NATIONAL ASSOCIATION OF REALTORS
The association of REALTORS dedicated to the protection and the preservation of the free enterprise
system and the right of the individual to own real property as guaranteed by the Constitution of the
United States of America. Each member of the NATIONAL ASSOCIATION OF REALTORS must adhere to
a strict Code of Ethics and Standards of Practice designed to provide assurances to the public of the
REALTORS integrity and professionalism.
Negative Amortization
An increase in principal balance which occurs when the monthly payments do not cover all of the interest
cost. The interest cost which is not covered by the payment is added to the unpaid principal balance.
Net Listing
An arrangement whereby the Broker receives as commission all monies received above a minimum sales
price agreed to by the owners and the Broker.
No Documentation Loan
A loan application that does not require verification of income but typically is granted in cases of
large down payments.
Non-conforming Loan
Loans that are above the loan limits set by FNMA and FHLMC. Also known as jumbo loans.
Note
A written promise to repay a certain sum of money on specified terms.
Offer
A promise by one party to do a specified deed as the other party in turn performs a specific deed.
Open End Mortgage
A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain
conditions.
Origination Fee
A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage
loan.
Owners Policy
Title insurance for the owner of property, rather than a lien holder.
Ownership
The right to possess and use property to the exclusion of others.
Package Mortgage
Mortgage covering both real and personal property.
Paper
A mortgage, deed of trust or land contract which is given instead of cash.
Permanent Mortgage
A mortgage on completed construction on the same property under one mortgage or trust deed.
PITI
Abbreviation for principal, interest, taxes and insurance, often combined in a single monthly mortgage
payment.
Plat
A map or chart of a lot, subdivision or community, showing boundary lines, buildings and easements.
PMI
Abbreviation for private mortgage insurance: insurance issued by a company, which insures the lender
against loss in the event that the borrower defaults on the mortgage.
Points
Origination fees charged by the originating lender or broker and/or discount fees charge by lenders to
increase the overall yield. A point is equal to one percent of the principal amount of your mortgage.
Power of Attorney
A written instrument authorizing a person to act as the agent of the person granting it, and a general
power authorizing the agent to act generally in behalf of the principle. A special power limits the agent to
a particular or specific act as: a landowner may grant an agent special power of attorney to convey a
single and specific parcel of property. Under the provisions of a general power of attorney, the agent
having the power may convey any or all property of the principal granting the general power of attorney..
Prepaid Interest
Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a
partial month. For example, if a loan closes on the 15th of the month and the first payment is due 45 days
later, the lender will charge 15 days of prepaid interest.
Prepaid Items of Expense
Perorations of prepaid items of expense which are credited to the seller in the closing statement.
Prepayment
Full payment of the principal before the due date; occurs when a property is sold or the borrower
refinances the existing loan.
Prepayment Penalty
Charge levied by the lender for paying off a mortgage loan before its maturity date.
Primary Residence
Considered the permanent location of residency.
Principal
1) The outstanding balance of a loan. 2) A party to a real estate transaction. 3) The head of a real estate
firm.
Private Mortgage Insurance (PMI)
Insurance which covers the portion of a mortgage loan above 80% thereby reducing the lenders risk to
principal loss in the event of a borrowers default. The insurance coverage allows lenders to make higher
loan-to-value ratios (95% LTV).
Processing, Underwriting and Document Fees
Charges for the lender's services associated with making the loan.
Property
The rights of ownership. The right to use, possess, enjoy, and dispose of a thing in every legal way and
to exclude everyone else from interfering with these rights. Property is generally classified into two
groups, personal property and real property.
Property Tax
A tax levied by the local municipality or county on real and personal property.
Purchase Money Mortgage
A mortgage used to finance the purchase of real property.
Quit Claim Deed
A deed operating as a release; intended to pass any title, interest or claim which the grantor may have in
the property.
Real Estate
Land and anything permanently affixed to the land and those things attached to the building.
Real Estate Broker
A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission
basis. The broker does not have title to the property, but generally represents the owner.
