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Glossary of Terms
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Acceleration Clause
A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
Acceptance
A party's consent to enter into a contract and be bound by the terms of the offer.
Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate changes over time based on a pre-determined economic index.
Administrative Fee
A fee charged by a lender to cover the administrative costs of processing your loan request (e.g., a lender fee).
Air Duct
A pipe or tube that is used to carry warm or cold air to and from a heating or air conditioning system or for ventilation purposes.
Amenities
Features of real property that enhance its attractiveness and increase the satisfaction of the occupant or user, even though the feature is not essential to the property's use (e.g., a swimming pool).
Amortization
The gradual repayment of a mortgage by installments.
Annual Percentage Rate (APR)
The total yearly cost of a mortgage stated as a percentage of the loan amount, including the base interest rate, primary mortgage insurance, and loan origination fee (points).
Application
A form used by the lender to collect information about a prospective borrower and the property being used as collateral.
Application Deposit
Funds required by a lender in advance of processing a loan request. Generally, a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.
Appraisal
An evaluation of the property to determine its value for purposes of the mortgage loan. An appraisal is concerned chiefly with market value, or what the home would sell for in the marketplace.
Appreciation
An increase in the value of a property.
Assessed Value
The valuation placed on property by a public tax assessor for the purposes of taxation.
Assessment
The process of placing a value on property for the strict purpose of taxation. Assessment may also refer to a levy against a property for a special purpose (e.g., a sewer assessment).
Assumable Mortgage
A mortgage that can be taken over ("assumed" by the buyer) when a home is sold.
Awning Window
A window that has a single sash that is hinged at the top of the window, giving the window the effect of an awning.
Backfill
Earth or other material replaced in the space around a building wall that was removed during construction.
Balloon
A loan which has a series of monthly payments (often for 5 years or less) with the remaining balance due in a large lump sum payment at the end.
Baseboard
A horizontal board that runs along at the joint between a wall and a floor to cover any gaps.
Basis Point
1/100th of one percent.
Batt
Insulation in the form of a solid unit, usually shaped to fit in between the studs of a framed wall.
Beam
The principal horizontal wood or steel members of a building (also called girders).
Bearing Wall
A wall that supports a vertical load in a structure other than its own weight.
Bib (Bibcock)
A water faucet with a bent down nozzle to which a garden hose may be attached (also called a hose bib), usually on the exterior of the building.
Binder
A preliminary agreement, secured by the payment of earnest money, under which a buyer offers to purchase real estate.
Building Code
Local or state building regulations that govern the design, construction and materials used in a building.
Butt Joint
The square joining point of two pieces of material.
Buyer's Broker
A broker who represents the buyer in a fiduciary capacity.
Buy down
A subsidy (usually paid by a builder or developer) to reduce the monthly payments on a mortgage loan.
Buyer's Market
A situation in which the supply of properties available exceeds demand. As a result, sellers are forced to lower their prices to attract buyers.
Cantilever
A projecting beam or joist, supported only at one end, used to support an extension of a structure.
Cap
A provision of an ARM limiting how much the interest rate or mortgage payments may increase or decrease in any single adjustment or over the life of the loan. See also Lifetime Cap.
Casing
The framework that surrounds a door or window.
Certificate of Occupancy
A document from an official agency stating that the property meets the requirements of local codes, ordinances, and regulations.
Certificate of Title
Like a car title, this is the paper that signifies ownership of a home.
Chair Rail
A horizontal piece of molding that runs along a wall around a room at a height to protect the wall from the backs of chairs.
Chamfered Edge
A beveled edge formed at the right angle of a surface, typically at a 45 degree angle giving the edge a decorative look.
Chase
A typically vertical recess on the inside of a wall that accommodates plumbing, heating or other pipes.
Cistern
A reservoir to capture and store rain water.
City/County Tax Stamp
A tax that is required in some municipalities if a property changes hands or a new mortgage is obtained. The amount of this tax can vary with each state, city and county.
Clear Title
A title that is free of clouds, liens, disputed interests or legal questions with regard to ownership of the property.
