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ABANDONMENT: The voluntary surrender of property, owned or leased, without naming a successor as owner or tenant.

Abstract of Title: A condensed history or summary of all transactions affecting a particular tract of land.

ACCELERATED DEPRECIATION: Depreciation methods, chosen for income tax or accounting purposes, that offer greater deductions in early years.

Acre: Tracts of land.

Accrued Interest: is the interest expense that accumulates on your loan. For example, if you have a monthly loan at an annual interest rate of 12%, interest accrues at the rate of 1 percent per month. If your loan balance is $20,000, the accrued interest after one month is 1 percent of the loan amount, or $200. If you make a loan payment of $300, $200 will be applied to the accrued interest and $100 to reducing loan principal. In order to pay down more of your loan, you must increase your loan payment to reduce the share that is paid to accrued interest.

ADJUSTABLE-RATE MORTGAGE (ARM): A mortgage loan in which the interest rate may increase of decrease at specified intervals over the life of the loan. A mortgage in which the Interest rate is adjustable, meaning that the rate can go up or down according to prevailing financial market conditions. It is also called Variable Rate Mortgage(VRM).

Administrator: A person appointed by a probate court to settle the affairs of a person that died without a will.

Affidavit: A sworn statement in writing.

Agent: An individual  or company who represents a seller, a buyer or both in the purchase or sale of real estate, e.g. a title agent, etc..

AMORTIZATION: a loan in which the principal as well as the interest is payable in monthly or periodic installments over the term of the loan. It is the schedule of loan payments that establishes the amount of payment to be applied to the principal and the amount to be applied to interest, usually on a monthly basis, for the full term of the loan.

ANNUAL PERCENTAGE RATE (APR): The "APR" is higher than the simple interest rate that is a part of a mortgage payment. The APR is based on the loan amount plus any finance charges paid at closing, then amortized over the life of the loan. Buyers DO NOT pay the APR; it is merely a rate that is required to be disclosed to buyers as a part of the Federal Truth in Lending disclosures. It is the interest rate of a mortgage, including the stated loan interest as well as any upfront interest paid in securing the loan. The APR will invariably differ from the mortgage rate quoted due to the inclusion of these items.

Appraisal: An estimate of value of a Real Estate property by a third party professional (Appraiser). Virtually all non-owner financed mortgages will require an appraisal and is generally paid for by the buyer.

Appurtenance: Anything so annexed to land or used with it that will pass with conveyance of the land.

Assessment: The value of a property as determined by the local tax jurisdiction which is used to determine the amount of your property taxes.

Assessor: An official who evaluates property for taxation.

Assignee: One to whom a transfer of interest is made.

Assignor: One who makes an assignment.

Assumable Mortgage: A mortgage that allows a new owner to take over its obligations per its terms.

AUTOMATED UNDERWRITING: Automated underwriting is being used in both the primary and secondary markets. It provides loan analysis by a computer using specialized software. HUD has encouraged the use of computerized loan analysis. It believes that properly designed computer programs can minimize the vagaries of human judgement in loan qualification and act in a less biased manner. It also should mean a cost saving for the consumer and a speeding up of the underwriting process.

BACK-END RATIO (Debt-to-Income Ratio): A ratio that indicates what portion of a person's monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI), credit-card payments, child support and other loan payments. Lenders use this ratio in conjunction with the front-end ratio to approve mortgages

For example, if your monthly income is $5,000 ($60,000/12) and your total monthly debt payments are $2,000, your back-end ratio is 0.40 or 40%. Generally, lenders like to see a back-end ratio that does not exceed 36%; however, there are lenders who make exceptions for ratios of up to 50% if you have good credit. Some lenders consider only this ratio when approving mortgages, as opposed to using it in conjunction with the front-end ratio.

BASIS: The point from which gains, losses, and depreciation deductions are computed.

BEFORE-TAX CASH FLOW: Cash flow prior to deducting income tax payments or adding income tax benefits.

Buyer's Agent: A Real Estate Agent that has made an agreement to represent the buyer exclusively, rather than the seller.

CANCELLATION CLAUSE: A contract provision that gives the right to terminate obligations upon the occurrence of specified conditions or events.

