Real Estate

 

Real Estate Glossary

 

 

 

 

 

 

 


 



Agreement for Purchase and Sale of Note and Mortgage
This is a contract between the buyer and seller of the mortgage spelling out the purchase price, terms, etc. of the proposed transaction.

Amortization
The method by which the outstanding balance of a loan is reduced by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays a portion of both interest and principal with each equal payment. 

Appraisal
The determination of property value based on recent sales information of similar properties. Depending upon the type of property and note purchase transaction, may require either a 'drive-by' or full appraisal.

Assignment
The process by which ownership in some portion of future payments is transferred from one party to another.  The Assignment Form is signed by the seller at closing, then recorded.

Balloon Mortgage
A fixed-rate mortgage for a set number of years (usually 15 years or more) which then must be paid off in full in a single "balloon" payment at a future earlier date (usually 3 to 10 years from the original date of the mortgage). 

Broker:  Note Broker, Cash Discounter, Note Buyer, Mortgage Broker, Paper Broker 
An individual or company in the business of assisting in arranging funding or negotiating contracts for a client but who does not necessarily advance the funds himself.  Brokers usually charge a fee or receive a commission for their services.

Bulk Purchases
The purchase of a portfolio or "pool" of mortgages by an investor, generally as one transaction.

Buyer:  Note Broker, Cash Discounter, Note Buyer, Mortgage Investor, Note Investor, Note Purchaser 
An individual or company in the business of purchasing or arranging for the purchase of notes.

Cash Discounters
An individual or company in the business of purchasing or arranging for the purchase of notes.

Chattel    
Security other than real estate; i.e., inventory, equipment, etc. 

Closing Costs
Costs of title search, title insurance, appraisal, recording fees, etc. required for the transaction. May be paid by either the buyer or seller, depending upon their prior agreement.

Closing Statement / Settlement Statement
Also known as a HUD1.  This document is prepared by the title company or closing attorney and details all funds received and disbursed at the time of purchase and closing on the property. 

Commercial Property
A classification of real estate which includes income producing property such as office buildings, gasoline stations, restaurants, shopping centers, hotels and motels, parking lots and stores, and other similar uses.

Contracts
The written understanding between the parties.  May be a mortgage, land contract, contract for deed, deed of trust, etc.

Contracts for Deed
Similar to a mortgage in that it secures the obligation with the underlying real estate, it differs in that the property has not yet been transferred (deeded over).  Transfer of the deed is contingent upon all terms of the Contract having first been fulfilled.

Credit Application/Form  1003   (Residential Uniform Mortgage Application)
This is the standard, most generally-accepted form used in the purchase of residential properties.

Credit Rating/Credit Score
Persons paying on a mortgage are rated by investors according to the borrower's credit- worthiness or risk profile. Credit ratings are expressed as letter grades such as A, B, C, etc.. These ratings are based on various factors such as a borrower's payment history, foreclosures, as well as the numerical credit scores issued by the credit bureaus.

Credit Report
A report on the credit standing of a prospective or existing mortgagor/payor. Used by the investor to help determine creditworthiness.

Deed
A legal, recorded document which shows the transfer of ownership of real estate from the one party to another. 

Deed of Trust
Similar to a mortgage, this is a recorded document that in conjunction with the mortgage note creates a security interest in real property.

Default
The failure to make payments as agree, possibly resulting in foreclosure.

Down Payment
Money paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed. 

Documentation ( Mortgage Documents )
Required documents for all mortgage purchase transactions: copies of note, security instrument, etc.   

Escrow
The holding of funds and/or documents in trust by a third party, typically an attorney or title company, on behalf of another party or parties.

Equity
The difference between the current market value of a property and the principal balance of all outstanding mortgage loans. 

Fixed-Rate Mortgage
A mortgage where the interest rate does not change over the life of the loan. 

Flipping 
The practice of buying a property generally in need of repair with the intent of re-selling it at a substantially higher price in the future. Many times, these properties are initially acquired through foreclosure or similiar circumstances and at a below-market price.

Foreclosure
A legal procedure in which real estate is sold by the lender to pay a defaulting borrower's debt. 

Good Faith Estimate
An estimate of charges which a borrower is likely to incur in connection with a loan closing for the purchase of real estate. 

Hazard Insurance
A form of insurance in which the insurance company protects the insured from certain losses, such as fire, vandalism, storms and certain other natural causes. 

Interest Only Mortgages/Notes
Payments are required on an interest-only (no principal payments) basis for a set payment schedule, with a final, or "balloon" payment at maturity.

Investment to Value Ratio
A ratio used by investors for calculating the amount of their investment to the value of the property, to determine their risk factor.