Closing
A meeting to sign documents which transfer property from a seller to a buyer. (Also called settlement)
Closing Costs
Sometimes called settlement costs, these are costs in addition to the price of the home, including mortgage service charges, title search and insurance, and transfer of ownership charges.
Closing Day
The date on which the title for property passes from the seller to the buyer, and/or the date on which the borrower signs the mortgage.
Commitment Letter
A formal offer by a lender stating the terms under which the lender agrees to loan money to a borrower.
Conditions, Covenants, and Restrictions (CC and Rs)
The standards that define how a property may be used and the protections the developer has made for the benefit of all owners in a subdivision.
Condominium
A type of property that includes individual ownership of one unit in a multi-unit dwelling, and an undivided interest in the common area and facilities that serve the entire multi-unit project.
Contingency
A condition that must be met before a contract is legally binding.
Conventional Loan
A mortgage loan not insured by a government agency (such as FHA or VA).
Conventional Mortgage
A mortgage in which the interest rate does not change during the entire term of the loan. Also called a Fixed-Rate Mortgage (FRM).
Corner Bead
A strip galvanized iron for protecting the corners of plastered walls.
Cosigner
Another person who signs your loan and assumes equal responsibility for it.
Cove Lighting
Hidden light sources that direct their light on a ceiling from behind a cornice or horizontal recess.
Crawl Space
The area between the floor and the ground under the bottom floor of a house that has no basement that is used to access utilities that run below the house.
Credit Bureau
An agency that gathers and keeps your credit record (e.g., Experian, Equifax and TransUnion).
Credit Rating
A report ordered by a lender from a credit bureau to determine if the borrower is a good credit risk
Credit Report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's credit worthiness.
Deed
A legal document that transfers ownership of a property from one person to another.
Default
Failure to make mortgage payments on a timely basis or to comply with other conditions of a mortgage.
Depreciation
A decline in the value of a home as the result of time, changes in the housing market, wear and tear, adverse changes in the neighborhood and its patterns, or any other reason.
Dormer
A projecting frame or minor gable in a pitched roof.
Double Glazing
A window pane formed of two pieces of glass with an area of sealed air space between them to insulate against heat passage.
Down payment
An initial payment on a home, usually a specific percentage of the home purchase price that is required of a borrower at the time of loan closing.
Drip Edge
L-shaped weather-resistant metal that is installed at exposed roof edges (eaves) to protect the roof's wooden parts from water damage.
Dry Wall
An interior wall surface that is constructed of a material other than plaster, typically gypsum wallboard.
Earnest Money
The deposit money given to the seller by the potential buyer to show that he/she is serious about buying the home. If the deal goes through, the earnest money is usually applied toward the down payment. If the deal does not go through, it may be forfeited.
Easement Rights
A right of way granted to a person or company authorizing access to or over the owner's land. Electric companies often have easement rights across your property.
Eaves
The section of the roof that extends beyond the exterior walls of a house.
Efflorescence
The salts (white powder substance) that forms on the surface of brick or masonry (also called saltpetering).
Equal Credit Opportunity Act (ECOA)
A federal law that prohibits lenders from denying mortgages on the basis of the borrower's race, color, religion, national origin, handicap, age, sex, marital status or receipt of income from public assistance programs.
Equity
The difference between the market value of the home and the amount of money you still owe on it.
Escrow
The holding of documents and money by a neutral third party prior to closing; also an account held by the lender into which a homeowner pays money for taxes and insurance.
Escrow Account
The account in which funds are held by the lender for the payment of real estate taxes and/or homeowners insurance. This can also refer to the account in which that funds are held for the completion of repairs or improvements to a property that cannot be completed prior to closing.
Escrow Funds
Money, or papers representing transactions, that are given to a third party to hold until all conditions in a contract are fulfilled.
Fair Credit Reporting Act
A consumer protection law that sets up a procedure for correcting mistakes on one's credit record.
Fannie Mae
Federal National Mortgage Association. See FNMA.
Fascia
A decorative flat board or band used to cover joints between the wall and the eaves.
Federal Housing Administration (FHA)
Federal Housing Administration. A government agency whose primary purpose is to insure residential mortgage loans.
