Abstract of Title   Summarized history of the legal title to property, shows changes of title, records of liens and encumbrances.   Adjustable Rate Mortgage (ARM)   A mortgage with an interest rate that changes over time in lime with movements in the index. ARMs are also referred to as AMLs (Adjustable Mortgage Loans) or VRMs (Variable Rate Mortgages)   Adjustment Period   The length of time between interest rate changes on an ARM. For example, a loan with an adjustments period of one year is called a one year ARM, which means that the interest rate can change over a year.   Amortization   Repayment of a loan in installments of principal and interest rather than interest only payments.   Annual Percentage Rate (APR)   The total finance charge, (interest loan fees, points) expressed as percentage of the loan amount.   Appraisal   An estimate or real estate value prepared by a professional appraiser, usually on behalf of the lender.   Arbitration Agreement   An agreement between the seller and buyer to insure that an independent arbitrator will decide out of court, any disputes over the property.   Assessments   A city determined fee charged to homeowners used to pay for improvements to the city in which the homeowner lives.   Assumption of Mortgage   A buyers agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approver the buyer in order to release the original borrower (usually the seller) from liability.   Balloon Payment   A lump sum principal payment due at the end of some mortgages or other long-term loans.   Binder   Sometimes know as an offer to purchase or and earnest money receipt. A binder is the acknowledgement of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.   Buydown   Permanent - prepaid interest that brings the note rate on the load down to a lower, permanent rate. Temporary - prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.   Cap   The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.   Cash Reserves   The amount of the buyers liquid cash remaining after making the down payment and paying all closing costs.   CC&Rs   Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.   Certificate of Commitment   The lenders approval of a VA loan, which is usually good for up to six months.   Certificate of Reasonable Value ( CRV )   A document that establishes the maximum value and loaned amount for a VA guaranteed mortgage.   Chattel   Personal property.   Closing Costs   Expenses incurred for the purpose of closing a real estate or mortgage transaction. Examples include, attorney fees, recording charges, survey fee, title policies, lender fees, discount points, appraisal fees, etc.   Closing Statement   The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance and mortgage insurance.   Closing Statement (HUD-1)   The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance and mortgage insurance.   Commitment Period   The period during which loan approval is valid.   Condominium   A form of real estate ownership where the owner receives title to a particular unit and has proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surface (walls, floors and ceilings) serve as its boundaries.   Contingency   condition that must be satisfied before a contract is binding. For instance, a sale agreement may be contingent on the sale of the buyer's existing home.   Conversion Clause   A provision in some ARMs that enables home buyers to change an ARM to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra.   Cooperative   A form of multiple ownership in which a corporation business trust entity hold title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.   CRB   Certified Residential Broker. To be certified a broker must be a member of the National Association or Realtors, have five years experience as a licensed broker and have completed required Residential Division courses.   CRS   Certified Residential Specialists   Debt Ratios   The comparison of a buyer's housing coasts to his or her gross or net effective income, and the comparison of a buyers total long-term debt to his or her gross or net effective income. The fires ratio is housing ratio, the second is total debt ratio.   Due-On-Sale Clause   A clause that requires full payment of a mortgage when the secured property changes ownership.   Earnest Money   The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.   Easements   Rights of way granted to persons or companies authorizing access to or over the owner's land. For example, utility companies may have easement rights to install pipes or wire on or over your land.   Equity   The difference between what is owed and what the property could be sold for.   Escrow   A procedure in which a third party holds funds for both buyer and the seller to assure completion of agreed upon duties.   Federal Home Loan Mortgage Corporation (FHLMC)   Called "Freddie Mac", a part of the secondary market, particularly used to purchase loans from savings and loan lenders within the Federal Home Loan Bank Board.   Federal National Mortgage Association (FNMA)   Popularly know and "Fannie Mae". A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insure by FHS or guaranteed by the VA, as well as conventional home mortgages.   Fee Simple   An estate in which the owner has unrestricted power to dispose of the property as he wishes , including leaving by will or inheritance. It is the greatest interest a person can have in real estate.   