortgage companies may be subsidiaries of depository institutions or their holding companies but do not receive money from individual depositors. | |
| Mortgage Broker | An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services. The National Association of Mortgage Brokers defines a mortgage broker as "an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages." There are an estimated 20,000 mortgage brokerage operations from coast to coast. They originate more than half of the residential loans in the U.S. A mortgage broker has professional expertise that can assist mortgage seekers in finding the best loan for them. The mortgage broker is also experienced in offering many applicable financing options for a consumer's specific needs. | |
| Mortgage commitment | A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house. | |
| Mortgage Insurance | A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan. | |
| Mortgage Insurance Premium | The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company. | |
| Mortgage insurance premium (MIP) | The fee paid by a borrower to FHA or a private insurer for mortgage insurance. | |
| Mortgage interest rate | The rate of interest in effect for the monthly payment due. | |
| Mortgage Life Insurance | A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. | |
| Mortgage margin | The set percentage the lender adds to the index value to determine the interest rate of an ARM. | |
| Mortgage note | A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time-, the mortgage note is secured by a mortgage. | |
| Mortgage note (also none as Promissory N | Mortgage note (also none as Promissory Note or Note) A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actua l amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment. | |
| Mortgage-Related Closing Costs | Mortgage-related closing costs generally are costs associated with your loan application. They vary, but here are some of the most common ones: | |
| Mortgagee | The lender in a mortgage agreement. | |
| Mortgagor | The borrower in a mortgage agreement. | |
| Multidwelling Units | Properties that provide separate housing units for more than one family, although they secure only a single mortgage. | |
| Multifamily Mortgage | A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex. | |
| Multiple listing | Sharing of property sales listings by a number of real estate brokers with an agreement as to how the costs and commissions are to be split. | |
| Mutual Mortgage Insurance Fund (MMI) | One of four separate funds within the FHA Fund; provides funds for home mortgage insurance. | |
| National Association of Home Builders | An organization which represents home builders at all levels of government and provides information on new developments in the housing industry. It is also responsible for initiating the Homeowners Warranty Corporation which provides a guarantee of workmanship in residential homes. | |
| National Association of Housing and Rede | An organization which develops new techniques related to the finance, design, construction and management of housing. The NAHRO also plays a key role by consulting with Federal Agencies and the Congress on U.S. housing policy. | |
| National Association of Real Estate Brok | The oldest minority trade association in America founded in 1947 on the principle that all citizens have the right to equal housing opportunities, regardless of race, creed, or color. Internet Site: www.nareb.com | |
| National Association of Realtors (NAR) | An organization which represents the interests of realtors and promotes education, professional standards, and modern techniques in real estate practices. | |
| National Tenants Organization (NTO) | Organization which represents tenants in subsidized housing. | |
| Navigable water | A waterway capable of passage by watercraft; navigable if so designated by a U.S. or state map. | |
| Negative Amortization | A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization. | |
| Negative leverage | Situation where the cost of funds exceeds the rate of return on the real estate. | |
| Net Cash Flow | The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments. | |
| Net lease | A lease agreement in which the tenant pays rent plus all taxes, insurance, repairs and other costs. | |
| Net Operating Income (NOI) | The property gross earnings less the operating expenses, but before interest and depreciation expenses are deducted. | |
| Net Present Value (NPV) | The sum of the present values of all future cash flows netted against the initial investment, discounted at a given rate. | |
| Net Worth | The value of all of a person's assets, including cash, minus all liabilities. | |
| Net-Net-Net Lease (NNN) | See tripple net lease. | |
| No Cash-Out Refinance | A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage). | |
| Nominal interest rate | The interest rate stipulated in an agreement. | |
| Non-recurring closing costs | See Closing costs. | |
| Nonconforming use | A use of land that lawfully existed before a zoning ordinance that is legally continued after the effective date of the ordinance, even though the use no longer conforms to the new zoning regulations. | |
| Nonliquid Asset | An asset that cannot easily be converted into cash. | |
| Nontraditional credit history | A record of credit performance shown with receipts and bill and check stubs from payments to landlords, utility companies, child-care providers, and others. A method for loan applicants who do not have a credit history from, for example, car-loan or credit card payments. | |
