20 Hour Course Glossary Flashcards
A Fannie Mae Loan application form designed by Fannie Mae and Freddie Mac that is used by lenders to obtain personal financial information from borrowers who apply for a mortgage loan secured by a one-to-four unit residential real estate. Also known as: Uniform Residential Loan Application (URLA)
1003
allows resident and non-resident united states federal taxpayers to defer capital gains and recapture depreciation taxes when exchanging real or personal property held for a productive use in a trade, business, o r for investment for like-kind real or personal property held for productive use in a trade, business, or for investments.
1031 Exchange
an IRS form used to retrieve past tax returns, W-2, and 1099 transcripts that are on file with the IRS. Used to validate income documentation for underwriting and quality control purposes
4506-T
A concise statement, usually prepared for a mortgagee or purchaser of real property, summarizing the history of a piece of loan, including all conveyances, interests, liens, and encumbrances that affect title to the property.
Abstract of Title
a loan-agreement provision that requires the debtor to pay off the balance sooner than the due date if some specified event occurs, such as failure to pay an installment or to maintain insurances
acceleration clause
interest that is earned but not yet paid. for example: interest that accrues on real estate will be paid when the property is sold if the rental income does not cover the mortgage payments
accrued interest
the original cost of an asset
acquisition costs
a mortgage in which the lender can periodically adjust the mortgage interest rate in accordance with fluctuations in an external market index.
Adjustable Rate Mortgage ARM
basis increased by capital improvements and decreased by depreciation deductions
adjusted basis
on an ARM the time between changes in the interest rate and/or monthly payment. Typically one, three or five years depending on the index
Adjustment Interval
time between the adjustment dates for an ARM
adjustment period
an arrangement in which a person refers a business to a real estate service involving a federally related mortgage loan that has either an affiliate relationship with or a beneficial ownership interest. Such persons directly or indirectly refer business to that provider and may influence the selection of that provider.
Affiliated Business Arrangement (ABA) not a violation of section 8 of the RESPA
an agreement that obligates someone to sell and may include a corresponding obligation for someone else to buy
agreement of sale
a method of documenting a loan file by using information such as pay stubs, W-2 forms, and bank stubs instead of waiting on verification sent to third parties for confirmation of statements made on the application
alternative documentation
the act or result of gradually extinguishing a debt, such as a mortgage, usually by contributing payments or principal each time a periodic interest payment is due
amortization
the length of time it will take to amortize the mortgage loan expressed in months.
amortization term
the actual cost of borrowing money, expressed in the form of an annualized interest rate
Annual percentage rate (APR)
a fixed sum of money payable periodically, usually monthly or annually. These payments terminate upon the death of the designated beneficiary. Also, a right, often acquired under a life-insurance contract, to receive fixed payments periodically for a specified duration
annuity
the determination of what constitutes a fair price for something or how its condition can be fairly stated at a point in time
appraisal
a fee charged by a licensed certified appraiser to determine the fair market value
appraisal fee
an impartial person who estimates the value of something such as real estate
appraiser
an increase in an asset’s value (often because of inflation)
appreciation
a dispute-resolution process in which the disputing parties choose one or more neutral third parties to make a final binding decision resolving the dispute. A third party may be chosen directly by mutual agreement, or indirectly by agreeing to have an arbitration organization select the third party
Arbitration
describes the features of the ARM loan which must be presented to the consumer within 3 days of application
ARM disclosure
the consumer handbook to adjustable rate mortgages must be presented within 3 days of application
adjustable rate mortgage handbook (CHARM)
a soft gray mineral that was used as a building material in the past. it is no longer in use, but can still be found in some older homes. when asbestos dust is inhaled it can cause serious diseases of the lungs
asbestos
the value of an asset as determined by an appraiser for tax purposes
assessed balue
determination of the rate or amount of something, such as a tax or damages
assessment
an official who evaluates or makes assessments, especially for purposes of taxation
assessor
an owned item that has value
asset
the transfer of rights or property
assignment
an assignment in which a mortgage lender or borrower transfer the mortgage to a third party
assignment of mortgage
the acquisition of real property coupled with the assumption of personal liability for debt secured by that property
assumption (of Mortgage or trust deed)
the fee paid to a lender when an assumption takes place. it is usually paid by the purchaser
assumption fee
a statement of financial position as of the statement’s date, disclosing the value of assets, liabilities, and equity
balance sheet
a mortgage requiring periodic payments for a specified time and a lump-sum payment of the outstanding balance at maturity
balloon mortgage
a final loan payment that is usually much larger than the preceding regular payments. this payment discharges the principal balance of the loan
balloon payment
used in computing and calculating the interest rate in real estate transaction.