Federal National Mortgage Association (FNMA)
Federal National Mortgage Association. A congressionally chartered corporation (sometimes called a government sponsored enterprise or GSE) that buys mortgages on the secondary market, pools them and sells them as mortgage-backed securities to investors on the open market. Monthly principal and interest payments are guaranteed by FNMA but not by the U.S. Government.
Felt Paper
A building paper infused with asphalt used on exterior walls and roofs that insulates against heat, cold and moisture.
Fill Insulation
Loose, granulated material which is applied by hand or blown into wall spaces mechanically that reduces the transfer of heat.
Fixed Rate Mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
Flashing
Non-corrosive metal used for waterproofing around angles or junctions in roofs and exterior walls.
Flood Insurance
Insurance required for properties in federally designated flood areas.
Footing
An enlarged concrete base on which a foundation or column sits.
Foreclosure
The process by which a mortgaged property may be sold by the mortgage lender when the homeowner fails to pay the monthly mortgage payment. The mortgage is considered in default.
Foundation
The lower support or base, typically below ground level, on which the structure is built.
Freddie Mac
Federal Home Loan Mortgage Corporation (or FHLMC). A quasi-public corporation (sometimes called a government sponsored enterprise or GSE) authorized to make loans and loan guarantees. The FHLMC was created to expand the secondary market for mortgages. Along with other GSEs, Freddie Mac buys qualified mortgage loans from the financial institutions that originate them, securitizes the loans and sells them as mortgage-backed securities to investors on the open market. The U.S. Government does not back the securities.
Gable
The triangular part of the end of a structure from cornice or eaves to ridge.
GFCI Receptacle
Means Ground Fault Circuit Interrupter. Safeguards against a ground fault, which occurs when a person comes into contact with live electrical wiring.
Grade
The level of the ground around a building.
Hazard Insurance
Insurance to protect the homeowner and the lender against physical damage to a property from fire, wind, vandalism or other hazards.
Headers
A horizontal beam or over a door or window that provides support for the opening; a beam used to support free ends of floor joists, studs or rafters.
Hip
The external intersection of two slopes of a roof.
Homeowner's Association Fee
A term related to a condominium associations collection of money from the owners of each condominium. In determining whether you can afford the property, the lender will calculate the homeowner's association fee as part of your housing-to-income ratio. The fee pays for common expenses including insurance, maintenance, trash removal and is used to establish reserves for future major expenditures.
Home Inspection
A complete and detailed inspection that examines and evaluates the mechanical and structural condition of a property. The home buyer often requires a complete and satisfactory home inspection.
Homeowners Insurance
Insurance that protects a homeowner against the cost of damages to a property caused by fire, windstorms and other common hazards. Also referred to as hazard insurance.
Home Mortgage Loan
A loan used to buy a home.
HUD
Also known as the U.S. Department of Housing and Urban Development. Among other things, HUD ensures that home mortgage loans made by lenders meet minimum standards.
HUD-1
Statement Also referred to as the closing statement or the settlement statement, this document that provides line-by-line information of the financial details related to a specific real estate transaction, such as the fees paid by the seller and the buyer for a purchase transaction.
Interest
The fee charged for borrowing money.
Jamb
The exposed surfaces that line an opening for a door or window, including the vertical frames of a door or window.
Joint Tenancy
A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.
Jumbo Loan
A loan (such as a mortgage) that exceeds the size limit set for purchase or securitization by the appropriate agency, such as Fannie Mae or Freddie Mac.
Late Charge
The penalty a borrower must pay when a payment is made after the due date.
Lath
A thin strip of wood used as the foundation or key for plastering, tiling or slating.
Ledger
A horizontal piece of wood attached to a beam to support joists.
Lender
The bank, mortgage broker or financial institution providing the loan funds to a borrower.
Liabilities
A person's financial obligations, including both long-term and short-term debt, as well as any other amounts that are owed to others.
Lien
A legal claim against a property that must be paid when the property is sold.
Lifetime Cap
A provision of an ARM that limits the total increase or decrease in the loan interest rate over the life of the loan.
Load-Bearing Wall
A wall capable of supporting its own weight as well as the weight of other objects and forces.