| Note | A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. One way to think of the mortgage note is that it is a legal "IOU." Often called the promissory note, it represents your promise to pay the lender according to the agreed upon terms of the loan, including when and where to send your payment. The note lists any penalties that will be assessed if you don't make your monthly mortgage payments. It also warns you that the lender can "call" the loan -- demand repayment of the entire loan before the end of the term -- if you violate the terms of your mortgage. | |
| Note Rate | The interest rate stated on a mortgage note. | |
| Notice of Default | A formal written notice to a borrower that a default has occurred and that legal action may be taken. | |
| Nuisance | The wrongful interference by one person with the use and enjoyment of real estate owned by another. | |
| Occupancy Date | This provision is a good way to help ensure that your home will be ready for occupancy after the closing takes place. As part of your formal purchase offer, consider including a provision that holds the seller responsible for paying you rent should they not move out on or prior to the agreed-upon date. This allows you, for example, to use the money you receive to pay your own rent if you are leasing your current residence. | |
| Offer | When you make an offer on a house, it means you are making a formal bid to buy a home. You can work with your real estate sales professional to put together a written bid that abides by the laws in your state. Your offer should include such aspects as the address of the home, the sales price, the type of mortgage financing you will use to purchase the home, any personal property that might be included as part of the sale, and a target date for closing and occupancy. An earnest money deposit typically accompanies the offer. Your real estate sales professional can provide guidance on other elements of the offer. Once you have made an offer, the seller has the opportunity to accept, decline, or make a counter-offer. If your offer is accepted, you have a ratified sales contract. This contract is the starting point for working with an approved lender to get the mortgage that's right for you. | |
| One-Year Adjustable-Rate Mortgage | This adjustable-rate mortgage (ARM) offers a low initial interest rate with an interest rate that adjusts annually after the first year. The rate cap per annual adjustment is usually 2 percent; the lifetime adjustment caps can be 5 percent or 6 percent. This type of mortgage may be right for you if you anticipate a rapid increase in income over the first few years of your mortgage. That's because it lets you maximize your purchasing power immediately. It may also be the right mortgage for you if you plan to live in your home for only a few years. Advantages: | |
| Ongoing Costs | Home buyers should not forget that there are on-going costs associated with owning a home. They include, but are not limited to: | |
| Open-end mortgage | A mortgage that provides for the borrowing of additional funds. | |
| Operating expenses | Such as real estate taxes, insurance premiums, etc. | |
| Operating ratio | Ratio of operating expenses to effective gross income. | |
| Opportunity cost | The "cost" of selecting one alternative is the benefit foregone from the next best alternative. | |
| Option | A Contract given by the owner of a property to another person, giving the latter a right to buy or lease the property at a certain price within a specified period of time. | |
| Optionee | A person who holds an option. | |
| Optionor | An owner who gives an option to another person. | |
| Original Principal Balance | The total amount of principal owed on a mortgage before any payments are made. | |
| Origination | The process that a lender goes through to get complete and correct informa-tion about a loan applicant's income and credit. | |
| Origination Fee | A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount. The loan origination fee covers the administrative costs of processing the loan. It is often expressed in points. One point is 1 percent of the mortgage amount. For example, a $100,000 mortgage with a loan origination fee of 1 point would mean you pay $1,000. | |
| Overhang | The portion of a roof extending beyond the walls. | |
| Owner Financing | A property purchase transaction in which the property seller provides all or part of the financing. | |
| Package mortgage | A mortgage that includes personal property as part of the security. | |
| Partial Payment | A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. | |
| Partially amortized | The payments do not repay the loan over its term and thus a lump sum mortgage loan (balloon) is required to repay the loan. | |
| Participation mortgage | A loan in which two or more lenders participate. | |
| Partnership | An association of two or more persons to carry on a business for profit as co-owners. | |
| Party wall | A wall erected on the line between two adjacent properties for the use of both parties. | |
| Payment cap | A provision of some ARMs limiting the amount by which a borrower's payments may increase regardless of any interest rate increase; may result in negative amortization. See Adjustable-rate mortgage. | |
| Payment Change Date | The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date. | |
| Percentage lease | A lease in which the rent amount is based on a percentage of gross sales (monthly or annually) made by the tenant. | |
| Percentage rent | The additional rent (over a base amount) paid by tenants to owners based on tenant sales over a specified dollar amount. | |
| Periodic Payment Cap | For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period. | |
| Periodic Rate Cap | For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be. | |
| Permits | With most major home improvement projects, work permits may be required. Permits provide legal permission to undertake a project and are usually given by local governments agencies.Some of the most common permits are for general projects or permits that require you to meet specific local building c | |