FHA Loan   A loan insured by the Federal House Administration ( of the Department of Housing and Urban Development)   Finance Charge   The total cost a borrower must pay directly or indirectly, to obtain credit according to Regulation Z.   Fixed Rate Mortgage   A conventional loan with a single interest rate for the life of the loan.   Fully Indexed Rate   The maximum interest rate on an ARM that can be reached at the first adjustment.   Gift Letter   A letter from a relative stating that an amount will be gifted to the buyers and that said amount is not to be repaid.   Government National Mortgage Association (GNMA)   Called " Ginne Mae"; a governmental part of the secondary market that deals primarily in recycling VA and FHA mortgages, particularly those that are highly leveraged.   Graduated Payment Mortgage   A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.   GRI   Graduate, Realtors Institute. A professional designation granted to a member of the National Association of Realtors who has successfully completed courses covering Law, Finance and Principles of Real Estate   GRI   Graduate, Realtors Institute. A professional designation granted to a member of the National Association of Realtors who has successfully completed courses covering Law, Finance and Principles of Real Estate.   Home Inspection Report   A qualified inspector's report on a property's overall condition. The report usually includes an evaluation of both the structure and mechanical systems.   Home Warranty Plan   Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.   Index   A Measure of interest rate changes used to determine changes in an ARM's interest rate over the term of the loan.   Initial Interest Rate   Then introductory interest rate on a loan, signals that there may be rate adjustments later in the loan.   Joint Tenancy   An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.   Jumbo Loans   Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market; these jumbos must be packaged and sold differently to investors and therefore have separate underwriting guidelines.   Lien   A legal hold or claim on property as security for a debt or charge.   Loan Commitment   A written promise to make a loan for a specified amount on specified terms.   Loan to Value Ratio   The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.   Lock in   The fixing of an interest rate or points at a certain level, usually during the loan application process. It is usually done for a certain period time such as 60 days, and may require a fee or premium in the form of a higher interest rate.   Margin   The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.   Mortgage   Pledge of property as security for the payment of a debt.   Mortgage Insurance Premium (MIP)   The mortgage insurance required on FHA loans for the life of said loans; MIP can either be paid in cash at closing or financed in its entirety in the loan. The premium varies depending on the method of payment.   Mortgage Life Insurance   A type of term life insurance often bought be home buyers. The overage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the mortgage debt is automatically covered by insurance proceeds.   Multiple Listing Service (MLS)   A service used by Realtors to obtain information on homes and land for sale.   Negative Amortization   Occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid principal balance which means that even after several payments the borrowers could owe more than they did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren't high enough to cover the interest.   Origination Fee   A fee or charge for work involved in evaluating, preparing and submitting a proposed mortgage loan. The fee is generally 1% of the mortgage amount.   Payment Cap   The maximum amount the payment can adjust in any given time frame.   PITI   Monthly mortgage payment consisting of principal, interest, taxes and insurance.   Point   An amount equal to 1% of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.   Prepayment Penalty   A fee charged to a borrower who pays a loan before it is due. Not allowed on some type of loans.   Private Mortgage Insurance (PMI)   Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.   Purchase Agreement   A written document in which the purchase agrees to buy certain real estate and the seller agrees to sell under state terms and conditions.   Rate Gap   The difference between where the rate is now and where it could adjust to on an ARM. Also used to compare the difference between a current conventional rate and that of an ARM   Realtor   A real estate broker or sales associate active in a local real estate board affiliated with the National Association of Realtors   Regulation Z (Truth in Lending)   The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with Consumer Protection Act.   Tenancy in Common   A type of joint ownership of property by two or more persons with no right of survivorship.   Title Insurance Policy   A policy that protects the purchaser, mortgagee or other party against losses based on title defects.   Title Search   Detailed review of title records, generally at the local courthouse, to assure that the property is bought from the legal owner and to determine of any liens, special assessments, other claims or outstanding restrictive covenants are on records.   VA Loan   A loan, made by a private lender that is partially guaranteed by the Vetrans Administration.