Real Estate Terms / Real Estate Glossary
Fort Worth Homebuilders
A mortgage with an interest rate that changes over time in line with movements
in the index. ARMs are also referred to as AMLs (adjustable mortgage loans)
or VRMs (variable rate mortgages).
The length of time between interest rate changes on an ARM. For example,
a loan with an adjustment period of one year is called a one-year ARM,
which means that the interest rate can change once a year.
Repayment of a loan in installments of principal and interest, rather
than interest-only payments.
Annual Percentage Rate (APR)
The total finance charge (interest, loan fees, points) expressed as a
percentage of the loan amount.
An estimate of the property's value provided by a professional appraiser.
Assumption of Mortgage
A buyer's agreement to assume the liability under an existing note that
is secured by a mortgage or deed of trust. The lender must approve the
buyer in order to release the original borrower (usually the seller) from
A lump sum principal payment due at the end of some mortgages or other
Sometimes known as an offer to purchase or an earnest money receipt. A
binder is the acknowledgement of a deposit along with a brief written
agreement to enter into a contract for the sale of real estate.
Permanent - prepaid interest that brings the note rate on the loan down
to a lower, permanent rate. Temporary - prepaid interest that lowers the
note rate temporarily on the loan, allowing the buyer to more readily
qualify and to increase payments as income grows.
The limit on how much an interest rate or monthly payment can change,
either at each adjustment or over the life of the mortgage.
The amount of the buyer's liquid cash remaining after making the down
payment and paying all closing costs.
Covenants, conditions and restrictions. A document that controls the use,
requirements and restrictions of a property.
Certificate of Commitment
The lender's approval of a VA loan, which is usually good for up to six
Certificate of Reasonable Value (CRV)
A document that establishes the maximum value and loan amount of a VA
The financial disclosure statement that accounts for all of the funds
received and expected at the closing, including deposits for taxes, hazard
insurance, and mortgage insurance.
The period during which a loan approval is valid.
A form of real estate ownership where the owner receives title to a particular
unit and has a proportionate interest in certain common areas. The unit
itself is generally a separately owned space whose interior surface (walls,
floor, ceilings) serve as its boundaries.
A condition that must be satisfied before a contract is binding. For instance,
a sales agreement may be contingent upon the buyer obtaining financing.
A provision in some ARMs that enables home buyers to change an ARM to
a fixed rate loan, usually after the first adjustment period. The new
fixed rate is generally set at the prevailing interest rate for fixed
rate mortgages. This conversion feature may cost extra.
A form of multiple ownership in which a corporation or business
trust entity holds title to a property and grants occupancy rights
to shareholders by means of proprietary leases or similar arrangements.
Certified Residential Broker. To be certified, a broker must be
a member of the National Association of Realtors, have five years
experience as a licensed broker and have completed required Residential
Certified Residential Specialist.
The comparison of a buyer's housing cost to his or her gross or
net effective income, and the comparison of a buyer's long-term
debt to his or her gross or net effective income. The first ratio
is housing ratio; the second ratio is total debt ratio.
A clause that requires a full payment of a mortgage or deed of trust
when the secured property changes ownership.
The portion of the down payment delivered to the seller or escrow
agent by the purchaser with a written offer as evidence of good
A procedure in which a third party acts as a stakeholder for both
the buyer and the seller, carrying out both parties' instructions
and assuming responsibility for handling all of the paperwork and
The difference between what is owed and what the property could
be sold for.
A loan insured by the Federal Housing Administration (of the Department
of Housing and Urban Development).
Federal Home Loan Mortgage Corporation (FHLMC)
Called "Freddie Mac"; a part of the secondary market,
particularly used to purchase loans from savings and loan lenders
within the Federal Home Loan Bank Board.
Federal National Mortgage Association (FNMA)
Popularly known as "Fannie Mae"; a privately owned corporation
created by Congress to support the secondary mortgage market. It
purchases and sells residential mortgages insured by the FHA or
guaranteed by the VA, as well as conventional home mortgages.
An estate in which the owner has unrestricted power to dispose of
the property as he wishes, including leaving by will or inheritance.
It is the greatest interest a person can have in real estate.
The total cost a borrower must pay, directly or indirectly, to obtain
credit according to Regulation Z.