Basis Point: one point is equal to 1/100th of 1% or 0.01% and is used to denote the percentage change in a financial instrument
a statutory procedure by which a usually insolvent debtor obtains financial relief and undergoes a judicially supervised reorganization or liquidation of the debtor’s assets for the benefit of creditors
bankruptcy
a mortgage that covers an aggregation of property, or that secures indebtedness previously existing in various forms. for example: a mortgage covering two or more properties that pledged to support a debt
blanket mortgage
made in good faith without fraud or deceit
bona fide
someone who mortgages property
borrower (mortgagor)
a short-term loan that is used to cover costs until more permanent financing is arranged or to cover a portion of costs that are expected to be covered by an imminent sale
bridge loan
a law or regulation setting forth standards for the construction, maintenance, occupancy, use, or appearance of buildings and dwelling units
building code
money paid by the buyer of a house to reduce the mortgage-interest payments
buy-down
the account in which funds are held so they can be applied as each payment comes due for an interest rate buy-down plan
buy-down account
a market in which supply significantly exceeds demand, resulting in lower prices.
buyer’s market
an option to buy something at a fixed rate price even if the market rises; the right to require another to sell
call option
the power to create a legal agreement under the same circumstances in which a normal person would. it is with the satisfaction of a legal qualification, such as legal age or soundness of mind, that determines one’s ability to sue or be sued, enter a binding contract, etc. a party wishing to raise the issue of capacity must do so by specific negative pleading
capacity
the movement of cash through a business as a measure of profitability or liquidity
cash flow
a check drawn by a bank payable to another person. this is evidence that the payee has authorization from the bank for the amount of the money represented by the check
cashier’s check
a banker’s certificate acknowledging the receipt of money and promising to repay the depositor
certificate of deposit
a certificate issued by the Department of VA certifying a veteran’s eligibility for a VA loan
certificate of eligibility
a document indicating that a building complies with a zoning and building ordinances and is ready to be occupied
certificate of occupancy
an appraisal issued by the Department of VA showing the property’s fair market value
certificate of reasonable value (CRV)
a document indicating the ownership or real or personal property. this document also identifies any liens or other encumbrances
certificate of title
certificate given to veterans or reservists who have served 90 days of continuous active duty (including training time), which enables veterans to obtain lower down payments on certain fair housing act (FHA) loans
certificate of veteran status
the ownership history of a piece of land, from its first owner to the present one. for the folder to have a good title, every prior negotiation must have been proper.
chain of title
a modification of the original construction plans ordered by the property owner or general contractor
change orders
a title free from any encumbrances, burdens, or other limitations
clear title
affirmed that all citizens are equally protected by the law
civil rights act (1866)
change in the frequency of payment or interest rate of ARM
change frequency
the final transaction between the buyer and seller whereby the conveyances of documents is concluded and they money and property transferred
closing/settlement
an agent who represents the buyer in the negotiation and closing or real property transactions by handling financial calculations and transfer of documents.
closing agent
the expenses that must be paid, usually in a lump sum at closing, apart from the purchase price and interest, these may include taxes, title insurances, and attorney’s fees
closing costs
the date scheduled for the conclusion fo the real estate transaction
closing date
a written breakdown of the costs involved in the real estate transaction, usually prepared by a lender or an escrow agent
closing statement
a defect or potential defect in the owner’s title to a piece of land arising from some claim or encumbrance, such as a lien, an easement, or a court order.