Loan-to-Value Ratio (LTV)
The relationship between the amount of a mortgage and the total value of the property.
Lock-In
A written agreement guaranteeing the home buyer a specified interest rate, provided the loan is closed within a set period of time.
Margin
The set percentage that the lender adds to the index rate to determine the interest rate of an ARM.
Moisture Barrier
Material used to keep dampness from passing into walls or floors - usually, treated paper or plastic.
Molding
Strips of decorative material often used ornamentally on bases, windows, doors and heads.
Mortgage Banker
A company that borrows money from a bank, lends it to consumers who want to buy homes, then sells the loans to investors.
Mortgage Commitment
The written notice from the bank or other lender saying that it will advance you the mortgage funds in a specified amount to enable you to buy the home.
Mortgage
The legal document that pledges a property to the lender as security for payment of debt.
Mortgage Loan
A contract in which the borrower's property is pledged a s collateral and which can be repaid in installments over a long period. The mortgagor (buyer) promises to repay principal and interest, to keep the home insured, to pay all taxes, and to keep the property in good condition.
Mortgage Origination Fee
A charge by a lender for the work involved in preparing and servicing a mortgage application (usually one percent of the loan amount).
Mortgagee
The bank or lender who loans the money to the mortgagor.
Mortgagor
The homeowner who is obligated to repay a mortgage loan on a purchased property.
Mullion
The thin framing that divides the lights in a window or panes in a door.
Non-Liquid Assets
Any assets that cannot easily be converted into cash (e.g., property).
Nosing
The overhanging rounded edge of a stair tread.
Offer to Purchase Real Estate
A promise by a buyer to enter into an agreement to purchase real estate, provided certain terms and conditions are met by the property's seller.
Origination Fee
A fee charged for the work involved in preparing and processing a proposed mortgage loan. This is stated as a percentage of the mortgage amount, or points, and is usually paid at closing.
PITI (P)rincipal, (I)nterest, (T)axes and (I)nsurance
a reference to the total monthly payment required to repay a mortgage in accordance with its term, as well as monthly escrow payments for taxes and insurance.
Pitch
The angle or slope of a roof.
Point
A charge of one percent of the mortgage amount. Points are a one-time charge assessed by the lender at closing to increase the interest yield on a mortgage loan.
Prepaid Expenses
The initial deposit at the time of closing for taxes, hazard insurance and the subsequent monthly deposits made to the lender for that purpose. Expenses may also include an interest amount.
Prepaid Items/Expenses
Obligations paid in advance at a real estate closing.
Pre-Qualification
The process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for.
Principal
The amount borrowed or remaining unpaid; also, that part of the monthly mortgage payment that reduces the outstanding balance of a mortgage.
Private Mortgage Insurance (PMI)
Insurance provided by non-government insurers that protect lenders against loss if a borrower defaults.
Processing/Administrative Fee
A fee charged by a lender to cover the administrative costs of processing a loan request.
Purchase and Sale Agreement (P&S)
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Property Taxes
Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works and other costs of local government. Property taxes are sometimes paid as part of the monthly mortgage payment.
Qualifying Ratios
Guidelines applied by lenders to determine how large a loan may be granted to a home buyer.
Radiant Heat
Electrical coils, hot water tubes or steam pipes embedded in floors, ceilings or walls for heating.
Radon
A naturally appearing radioactive gas, found in some buildings that in sufficient concentrations may cause health problems.
Rafter
One of a series of structural roof members used to support roof loads.
Rate Lock
An agreement by a lender to guaranty the interest rate offered for a mortgage provided the loan closes within a specified period of time.
Real Estate Agent
A person licensed to negotiate and transact the sale of real estate on behalf of an owner or a seller.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
REALTOR®
A real estate agent who is a member of the National Association of Realtors® and subscribes to its strict Code of Ethics. Not all real estate agents are Realtors®.
Recording Fees
A fee charged by the local government to record mortgage documents into the public record so that any interested party is aware that a lender has an interest in the property.
Refinancing
The process of paying off one loan with the proceeds from a new loan secured by the same property.
