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| Acceleration Clause - A clause that may be found in a mortgage that can be enforced by the lender to request the full amount of the loan to be immediately due if the mortgagor defaults on the contract (for example - by not paying the required monthly payment) |
| Accrued Interest - Interest accumulated that has not yet been paid. |
| Accredited Buyer's Representative -
The Real Estate Buyer's Agents Council (REBAC), which originated and issues the Accredited Buyer Representative (ABR ) designation, is a division of the National Association of REALTORS (NAR). Licensed Accredited Buyer's Representatives support and work for a buyer in all stages and transactions in the purchase of a home. |
| Adjustable Rate Mortgage (ARM) - A loan characterized by a fluctuating interest rate, usually tied to a bank's cost-of-funds index. Typically ARMs are used to fix a lower interest rate for an initial period of years (typically 3 or 5 years) then the interest rate changes to a higher variable rate. |
Agent- Person acting on behalf of another. Commonly used in real estate to describe a person acting on behalf of a home buyer or seller.
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| Agreement of Sale - An offer to purchase (from a buyer) that has been accepted by the seller and has become a binding contract. |
| Amortized Loan - Loan in which the principal and interest is payable monthly or during other periodic installments over the term of the loan. |
| Annual Percentage Rate - Cost of obtaining credit, expressed annually. This is usually not the same as the interest rate. It is based on a percentage of the amount being financed, the terms if the loan, and any other applicable finance charges. |
| Appraisal - Estimate (expert opinion) of a real property's value with considerations given to comparable properties, surrounding community, and current market conditions. |
| Appraisal Fee - Amount charged by a licensed appraiser to summarize and render an expert opinion on the current market value of a property. |
| APR - (see Annual Percentage Rate) |
| Appreciation - Increase in the worth or value of a property related to economic or other causes-- may be temporary or permanent. |
| ARM - (see Adjustable Rate Mortgage) |
| As-Is - Agreeing to buy a home 'As-Is' means that the buyer agrees not to hold the seller liable for any mechanical, structural defects, or necessary repairs that may produce negative results in the future. The buyer assumes the risk and liability for possible defects in the house. |
| Assignment - Ownership, rights, and interests transferred by one person (who is the assignor) to another (the assignee). |
| Assessed Value - Valuation placed upon property by a public assessor as the basis for tax purposes (Visit the www.eriecountygov.org site to find the assessed value of a property). |
| Assumption of Mortgage - When a buyer "assumes" a lien on a property, the buyer becomes responsible for paying back that lien. This may occur if a buyer agrees to assume a mortgage on a property, in exchange for buying the property at a lower sale price. |
Automated Underwriting - Automated computer system that help lenders to expedite the loan approval process and reduce lending costs.
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| B |
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| Balloon payment - A large, lump-sum scheduled at the end of a series of considerably smaller periodic payments. |
| Bankruptcy - Federal court proceedings to relieve specified debts of a person or business. Bankruptcy has a significant impact on credit scores, and may prevent future loans from being secured by that individual or business, or the lender may require a substantially higher rate of interest in order to provide the loan. |
Blanket Loan - Mortgage that covers more than one parcel of real estate.