cloud on title
any borrower in addition to the first borrower whose name appears on the application. the co-borrower’s income, assets, liabilities, and credit history are considered in determining creditworthiness
c0-borrower
property that is pledged as security against a debt; the property subject to a security interest or agricultural lien
collateral
ratio of the total mortgage liens against the property to the lesser of either the appraised value or the sales prices
Combined Loan-to-value (CLTV)
the fee paid to an agent for a transaction usually as a percentage of the money received from the transaction
commission
a binding offer by a lender to make a loan under certain terms or conditions to a borrower. includes the amount of the mortgage, the interest rate, and repayment terms
committment
the realty that all tenants may use, though the landlord retains control over and responsibility for it. an area owned and used in common by the residents of a condominium, subdivision, or planned-unit development
common areas
intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low to moderate income neighborhoods, consistent with safe and sound banking operations
community reinvestment act (1977)
an abbreviation for comparable properties used in the appraisal process. properties similar to the property under consideration
comparables
the voluntary yielding to a demand for the sake of a settlement. In a real estate transaction, something given up or agreed to in sale negotiations. for example, the sellers may agree to help pay for closing costs
concession
a stipulation or prerequisite in a sales contract. if a court construes a contractual term to be a condition, then its breach will entitle the party to whom it is made to be discharged from all liabilities under the contract
condition
a mortgage loan under the maximum amount of loans that Fannie Mae and Freddie mac are legally allowed to buy
conforming loan
a single real estate unit in a multi-unit development in which a person has both separate ownership of a unit and a common interest, along with the development’s other owners, in the common areas
condominium
a mortgage used to finance a construction project
construction mortgage
an independent federal agency that regulates consumer financial products and services. the Bureau protects consumers by restricting unfair and deceptive business practices, by promoting financial education, taking consumer complaints, and enforcing federal consumer-financial-protection laws. it was established by the dodd-frank act in 2010 and began operating in 2011
consumer financial protection bureau (CFPB)
an independent firm that collects, compiles and reports the credit activities of individuals which is made available, for a fee, to lenders or credit issuing entities investigating the creditworthiness of those applying for credit. consumers may also access reports from each of the three major reporting agencies for free as required by law
consumer reporting agency (credit bureau)
a clause within the sales contract stating that a certain condition must be met before a contract is legally binding, and the sale can close. Real estates contracts often have a specific date by which the contingency must be met. The buyer will often include an inspection contingency, requiring the home to be inspected for physical damages or problems before the sales contract is binding. the buyer will have the right to rescind if the contingency is not met
contingency clause
a mortgage, not backed by government insurance, which the borrower transfers a lien or title to the lending bank or other financial institution. these mortgages, which feature a fixed periodic payment and interest throughout the mortgage term, are typically used for home financing
conventional mortgage
a provision in an ARM which allows the loan to be converted from an ARM to a fixed-rate mortgage at specified times during the term. usually allowed at the end of the first adjustment period. also known as a convertible ARM
conversion clause/option
the voluntary transfer of property
conveyance
a project in which a corporation holds the title to a residential property and sells shares to individual buyers, who then receive a proprietary lease as their title
cooperative (co-op) project
an offeree’s new offer that varies the terms of the original offer and that ordinarily rejects and terminates the original offer.
counteroffer
a formal agreement or promise to perform, or not perform, a particular act
covenants
one’s ability to borrow money
credit
information in the files of a credit bureau regarding an individual’s debts and repayments (or non-repayments)
credit history
life insurance on a borrower, usually in a consumer installment loan, in which the amount due is paid if the borrower dies.
