Abstract of Title
A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear,marketable, and insurance title.

Acknowledgment
Formal declaration before a public official that one has signed a document. Prior to recording real estate legal documents, such as grant deeds and deeds of trust, a Notary Public acknowledges the person’s signature on the document.

Acre
A measure of land equal to 43,560 square feet.

Action to Quiet Title
A court action to establish ownership of real property. Although technically not an action to remove a cloud on title, the two actions are usually referred to as “Quiet Title” actions.

Balloon Loan
Mortgage in which the remaining principal balance becomes fully due and payable at a predetermined time. Most of the time, balloon loans have level payments unitl the note becomes due and payable.

Broker
A person that represents another for a fee in real estate transactions. Real Estate brokers help consumers locate suitable real estate and are paid a fee for their services.

Building Line or Setback
Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leased, by building codes, or by zoning ordinances.

Buydown
An interest rate buydown is the temporary reduction of the note rate and resulting monthly payments a borrower pays to the lender. The shortfall between the rate on the note and initial payment made by the borrower is usually paid by a third party such as a seller or builder.

Chain of Title
The chronological order of conveyance of a parcel of land from the original owner to the present owner.

Closing
Conclusion of a real estate sale where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties ( seller, old lender, real estate broker, etc.).

Closing Agent
A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company or attorney.

Closing Costs
Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring costs that include a one time charge for points, appraisal fees, etc. or a proration of recurring costs such as taxes and insurance incurred while the new buyer/borrower owns the real estate.

Closing Statement
Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.

Cloud on Title
An outstanding claim or encumbrance which, if valid, adversely affects the marketability of title.

Commercial Property
Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments.

Commission
Fee paid to a broker or other entity for services rendered. Real estate brokers and mortgage brokers receive a commission for the services they provide; a real estate broker secures a buyer for a property that is for sale and a mortgage broker secures a mortgage loan for the buyer to finance the purchase of a property. Commissions are generally paid as a percentage of the sales price in a real estate transaction or the loan amount in a mortgage transaction.

Commitment
A written promise to make or insure a loan for a specified amount and on specified items.

Condemnation
The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government’s power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

Condominium
A structure of two or more units, the interior space of which are individually owned.

Consideration
Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.

Construction Loan
Short-term financing for real estate construction. Generally followed by long term financing called a “take out” loan issued upon completion of construction.

Contingency
Condition which must be satisfied before the buyer can consummate the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller.

Contract of Purchase
An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract. In Texas it is known as an Earnest Money Contract.

Contract of Sale
A purchase transaction in which the buyer receives possession of the property, but the seller retains title.

Contract Sales Price
The full purchase price as stated in the contract.

Conventional Loan
A mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans.

Convertible ARMs
ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.

Conventional Mortgage
A loan neither insured by the FHA nor guaranteed by the VA.

Covenant
An agreement written into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of the property.

Counteroffer
A new offer made as a result of another offer, which cancels the original offer.

Declaration of Restrictions
A set of restrictions filed by a sub-divider to cover an entire tract or subdivision.

Dedication
The voluntary giving of private property to some public use by the owner, as the dedication of land for streets, schools, etc., in a development.

Deed
Formal written document transferring title to real estate; a new deed is used for each transfer. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. (See also deed of trust, general warranty deed, quitclaim deed, and special warranty deed.)

Deed of Trust
An instrument given by the borrower to a third party (trustee) vesting title to the property in the trustee as security for the borrower’s repayment of the mortgage loan.

Deed of Trust Rider
The document required by the lender to be recorded along with the security instrument for an ARM.

Deed Restriction
Restrictions placed on use of real property by writing in a deed to control use and occupancy of the property by future owners.

Default
Failure to make mortgage payments or violations other provisions of the mortgage note.

Defective Title
Title to real property which lacks some of the elements necessary to transfer good title. Title to a negotiable instrument obtained by fraud.

Deficiency Judgment
Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the loan(s) and accrued interest.

