This glossary contains commonly used Virginia real estate terms, and industry jargon. If it isn’t here then please ask me!
Sources: Various across the Internet
Adjustable Rate Mortgage (ARM): interest rates on this type of mortgage are periodically adjusted up or down, depending on a specified financial index.
AIR: Adjustable interest rate.
Agent: acts on behalf of another, representing that person’s interests and serving as an intermediary.
Amortization: a method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, principal repayment is very small and interest repayment very high; at the end of the loan, that relationship is reversed.
Annual Percentage Rate (APR): the actual finance charge for a loan, including points and loan fees in addition to the stated interest rate.
AP: Adjustable Payment
Application: the submission of a consumer’s financial information for the purposes of obtaining an extension of credit, and consists of the submission of the consumer’s name, income, social security number, property address, estimate of the value of the property, mortgage loan amount sought.
Appraisal: an expert judgment of the value or worth of a property.
Appraiser: works on behalf of a lender and provides a market analysis of the property.
ARM: see “Adjustable Rate Mortgage”
Assessed Value: value placed on property by a municipality for purposes of levying taxes which may differ widely from appraised or market value.
Assignment of Funds: a direction to a third party to transfer funds from the sale or mortgage of one property directly to the Settlement Agent for the specified contract property.
Assumption of Mortgage: Buyer assumes liability for an existing mortgage note held by the Seller. This is subject to approval by the lender, who must be willing to approve the Buyer and release the Seller.
Balloon Payment: a large principal payment due all at once at the end of some loan terms.
Broker: a real estate professional that has a higher level of training than an agent. Generally, this is one who is the legal representative or proprietor of the office.
Business Day: defined differently for the Long Estimate (LE) vs. Closing Disclosure (CD). For the Loan Estimate, a business day is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions. For the Closing Disclosure, a business day refers to all calendar days except Sundays and federal holidays specified in 5 U.S.C. 6103(a) such as New Year’s Day, Martin Luther King Jr.’s Birthday, Washington’s Birthday, Memorial Day, Independence Day,Labor Day, Columbus Day, Veteran’s Day, Thanksgiving Day, and Christmas Day.
Buyer’s Agent or Selling Agent: works with the buyer to locate a suitable property and negotiate a successful home purchase.
Cap: limit on how much the interest rate can change in an ARM.
CFPB: Consumer Financial Protection Bureau, and entity created by the Dodd-Frank Act.
Closing: see “Settlement.”
Closing Disclosure (CD): CFPB mandated form replacing the HUD-1 and TIL (Truth in Lending) on impacted transactions designed to provide helpful disclosures to consumers in understanding all the costs of the transaction. This form is given to the buyer (consumer) three business days before closing.
Commission: fee (usually a percentage of total transaction) paid to an agent or broker for services performed.
Condominium (Condo): type of real estate ownership where the owner has title to a specific unit and shared interest in common areas.
Consummation: when the consumer becomes contractually obligated to the creditor on the loan.
Contingency: a condition in a contract that must be met for the contract to be binding.
Contract: binding legal agreement between two or more parties that delineates the conditions for the exchange of value (for example: money exchanged for title to property).
Conversion Clause: a provision that allows converting an ARM to a fixed-rate loan after a specified interval.
Deed: legal document that formally conveys ownership of property from Seller to Buyer.
Deed of Trust: See Mortgage
Down Payment: percentage of the purchase price which the Buyer must pay in cash and may not borrow from the lender.
Earnest Money: a large deposit paid when the sales contract is signed before the closing.
Equity: the value of the property actually owned free & clear by the homeowner: purchase price plus appreciation plus improvements, less mortgages and liens.
Escrow: a fund or account held by a third-party custodian until conditions of a contract are met.
Fannie Mae: see Federal National Mortgage Association. Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (FNMA, called
“Fannie Mae”): privately owned corporations created by Congress that buy mortgage notes from local lenders and are responsible for the guidelines a majority of lenders use to qualify borrowers.
Finance Charge: the total cost, including all fees, points and interest payments a borrower pays to obtain credit.