CERTIFIED RESIDENTIAL SPECIALIST (CRS): a special designation awarded to only about 5 % of all REALTORS® for recognition of successful sales production and ability.

Chain of Title: A term applied to the past series of transactions & documents affecting title.

CHATTEL: Anything owned and tangible, other than real estate; personal property.

Closing: The process that effects the final transfer of the deed from the seller to the buyer, as well as finalize all aspects of the mortgage of the property.

Closing Costs: Funds needed at the time of closing (separate from and in addition to the down payment). Loan origination fees, discount points, Attorney fees, recording fees and pre-paids are some items that may be included. They often will total from 3% to 5% of the price of the home, payable in cash.

Clouded Title: This is an encumbered title.

Commitment to Insure: A report issued committing a title insurance company to insure.

Comparable Market Analysis (CMA): A comparison of the prices of similar houses in the same general geographic area. A CMA is used to help determine the value of a property, either for a seller or a buyer.

Conditions: A provision in a deed or will that may affect the title.

Condominium: Housing where the owner owns only the unit in which he/ she lives - from the interior walls inward, generally-as well as a portion of the common area.

Contingencies: These are conditions--or "safety valves" written into Real Estate offers and contracts to prevent a buyer from being forced to buy a house that is unsatisfactory--either structurally or financially. Examples of contingencies are "This contract is subject to the buyer obtaining a satisfactory whole house inspection." or "Subject to the buyer being able to obtain a mortgage."

Contract for Deed: An agreement to sell and purchase under which title is withheld until final payment.

Cooperative: A residential multi-unit building owned & operated for the benefit of others. It is operated like a "club".

Covenants: An agreement written into deeds and other instruments promising performance of certain acts or stipulating use or non-use.

Debt to Income (DTI) Ratio: The ratio of a borrowers total of debt as a percentage of their total gross income.

Deed: This is a written document that, when recorded with your local government, determines ownership of a property. It is transferred from seller to buyer at closing.

DESCENT: The acquisition of property by an heir when the deceased leaves no will.

DEVISE: A gift of real estate by will or last testament.

DEVISEE: One who inherits real estate through a will.

DISCOUNT POINTS: Amounts paid to the lender at the time of origination of a loan, to account for the difference between the market interest rate and the lower face rate of the note.

Due On Sale Clause: Provision in a mortgage requiring payment in full upon a subsequent sale.

Earnest Money: Money that is submitted with an offer to purchase which indicates a buyer's seriousness and good faith. In virtually all cases, earnest money will need to be submitted at the time of the offer and remains in escrow until the time of closing, at which time it becomes part of the downpayment.

EMINENT DOMAIN: The right of the government or public utility to acquire property for necessary public use by condemnation; the owner must be fairly compensated.

ENCUMBRANCE: Any right to or interest in land that affects its value.

EQUITY: The interest or value that an owner has in real estate over and above the liens against it. For example, a property owner with a total mortgage loan balance of $66,000 and a property worth $155,000 would have equity of $89,000 ($155,000 value minus $66,000 lien = $89,000). That is, the difference between the value of a property and the total of any outstanding mortgages or loans against it.

ESCROW: The term "escrow" is used in two different ways in real estate. One way refers to the documents and money involved in a real estate transaction that are held in trust by a neutral third party, an "escrow agent" (e.g., title company, or attorney), until all conditions of the sale are met. The second way that "escrow" is used refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance. 

Escrow: Funds held in reserve both prior to closing (for example the earnest money and deposit) by a third party and after closing by the mortgage company to pay future taxes and homeowners insurance. In some areas, "escrow" also refers to the closing process.

FICO: A measure of creditworthiness. Lenders like to see FICO scores of 620 or higher for FHA loans, and 660 or higher for Conventional loans. The components used in calculating the score and their weights are as follows: (a) 35--Payment history, (b) 30 percent--Amount owed, (c) 15 percent--Length of credit history, (d) 10 percent--New credit, (e) 10 percent--Credit mix.

Fixed Rate Mortgage: A mortgage loan where the interest rate is established at its origination and continues unchanged through the life of the loan.

Fixtures: An item of property attached to real property.

Foreclosure: The process through which a lender takes back property from a defaulting owner and re-sells it.

FRONTAGE: the linear distance of a piece of land along a lake, river, street or highway.