Deposit
Also called Earnest Money Deposit, the deposit is money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money deposit will be forfeited to the seller unless the purchase contract expressly provides conditions for its return to the buyer.

Depreciation
Decrease in value to real property improvements due to wear and tear, adverse changes in the neighborhood, or any other reason.

Devise
Real Estate left by will.

Direct Endorsement
A lender that can complete the processing and closing of an FHA loan without prior approval from FHA.

Direct Reduction Mortgage
An amortized mortgage in which principal and interest are computed on the remaining balance.

Disbursements
Payments made during the course of an escrow or at closing.

Documentary Tax Stamps
Stamps affixed to a deed showing the amount of transfer tax. In Nebraska the documentary tax is $1.75 for each thousand dollars of the selling price.

Down Payment
Cash to be paid by the buyer at closing to consummate a real estate transaction. Down payment is the difference between the sales price and the mortgage amount. Buyer cash required at closing includes the down payment, closing costs and prepaid expenses.

Earnest Money
The earnest money is the deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money deposit will be forfeited to the seller unless the purchase contract expressly provides conditions for its return to the buyer.

Easement
A right-of-way created by grant, reservation, agreement, prescription or necessary implication which one has in land owned by another.

Eminent Domain
A government right to acquire private property for public use by condemnation and the payment of just compensation.

Encroachment
Unauthorized intrusion of a building or improvement such as a wall, fence, etc. onto another’s land.

Encumbrance
A legal right or interest in land that affects a good or clear title and may diminish the land’s value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent the transfer of real property. It is up to the buyer to determine whether to purchase with the encumbrance.

Equity
The market value of the property less the homeowner’s unpaid mortgage balance and any outstanding liens or other debts against the property.

Escrow
The deposit of instruments and/or funds into the care of a neutral third party with instructions to carry out the provisions of an agreement or contract once all instruments and/or funds have been deposited. Many closings are handled by escrow agents. In this situation, the seller deposits the deed and the buyer deposits the funds necessary with the escrow agent. Once all requirements of the purchase contract are in the control of the escrow agent, the money and deed are distributed accordingly.

Escrow Payment
That portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, mortgage insurance, hazard insurance, lease payments and other items as they become due. Also known as “impounds” in some states.

Escrow Reimbursement
The buyer reimburses the seller for the current balance of his escrow (or impounded) funds.

Estimated Closing Costs Statement
The statement which lists the financial settlement between buyer and seller and the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

Estoppel
An impediment to a law of action, whereby one is forbidden to contradict or deny one’s own previous statement or act.

Exclusive Agency
Listing agreement in which only the listing office may sell the property and earn the commission. If the owner sells the house, the listing office would not receive any commission.

Fannie Mae (Federal National Mortgage Association/FNMA)
FNMA is one of the major secondary market investors that purchases loans from mortgage companies and other depository institutions. The company is a private corporation and its stock is traded on the New York Stock Exchange.

Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC)
A government sponsored agency that is also a publicly traded company on the New York Stock Exchange that purchases mortgage loans from mortgage bankers and financial depository institutions. FHLMC is a major secondary market investor.

Federal Housing Administration
A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

Federal Reserve Bank
The regulatory agency for certain commercial banks and bank holding companies. Sets monetary policy for the country and provides liquidity for supervised financial institutions.

Federal Tax Lien
A lien attached to property for nonpayment of a federal tax.

Federal Tax Return
The U.S. government’s method to identify individual and company’s annual tax responsibility. The tax returns identify the income and taxes.

Fee Simple
Highest possible degree of ownership of land. The estate allows owners to have unrestricted powers to dispose of property, and which can be left by will or inherited.

Fiduciary
A person in a position of trust or responsibility with specific duties to act in the best interest of a client. Real estate brokers and mortgage brokers are fiduciaries.

First Mortgage
Mortgage holding priority over the claims of subsequent lenders against the same property.