Fixed Rate Mortgage
A conventional loan with a single interest rate for the life of
Fully Indexed Rate
The maximum interest rate on an ARM that can be reached at the first
A letter from a relative stating that an amount will be gifted to
the buyer, and that said amount is not to be repaid.
Government National Mortgage Association (GNMA)
Called "Ginnie Mae"; a government part of the secondary
market that deals primarily in recycling VA and FHA mortgages, particularly
those that are highly leveraged.
Graduated Payment Mortgage
A residential mortgage with monthly payments that start at a low
level and increase at a predetermined rate.
GRI Graduate, Realtors Institute.
A professional designation granted to a member of the National Association
of Realtors who has successfully completed courses covering Law,
Finance and Principles of Real Estate.
Home Inspection Report
A qualified inspector's report on a property's overall condition.
The report usually includes an evaluation of both the structure
and mechanical systems.
Home Warranty Plan
Protection against failure of mechanical systems within the property.
Usually includes plumbing, electrical, heating systems and installed
A measure of interest rate changes used to determine changes in
an ARM's interest rate over the term of the loan.
Initial Interest Rate
The introductory interest rate on a loan; signals that there may
be rate adjustments later in the loan.
An equal undivided ownership of a property by two or more persons.
Upon the death of any owner, the survivors take the decedent's interest
in the property.
Mortgage loans that exceed the loan amounts acceptable for sale
in the secondary market; these jumbos must be packaged and sold
differently to investors and therefore have separate underwriting
A legal hold or claim on property as security for a debt or charge.
A written promise to make a loan for a specified amount on specified
The relationship between the amount of the mortgage and the appraised
value of the property, expressed as a percentage of the appraised
The fixing of an interest rate or points at a certain level, usually
during the loan application process. It is usually done for a certain
period of time, such as 60 days, and may require a fee or premium
in the form of a higher interest rate.
The number of percentage points the lender adds to the index rate
to calculate the ARM interest rate at each adjustment.
Mortgage Insurance Premium (MIP)
The mortgage insurance required on FHA loans for the life of said
loans; MIP can either be paid in cash at closing or financed in
its entirety in the loan. The premium varies depending on the method
Mortgage Life Insurance
A type of term life insurance often bought by home buyers. The coverage
decreases as the mortgage balance declines. If the borrower dies
while the policy is in force, the mortgage debt is automatically
covered by insurance proceeds.
Occurs when monthly payments fail to cover the interest cost. The
interest that isn't covered is added to the unpaid principal balance,
which means that even after several payments the borrowers could
owe more than they did at the beginning of the loan. Negative amortization
can occur when an ARM has a payment cap that results in monthly
payments that aren't high enough to cover the interest.
A fee or charge for work involved in evaluating, preparing, and
submitting a proposed mortgage loan. The fee is limited to one percent
for FHA and VA loans.
The maximum amount the payment can adjust in any given time frame.
Principal, Interest, Taxes and Insurance.
Planned Unit Development (PUD)
A zoning designation for property developed at the same or slightly
greater overall density than conventional development, sometimes
with improvements clustered between open, common areas. Use may
be residential, commercial or industrial.
An amount equal to one percent of the principal amount of the investment
or note. Lender assesses loan discount points at closing to increase
the yield on the mortgage to a position competitive with other types
A fee charged to a borrower who pays a loan before its due. Not
allowed for FHA or VA loans.
Private Mortgage Insurance (PMI)
Insurance written by a private company protecting the lender against
loss if the borrower defaults on the mortgage.
A written document in which the purchaser agrees to buy certain
real estate and the seller agrees to sell under stated terms and
conditions. Also called a sales contract, earnest money contract,
or agreement for sale.
The difference between where the rate is now and where it could
adjust to on an ARM. Also used to compare the difference between
a current conventional rate and that of an ARM.
A real estate broker or associate active in a local real estate
board affiliated with the National Association of RealtorsŪ.
The set of rules governing consumer lending issued by the Federal
Reserve Board of Governors in accordance with the Consumer Protection
Tenancy In Common
A type of joint ownership of property by two or more persons with
no right of survivorship.
Title Insurance Policy
A policy that protects the purchaser, mortgagee or other party against
A loan, made by a private lender, that is partially guaranteed by
the Veterans Administration.
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SHARON MAYS, CRS, ABR, GRI, e-PRO
2442 Forest Park Blvd. || Fort Worth, TX 76110
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