REALTOR
Registered name for a member of the NATIONAL ASSOCIATION OF REALTORS.
REALTOR ASSOCIATE
Salesperson associated with a broker who is a member of a the NATIONAL ASSOCIATION OF
REALTORS.
Realty
A synonym for real estate.
Recording
The act of writing or entering an instrument in a book or public record, usually in the office of the county
clerk and recorder. Such recording constitutes notice to all persons of the rights or claims contained in
the instrument. This type of notice is called "constructive notice" or "legal notice."
Redlining
The practice of refusing to provide loans or insurance in a certain neighborhood.
Refinancing
The repayment of a debt from the proceeds of a new loan using the same property as security.
Release
An instrument releasing property from the lien of the mortgage, judgment, etc.
RESPA (Real Estate Settlement Procedures Act)
A federal regulation that requires lenders and mortgage brokers to disclose to borrowers, in advance, the
fees required to obtain a mortgage loan.
Revenue Stamps
Formerly, federal tax on a sale of real property. Canceled and replaced by state tax stamps.
Reverse Mortgage
A special program for the elderly that provides income until death. Payment requirements are arranged
through the increase in the principal amount of the loan.
Sales Agreement
See agreement of sale.
Satisfaction of Mortgage
Document issued by mortgagee when the mortgage is paid off.
Second Home
Commonly known as a vacation home. This home is not rented and is occupied occasionally by the
owners.
Secondary Financing
A loan secured by a mortgage or trust deed, which lien is junior to another mortgage or trust deed.
Secondary Market
The buying and selling of mortgage notes between sophisticated investors such as pension funds,
commercial banks, savings and loans and wall street firms.
Secondary Mortgage Market
The buying and selling of first mortgages of trust deeds by banks, insurance companies, government
agencies, and other mortgagers.
Second Mortgage
Same as a home equity loan. A loan secured by your home's equity that may also be tax deductible.
Security
Real or personal property pledged by a borrower as additional protection for the lender's interest.
Set Back Ordinance
Regulates the distance from the lot line to the point where improvements may be constructed.
Settlement
See "closing".
Settlement Statement
A statement prepared by broker, escrow or lender giving a complete breakdown of the cost associated
with a real estate transaction.
Single Family Detached Home
A residential home that is not attached physically to another home.
Stated Income
A documentation requirement where the lender verifies the source of the income but not the
amount.
Statute of Frauds
The law requires that certain contracts, such as agreements of sale, to be in writing in order to be
enforceable.
Survey
Map or plat made by a licensed surveyor who measures land and charts its boundaries, improvements,
and relationship to the property surrounding it. A survey is often required by the lender to assure him
that a building is actually sited on the land according to its legal description.
Tax Lien
Lien for nonpayment of taxes.
Tax Sale
Public sale of property at an auction by a governmental authority, due to non payment of property taxes.
Tenancy
A holding, as of land, by any kind of title, occupancy of land, a house or the like under a lease or on
payment of rent or tenure.
Tenant
Any person in possession of real property with the permission of the owner.
Title
Often used interchangeably with the word ownership. It indicates the accumulation of all rights in property
by the owner and others.
Title Insurance
An insurance policy which protects the insured (purchaser and lender) against loss arising from defects
in title.
Title Search
A review of the public 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 or
outstanding restrictive covenants filed in the records, which would adversely affect the marketability or
value of title.
Truth in Lending Statement (Regulation Z)
A federal government regulation that provides details of the cost of obtaining a mortgage loan. Lenders
must provide this shortly after the loan application has been completed.
Upfront Mortgage Lender
A lender offering loans on the internet who provides mortgage shoppers with the information they need to
make an informed decision before applying for a mortgage; and guarantees them fair treatment during
the period after they apply through to closing.
Usury
On a loan, claiming a rate of interest greater than permitted by law.
Valuation
The act or process of estimating value; the amount of estimated value.
Warranty Deed
Most valuable type of deed in which the grantor makes formal assurance of title.
Yield
The interest earned by an investor on his investment (or bank on the money it has lent). Also called
Return.
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