As with many businesses there are terms and abbreviations used within the process which we do not always understand.

In a Real Estate transaction there are many. Often as a Realtor I find myself talking to buyers and sellers and realize I may sound like I’m speaking a foreign language. Years ago I devised a glossary of terms and abbreviations to include as part of my information packet during my initial consultation.

I thought it may be useful to provide this in hopes it may be helpful to you as well. 

I alphabetized the list for easy future reference.

Acceptance:  the date when both parties, seller, and buyer, have agreed to and completed signing and/or initialing the contract.

ARM Adjustable-Rate Mortgage:  a mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change.

Amortized Loan:  a loan that is paid in equal installments during its term.

Appraisal:  an estimate of real estate value, usually issued to standards of FHA, VA and FHMA.  Recent comparable sales in the neighborhood are the most important factor in determining value, although property condition flaws can be a factor to value and ability to proceed to closing.

Appreciation:  an increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

Assumable Mortgage:  purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage.

BOS Bill of Sale:  document used to transfer title (ownership) of personal property. Mostly used in Real Estate for manufactured home sales

CD Closing Disclosure: a financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended. Formally known as HUD settlement statement as seen below, typically used for now case sales.

Cloud on Title:  any condition that affects the clear title to real property.

Consideration:  anything of value to induce another to enter into a contract, i.e., money, services, a promise.

Deed:  a written instrument, which when properly executed and delivered, conveys title to real property.

Discount Points:  a loan fee charged by a lender of FHA, VA or conventional loans to increase the yield on the investment.  One point = 1% of the loan amount.

Easement:  the right to use the land of another.

Encumbrance:  anything that burdens (limits) the title to property, such as a lien, easement, or restriction of any kind.

Equity:  the value of real estate over and above the liens against it.  It is obtained by subtracting the total liens from the value.

Escrow Payment:  that portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, hazard insurance and other items as they become due.

Estate Sale: a sale or auction to dispose of a substantial portion of the materials owned by a person who is recently deceased or who must dispose of their personal property to facilitate a move

FHA Federal Housing Administration:  an agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

FHA Insured Mortgage:  a mortgage under which the Federal Housing Administration insures loans made, according to its regulations.

FHLMC Freddie Mac:  nickname for Federal Home Loan Mortgage Corporation, a federally controlled and operated corporation to support the secondary mortgage market.  It purchases and sells residential conventional home mortgages.

FMV Fair Market Value: the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

FNMA Fannie Mae:  nickname for Federal National Mortgage Corporation, a tax-paying corporation created by congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional loans.

Foreclosure:  procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.

FRM Fixed Rate Mortgage:  a loan that fixes the interest rate at a prescribed rate for the duration of the loan.

HOA Homeowner’s Association: a private organization within a planned community, subdivision, or condominium tasked to create and enforce rules for the homes in the community and its residents. Those who buy a property within an HOA’s jurisdiction are automatically included as members and are required to pay dues or HOA fees.

HUD-1 Settlement Statement :  a financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended. Currently used for cash sales. The new term is Closing disclosure as seen above

JT Joint Tenancy: a person who holds an estate or property jointly with one or more parties, the share of each passing to the other or others on death.

Lease with Option:  a contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date.

LTV Loan to Value Ratio:  the ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price).  Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.

MLS Multiple Listings Service: a database of property listings data available for sale (currently or in the past) maintained and shared by real estate brokers.

Mortgage:  a legal document that pledges a property to the lender as security for payment of a debt.

MIP Mortgage Insurance Premium :  the amount paid by a mortgagor for mortgage insurance.  This insurance protects the investor from possible loss in the event of a borrower’s default on a loan.

Note:  a written promise to pay a certain amount of money.

Origination Fee:  a fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan.

PITI principal, interest, taxes, and insurance: the sum components of a mortgage payment. Because PITI represents the total monthly mortgage payment, it helps both the buyer and the lender determine the affordability of an individual mortgage.

PMI Private Mortgage Insurance:  see Mortgage Insurance Premium.

P&S Purchase and Sale Agreement: a binding legal contract between two parties that obligates a transaction between a buyer and a seller. ... The agreement finalizes the terms and conditions of the sale, and it is the culmination of negotiations between the buyer and the seller.

Second Mortgage / Second Deed of Trust / Junior Mortgage / Junior Lien:  an additional loan imposed on a property with a first mortgage.  Generally, a higher interest rate and shorter term than a “first” mortgage.

Severalty Ownership:  ownership by one person only.  Sole ownership.

TBE Tenancy By The Entirety a form of shared property ownership that is reserved only for married couples. A tenancy by the entirety essentially permits spouses to jointly own property as a single legal entity. This means that each spouse has an equal and undivided interest in the property. This form of legal ownership creates a right of survivorship so if one spouse dies, the surviving spouse automatically receives the full title of the property.

TIC Tenancy In Common:  ownership by two or more persons who hold an undivided interest without right of survivorship.  (In event of the death of one owner, his/her share will pass to his/her heirs.

Title Insurance:  an insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title.

VA Veteran’s Administration Loan: a type of home loan that is only available to US military veterans and their surviving spouses. Designed to assist veterans who are looking to purchase a property without needing a down payment or mortgage insurance. A percentage of VA loans are guaranteed by the federal government, allowing lenders to offer more advantageous loan terms.

By Donna DeLauro

RE/MAX Real Estate Center

401-486-6044

donnadelauro@hotmail.com

www.donnadelaurorealestate.com