FRONT-END RATIO: A ratio that indicates what portion of an individual's income is used to make mortgage payments. It is calculated as an individual's monthly housing expenses divided by his or her monthly gross income and is expressed as a percentage. Monthly gross income is simply annual income divided by 12 (months). Lenders use the front-end ratio in conjunction with the back-end ratio to approve mortgages.

Calculated as:

For example, if your annual income is $60,000, your monthly income is $5,000(60,000/12). By asking your lender what front-end ratio would be required in order for your mortgage to be approved, you can figure how much of that $5,000 you can allocate to your mortgage payments. If the required front-end ratio is 31%, you can allocate $1,550 (5,000 x 0.31). Thus, if your PITI is $1,550 or less, you would be approved.

Typical monthly housing expenses include the mortgage principal, interest, taxes and insurance payments - collectively known as PITI.

FSBO (For Sale By Owner): Real Estate that is sold without the assistance of an Agent. FSBO can refer to both the individual selling the property. "They are a FSBO," or the property itself  - "that house is a FSBO."

GRANTEE: A person who receives a conveyance of real estate from the grantor. A person who acquires the interest in land by deed, trust, or other means.

GRANTOR: The person transferring title to or an interest in real property to a grantee. A person, who, by written instrument transfers his interest to another.

Homeowner's Association: An owners group, whether in a condominium, townhouse or single family subdivision that establishes general guidelines for the operation of the community, as well as its standards.

HOMEOWNER'S INSURANCE POLICY: A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.

HOMESTEAD: Land that is owned and occupied as the family home. In Texas, a portion of the area or value of this land is protected or exempt from forced sale by creditors for judgments for debts other than taxes, purchase money or improvements.

HUD: The Department of Housing and Urban Development'

HUD 1: A form settlement balance statement required to be given to clients when using a Federally insured loan. HUD means Housing Urban Development.

Ingress: The right to enter a tract of land.

Inspection: A whole house inspection of a home being considered for purchase which looks for defects in the property.

Interest: That portion of a mortgage payment that is the "charge" for using the lender's funds.

INTERMEDIARY BROKER: a broker who is employed to negotiate a transaction between both parties and for that purpose may be an agent of both parties to the transaction, acting fairly so as not to favor one party over the other.

JOINT TENANCY: Ownership of realty by two or more persons, each of whom has an undivided interest with the right of survivorship. That is, where two or more persons own real estate jointly for life.

LESSEE: a person to whom property is rented under a lease; a renter; a tenant.

LESSOR: one who rents property to another under a lease; a landlord.

Lien: A legal claim ( hold or charge) against a piece of property that can prevent it from being sold unless the lien is satisfied (paid off). Liens can be filed by unpaid contractors or other debtors in a legal process so that they will be paid when a property is sold. This is a claim or charge allowed for a creditor upon the property of a debtor. Example: Mechanic lien - A lien against a property by contractors, laborers, or suppliers of materials.

Lis Pendens - A notice recorded in a county indicating a suit is pending against a property.

Listing: A property for sale by a Real Estate Brokerage and Agent.

Loan Origination Fee: A charge imposed by the lender, payable at closing, for processing the loan.

LOAN-TO-VALUE RATIO (LTV): the portion of the amount borrowed on a property compared to the value of the property. Example: if a $100,000 house is bought with a $10,000 down payment, the result is a 90 percent LTV ($90,000 loan divided by $100,000).

Lock-in: An agreement by the lender at the time of mortgage application or shortly thereafter, to write the mortgage at a specific interest rate, whether rates rise or fall up to the date of closing. Obviously a good move if rates are rising, not so good if they are falling. Lock-ins have specific expiration dates, such as 30, 60 or 90 days in the future.

LTV (Loan to Value): The ratio of the amount of the mortgage as a percentage of the value of the property.

Marketable Title: A good title with no fair or reasonable doubt.

Metes & Bounds: A description of land utilizing courses and distances.

MLS (Multiple Listing Service): A listing (almost always computerized) of all the properties for sale by Real Estate Brokerages in a given geographical area. That is, it is a database of "homes for sale" in a specific market area. It is compiled and updated by local real estate agents. It is the resource real estate agents use to market their listings to other real estate agents and to search for homes for sale for their clients, and though currently it is not fully yet accessible to the general public.

