Amortization
Payment of a debt in equal installments of principal and interest, rather than interest only payments.

Assessment
The estimating of value of property for tax purposes. A levy against property in addition to regular  taxes. Usually for improvements such as streets, sewers, etc.

Assumable mortgage
Can be taken over, by another borrower. Attractive when interest rates are rising, because the new borrower can assume the old loan and keep its original rate and terms.

Attorney at Law
An advocate, counsel, or official agent employed in preparing, managing, and trying cases in court. Must be licensed by the state.

Beneficiary
(1) One for whose benefit a trust is created. (2) in states in which deeds of trust are commonly used instead of mortgages, the lender (mortgagee) is called the beneficiary.

Bill of Sale
An instrument by which one transfers personal property.

Blanket Mortgage
A mortgage that covers more than one property owned by the same borrower. For example, a lender might issue a blanket mortgage to a borrower that covers both a primary and a second home, or the lender might issue a blanket mortgage to a builder to cover all of the lots in the builder's subdivision.

Buy-Sell Offer
An offer by one owner of a business or real estate to buy out the interest of anther owner of the same business or real estate (a partner or other shareholder), or to sell the offeror's interest at the same price or proportionate price if unequal ownership. Example: A and B each own a 1/2 interest in lot 1. A offers to buy B's interest for $10,000, or to sell A's inters to B for $10,000. Theoretically very fair, since B has the option to buy or sell. However, B's interest may be worth $12,000, but B is financially unable to buy A's interest (also worth $12,000).

C
Caps The maximum amount that the interest rate charged for an "adjustable rate" loan may change at each change date. Also, a cap is the maximum amount that an interest rate can change over its entire term.

Chattel
Personal Property to ownership.

Clear title
A title to a property that is free of legal challenges to ownership.

Covenant
Generally, almost any written agreement.  Most commonly in real estate, assurances set forth (expressed) in a deed by the grantor or implied by law.  Example:  Covenant against encumbrances, covenant of right to convey, etc.

Corporation
A general term encompassing any group of people "incorporating" by following statutory procedures. Most common type of corporation is a private one formed to carry on a business.

Co-signer
A person who assumes joint liability for a loan. The co-signer of a loan agreement is not necessarily, however, a co-owner.

Credit
A measurement of a person's ability to pay bills on time. Several companies track individuals' credit histories by detailing late or missed payments on loans, credit cards and other debts.

Credit report
Used by lenders to determine a potential borrower's creditworthiness. Independent sources compile the report, which lists the borrower's debts, liabilities and assets.

D
Debt
Money owing from one person to another.

Decedent
Originally, one who was dying. Modernly, one who is dead.

Deed
A document that transfers real estate from one party to another. Officially recorded in government records.

Default
Failure to meet all of the terms and conditions of the note or mortgage. Defaulting enables the lender to seek ownership of the property pledged as security for the loan.

Delinquent mortgage
Involves a borrower who is behind on payments. If the borrower cannot bring the payments current within a specified number of days,the lender may begin foreclosure proceedings.

Default
Failure to meet all of the terms and conditions of the note or mortgage. Defaulting enables the lender to seek ownership of the property pledged as security for the loan.

Down Payment
Cash portion paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.

E
Easement
A landowner can grant a second party the right to use land in a certain way. For example, if you need to cross your neighbor's property to access your garage, you would ask your neighbor to grant you an easement. Easements may restrict changes a buyer can make to a property.

Encroachment
Anything belonging to one landowner that extends onto an adjacent landowner's property is considered an encroachment. A fence that is a few inches over the property line is one example.

Encumbrance
A problem with the title to a property that does not affect the transfer of ownership.

Environment
Surroundings. As an appraisal term, the characteristics of the area around a property which bear on the value of the property.

Escrow
Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event. Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a third (neutral) party, with instructions as to their use.

Escrow Closing
In some areas, the closing does not involve the meeting of the parties. Instead, a person who has been designated by the parties as an "escrow agent" accomplishes all of the tasks necessary for a closing.

Estate
(1) The interest or nature of the interest which one has in property, such as a life estate, the estate of a deceased, real estate, etc. (2) A large house with substantial grounds surrounding it, giving the connotation of belonging to a wealthy person.

Equity
The actual cash value of property after all claims against the property have been paid. 

Executor
One who is appointed under a will to carry out (execute) the terms of a will.

F
Fair Credit Reporting Act
A federal law that gives consumers the right to see their credit records and correct any mistakes.

