ACCELERATION CLAUSE:  A clause inserted in a note, mortgage or deed of trust which requires immediate payment of the entire debt if certain conditions are violated during the normal terms of the loan.  Change of ownership is the standard violation involved although failure to maintain the property, pay taxes, etc. are other factors generally included in this clause. 

ACCEPTANCE:  Consent to an offer or contract.

ADJUSTABLE RATE MORTGAGE (ARM):  Interest rate and monthly payments are adjusted periodically during the life of the loan to correspond with changes in the money market.  The initial interest rate is usually lower than that for a fixed-rate loan.  A cap limits the amount by which either the rate or the payment can change. 

AGENT:  Someone who is authorized to represent another individual (the principal). 

AMORTIZATION:  The process of paying off a debt by installments normally by equal installments over a fixed period of time as in a 30 year fixed-rate mortgage. 

APPRAISAL:  A formal opinion or estimate of value by one who is qualified to evaluate factors of value.  In real property appraisals the purpose of the opinion may affect the type of report issued , e.g. insurance, market value, tax assessment, etc. 

ARTICLES OF AGREEMENT:  Same as “land contract”. 

ASSESSMENT:  A special charge placed against a particular property for some specific purpose such as installation of sidewalks. 

ASSUMPTION OF MORTGAGE:  The process of assuming personal liability for the payment of existing loans for which property is the security. 

BALLOON PAYMENT:  The amount due when a note or mortgage becomes due which is in excess of normal installment payments. 

BILL OF SALE:  The legal document used to transfer title to personal property. 

BROKER:  One who acts as an agent or negotiator for his principal when dealing with third parties on behalf of his clients. 

BUILDING CODE:  The code of restrictions established by a government body for regulating the construction of buildings. 

CARRYING CHARGES:  The various expenditures necessary to maintain a property from month to month such as taxes, insurance, repairs. 

CAVEAT EMPTOR:  A Latin expression used in law to designate the buyer’s responsibility to investigate before purchasing; literally “Let the buyer beware.”

CLIENT:  The principal to a real estate transaction who employs the agent. 

CLOSING COSTS:  Additional costs other than down payment needed to purchase a property.  They include points application fee, one years’ premium for hazard insurance tax and insurance escrow deposit, city revenue stamps, recording fees and attorney’s fees. 

CLOSING STATEMENT:  The settlement sheet which is a statement of debits and credits for the buyer and seller in summarizing the costs involved when selling property. 

COMMITMENT:  An agreement to loan a specified amount to a purchaser in the event of title transfer or to a seller in a refinance arrangement. 

CONDOMINIUM:  An apartment house subdivided to give title to individual occupants by a description of the air and ground space involved for each unit.  A form of real estate ownership. 

CONTINGENCY:  Any requirement in a contract which must be completed before the contract can be considered ready for performance; most commonly refers to a mortgage contingency. 

CONTRACT:  An agreement negotiated and entered into by two or more parties who exchange mutual promises to perform certain acts in accordance with the wishes of both parties. 

CONVENTIONAL MORTGAGE:  Any mortgage that is not government insured is considered to be a “conventional” mortgage. 

COOPERATIVE APARTMENT:  Each occupant receives an undivided interest in the ownership of the apartment he uses and a common interest in all other facilities.  This is usually effected by forming a corporation with each owner receiving stock in the corporation equal to his investment.  The form of ownership is shares/stock in a corporation.  The corporation owns the real estate. 

CO-SIGNER:  One who accepts equal obligation for the performance of a contract, note or other act by affixing his or her name to the documents involved. 

DEED:  A written instrument which conveys title to real property. 

DEFAULT:  Failure to perform the acts or promises made, such as the default on a mortgage when payment is not made on time. 

DISCOUNT POINTS:  Refers to the points paid in connection with an FHA/VA loan.  Will fluctuate with the money market (see “Points”). 

EARNEST MONEY:  A sum of money given to bind an agreement or an offer made to show good faith. 

EQUITY:  The interest one has in real property as an owner above all existing indebtedness. 

ESCROW:  A depository for papers, funds and instructions with a third party who is then obligated to carry out all instructions, providing they are in complete agreement

“FANNIE MAE”:  The nickname given to the Federal National Mortgage Association operated by the government as a secondary market for mortgage loans. 

FHA LOAN:  Federal Housing Administration loans are insured by the federal government.  Interest rates can be lower than for conventional loans but the real advantage lies in the low down payment requirement usually under 5%.  These loans are assumable.  Usually “discount points” must be paid and can be paid by either buyer or seller, as agreed. 

FIXED-RATE MORTGAGE:  Interest rate and monthly payments remain the same for the entire term of the loan. 

GIFT LETTER:  A letter prepared for a mortgagee which verifies that the sums of money being used as a down payment were a gift from a relative made without obligation of repayment. 

GRADUATED PAYMENT MORTGAGE (GPM):  Monthly payments are lower in the early years than in the later years of the loan.  This arrangement allows many families to buy a home with monthly payments that are affordable at the time of purchase and make higher payments as income rises. 

LAND CONTRACT:  A form of owner financing by means of an installment agreement during which title remains with the original seller until the predetermined terms of sale are satisfied. 

LEASE:  An agreement by which real estate is rented for a fixed period of time. 

LEGAL DESCRIPTION:  A description of property which can be recognized by law and by which the property in question can be definitely located by reference to recorded maps. 

LISTING:  A contract with a real estate broker authorizing that broker to be the sales agent for the property. 

LONG TERM CAPITAL GAIN:  An increase in the value of an asset occurring over a period of at least 6 months duration and on which the owner can claim special tax privileges when the property is ultimately sold. 

MARKET PRICE:  The price a property should bring based on comparable sales of similar properties within recent months. 

MONTH TO MONTH TENANCY:  Tenancy of a property on a month to month basis which can be terminated by either party with proper notice.  Although usually an oral lease rather than a written lease it is still legally binding. 

PERSONAL PROPERTY:  That which is essentially moveable or not affixed to real property. 

“P.I.T.I.”:  A phrase used to denote the components of a mortgage payment:  principal, interest, taxes and insurance. 

POINTS:  A term used to describe loan discounts collected by mortgage lenders as a means of increasing their yield on real estate loans.  A point is 1% of the amount of the mortgage. 

PRINCIPAL:  One who employs an agent or becomes a participant in a real estate transaction as owner, buyer, etc.

PRIVATE MORTGAGE INSURANCE (PMI):  An insurance premium charged by lender to buyers with less than 20% down payment.  PMI insures lender in the event that buyer should default on the loan. 

PROMISSORY NOTE:  A written promise to pay a certain sum of money at a definite date in the future. 

PRORATION:  To divide proportionately among the parties involved based on a fixed date of computations their share of an obligation paid or due , e.g., taxes, water, sewer and rents. 

PURCHASE MONEY MORTGAGE:  A form of owner financing whereby the owner replaces an institutional lender.  The buyer receives title to the property and the bundle of rights attached thereto. 

SECONDARY MORTGAGE MARKET:  The outlet for primary mortgages to those who buy them for investment after the original lender has completed his purchase of the loan. 

VA LOAN:  Only veterans of the United States Armed Forces who have received an honorable discharge are eligible to receive these loans. 

WAIVE:  To abandon, forego or relinquish a right, e.g., to waive a contingency.