Diamond Title Agency – Real Estate Glossary
At Diamond Title, we believe that the more Real Estate buyers and sellers know about Real Estate, the better equipped they are to make good decisions. As part of our dedication to educating our clients and customers, we’re happy to provide a glossary of Real Estate Terms, with definitions written in plain English. We hope you’ll consult our glossary whenever you find a word or term you don’t completely understand. And don’t forget: At Diamond Title, we’re always happy to explain anything involved in the title process at any time. Please contact us with your questions. We’d love to help!
Florida Real Estate Glossary
Abstract of Title – An abstract of title is a history of the ownership of a real property, condensed to provide quick access to all pertinent information. There are several forms of title abstracts that may be used by Title Service Companies.
Adjustable-rate mortgage (ARM) – A common form of home mortgage loan, having an interest rate that changes according to a financial index.
Amortization – When you make a mortgage payment, some of the payment is applied to the interest on the loan, and some to the principal. Over time the interest amount goes down, while the principal amount goes up. The payment remains the same.
Annual Percentage Rate (APR) – When you are quoted an percentage rate on a loan, that is not the actual rate you will pay over the term of the mortgage. The APR is the effective rate, and is always higher than the quoted rate. The APR will always be disclosed in the closing documents.
Appraised Value – Part of every real estate transaction is an appraisal of the property by a professional appraiser. Based on the actual sale prices of comparable homes in your area, the condition of the home in question, and other factors, it is the fair market value of the home.
Appreciation – Any increase in the value of a property, due to changes in the market, inflation, or other factors.
Assessed Value – The value of your home for tax assessment purposes. Set by the public tax assessor, it may be quite different from the actual market value.
Assumable Mortgage – Any mortgage loan that can be taken over by a buyer when the property is sold. Normal loan qualifications will apply.
Balloon Mortgage – A mortgage where the entire remaining principal must be paid after a specific term. These are used for very specific purposes.
Bridge Loan – Rarely used today, these loans are used to make the down payment on a home when the buyer’s existing home has not yet been sold.
Broker – A Real Estate Broker is a person who generally owns a real estate agency, with Realtors or agents working under him or her. A Loan Broker is a person or company that arranges real estate loans between lender and borrower for a fee.
Certificate of Eligibility (VA) – A document from the Veterans Administration that certifies a person’s eligibility for a VA Loan.
Clear Title – A real estate title that is free of liens or other legal questions about ownership of the property.
Closing – A meeting of buyer, seller, and agents that is final step of a real estate transaction. At the closing money changes hands, documents get signed, and the transaction is finalized.
Closer – Usually an employee of a Title Services Company, this person manages the closing process and makes sure all documents are properly signed and that all funds are properly distributed.
Closing Costs – Non-recurring costs are one-time payments of costs of purchasing a property. These may include loan fees, commissions, title fees, and other costs, and are paid as part of the closing process. Pre-paid items, including property taxes and homeowner’s insurance are paid over time. A good faith estimate of these costs will be available well in advance of closing, but may change in small amounts.
Closing Statement – Often referred to as a HUD-1, this statement details all the closing costs for a real estate transaction. Generally, this statement is available shortly before the closing date, but a final statement will be presented at the closing.
Commissions – Every real estate transaction includes many commissions for agents, brokers, escrow representatives, appraisers, and many others. Most are paid by the seller, but some are paid by the buyer of the property. These are laid out in detail in advance of closing.
Comparable Sales (Comps) – These are recent sales of properties similar to the one involved in the transaction. They are used to determine the market value of the property.
Condominium – A form of ownership where all owners own the property, common areas, and buildings of a development, with individuals owning the interior of the titled property.
Contingency – A condition that must be met before a contract is final. A satisfactory home inspection is often a contingency in real estate transaction. Other contingencies may also exist.
Conventional Mortgage – Any mortgage other than a government (VA, FHA) loan.
Deed – A legal document that conveys ownership in a property. Deeds are recorded with the county where the property is located. A paper copy is held by the owner, and should be protected carefully.
Deposit – An amount given in advance of a property sale. Also called the earnest money deposit, it is held during the Escrow period. The amount of the deposit varies, but is typically 1-2% of the selling price. This deposit is refundable under certain circumstances if the sale falls through.
Down Payment – The cash payment portion of the sale of a property.
Easement – A right of way allowing a person other than the owner to access the property. Generally noted on the deed.
Encumbrance – Anything that limits the “fee simple title” to a property. E.G.: Mortgages, restrictions, leases, easements, etc.
Equity – The difference between the market value of a property and any money owed on mortgages, liens, etc.
Escrow – Any item of value held by a third party and delivered on completion of an agreement. Typically the earnest money deposit is held in escrow until the closing. The term is also commonly used to describe the period between signing the Purchase Agreement and the Closing.
Examination of Title – A report on the state of the title to the property based on public records.
Exclusive Listing – A contract granting a real estate agent the exclusive right to sell a property for a given period of time.
Fee Simple Title – The highest level of property ownership.
FHA Mortgage – A mortgage guaranteed by the Federal Housing Administration.
Firm Commitment – An agreement from a lender to make a loan to a person for a specific property.
First Mortgage – The primary mortgage on a property. Usually the first loan recorded.
Fixed-Rate Mortgage – A mortgage on which the interest rate does not change.
Fixture – Any personal property permanently attached to real property. Fixtures are usually included in the selling price of the property.
Flood Insurance – Insurance that covers losses due to flooding. Required for properties in designated flood areas. Separate from normal homeowner’s insurance.