Fiduciary
One acting in a relationship of trust, regarding financial transactions

First mortgage
Primary mortgage on a property. When property is sold, the lender who issued the first mortgage will be paid first. If there is a second or third mortgage on the same property but proceeds of the sale are not enough to pay those loans off, the lenders who made those loans might not be able to recover their losses.

Franchise
(1) A statutory right which could not be exercised in the absence of the statute, such as the statutes enabling persons to form a corporation. Since a corporation is created by the statue, it could not be formed except by the grant of the legislature. (2) A combination of individual ownership and central control. One may own a fast food restaurant, hotel, hardware store, etc., yet use the name of a national company. Each individual owner pays for the name use, advertising and may be required to make certain purchases (napkins, buns, etc.) from the national company. he individual benefits from the name and advertising. The real estate brokerage business was slow to use the franchise method, but now has many companies operating in this manner.

Fixed rate mortgage
Home loans whose interest rate will remain fixed for the entire loan term. About 75% of all home mortgages that exist at the time of this writing are fixed-rate mortgages.

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

Front ratio
The proportion of a purchaser's income that lenders will allow for principal, interest, taxes and insurance on a property. Used in the evaluation of a loan application. 

Full disclosure
A requirement that sellers fully disclose all known defects in a property when selling it.

Future Interest
A present interest, but only a future right to possession and enjoyment of the land, such as a remainder interest, reversionary interest, etc.

G
Graduated-payment mortgage
(GPM) is a loan that requires the borrower to make larger monthly payments as the years go by.In a typical GPM, the payment is unusually low in the first year or two of the loan but gradually rises until year three or five, at which time the payment levels-out and remains fixed for the life of the mortgage. Appeals to borrowers whose earning power will increase in lock-step with their required Monthly mortgage payments.

Growing-equity mortgage
A fixed rate mortgage that increases payments over a specific period of time. The extra funds are applied directly to the principal balance.

Guarantee mortgage
A loan guaranteed by a third party, such as a government institution.

Guardian
One who is court appointed to manage the affairs of a minor or incompetent.

I
Inter vivos living trust
A trust established during the settler's lifetime.

Instrument
Any writing having legal form and significance, such as a deed, mortgage, lease, will, trust, etc.

Interest Rate
The cost of borrowing money, usually expressed as a percentage of the amount borrowed, for example, 10%.

Insurance
A contract under which, for a consideration, one party (the insurer) agrees to indemnify another (the insured) for a possible loss under specific conditions. May be loss of life, health, property, or property rights.


Intestate
Without leaving a will, or leaving an invalid will so that the property of the estate passes by the laws of succession rather than by direction of the deceased.

J

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

Judgment lien
An unpaid, court-ordered monetary judgment against a current or previous property owner.

L
Leasehold
An estate in realty held under a lease; an estate for a fixed term. Considered in many states to be personal property.

License
A permission, either express or implied.

Lien
Any claim against a property, including mortgages, unpaid taxes or repair bills or other unpaid charges. Prospective property buyers conduct a title search to determine whether any liens against the property exist. A lien must be filed or recorded with the local county government to be attached to a property title.

Limited Liability Company
A partnership consisting of one or more general partners who conduct the business and are responsible (liable) for losses, and one or more special (limited) partners, contributing capital and liable only up to the amount contributed.

Lis pendens
A dispute or matter which is the subject of ongoing or pending litigation. Politicians will sometimes refuse to discuss a matter or an issue which is "lis pendens" because they do not want their comments to be perceived as an attempt to influence a court of law.

Liquid Asset
Cash, or assets immediately convertible to cash.

Living Trust
A trust which is in effect during the life of the settlor, rather than upon his death (testamentary trust).

M
Mechanic's lien
Any payment owned to a contractor for work done on the property.

Mortgage
Also called a "deed of trust" in some areas, a mortgage provides security to the lender by giving the lender an interest in the home until the loan is repaid. The various types of mortgages are discussed in the Real Estate section.

Mortgage Banker
A company providing mortgage financing with its own funds rather than simply bringing together lender and borrower, as does a mortgage broker. Although the mortgage banker uses its own funds, these funds are generally borrowed and the financing is either short term or, if long term, the mortgages are sold to investors (many times insurance companies) within a short time.

Mortgage lien
The unpaid balance on the mortgage loan.

Multifamily mortgage
A mortgage made on a multi-family dwelling with more than four families, typically an apartment building.

Multiple listing service
The multiple listing service, or MLS, is a local database that lists homes for sale. Member real estate agents can access the MLS and show listed homes to potential buyers.