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| Bona Fide - Means "In Good Faith". |
| Borrower (Mortgagor) - Individual that secures a voluntary lien against real property in the form of a loan and agrees to pay back to the lender under the terms in the agreement. |
| Breach of Contract - Violation of any terms or conditions in a contract without legal excuse (failure to make a payment when due is considered a breach of contract). |
| Bridge Loan - Loan that can be secured on your current home in order to use the net proceeds towards the purchase of a new home. These loans are typically secured when the current home is listed for sale (or under potential contract), but the individual still wishes to continue with their new purchase. The amount of money that the lender will approve depends on a number of factors including: appraised value, if the house is listed for sale, if there is a contract on the home, and any existing liens against the home. Payments on these types of loans are typically interest only. |
| Broker - Individual licensed by the Pennsylvania Department of Banking who brings together and assists in helping potential home buyers secure loans. |
| Building Code - An ordinance that specifies the minimum standards of construction for buildings in the effort to protect public health and safety. |
| Buy-Down Mortgage - A mortgage loan that has a below-market interest rate for a specific period of time. |
| Buyer's Agent - (See Accredited Buyer's Representative) |
| Buyer's Market - Market conditions that favor buyers (more real property is listed for sale, than there are buyers to purchase). This may signify that sellers may need to be flexible in their negotiations with prospective buyers, because the buyers may have more options than the sellers. |
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| Call Option - Provision of a note that gives the lender the right to require immediate repayment of the full amount on the outstanding loan. The most common way for this to occur is when the borrower breaches the contract. |
| Capital Gain - Profit earned for the sale of an asset (in real estate this usually refers to the selling price minus any mortgages or other liens currently held against the property). |
| Cash Out - Cash received when the borrower is able to secure a new loan for more than what is required to pay off the remaining mortgage. This typically occurs in a refinance and also applies when the lender must combine home equity loans together in order to refinance the home. This would be considered a "cash-out" refinance because the lender needs to pay off and consolidate loans secured by the property that was not taken out at the same time as the original mortgage. |
| Cashier's Check - (also known as a Bank Check) a check whose payment is guaranteed because it was paid for in advance and is certified by the bank. Typically this is the method required to pay any outstanding costs at the closing (or more commonly known as the closing costs). |
| Ceiling - Maximum interest rate that is allowed to be charged when relating to an adjustable rate mortgage. |
| Certificate of Eligibility - Document issued by the Veterans Association to qualified veterans which verifies a veteran's eligibility for a VA loan. Obtainable through the local VA office. |
| Certificate of Title - Document signed by a title examiner or attorney stating that the seller has a good marketable and insurable title. |
| Closing Statement - (also known as a Settlement Statement) A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction. |
| Closing Costs - Non-recurring fees that are paid at the time of closing (these are only a portion of the funds that will be required for the closing --not to be confused with the Total Cost for Closing). |
| Collateral - Assets secured to obtain a loan. In the case of obtaining a mortgage, the real property is used as collateral for securing the mortgage-- the bank retains the right to take back the property in the case of the borrower defaulting on the loan (this usually occurs through foreclosure proceedings). |
| CMA - (See Comparative Market Analysis) |
| Commission - Payment to a real estate broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property. |
| Commitment - Promise to lend by a lender - usually a statement by the lender under the terms with which the loan can be made. |
| Comparative Market Analysis - A written analysis, opinion, or conclusion relating to the probable prices of recently sold homes that are similar to a particular home in terms of location, style or featured amenities. This is most often used to aid the seller in pricing their homes, but is also useful to a buyer when evaluating prospective purchases. Contact ERA Signature Realty for more information on obtaining a CMA for a property. |
| Condominium - The absolute ownership of a unit in a multiunit building based on a legal description of the airspace the unit actually occupies plus an undivided interest in the ownership of common elements, which are owned jointly with the other condominium unit owners. |
| Consumer - A person who is the recipient of any real estate service as defined in Pennsylvania's real estate licensing law. |
| Consumer Notice - A form adopted by the real estate commission in Pennsylvania to disclose information about permitted business relationships and specific agency procedures in real estate transactions. This notice must be presented at an initial interview to any consumer of real estate services. (This also applies to any For Sale By Owners - these notices can be picked up at the local Greater Erie Board of Realtor's office). |
| Contingency - A condition that must be satisfied before the contract can become binding. |
| Conventional Loan - A loan that is not insured or guaranteed by a government or private source. |
| Convertible Adjustable Rate Mortgages - (See Adjustable Rate Mortgages) |
| Conveyance - Refers to a document that transfers title to real property (such as a deed or mortgage). |
| Credit Report - A report detailing the credit history of a prospective borrower that is used to help determine a borrower's creditworthiness. Give us a call and we can provide a free credit analysis today. |
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| Deed - Formal written instrument by which title to real property is transferred from one owner to another. |
| Deed of Trust - A legal document that conveys title to real property to a third party. The third party holds title until the owner of the property has repaid the debt in full. |
| Default - Failure to meet legal obligations in a contract, including failure to make payments on a loan (may result in foreclosure proceedings). |