Fixture
Personal property affixed to structures or land, usually in such manner that they cannot be independently moved without damage to themselves or the property housing, supporting, or pertinent to them. Varies under state laws.

Foreclosure
A proceeding in or out of court to extinguish all rights, title and interest of the owner(s) of a property in order to sell the property and satisfy a lien against it.

Fredde Mac
See Federal Home Loan Mortgage Corporation.

Full Disclosure
Revealing all known facts which may affect the decision of a buyer or tenant.

General Lien
A lien such as a tax lien or judgment lien, which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property.

General Warranty Deed
A deed which conveys not only all the grantor’s interests in and title to the property to the grantee, but also warrants that if the title is defective or has a “cloud” on it (such as mortgage claims, tax liens, title claims, judgements, or mechanic’s liens against it) the grantee may hold the grantor liable.

Government National Mortgage Association (GNMA/Ginnie Mae)
A government owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA guarantees the timely principal and interest payments to investors.

Grandfather Clause
The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible.

Ground Rent
Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only.

Grantee
The buyer, who receives a deed.

Grantor
The seller, who gives a deed.

Hazard Insurance
Insurance on a property against damages caused by fire, wind storms, and similar risks.

Heirs and Assigns
One who might inherit or succeed to an interest in a property under the rules of law applicable when a property owner dies.

Homeowners Association
An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.

Homeowner’s Policy
Policy which expands the insurance for a homeowner. It may include theft, liability, earthquake, etc.

Homeowner’s or Maintenance Fees
Payments made by property owner(s) of a condominium or a unit in PUD to the homeowners’ association for expenses incurred in upkeep of the common areas.

Housing and Urban Development (HUD)
The federal government agency that oversees FHA.

HUD 1
A closing document required by HUD that outlines the settlement cost of a loan. The closing agent generally prepares the document and buyer receives it shortly after the loan is closed.

Impound Account
Account held by a lender for payment of taxes, insurance or other related expenses. Also known as an escrow account.

Improvement
Valuable additions to property which raise the value of the property.

Index
A published rate or benchmark measure of current interest rate levels used to calculate periodic changes in rates charged on adjustable rate mortgages.

Installment Sale
A tax term used to describe a sale which is usually accomplished by use of a land contract.

Insured Mortgage
A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the mortgaged property to satisfy the balance owing plus cost of foreclosure.

Interest Payment Notification (1098)
A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year.

Interest Rate
The percentage of an amount of money which is paid for its use for a specified time.

Investment Property
A property that is not occupied by the owner and in most cases produces income or is held for gains from appreciation.

Joint and Several Liability
A liability which allows the creditor to sue any one of the debtors or sue all together.

Joint Tenancy
An undivided interest in property taken by two or more joint tenants. The interests must equal, accruing under the same conveyance and beginning at the same time. Upon death of a joint tenant, the interest passes to the surviving joint tenants rather than to the heirs of the deceased.

Judgment
The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Junior Mortgage
A mortgage subordinate to another mortgage.

Land
In a legal sense, the solid part of the surface of the earth, as distinguished from water; any ground, soil or earth whatsoever regarded as the subject of ownership and everything annexed to it, whether by nature, e.g., trees and everything in or on it, such as minerals and running water, or annexed to it by man; e.g., buildings, fences, etc. In an economic sense, land consists of all those elements in the wealth of a nation which is supposed to be furnished by nature as distinguished from those improvements which owe their value to the labor and organizing power of man.

Land Contract
Installment plan for buying a house. It is used as an alternative to obtaining a loan from a traditional, source such as a mortgage banker or savings and loan.

Late Charge
A penalty for failure to pay an installment on time.

Lease with Option to Purchase
A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of the lease period.

Legal Description
An expanded and unique description of a property that is used on legal documents, such as deeds and deeds of trust. Recorded documents generally require a legal description.

Lender
A general term encompassing all mortgages, and beneficiaries under deeds of trust.

Lender’s Instructions
A document that lenders prepare for the closing agent that outlines the requirements for loan closing.

