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Real Estate Glossary

Real Estate Glossary
Use this real estate glossary to research terms you might run across in a real estate transaction.

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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: Bank account balances and account numbers, as well as bank branch address Information about where you work or what sources of income you have Outstanding debts (including loans and credit cards with names and addresses of creditors) Information needed for the loan application may vary from lender to lender, so prior to filling out the application it's important to discuss with your lender what items your lender will need. If your an approved lender uses Desktop Underwriter, an automated underwriting system, they will not have to ask you for as much information regarding your employment, credit, or residence history. As a result, you won't need to provide as much documentation to back-up the information. Ask your lender if the lender uses this time-saving system.

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.

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