| Delinquency - Failure to make payments as agreed upon in the loan agreement. |
| Deposit - (See Earnest Money). |
| Discount Points (or Points) - An amount equal to a percentage of the principal amount of the investment or note. The lender assesses loan discount points at closing to "prepay interest" in exchange for securing a lower overall interest rate. (In effect you are prepaying interest on the loan-- not a good idea if the borrower will not be in the mortgage long enough to gain the benefit from prepaying the interest). |
| Down Payment - The amount of your home's purchase price you need to supply up front in cash to get your loan (also a portion of the Total Cost of Closing). A conventional loan secured with a down payment less than 20% of the appraised value of the home will require the borrower to pay Mortgage Insurance. (Note, however, that FHA and VA loans have different policies regarding insurance.) |
| Dual Agency - An agency relationship in which the agent is representing both parties in a transaction (most commonly means the seller's agent is also representing the buyer in the transaction) - this is unethical unless all parties involved have consented to this arrangement. |
| Dual Agent - An agent who acts on both the buyer and seller's behalf. |
| Due-on-Sale Clause - Provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance upon sale of the property. |
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| Earnest Money - Deposit made by a buyer towards the down payment in evidence of good faith when the purchase agreement is signed. This does not legally bind the buyer to the purchase, however, the buyer will forfeit a part (or all) of their earnest money if they choose to walk away from the agreement. |
| ECOA - (See Equal Opportunity Act) |
| Encumbrance - Anything (such as a Mortgage, tax or judgment lien, or an easement or restriction on the use of the land) that may diminish the value of a property. |
| Equal Opportunity Act (ECOA) - Federal law that prohibits discrimination in the extension of credit due to a prospective borrower's race, color, religion, national origin, sex, age, or marital status. |
| Equity - The difference between the current market value of a property and the total debt obligations currently secured against the property. On a newly secured mortgage loan, the down payment represents the current equity in the property. |
| Escrow - A transaction in which a third party acts as the agent for the seller and buyer, or for the borrower and lender, in handling legal documents and disbursement of funds. |
| Escrow Account - An account held by the lender in which the borrower pays monthly installments, collected as part of the monthly mortgage payment, for annual expenses such as taxes and insurance. The lender disburses escrow account funds on behalf of the borrower when they become due. |
| Escrow Agent - A person with fiduciary responsibility to the buyer and seller, or the borrower and lender, to ensure that the terms of the purchase or sale of the loan is carried out. |
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| Fair Housing Act - The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status, and national origin. |
| Fannie Mae - (See Federal National Mortgage Association) |
| FDIC - (See Federal Deposit Insurance Corporation) |
| Federal Deposit Insurance Corporation - An independent federal agency that insures the deposits in commercial banks. |
| Federal Home Loan Mortgage Corporation (FHLMA) - (also known as Freddie Mac) - This agency buys loans that are underwritten to its specific guidelines. These guidelines are an industry standard for residential conventional lending. |
| Federal Housing Administration (FHA) - A federal agency within the Department of Housing and Urban Development (HUD), which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans. |
| Federal National Mortgage Association (FNMA) - (also known as Fannie Mae). A privately owned corporation created by the U.S. Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages. |
| Fee Simple - Refers to absolute rights and ownership of real property. |
| FHA - (See Federal Housing Administration) |
| FHA loan - Fixed (or adjustable-rate) loans insured by the U.S. Department of Housing and Urban Development. FHA loans are designed to make housing more affordable, particularly for first-time homebuyers. FHA loans typically permit borrowers to buy a home with a lower down payment than conventional loans. The current FHA loan limits vary depending on home type and home location. |
| Fiduciary - One in whom trust and confidence is placed under the common-law of agency; usually a reference to a real estate broker or agent employed under the terms of a listing contract or a buyer agency agreement. |
| First Mortgage - The mortgage lien that takes first lien position by being recorded first. In the case of foreclosure, the first mortgage will be repaid before any other mortgages are satisfied. |
| Fixed Rate - An interest rate which is fixed for the term (or life) of the loan. |
| Fixed-Rate Loans - Fixed-rate loans have interest rates that do not change over the life of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan. Fixed-rate loans typically have 15-year 20-year or 30-year terms. With a fixed-rate loan, the borrower will have predictable monthly mortgage payments for the life of the loan. |
| FNMA - (See Federal National Mortgage Association) |
| Fixture - An item of personal property that has been converted to real property by being permanently affixed to real property. |
| Forbearance - The act by the lender of refraining from taking legal action on a mortgage loan that is currently delinquent. |
| Foreclosure (or Repossession) - Legal process by which a mortgaged property may be sold to pay off a mortgage loan that is in default. |
| Freddie Mac - (See Federal Home Loan Mortgage Corporation). |
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| Good Faith Estimate - Written estimate of the Total Costs for Closing that the borrower will likely be required to bring. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application. |
| GPM - (See Graduated Payment Mortgage). |
| Grace Period - Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note. |
| Graduated Payment Mortgage - A loan in which the monthly principal and interest payments increase by a certain percentage each year for a certain number of years and then level off for the remaining term of the loan. |
| Gross Income - Total income before taxes or expenses are deducted. |
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| Hand Money - (See Earnest Money). |
Hazard Insurance - (See Homeowner's Insurance Policy).