N
Negative Amortization
When using Graduated Payment Mortgages, debt is accumulated during the early years of the loan and added to the principal in later years, causing the monthly payments to increase at a predetermined time.

O
Offer
A bid for a home purchase. Generally, it is made in writing. Offers may be withdrawn without penalty prior to acceptance or rejection; if accepted, the offer becomes binding.

Option
The right to buy or sell property or sign a contract, based upon certain terms and conditions. Usually applicable to specific time frames during which the "option" may be exercised. 

P
Partnership
As defined by the Uniform partnership Act, "An association of two or more persons to carry on a co-owners, a business for profit." The business must be lawful and the partners must agree to share in the profit or loss (but not necessarily equally.
Perpetuity
Continuing forever. Legally, pertaining to real property, any condition extending the inalienability of property beyond the time of a life or lives in being plus twenty-one years.

Plat
A map that shows all boundaries of a piece of property.

Preapproval
A process whereby a potential home buyer secures a guaranteed mortgage approval before making an offer on a house. A lending institution guarantees in writing to grant a loan for a specified amount. Not to be confused with prequalification. (See the full article on preapproval.)

Prequalification
Some lenders "prequalify" mortgage applicants in less than an hour by performing cursory checks. Seldom can a lender fully check an applicant's credit, asset and debt status this quickly, so final approval typically takes at least a few more days. Though such preliminary prequalifications may soon lead to a full preapproval, there is no guarantee until the applicant receives a letter, certificate or wallet-size card bearing the mortgage-holder's name and maximum loan amount.

Principal
The amount of money that is actually borrowed. This excludes interest payments.

Probate
Originally, the proving that a will was valid. Modernly, any action over which probate court has jurisdiction - that being a court having jurisdiction of estates, whether of a deceased, a minor, or an incompetent person.

Points
An amount equal to 1% of the loan. Points are changed by the lender to improve the lender's return on a loan.

Prime Rate
The most favorable interest rates charged by a commercial bank on short term loans, (not mortgages).

Promissory Note
An agreement between the buyer and the lender that states the terms and conditions under which money is borrowed and how it is to be repaid.

Purchase-money mortgage
A mortgage that a borrower obtains to acquire a property, rather than to refinance an existing loan on a property the borrower already owns.

R
Rate-improvement mortgage
A loan with a clause that entitles a borrower to a one-time cut in the interest rate (if the market rates go down) without going through or paying for refinancing.

Recording Acts
State statutes enacted to cover the public recording of deeds, mortgages, etc., and the effect of these recordings as notice to creditors, purchasers, and other interested parties.

Recording fee
Fee charged by a government for entering into the public record a real estate purchase or sale.

Rescission
Cancel or revoke of sale.

Revoke
To cancel, annul, reverse, take back, etc.

Restriction
Most commonly used to describe a use or uses prohibited to the owner of land. Restrictions are set forth by former owners in deeds or in the case of a subdivision, a declaration of restrictions is recorded by the developer. A limitation on use of the property by law (zoning ordinances) may also be termed a restriction.

Right of first refusal
A priority arrangement that grants a particular prospective buyer the first right to purchase a property, given certain agreed-upon conditions.

S
Savings and Loan Association
An association chartered to hold savings and make real estate loans. Federally insured and regulated. Active in long term financing, rather than construction loans.

Self-amortization
Occurs when monthly payments allow a loan to be repaid, including principal and interest, over its terms without any balloon payments.

Settlement (Closing)
The process by which all financial dealings and contractual arrangements are completed for the buyer and seller. At the time of settlement, or closing, all debts are paid, adjustments made and money disbursed, and a deed is prepared in the new owner's name. 

Shared-appreciation mortgage
Mortgage that allows a lender or other party to share in the borrower's profits when the home is eventually sold.  For example, a lender might agree to provide a loan with an extremely low loan rate in exchange for 25 or 50 percent of the borrower's eventual profit.

Sole Proprietorship
Individual ownership of a business as opposed to a partnership or corporation.

Succession
The passing of real property by will or inheritance, rather than by grant of a deed or any other form of purchase.

Surety
One who voluntarily binds himself to be oblicaged for the debt or obligation of another. For example: A co-maker of a note; an insurance carrier. Surety differs from guarantor, although commonly (and mistakenly) used interchangeably.


Survey
A professional examination of a property. A survey usually will reveal the size of a property, its boundary distances, ground contours and where improvements or alterations have been made.

T