Searching an MLS gives you online access to information about available properties, including: property descriptions, addresses, asking prices and photographs.

Monument of Survey: Visible marks such as poles, stones, etc., indicating boundaries of a survey.

MORTGAGE: A conditional transfer of pledge of real estate as security for the payment of a debt. Also, the document creating a mortgage lien.

MORTGAGEE: A lender in a mortgage loan transaction.

MORTGAGOR: A borrower who conveys his or her property as security for a loan.

NET LEASE: A lease requiring the tenant to pay not only rent but also all costs incurred in maintaining the property, including taxes, insurance, utilities, and repairs.

NET PROFIT: The amount the seller receives after deducting sales expenses.

OPTION: The right to purchase or lease property upon specified terms within a specified period. For instance, a prospective purchaser will pay a seller of real estate an option fee to have the unrestricted right to purchase the property or withdraw from the deal without penalty during a specified option period. If the prospective purchaser proceeds with the purchase, the option fee may or may not be credited towards the purchase price, depending on the agreement between the parties.

Owners Policy: A policy of title insurance, which insures a named owner against loss.

Points: 1 point is equal to 1% of the loan value, paid at closing. Points can be loan origination fees or "discount points" which reduce the interest rate of the loan (you are actually paying a finance charge up front). When a lender, for example, quotes a rate of 8 1/2% with 1 + 1 points, 1 point is for the origination fee and 1 point is for the discount fee.

Pre-paids: Paid for (in cash) at closing for such items as homeowners insurance for one year and real estate taxes for several months.

Prequalification: The first stage of a mortgage application where the lender will run a basic credit report and determine your debt to income ratio in order to see how much mortgage you qualify for.

PRIME RATE: The lowest commercial interest rate charged by banks on short-term loans to their most credit-worthy customers.

PMI (Private Mortgage Insurance): Required on virtually all conventional loans with less than 20% downpayment. Although the payments for PMI are included in your mortgage payment, it protects the lender should you default on the loan. On FHA loans, you will pay a MIP (Mortgage Insurance Premium) which accomplishes the same purpose.

PROMISSORY NOTE: A promise to pay a specified sum to a specified person under specified terms.

Principal: The amount borrowed for a mortgage loan. Your monthly mortgage payment will be applied to both the interest and the principal (be assured, though, that the lions share will go to the interest portion in the first years of the loan).

Property Tax: An annual or semi-annual tax paid to one or more governmental jurisdictions based on the amount of the property assessment. Generally paid as part of the mortgage payment.

QUITCLAIM DEED: A deed that conveys only the grantor's rights or interest in real estate, without stating the nature of the rights and with no warranties of ownership.

RATE OF RETURN: The percentage relationship between the earnings and the cost of an investment.

REALTOR®: A registered trademark term reserved for the sole use of active members of local REALTOR® associations affiliated with the National Association of REALTORS®. All REALTORS® are required to have a real estate license, but not all licensed real estate agents are considered REALTORS®.

Recording: The act of entering deed and/or mortgage information into public record with your local government jurisdiction.

REGULATION Z: Law requiring credit institutions to inform borrowers of the true cost of obtaining credit; commonly called the Truth-in-Lending Act.

REVERSE MORTGAGE: Reverse mortgages work like a regular mortgage, only in reverse: instead of the borrower sending a payment to the lender, the lender sends a payment to the borrower. The big attraction of a reverse mortgage, a loan available to people 62 and older who have equity in their homes, is that the loan typically does not have to be paid back until the owner dies, sells the home, or moves out for a year. Homeowners should have at least 75 percent equity in their home to consider a reverse mortgage. So, for a home valued at $100,000, the outstanding loan balance should not exceed $25,000. The amount of money a borrower gets depends on several factors, including the property's value, the borrower's age, the costs associated with the type of loan product, and state and federal regulations.

SECTION 1031: Section 1031 of the Internal Revenue Code allows a taxpayer to exchange investment property for other investment property and defer the gain on the sale of the transaction.