credit life insurance
a credit bureau’s report on a person’s financial status, usually including the approximate amounts and locations of a person’s bank accounts, charge accounts, loans, other debts, bill-paying habits, defaults, bankruptcies, foreclosures, marital status, occupation, income, and lawsuits
credit report
statistically derived numeric expression of a person’s creditworthiness that is used by lenders to assess the likelihood that the individual will repay their debts
credit score
one who gives credit for money or goods
creditor
financially sound enough that a lender will extend credit in the belief that defaults is unlikely
creditworthy
liability on a claim
debt
the percentage of gross monthly income that goes toward paying for monthly housing expenses, alimony, child support, car payments, and other installments debts, and payments on revolving or open-ended accounts such as credit cards
Debt-to-income ratio
a legal document that is signed and delivered regarding the ownership of property
deed
Deed in which the mortgagor conveys all interest in the property to the mortgagee to satisfy a loan that is in default to avoid foreclosure proceedings.
deed-in-lieu of foreclosure
a deed conveying the title of real property to a trustee as security until the grantor repays a loan. this type of deed resembles a mortgage. it is an alternative to a mortgage preferred by lenders because it is faster and cheaper to foreclose
deed of trust
the omission or failure to perform a legal or contractual duty, especially the failure to pay a debt when due
default
a debt that is overdue in payment
delinquency
a reduction in the value of price of something, specifically, a decline in an asset’s value because of use, wear, obsolescence, or age
depreciation
a fee equal to 1% of the loan amount that is prepaid interest on the mortgage loan. the more points, the lower the interest rate. Borrowers can typically pay from 0-4 points. it is also tax-deductible
discount point
a 2010 federal statuate that promotes the financial stability of the united states by improving accountability and transparency in the financial system. the statue affects nearly every federal agency with jurisdiction over finance or consumer protection, and nearly every segment of the financial-services industry
dodd-frank wall street reform & consumer protection act
a portion of the purchase price paid in cash (or its equivalent) at the time the sale agreement is executed
down payment
a mortgage provision that gives a lender the option to accelerate the debt if the borrower transfers any part of the mortgaged real estate without the lender’s consent
due-on-sale clause
a deposit paid (often in escrow) by a prospective buyer to show a good-faith intention to complete the transaction, and ordinarily forfeited if the buyer defaults. it is generally a percentage of the purchase prices and it rarely exceeds 10%
earnest money deposit
an interest in land owned by another person, consisting of the right to use or control the land, or an area above or below it, for a specific limited purpose
easement
obsolescence that results from external economic factors, such as decreased demand or changed governmental regulations
economic obsolescence
the actual annual rate, which incorporates compounding when calculating interest, rather than stated rate or coupon rate
effective interest rate
the inherent power of a governmental entity to take privately owned property and convert it to public use, subject to reasonable compensation for the taking
eminent domain
a program in which an employer assists its employees in purchasing homes by helping with the down payment, closing costs, or monthly payments
employer-assisted housing
an interference with or intrusion onto another’s property
encroachment
a claim or liability that is attached to property and that may lessen its value, such as lien or mortgage. an encumbrance cannot defeat the transfer of possession, but it remains after the property or right is transferred
encumbrance
an absolute right to a benefit granted immediately upon legal requiremet
entitlement
a federal statute that prohibits creditors from discriminating against credit applicants based on race, color, religion, national origin, age, sex, or marital status, with respect to any aspect of a credit transaction
equal credit opportunity act (ECOA/Regulation B)
a transaction that has the intent but not the form of a mortgage, and that a court of equity will treat as a mortgage
equitable mortgage
the amount by which an interest in property exceeds secured claims or liens. the difference between the value of the property and all encumbrances on it
equity
a legal document or property delivered by a promissor to a third party to be held by that third party for a given amount of time or until the occurrence of a condition at which time the third party is to hand over the document or property to the promisee
escrow
a bank account, generally held in the name of the depositor and an escrow agent that is returnable to the depositor or paid to a third person on the fulfillment of specified conditions
escrow account
the third-party depository of an escrow. an escrow holder is not a common-law agent because the holder does not act subject to the control of the parties to the escrow agreement
escrow agent
the instruction given to the third-party depository of an escrow
escrow agreement
the contract among buyer, seller, and escrow holder, setting forth the rights and responsibilities of each
escrow contract
the act or process of legally dispossessing a person of land or rental property
eviction
the right to sell a principal’s products or to act as the seller’s real estate agent to the exclusion of all others, including the owner. the listing agreement upon which the broker gets commission even if seller is the one who sells the house during the agreement period or for a certain period thereafter
exclusive right-to-sell listing
a listing giving one agent the right to be the only person, other than the owner, to sell the property during a specific period. a listing agreement upon which the broker does not get a commission if the seller sells the property themselves
exclusive agency listing
a person named by a testator to carry out the provisions of the testator’s will
executor
a 2003 amendment to the federal fair credit reporting act providing free annual credit reports to consumers and establishing measures intended to help prevent identity theft. one of the act’s better-known and more heavily litigated provisions prohibits merchants from printing the expiration date or more than the last five digits of the card number on a point-of-sale credit card or debit card receipts.
