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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
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 codes.You may want to check with your local government to determine if there are building restrictions in historic areas or in environmentally-sensitive areas.

Personal Property	Any property that is not real property.

Pest Inspection Report	Termite InspectionHomes in many parts of the country must be inspected for termites before they can be sold. You should receive a certificate from a termite inspection firm stating that the property is free of both visible termite infestation and termite damage.The cost of the termite inspection is usually paid by the seller, and the seller's real estate sales professional orders the inspection. You need to make sure that the original certificate is delivered to your lender at least three days before closing.This allows the lender to review the certificate and address any potential problems.

Physical depreciation	Physical deterioration and concurrent loss in property value caused by wear, tear, and decay.

PITI	Principle, interests, taxes and insurance (PITI) are the four components of a monthly mortgage payment. The four components of a monthly mortgage payment: 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 hazard insurance.

PITI Reserves	A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Planned Unit Development (PUD)	A Land Development project involving a mixture of land uses and densities not available for separately zoned units. Similar to condominiums, it is viewed as an integrated whole. Unlike condominiums, however, t he individual unit owners do own a portion of the land under and around their individual unit.

Plat	A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Plot plan	A drawing showing the placement of a building on a site with precise locations, dimensions, and elevations.

Plottage	The increase in value of land by assembling smaller properties into one larger site.

Point	A charge of 1 percent of the loan amount made at origination of mortgage.

Point of beginning	The starting point in a metes and bounds legal description.

Point or points	A one-time charge the lender adds to a mortgage loan. A point is 1\% of the mortgage loan amount.

Points	A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.

Positive leverage	Borrowed funds are invested at a rate of return higher than the cost of the funds to the borrower.

Potential rental income	The total amount of rental income for a property if it were 100\% occupied and rented at competitive market rates.

Power of Attorney	A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval	When you work with your lender to get pre-approved, you are getting an indication of how much money you will be eligible to borrow when you apply for a mortgage. This process occurs before you complete an application for a loan.Pre-approval includes a screening of a borrower's credit history, and all information you give to your lender will be verified when you apply for your mortgage.

Pre-Qualification	The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

Prearranged Refinancing Agreement	A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.

Predatory Lending	Predatory lending refers to abusive mortgage practices, which threaten the financial security of homeowners and the stability of neighborhoods. Predatory mortgage lenders market their products to homeowners with home equity, people with large debts or those in need of home repairs. These lenders use high-pressure sales tactics, inflated fees or interest rates, and unaffordable repayment terms. Many homeowners become financially burdened by these loans and fall at risk of losing their homes.

Prefabricated home	Home built or partially assembled prior to delivery to the building site.

Preforeclosure Sale	A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor.

Premium	Amount above the face value of a loan.

Prepayment	Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty	A fee that may be charged to a borrower who pays off a loan before it is due. If you pay off your mortgage before it is due, you may be charged a fee -- this is referred to as a prepayment penalty. Any amount that is paid to reduce the principal balance of a loan before the due date -- such as the sale of the property, the owner's decision to pay the loan in full, the owner's decision to pay additional money every month to lower the principle or interest -- is considered prepayment.You may want to consider discussing the specifics of this fee as you negotiate the terms of your loan with your lender.

Prepayment priviledge	The right of a borrower to pay a mortgage ahead of the scheduled due date.

Prequalification	The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.

Present value	The sum of all future benefits accruing to the owner of an asset when such benefits are discounted to the present by an appropriate discount rate.

Price	The dollar amount that was offered, asked, or actually paid for a property.

Prime Rate	The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

Principal	The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. One of the terms you're likely to hear when you talk about a mortgage with your lender is principal. The principal is the amount originally borrowed or the amount that remains to be paid once you have started making payments. It is also the part of the monthly mortgage payment that reduces the remaining balance of a mortgage.The principal balance is the outstanding amount of principal on a mortgage; it does not include interest or any other charges.

Principal Balance	The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. (see also "Remaining Balance")

Private Mortgage Insurance	Also known as Mortgage Insurance, PMI is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.

Probate sale	A sale held to sell property, including houses, of a person who has died.

Promissory Note	A written promise to repay a specified amount over a specified period of time.

Property inspection	The examination of a house by a licensed inspector to see if its structure is sound and if its mechanical systems, such as plumbing and heating, are working.

Property Tax

Proration	Allocation of costs and income between the buyer and seller of real estate at the time of the transaction closing, based upon the time of ownership of each.

Public Auction	A meeting in an announced public location to sell property to repay a mortgage that is in default.

Public Housing Agency (PHA)	Organization created by local government which administers HUD's Low-Income Public Housing Program and other HUD programs.

Purchase Agreement	A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. The Purchase and Sale Agreement is a written contract that is signed by the buyer and seller. It states the terms and conditions under which a property will be sold. It includes: Description of property Price offered Down payment Earnest money deposit Financing Personal items to be included Closing date Occupancy date Length of time the offer is valid Special contingencies Inspection

Purchase and Sale Agreement	A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. The Purchase and Sale Agreement is a written contract that is signed by the buyer and seller. It states the terms and conditions under which a property will be sold. It includes: Description of property Price offered Down payment Earnest money deposit Financing Personal items to be included Closing date Occupancy date Length of time the offer is valid Special contingencies Inspection

Purchase money mortgage	A mortgage taken by the seller as pat of the purchase price.

Purchase Money Transaction	The acquisition of property through the payment of money or its equivalent.