Fixed Rate Mortgage: interest rates on this type of mortgage remain the same over the life of the loan term. Compare to “Adjustable Rate Mortgage.”
Fixture: a recognizable entity (such as a toilet bowl, kitchen cabinet, or light unit) that is permanently attached to property and belongs to the property when it is sold.
GFE: Good Faith Estimate provided by the lender on a federally mandated form to disclose to borrower the estimated charges for closing.
Hazard Insurance: compensates for property damage from specified hazards such as fire and wind. More complete coverage is given by all-risk homeowner’s insurance.
Home Inspector: provides an objective and independent comprehensive written report on a home’s condition, major systems and components.
Home Inspection Report: prepared by a qualified Home inspector to evaluate a property’s structure and mechanical systems.
HUD-1: a precise breakdown of closing costs for both Sellers and Buyers (also known as HUD 1 Settlement Statement) required by RESPA until October 3, 2015, then only in the
following transactions – Home Equity Loans, reverse mortgages, mobile, homes, co-ops, consumer-purpose loan secured by commercial real estate.
Impounds: another term sometimes used for “Escrows”collected and held by a lender to pay taxes and insurance on the mortgaged property.
Interest: the cost of borrowing money, usually expressed as a percentage over time.
Lien: a security claim on property until a debt is satisfied.
Listing Agent: through a broker forms a legal relationship with the homeowner to sell the property.
Listing Contract: agreement whereby an owner engages a real estate broker for a specified period to sell property, for which sale the agent & broker receives a commission.
Loan Estimate (LE): form replacing the GFE and early TIL designed to provide disclosures that will help consumers understanding the key features, costs, and risks of the mortgage loan for which they are applying. Initial disclosure to be given to the consumer three business days after Application.
Loan Officer (or Mortgage Consultant): Representative of a bank or other financial institution, who helps customers identify their borrowing options and helps them understand & secure the terms of their loan.
Market Value: the price that is established by present economic conditions, locations, and general trends.
Mortgage: security claim by a lender against property until the debt is paid.
MRIS a Bright MLS): a system that provides to its Realtor® members detailed information about properties for sale.
Negative Amortization: a method of calculating fixed monthly payments in combination with a variable interest rate. When monthly payments are not enough to cover interest costs, unpaid interest is added to the principal balance.
Origination Fee: application fee(s) for processing a proposed mortgage loan.
PITI: principal, interest, taxes, and insurance forming the basis for monthly mortgage payments.
Point: one percent of the loan principal. It’s charged in addition to interest and fees.
Prepayment Penalty: a fee paid by a borrower who pays off the loan before it is due.
Prequalification: informal estimate of how much financing a potential borrower might expect to obtain, done before paying substantial loan application fees.
Principal: one of the parties to a contract; or the amount of money borrowed, for which interest is charged.
Prorate: divide or assess proportionately.
Realtor®: a licensed real estate agent and member of the National Association of Realtors®. They also belong to state and local Association of REALTORS.
Real Estate Agent: individual licensed by the state to represent parties in the transfer of property. Every Realtor is a real estate agent, but not every real estate agent has the professional designation of a realtor.
RESPA: Real Estate Settlement Procedures Act.
Settlement: all financial transactions required to complete contract performance/obligations.
Survey: a house location survey (also known as a physicalimprovement survey), which is the type of survey generally required by lenders and title insurance underwriters. If a purchaser plans on making improvements to the property, or wants to be able to see the property line on location, a boundary survey (also known as a staked survey) can be ordered. The cost of a boundary survey usually runs twice the cost or more of a location survey.
TIP: Total Interest Percentage: total amount of interest paid over the life of the loan, expressed as a percentage of amount borrowed.
Title: legal ownership and right to use and possession of a
Title Insurance: protects insured against covered loss resulting from defects in the title.
Title Search: detailed examination of the recorded document history of a property to determine condition of title & any encumbrances.
Unreleased Trust: a mortgage or lien recorded in the Court records that appears to be outstanding because no Certificate of Satisfaction/Deed of Release has been recorded.
Variance: (tolerance) the change between a good faith charge provided on the LE and the actual charge on the CD.
from various sources