Real Estate Glossary

Adjustable Rate Mortgage (ARM)
Mortgage loans under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates.

Amortization (amortize)
Reduction of the principal of a debt in regular, periodic installments.

Appraisal
A report from an independent third party detailing the estimated value of real estate.

Assignment
The act of transferring certain interests in real estate from one party to another, like a mortgage or leasehold interest.

Balloon note
A promissory note with amortization payments scheduled for a long term, usually 30 years, but maturing in a shorter term, often five to seven years. It requires a substantial final balloon payment for the remaining principal.

Building codes
Local or state laws that control accepted building and construction practices.

Chain of title
The history of successive ownership and transfer in the title to a tract of land.

Clear title
Real property ownership free of liens, defects, encumbrances, or claims.

Closing (also called “settlement”)
The completion of a real estate transfer, where the title passes from seller to buyer, or a mortgage lien is given to secure debt.

Clouded title
A land title having an irregularity, possible claim, or encumbrance that, if valid, would adversely affect or impair it.

Community property
The law in some  states that recognizes all property acquired by a husband and wife, or either, during marriage (except property specifically acquired by a husband or wife as separate property), as owned in common by both of them.

Condominium
A statutory form of real estate development of separately owned units and jointly-owned common elements in a multi-unit project. See also cooperative, common interest community, or planned unit development.

Deed
An instrument for conveying real estate.

Deed of trust
A form of security instrument for mortgage loans

Earnest money
A deposit of funds made by a buyer of real estate as evidence of good faith.

Equity
The market value of real property, less the amount of existing liens.

Escrow
Closing a real estate transaction when all required documents and funds are placed with a third party for processing and disbursement.

Fannie Mae (FNMA)   
Federal National Mortgage Association. A U.S. government sponsored corporation dealing in the purchase of first mortgages for the secondary market.

FHA (Federal Housing Administration)
A federal agency that insures first mortgages, enabling lenders to lend a very high percentage of the sale price.

Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A federal  agency that purchases both conventional and federally insured first mortgages from members of the Federal Reserve System and the Federal Home Loan Bank System.

Good faith estimate 
The Real Estate Settlement Procedures Act (RESPA)  requires creditors to provide a good faith estimate of closing costs and a settlement statement listing the amounts paid by the consumer. If the creditor does not know the precise credit terms, the creditor must base the disclosures on the best information reasonably available and indicate that the disclosures are estimates.

HUD (Department of Housing and Urban Development)   
The federal department responsible for the major housing programs in the United States

Joint tenancy
An estate in cotenancy that must not only be specified in the grant, but also requires three “unities.” All joint tenants must receive title in the same conveyance, beginning at the same time, and with undivided possession.

Lien
A monetary charge imposed on a property, usually arising from some debt or obligation.

Loan-to-value ratio
The ratio of the amount of the loan divided by the fair market value of the land held as security for the loan.

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 at a higher loan-to-value ratio.

Quitclaim deed
A transfer of interest the transferor may have in the thing conveyed.

Recording
The noting in a public office of the details of a legal document, such as a deed or mortgage, affecting the title to real estate.

RESPA
The Real Estate Settlement Procedures Act (12 U.S.C.  2601) that, together with Regulation X promulgated pursuant to the Act, regulates real estate transfers involving a “federally-related mortgage loan” by requiring, among other things, certain disclosures to borrowers.

Title
A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy, and dispose of real estate or an inheritable right or interest therein.

Title insurance policy
A contract of title insurance under which the insurer, in keeping with the terms of the policy, agrees to indemnify the insured against loss arising from claims against the insured interest.

Veterans Administration (VA) loans
Housing loans to veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans Administration, enabling veterans to buy a residence with little or no down payment.

Zoning 
Land use laws or ordinances passed by local governments regulating the size, type, structure, nature, and use of land or buildings.