fair and accurate credit transactions act (FACT Act) 2003
a 1970 federal statute that regulates disclosure and use of consumer-credit information and ensures the right of consumers to have access to and to correct their credit reports
fair credit reporting act (FCRA/Reg V)
a 1968 federal statute that prohibits discrimination based on race, sex, religion, family status, or national origin in the sale or rental of a dwelling, especially in the refusal to sell or rent
fair housing act (FHA)
the price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm’s-length transaction, the point at which supply and demand interesect
fair market value
The current loan limits are $484,350 single family unit home, $620,200 for a two-unit home, $749650, for a three-unit home and $931,600 for a four-unit home.
fannie mae/freddie mac loan limit
a privately owned and manged corporation chartered by the U.S. government that provides a secondary mortgage market for the purchase and sale of mortgages guaranteed by the Veterans administration and those insured under the FHA
federal national mortgage association (fannie Mae/FNMA)
a corporation that purchases both conventional and federally insured first mortgages from members of the federal reserve system and other approved banks
Federal Home loan mortgage corporation (Freddie Mac/FHLMC)
an agency in the U.S. Department of HUD responsible for facilitating mortgage lending by insuring mortgage loans on houses meeting the agency’s standards. created in 1934
Federal Housing Administration (FHA)
the central bank that sets credit and monetary policy by fixing the reserves to be maintained by depository institutions, determining the discount rate charged by the Federal Reserve Banks, and regulating the amount of credit that may be extended on any security
Federal Reserve System (FRS)
an interest in land that, being the broadest property interest allowed by law, endures until the current holder dies without heirs
fee simple
a mortgage that is insured fully or partially by the federal housing administration (FHA)
FHA mortgage
current Federal housing Administration (FHA) upfront mortgage insurance premiums are 1.75% of the loan size.
FHA Mortgage: Insurance If an FHA-backed mortgage is used for a purchase mortgage and your loan size is $300,000 then your upfront mortgage insurance premium will be $5,250
a promise from a lender to make a mortgage loan
firm commitment
a mortgage that is senior to all other mortgages on the same property
first mortgage
an individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. THis includes a spouse.
first-time home buyer
the monthly payment due on a mortgage loan which includes both principal and interest
fixed installment
an ARM with an initial fixed interest rate period. after the fixed interest rate expires, the interest rate starts to adjust based on an index plus a margin. the amount by which the interest rate can adjust after the fixed period is usually subject to an interest rate cap
fixed period adjustable rate mortgage
a mortgage with an interest rate that remains the same over the life of the mortgage regardless of market conditions
fixed-rate mortgage (FRM
fee issued to the client which covers the cost of the assessment and is included in closing costs and fees
flood certification fee
insurance that indemnifies against a loss caused by a flood. this type of insurance is often sold privately but subsidized by the federal government
flood insurance