SECTION 121: Section 121 of the Internal Revenue Code contains provisions that allow taxpayers to avoid reporting gain from the sale of their principal place of residence on their tax returns. The provisions of Section 121 allow a married couple filing jointly to exclude up to $500,000 of profit (i.e., capital gain) on the sale of a home as long as they have occupied the home for at least two of the last five years. The tax is not deferred, it is forgiven. A taxpayer can take advantage of Section 121 no more than once in any two-year period. However, there is no limit to the number of times a taxpayer may make use of Section 121.

SECTION 8 HOUSING: Privately owned rental dwelling units participating in the low-income rental assistance program created by 1974 amendments to Section 8 of the 1937 Fair Housing Act. Under the program, landlords receive rent subsidies on behalf of qualified low-income tenants, allowing the tenants to pay a limited proportion of their incomes (or sometimes no proportion) toward the rent.

Seller's Agent: A Real Estate Agent that has made an agreement to represent the seller exclusively, rather than the buyer.

SELLER'S DISCLOSURE NOTICE: According to the provisions in Section 5.008 of the Texas Property Code, a seller of residential real property of not more than one dwelling must deliver a copy of the Seller's Disclosure Notice to a buyer. The form identifies which items convey with the property (e.g. ceiling fans, refrigerator, dishwasher, etc.) and identifies any problems that the seller may know about the property. If information is unknown, that fact may be indicated on the notice. 

Sub-Agent: A Real Estate Agent who is working with a buyer but who represents the seller in the transaction.

TAX SHELTER: A legal means by which an investor may reduce or defer payment of part of is or her federal income tax.

TITLE: The right to or ownership of land. The evidence of ownership of land.

TITLE INSURANCE: A policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than items specifically excluded by the policy. It protects your title--your ownership rights--from claims against it. Paid at closing, title insurance may be the responsibility of the buyer, the seller, or both, depending on what is traditional in your locality.

Total Debt Service Ratio - TDS: A debt service measure that financial lenders use as a rule of thumb to give a preliminary assessment of whether a potential borrower is already in too much debt. More specifically, this ratio shows the proportion of gross income that is already spent on housing-related and other similar payments.  

Receiving a ratio of less than 40% means that the potential borrower has an acceptable level of debt.

For example, Jack and Jill, two law students, have a monthly mortgage payment of $1,000 (annual payment of $12,000), property taxes of $3,000, credit card balances totaling $1,000  and have a gross family income of $45,000.  This would give a TDS of around 36%.  Based on the benchmark of 40%, Jack and Jill appear to be carrying an acceptable amount of debt.

This ratio is very similar to the gross debt service ratio (GDS) except that the GDS does not account for non-housing related payments. TDS allows for a slightly more detailed view of a potential borrower's financial situation.

TRUTH IN LENDING DISCLOSURES: Are required by the federal government. Lenders must let applicants know in advance the loan-related charges that they must pay. 

UNIMPROVED PROPERTY: Land that has received no development, construction, or site preparation; raw land.

VARIABLE RATE MORTGAGE: A mortgage loan in which the interest rate may increase or decrease at specified intervals within certain limits, based on an economic indicator.

VENDEE: A buyer VENDOR: a seller

Warranty: Covers either most of the house in a new home, or selected items (for example the heating and air conditioning system or the water heater) in a used home. Warranties can vary widely and are optional in used homes (paid for by either the buyer or the seller).

WARRANTY DEED: A deed in which the grantor fully warrants good clear title to the premises. Used in most real estate deed transfers, a warranty deed offers the greatest protection of any deed.

Wraparound Mortgage: A method of financing in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. If the lender is the seller, such sum is not "advanced" but rather carried back as a part of the purchase money. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount without removing the existence of the first mortgage.

YIELD: A measurement of the rate of earnings from an investment. "Current yield" is a measurement of investment returns based on the percentage relationship of annual cash income to the investment cost. Current yield = current income/investment cost. Example: A rental house is purchased for $100,000 and generates $19,000 of rental income each year. Property taxes, insurance, and maintenance costs total $9,000 per year, leaving $10,000 of annual before-income tax cash flow. The current yield is 10 percent ([$19,000-$9,000]/$100,000).

Zoning: Laws that govern specifically how a zoned area can be used. For example, an area may be zoned for single family residential, condominiums, commercial or retail, or a mix of two or more uses. 

ZONING ORDINANCE: Act of city or county or other authorities specifying the type of use to which property may be put in specific areas.

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