Pyramiding	A process of acquiring additional properties by refinancing existing properties.

Qualifying Guidelines	There are two main elements lenders consider when determining whether you and any co-borrowers qualify for a specific mortgage. The first is your monthly mortgage costs, including mortgage payments, property taxes and insurance. If you're considering buying a condominium or cooperative, any associated fees are also considered. Your mortgage costs should not exceed 28 percent of your gross monthly (pre-tax) income. The second qualifying guideline relates to your total monthly housing costs and other debts you and any co-borrowers have. These costs should not exceed 36 percent of your gross monthly income. Lenders follow these guidelines because they believe these percentages allow homeowners to pay off their mortgages fairly comfortably without the worry of loan defaults and foreclosures. However, these guidelines can be exceeded in certain cases, such as borrowers with a good credit history or with a larger down payment.

Qualifying Ratios	Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

Quiet enjoyment	Right of property owner to use his property without adverse claims of another to title or interest.

Quitclaim deed	A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim (or quit claim) deed is often given to clear the title when the grantor's interest in a property is questionable. By acc epting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (see Deed.)

Radon	A radioactive gas found in some homes that in sufficient concentrations can cause health problems.

Rafter	A board that supports the roof of a house.

Rate Caps	Lenders offer caps with their adjustable rate mortgages (ARMs) so you can have more control over your monthly mortgage payment. Usually, there are two types of rate caps: A per-adjustment cap, which specifies the most your interest rate can rise from one adjustment period to the next. A lifetime adjustment cap, which specifies how much your interest rate can rise over the life of your loan. Ask your lender about both caps when evaluating any ARM product.

Rate Lock	A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time. (see also "Lock-in")

Rate-Improvement Mortgage	A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term.

Ratified Sales Contract	A ratified sales contract means both the buyer and the seller have signed off on the final offer. It also acts as a starting point for the loan application interview. The ratified sales contract specifies the amount of your down payment, the price you will pay for the house, the type of mortgage financing you will seek, your proposed closing and occupancy dates, and other contingencies. You will give all this information to your loan officer when you meet to discuss your financing options.

Raw land	Land with no improvements.

Real estate	Land including the buildings or other improvements upon the land. Also includes the airspace above the parcel and the contents below the surface.

Real Estate Agent	A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

Real Estate Attorney	Many homeowners hire a real estate attorney to represent them during the loan application process. If you do so, your attorney will review the sales contract and represent you at closing.

Real Estate Broker	A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

Real Estate Investment Trust (REIT)	Passive investment vehicle whose distributions are taxed only to the investors who receive them.

Real estate sales professional	A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

Real Estate Settlement Procedures Act	A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Real Property	Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Realtor	A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Recasting	Changing terms of a loan while retaining the same loan.

Recission	The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.

Recorder	The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."

Recording	The noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

Recurring closing costs	See Closing Costs.

References	Names and phone numbers of previous customers of a contractor. It's a good idea to call a contractor's references before hiring him, to make sure he has done good work in the past.

Refinance Transaction	The process of paying off one loan with the proceeds from a new loan using the same property as security.

Refinancing

Rehab	Short for "rehabilitation." To rebuild an existing house or building, to make the space more livable or usable and more valuable.

Rehabilitation Escrow Account	A contingency reserve will be set up that contains funds borrowed to finance your home improvements. These will be placed into an escrow account upon the closing of your mortgage. Payments to the contractor will be periodically made from this fund as construction occurs. You will be paid interest on the funds that are in the escrow account that have not been paid to the contractor.

Rehabilitation Mortgage	A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.

Remaining Balance	The amount of principal that has not yet been repaid. (see also "Principal Balance")

Remaining Term	The original amortization term minus the number of payments that have been applied.

Remodeling	To rebuild and improve a house or building, often changing its "model" or layout or adding rooms.

Renegotiable Rate Mortgages (RRM)	A mortgage where the interest rate is renegotiated at intervals, usually every three to five years.

Rent	Consideration paid for the use of property.

Rent Loss Insurance	Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

Rent with Option to Buy	There are two different Rent With Option to Buy options:(1) Lease-Purchase Mortgage Loan: An alternative 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 payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which money for a downpayment will accumulate.(2) 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.

Rentable area	The actual square foot area for which the tenant will pay rent. Compare with gross area and usable area.

Repayment Plan	An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."

Replacement Reserve Fund	A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

Repossess	To take back a property, such as a car, when the borrower or owner does not make payments due on the property. Done by a lender or seller.

Restrictive covenants	Private restrictions limiting the use of real property. are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only betwee n the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating.

Reverse Annuity Mortgage	Loan to a homeowner which is paid as an annuity with interest increasing on the accumulated balance. The loan is paid back in full upon the sale or refinancing of the property.

Reverse Mortgage	Also called a Home Equity Conversion Mortgage (HECM). A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

Revolving Liability	A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.

RHS Loans	The Rural Housing Service (RHS), a branch of the U.S. Department of Agriculture, offers low-interest-rate homeownership loans with no down payment requirements to low- and moderate-income persons who live in rural areas or small towns. Check with your local RHS office or a local lender for eligibility requirements. For the location of RHS State Offices and details on RHS loans, see the RHS home page.

Right of First Refusal	A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of Ingress or Egress	The right to enter or leave designated premises.

Right of Survivorship	In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

Right-of-way	The right to cross over or under another person's property for ingress, egress, utility lines, or sewers.

Riparian rights	Rights of an owner of property abutting water to use the water and have uninterrupted flow.

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