Junior Mortgages  
Any mortgage having another mortgage ahead of it, in terms of priority.  A second mortgage is junior to a first mortgage; a third mortgage is junior to both a first and second. 

Land Contracts
Similar to a mortgage in that it secures the obligation with the underlying real estate, it differs in that the property has not yet been transferred (deeded over). Transfer of the deed is contingent upon all terms of the Contract having first been fulfilled. A land contract usually applies to the purchase of the land only, while a Contract for Deed typically covers structures as well.

Loss Payee/Loss Payee Clause
An additionally-named insured party to an insurance policy. At the time of closing on a mortgage/note purchase transaction, the buyer / investor is named as a co-insured party.

Manufactured Home
A dwelling that is wholly or substantially built in a factory with major components then delivered to the building site for assembly. Mobile homes, as well as prefabricated stationary homes, are included in the category of manufactured home.

Mobile Home  
A mobile home is a structure, transportable in one or more sections, designed and equipped to contain one or more dwelling units, and to be used with or without a foundation system. Specifically any trailer coach that is more than eight feet wide or forty feet long, or one that requires a permit to move on the highway is considered a mobile home.

Mortgage Broker
An individual or company that for a fee acts as an intermediary between borrowers and lenders.

Mortgage Buyer
An individual or entity that purchases mortgage notes from lenders.

Mortgage Investor
Parties buying mortgages and notes for their own account.

Mortgage Portfolio
The aggregate of mortgage loans held by an investor or serviced by a mortgage banker.

Mortgagee
The party receiving the mortgage payments.

Mortgagor
the party responsible for making the mortgage payments. Also known as the "Payor"

Mortgagees Title Policy
A title insursance policy protecting the holders of the mortgage against possible defects in title.

Mortgage/Mortgages
A recorded document that in conjunction with the mortgage note creates a security interest in real property. In some States, referred to as a Deed of Trust.

Note Broker
A person or company who buys and sells notes.

Note Buyer 
A person or company with the capital to purchase real estate notes.

Note Investors
Parties buying mortgages and notes for their own account.

Note 
The underlying promissory note/obligation to pay.  At times, referred to as "paper"

Owner Financed
Owner financed is a method used by a seller when conventional financing is not available or a situation arises where the property needs to sell quickly.

Owners Title Policy
A title insursance policy protecting the purchaser of the property against possible defects in title.

Paper
A general term for the mortgage, note, and related documents.

Partial Purchase/Partial Sale
The sale or purchase of only part of the remaining payments due on the mortgage note. The Seller receives cash at closing, plus they also receive the residual value, when due, of their portion of  future payments not sold initially.

Payment Streams
The actual "flow" of mortgage payments:  how much, and when to be received.

Payors
The party or parties obligated to pay on the note and mortgage.  Also referred to as Mortgagor(s).

Privately-held/Private Mortgages 
A note and mortgage taken by the seller or financier of a property, in lieu of cash provided by an institutional lender.

Property Value
Determined by appraisal. For properties sold within the past year, generally the lesser of sales price or current appraisal is used. If after one year, current appraised value is used.

Real Estate Contracts
Any document relating to the ownership, transfer or securitization of real property.

Real Estate Notes
Any note or obligation secured by real property.

Recorded Documents
A document filed and officially recorded in the County recording offices, putting all parties on notice as to ownership, etc. 

Residual Value of Mortgage/Note
When a mortgage/note is sold under a Partial Sale arrangement, the seller of the note is entitled to receive the mortgage back when the terms of the assignment have been met.  The amount of this 'residual balance' may be affected by early prepaypent, default, and other factors. 

Seasoning
This refers to the number of payments made to-date on a mortgage note.  A note where 25 months payments have been made, is said to be "seasoned 25 months."

Second Mortgage
A mortgage junior to a first mortgage lien; i.e., put in place and recorded after the recording of a first mortgage. The first mortgage has priority over the second mortgage in terms of repayment in the event of default.

Seller Financing
Owner financing (also called seller financing or owner carry-back) is when the seller of a property allows the buyer to pay all or some of the purchase price over time.

Simultaneous Closings/Simultaneous Funding
A closing transaction where the property is sold and the seller converts his owner-held mortgage and note into cash all at the same time. 

Title Insurance
A policy issued by a title insurance company protecting the parties against defect in title.

Trust Deeds
A recorded document that in conjunction with the note creates a security interest in real property. In some States, referred to as a Mortgage.

Wraparound Mortgages 
A junior mortgage created to "wrap around" a superior mortgage, generally to avoid having to pay off the first mortgage at the time of sale of the property.  Typically, this is done with a second mortgage wrapping around a smaller first mortgage.  If the wraparound mortgage is sold, at which time the first mortgage is paid off, the wraparound mortgage then becomes a first mortgage.  
 


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