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Glossary

Need help understanding the terminology of mortgages? We’ve got you.

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1031 Exchange

Also referred to as a nontaxable sale, a 1031 exchange is a method enabling property owners to trade an investment property for another investment property (or properties) without paying capital gain taxes on the transaction.

A

Appraisal

An opinion of value based upon factual analysis.

Appraisal Methods

Generally, there are three major methods—cost approach, income approach, and market value (comparable) approach.

Appreciation

An increase in value of real estate.

C

Closing

The final settlement of real estate transactions between buyer and seller.

Condominium

A system of individual fee ownership of units combined with joint ownership of a common area of the structure and land.

Conventional Loan

A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed.

Counter Offer

A rejection of an offer by a seller along with an agreement to sell the property to the potential buyer on terms differing from the original offer.

D

Deed

Written instrument which, when properly executed and delivered, conveys title.

Discount Points

Additional charges made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent.

E

Earnest Money Deposit

Down payment made by buyer as evidence of good faith.

Easement

Created by grant or agreement for a specific purpose, such as an electrical line by a power company, or a shared driveway. An easement is the right, privilege, or interest which one party has in the land of another.

Equity

The interest or value which an owner has in real estate over and above the liens against the real property.

Escrow

The deposit of instruments and funds with instructions to a third neutral party (the escrow) to carry out the provisions of an agreement or contract.

F

Federal Housing Administration (FHA) Loan

A loan which has been insured by the federal government guaranteeing its payment in case of default by the owner.

Farmers Home Administration (FmHA) Loan

A loan by the federal government similar to an FHA loan usually used for residential property in rural areas.

I

Impound Account

An account held by the lender for payment of taxes, insurance, or other periodic debts against real property.

J

Joint Tenancy

Joint ownership by two or more persons with right of survivorship; all joint tenants own equal interest and have equal rights in the property.

L

Lien

A form of encumbrance which usually makes property security for the payment of a debt of discharge of an obligation. Example: judgments, taxes, mortgages, deeds of trust, etc.

M

Marketable Title

Merchantable title, or title free and clear of objectionable liens or encumbrances.

Mortgage

An instrument recognized by law by which property secures the payment of a debt or obligation.

Mortgage Insurance

Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage on the sale price.

O

Origination Fee

A fee charged by the lending institution.

P

Personal Property

Any property which is not real property, e.g., money, savings accounts, appliances, cars, boats, etc.

Purchase Agreement

An agreement between a buyer and seller for the purchase of real estate.

Q

Quitclaim Deed

A deed operating as a release, e.g., a husband quitclaiming to wife.

R

Real Property

Land and whatever by nature or artificial annexation is a part of it.

S

Special Assessment

Legal charge against real estate by a public authority to pay the cost of public improvements such as street lights, sidewalks, street improvements, etc.

Subdivision

A parcel of land that has been divided into smaller parts.

T

Term of Mortgage

The period during which a mortgage must be paid.

Trust Account

An account separate and apart from a broker's own account, and in which the broker is required by law to deposit all funds collected for clients.

V

VA Loan

A loan guaranteed by the Veterans Administration.

W

Warranty Deed

A deed used to convey real property which contains warranties of title and quiet possession, where the grantor agrees to defend the premises against the lawful claims of third persons.

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