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| Home Equity Loan - A loan (sometimes referred to as a line-of-credit) under which a property owner uses his or her residence as collateral and can then draw funds up to a pre-determined amount against the property. |
| Homeowner's Insurance Policy - An insurance policy that covers a residential real estate owner against occurrences such as the financial loss from fire, theft, public liability, and other common risks (coverages vary according to the insurance company and type of coverage). |
| HUD - (See Housing and Urban Development) |
| Housing and Urban Development - Housing and Urban Development. A U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration. |
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Index - A published rate used by lenders that serves as the basis for determining interest rate changes on Adjustable Rate Mortgage loans.
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| Inflation - The gradual reduction of the purchasing power of the dollar, usually related directly to the increases in the money supply by the federal government. |
| Initial Rate - The rate charged during the first interval of an Adjustable Rate Mortgage loan. |
| Interest - Charge paid for borrowing money, calculated as a percentage of the remaining balance of the amount borrowed. |
| Interest Rate - The annual rate of interest on the loan, expressed as a percentage of 100. |
| Investment - Money directed toward the purchase, improvement, and development of an asset in expectation of future income or profits. |
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| Joint Liability - Liability shared among two or more people, each of whom is liable for the full amount of the debt. |
| Junior Lien - (also known as a junior mortgage) A mortgage subordinate to the claim of a prior lien or mortgage. In the case of a foreclosure, a senior mortgage or lien will be satisfied first. |
| Joint Tenancy - A form of ownership of property giving each person equal interest in the property, including rights of survivorship. |
| Jumbo Loan - A mortgage larger than the $240,000 limit set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. |
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| Late Charge - Penalty paid by a borrower when a payment is made after the due date and Grace Period has passed. |
| Lender - The bank, mortgage company, or mortgage broker offering the loan. |
| Lien - Legal hold or claim on property as security for a debt or charge. |
| Listing Contract - Binding agreement that a home seller makes with an agent to represent them and to market and sell their home for a set period of time (listing contracts cannot be made for a period longer than one year). |
| Loan Application - An initial statement of a prospective borrower's personal and financial information required to apply for a loan. |
| Loan Origination Fee - Fee charged by a lender to cover administrative costs of processing a loan. |
| Loan-to-Value Ratio - The percentage of the loan amount to the appraised value (or the sales price, whichever is less) of the property. |
| Lock or Lock-In - A lender's guarantee of an interest rate for a set period of time. The time period is usually that between loan application approval and loan closing. The lock-in protects you against rate increases during that time. |
LTV - (See Loan-To-Value Ratio).
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| Margin - A specified percentage that is added to your chosen financial index to determine your new interest rate at the time of adjustment for Adjustable Rate Mortgage loans. |
| Market Value - The most probable price property would bring under normal conditions and in an open market. Basis for the "listing price", or "asking price". |
| MLS - (See Multiple-Listing Service). |
| Mortgage - Claim against real property given by the buyer to the lender as a method of securing money borrowed. |
| Mortgage Broker - An individual or company that originates and/or services mortgage loans. |
| Mortgagee - The lender in a mortgage loan transaction. |
| Mortgagor - The borrower in a mortgage loan transaction. |
| Mortgage Insurance - (also referred to as PMI) Insurance to protect the lender in case the borrower defaults on the loan. With conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's appraised value (VA and FHA loans have different insurance guidelines). |
| Mortgage Lien - A lien or charge on the property of a mortgagor that secures the underlying debt obligations. |
| Mortgage Loan - A loan for which real estate serves as collateral to provide for repayment in case of default. |
Multiple-Listing Service (MLS) - A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing and able buyers for their properties more quickly than they could on their own. This region's MLS can be searched publicly online at: http://www.realestateerie.com
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| Negative Amortization - A loan payment schedule in which the outstanding principal balance of a loan goes up rather than down because the payments do not cover the full amount of interest due. The monthly shortfall in payment is added to the unpaid principal balance of the loan. |
| Nonconforming use - A use of property that is permitted to continue after a zoning ordinance prohibiting it has been established for the area. |
| Note - Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument. |
| Notice of Default - Written notice to a borrower that a default has occurred and that legal action may be taken (such as foreclosure proceedings). |
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| Obsolescence - The loss of value due to factors that are outdated or less useful. Obsolescence may be functional or economic. |
| Option - An agreement to keep an offer to sell or purchase a property during a specified period of time. |
Origination Fee - A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan.