Reinforced Concrete
Concrete fortified with wire or metal bars.
Repair and Maintenance
The costs incurred in replacing damaged items or maintaining household systems to prevent damage.
Riser
The vertical piece of a stair step, running from tread to tread.
Sales Contract
A contract between a buyer and seller which should explain, in detail, exactly what the purchase includes, what guarantees there are, when the buyer can move in, what the closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot get a mortgage commitment at the agreed-upon terms.
Second Mortgage
A mortgage with rights that are subordinate to the rights of the first mortgage holder.
Sellers Market
An economic situation that favors the seller because the demand for property exceeds the supply.
Shim
A thin tapered piece of material used for the leveling of a building component or for filling a gap between two building components.
Skirt
Narrow board around the margin of a floor (also baseboard), or the vertical molded piece under a window sill to cover plaster edges (also apron).
Slab
A thick, often reinforced-concrete floor laid in a single, unjointed piece on the interior of surrounding foundation walls (monolithic slabs join the pouring of foundation walls and floor into one pour).
Soffit
The visible underside of structural member of a building, including staircases, cornices, overhangs or eaves.
Special Assessment
A tax for a specific purpose such as providing paved streets or new sewers. People whose properties abut the improved streets or tie into the new sewer system must pay the tax. Condominium owners may also be assessed for major repairs done in common areas of their building.
Splash Block
A solid material that diverts roof water drainage away from the foundation of a house.
Strike
The metal plate located on the frame of a door that the doors latch slides into.
Stringer
A long, horizontal member that connects uprights in a frame or supports a floor. Also one of the enclosed sides of a run of stairs supporting the treads and risers.
Studs
Vertical members - usually two-by-fours or two-by-sixes - to which horizontal pieces (plates) are nailed to frame walls.
Subfloor
Rough flooring, usually made of plywood sheets, nailed to the floor. Finished flooring, such as carpet, hardwoods or tile, are applied on top of the subfloor.
Sump
A tank or pit in the crawlspace or basement in which water collects to be pumped out with a sump pump.
Survey
A drawing that shows the legal boundaries of a property.
Tenancy by Entirety
A type of joint ownership of property available only to a husband and wife.
Tenancy in Common
A type of joint ownership in a property without the right of survivorship.
Title
The evidence of a person's legal right to possession of property, normally in the form of a deed.
Title Company
A company that specializes in insuring title to property.
Title Insurance
This special insurance protects lenders against a loss of interest in a property due to unforeseen occurrences that have already occurred and might be traced to legal flaws in previous ownerships (e.g., forged deed). An owner can protect his interest by purchasing separate coverage.
Title Search
A check of the title records to ensure that the seller is the legal owner of the property, and that there are no liens or other claims outstanding.
Toenail
Driving nails at a slat into corners or other joints to attach one piece of lumber to another.
Tongue-And-Groove
Sheeting that includes a projecting edge of one end and a grooved edge on the other so that they may be interlocked when laid side by side.
Total Debt Ratio
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type. Total debt ratio is calculated by dividing the monthly housing expense (PITI plus all other monthly debt obligation) by the borrowers monthly gross income. This is also referred to as a "back-end ratio" or "bottom ratio."
Trap
A bend in a plumping pipe that holds water so sewer air will not escape through a plumbing fixture into the house.
Tread
The horizontal portion of a stair step.
Truss
A grouping of structural members, typically triangular, to form a rigid framework to span between load-bearing walls for supporting a roof.
Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.
Wainscoting
The wooden paneling that lines the lower three of four foot section of an interior wall.
Walk-Through
A final inspection of a home before settlement to search for problems that need to be corrected before ownership changes hands.
Wall Sheathing
The first layer of exterior wall covering, usually sheets of plywood, gypsum board, or other material, nailed to the outside face of studs as a base for exterior siding.
Warranty
A promise, either written or implied, that the material and workmanship of a product is defect-free or will meet a specified level of performance over a specified period of time. Written warranties on new homes are either backed by insurance companies or by the builders themselves.
Weather Stripping
Metal, felt, plastic or other material used around door and window openings to prevent the penetration of the air, water, dust, etc.