Lessee
One who possesses the right to use or occupy a property under lease agreement.

Lessor
One who holds title to and conveys the right to use and occupy a property under lease agreement.

Letter of Intent
A formal method of stating that a prospective developer, buyer or lessee is interested in property.

Lien
An encumbrance against property for for the payment of debt; a lien may be a mechanic’s lien, mortgage, unpaid taxes or judgment.

Life Estate
An estate in real property for the life of a living person. The estate then reverts back to the granter or to a third party.

Limited Partnership
A partnership consisting of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, who contributes capital and are liable only to the amount contributed.

Lis Pendens
A public notice that litigation is pending on a property.

Listing
A record of property for sale by a broker who has been authorized by the owner to sell. Also used to denote the property so listed.

Listing Agreement
Agreement between a property owner and a real estate broker, authorizing the broker to find a buyer for the property. If the sale is consummated, the listing broker will be paid a fee.

Loan Discount/Premium Fees
Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to the yield requirement of the investor. Loan discount denotes an investor yield requirement higher than the note rate. Loan premium denotes an investor yield requirement lower than the note rate.

Loan Lock
Guarantee from a lender that a borrower will receive the interest rate in effect at the time of loan application.

Loan Officer
A person that helps borrowers through the loan selection, processing, and closing of a mortgage loan. Loan officers can be paid a commission or salary for their services and can work for mortgage brokers, mortgage bankers, or depository institutions.

Loan Origination Fees
The cost to obtain a loan that is paid to the originating lender or broker.

Loan Package
The information regarding a borrower and property necessary which is the basis for a lender’s credit decision to extend or deny credit.

Loan Ratio
The amount of a loan to the value or selling price of real property.

Loan-to-Value Ratio
The ratio of the mortgage loan amount to the property’s appraised value or selling price, whichever is less.

Loan Servicing
The function of collecting loan payments, managing the property tax and insurance escrows, foreclosing on defaulted loans and remitting payments to the investor/beneficiary.

Margin
The number of percentage points the lender adds to the index rate to calculate the adjustable rate mortgage (ARM) interest rate at each adjustment.

Market Value
The most likely price a given property will bring if widely exposed on the market, assuming fully informed buyer and seller.

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.

Market Price
The price paid for a property; the amount of money that must be given or which can be obtained at the market in exchange under the immediate conditions existing at a certain date. To be distinguished from market value.

Market Value
The highest price estimated in terms of money which a buyer would be warranted in paying and a seller justified in accepting, provided both parties were fully informed, acted intelligently and voluntarily and, further, that all the rights and benefits inherent in or attributable to the property were included in the transfer.

Mechanics Lien
A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land.

Misrepresentation
False statement made to or concealment of knowledge from another party with the intent to provoke action from that party.

Mortgage
A lien or claim against real property given as security for a loan. It is a two party agreement as apposed to the three-party agreement of a deed of trust.

Mortgage Broker
A professional that helps consumers through the loan selection, processing and closing of a mortgage loan. Most mortgage brokers have access to a wide range of mortgage products through many mortgage lenders. Mortgage brokers are paid a fee by the borrower when a suitable mortgage is found and closed.

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.

Mortgagee
The lender of money or the receiver of the mortgage document.

Mortgage Insurance
Insurance required for a loan-to-value ratio above 80.01%.

Mortgage Banker
Financial intermediaries that originate mortgage loans through loan officers or independent mortgage brokers and sell the mortgages into the secondary mortgage market.

Mortgage Note
The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps for ARMs, the name of the lender and the borrower, and any other material item required by the lender.

Mortgage Warehousing
A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans which are sold to an investor shortly thereafter. The mortgage notes are used as collateral for this interim financing.

Mortgagor
The borrower of money or the giver of the mortgage document.

Multiple Listing Service
A means of making possible the orderly dissemination and correlations of listing information to its members so that REALTORS may better serve the buying and selling public.