Foreclosure – A legal action taken by a lender to reclaim ownership of a property when the mortgage is in default.
Grantee – The person assuming an interest in a real property
Grantor – The person conveying an interest in a real property.
Hazard Insurance – Required by all lenders, this insures against physical property damage.
Home Equity Line of Credit – A type of mortgage loan, allowing borrowers to draw on the equity in their home. Generally classified as a second mortgage.
Home Inspection – A professional inspection of a home, designed to find structural and other faults. Frequently required as a contingency of a home sale.
Homeowner’s Insurance – An insurance policy that includes hazard insurance and personal liability insurance.
Homeowner’s Warranty – A type of insurance, generally purchased by the seller, which insures expensive appliances and home systems against breakdowns.
HUD-1 – A federally required form that lists the details of all closing costs for a transaction. Also called a Closing Statement.
Joint Tenancy – A legal form of ownership in real property. All parties own the property jointly, and the ownership passes to remaining parties should one die.
Jumbo Loan – A mortgage loan exceeding a fixed value set by government agencies. The current value, in 2010, is $417,000, with some location specific exceptions.
Lender – May refer either to the institution making a loan or an individual acting for that institution.
Lien – A legal claim on real property. Liens must be paid off when a property is sold. Liens may include tax liens, mechanics liens, as well as mortgages.
Loan Officer – A person representing a lending institution who handles the paperwork for a loan and submits it to the institution for the homeowner.
Lock-in Period – A time period during which a lender guarantees a specific interest rate to the borrower.
Mortgage – A legal contract that pledges real property to a lender as security for a debt.
Mortgage Banker – An institution that originates and funds mortgages. Mortgages can be sold later to other firms or agencies.
Mortgage Broker – A company which originates loans, then submits them to lending institutions for funding.
Mortgagee – The lender in a mortgage.
Mortgage Insurance – An insurance policy that covers the lender in case of default. Paid for by the borrower, if required, either in premiums added to mortgage payments or through a higher interest rate on the loan.
Mortgage Life and Disability Insurance – A form of insurance, paid for by the borrower that pays off a mortgage in the case of the death of the borrower, or makes payments in case of disability.
Mortgagor – The borrower or borrowers in a mortgage loan.
Negative Amortization Mortgage – A form of mortgage loan where the interest rate may fluctuate. The minimum payments on such a mortgage may not cover the interest costs, which are added to the principal of the loan. The principal in such loans may grow to exceed the original amount borrowed.
Note – The legal document that obligates a mortgagor to repay the mortgage at a specific interest rate over a specific period of time.
Origination Fee – A fee charged for issuing a mortgage loan. Government loans have a 1% origination fee. Conventional loans have origination fees that may be higher.
Owner Financing – A form of real estate financing where the seller provides some or all of the financing.
PITI – An acronym for Principal, Interest, Taxes, and Insurance. In a typical mortgage, this amount is included in each payment. In some mortgages, the Taxes and Insurance portions of PITI are waived.
Point – One percent of the amount of a mortgage. Loan origination fees are usually specified in points.
Pre-Approval – A general statement by a lender that a borrower is able to borrow a certain amount of money to buy real property. It is not a guarantee that a particular home purchase will be funded.
Prepayment – An amount of money paid against a mortgage’s principal outside of regular payments. In the case of a sale, the entire prior mortgage is paid. In some cases a prepayment penalty is applied, depending on the terms of the mortgage.
Pre-Qualification – A non-binding opinion by a loan broker regarding the borrower’s ability to qualify for a home loan.
Principal – The amount of a mortgage that remains unpaid. Part of each mortgage payment goes to lower the principal balance in most loans.
Promissory Note – A legal contract that is a promise to pay a certain amount over a period of time.
Purchase Agreement – A written contract between buyer and seller that includes all the terms of the sale. It may contain conditions that will void the sale if not met.
Quitclaim Deed – A deed that that transfers any interest a grantor may have in a real property. No warranty is implied or included. A risky form of deed.
Real Estate Agent – A person licensed by a state to transact and negotiate the sale of real property.
Realtor – A real estate agent, broker, or associate who is a member of a real estate board that is an affiliate of the National Association of Realtors.
Recorder – A government person who keeps records of real estate transactions in a jurisdiction. Synonyms: Registrar of Deeds; County Clerk
Recording – The official filing of a legal document, such as a deed, mortgage note, or satisfaction of a mortgage with the Recorder.
Remaining Term – The time required to make all of the remaining payments on a mortgage note.
Right of Survivorship – The right of survivors in a joint tenancy to assume the interest of a deceased joint tenant.
Second Mortgage – A mortgage with a lower lien precedence to a first mortgage.
Secondary Mortgage Market – Mortgage loans that are often sold individually or as part of a pool of mortgages by the original lender.
Loan Servicer – A company that collects mortgage payments from borrowers. This generally refers to loans sold in the secondary market.
Sweat Equity – Any increase in the value of a home through the direct work of the owner.
Title – A legal document demonstrating ownership in a real property.
Title Insurance – Issued by a Title Insurance Company, it is insurance that protects against losses caused by disputes over property ownership.
Title Search – A thorough inspection of title records to ensure that the seller is the legal owner of the property and to discover any liens on the property that must be satisfied before the sale is complete.
Title Services Company – A company that handles the title issues of a real estate transaction and conducts the closing of the transaction.
Truth-in-Lending – A law requiring lenders to disclose all terms of a loan, including annual percentage rate (APR) and any charges.
VA Mortgage – A mortgage guaranteed by the Department of Veterans Affairs.