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| PITI - Stands for principal, interest, taxes, and insurance. |
| Point - (See Discount Point). |
| Pre-Approval - The process of determining how much money a prospective home buyer or refinancer will be eligible to borrow prior to application for a loan. A pre-approval includes a preliminary screening of a borrower's credit history. Information submitted during pre-approval is subject to verification at the time of application. |
| Prepayment Penalty - Fee charged by a lender for a loan paid off in advance of the contractual due date, if prepayment penalties are defined in the loan contract. |
| Principal - The amount of debt, not counting interest, left on a loan. |
| Private Mortgage Insurance (PMI) - (See Mortgage Insurance) |
| Prorations - Expenses, either prepaid, or paid in arrears, that are divided or distributed between buyer and seller at the closing. These are a portion of the Total Costs of Closing. |
Purchase Agreement - (See Agreement of Sale).
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| Real Estate Settlement Procedures Act (RESPA) - The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees. |
| Realtor® - A registered trademark term reserved for the sole use of active members of local Realtor® boards affiliated with the National Association of Realtors® . |
| Recording - The act of entering documents concerning title to a property into public record. |
| Recording fee - Money paid to an agent for entering the sale of a property into public record. |
| Refinancing - The process of paying off one loan with the proceeds from a new loan secured by the same property -- Most often done to reduce monthly payments, interest rates, or change loan terms. |
| Regulation Z - Implements the Truth-In-Lending Act requiring credit institutions to inform borrowers of the true costs associated with obtaining credit. |
| Replacement Cost - The construction cost at current market prices of a property. This is not necessarily an exact duplicate of the subject property but a replication that serves the same purpose or function as the original. |
| RESPA - (See Real Estate Settlement Procedures Act). |
Right to Recission - Under the provisions of the Truth-In-Lending Act, the borrower's right, on certain kinds of loans, to cancel the loan within three days of signing a mortgage.
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| Satisfaction of Mortgage - A document acknowledging the payment of a mortgage debt. |
| Setback - The amount of space the local zoning regulations require between a lot line and a building line. |
| Single Agency - The broker acts as the agent of one principal, either the seller or the buyer, in a transaction. The broker may practice exclusive single agency or may represent sellers and buyers, but never both in a transaction under single agency. |
| Stigmatized Property - A property that has acquired an undesirable reputation due to an event that occurred on or near it, such as violent crime, illness, or personal tragedy. |
| Subagency - An agency relationship in which the broker-agent appoints other brokers as subagents to help perform client-based functions on behalf of the principal. |
Survey - A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land.
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| Tax Lien - A claim against a property for unpaid taxes |
| Tenancy in Common - A type of joint ownership of property by two or more persons with no right of survivorship. |
| Term - The period of time between the beginning loan date on the legal documents and the date the entire balance of the loan is due. |
| Title Insurance - Protects lenders and homeowners against loss of their interest in property due to legal defects in title. |
| Title Search or Examination - A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims. |
| Total Cost of Closing - Closing costs, plus down payment & prepaid taxes and homeowners insurance. This is the total amount that the borrower will be required to bring to the closing. |
Transfer tax - Tax paid when title passes from one owner to another.
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| Underwriting - In mortgage lending, the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan. |
| Undivided Interest - (See Tenancy in Common) |
Usury - Charging interest at a higher rate than the maximum rate established by state law.
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| VA Loans - Fixed-rate loans guaranteed by the U.S. Department of Veterans Affairs. These loans are designed to make housing affordable for eligible U.S. veterans. VA loans are available to veterans, reservists, active-duty personnel, and surviving spouses of veterans. |
| Variable Rate - Interest rate that changes periodically in relation to an index. |
Variable Rate Mortgage - (See Adjustable Rate Mortgage)
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| Waiver - Voluntary relinquishment or surrendering of a privilege or right. |
Walk-through - A final inspection of a home (prior to closing) to check for problems that may need to be corrected before the loan and sale is finalized.
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| Zoning Ordinances (or Zoning Regulations) - Local law establishing building codes and usage regulations for properties in a specified area. |
