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Real Estate Glossary

A detailed glossary of real estate terms with clear definitions. To get started select the appropriate letter for a listing of all of the glossary terms that begin with that letter. Then, locate the word you are looking for.

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11th district cost of funds
A monthly cost-of-funds index (COFI) reflecting the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts. The 11th district covers Arizona, California and Nevada. The index is published on the last day of the month and reflects the cost of funds for the prior month.

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a la carte real estate services
Professional real estate services that are rendered one transaction at a time instead of the conventional full-service, commission-based brokerage relationship.

A disclaimer of ownership by the trustee or debtor in a property deemed burdensome or inconsequential. Once a property has been abandoned it is no longer the property of the estate, and creditors can seek to recover their money.

absolute auction
Auction with no minimum bid amount. The seller has no reservation price. The highest bidder wins.

absolute title
A title that is clear, without any liens or judgment.

A succinct summary.

abstract of judgment
The summary of a court judgment that creates a lien against a property when filed with the county recorder.

abstract of title
A historical summary of all of the recorded instruments and proceedings that affect the title of the property.

accelerated amortization
Paying the principal amounts in excess of the minimum required by the mortgage contract so as to shorten the effective term of the loan.

acceleration clause
The clause in a mortgage or trust deed that stipulates the entire debt is due immediately if the borrower defaults under the terms of the contract.

The act of agreeing to accept an offer to enter into a contract. A contract cannot exist without an offer and acceptance. Acceptance is legal and binding when the buyer and seller agree to the initial terms.

acquisition cost
Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs.

A measure of land equal to 43,560 square feet.

ad valorem tax
Tax based on the value of the property.

An attachment to a contract, often to describe required inspections or financing terms.

add-on interest
Interest that is computed at the beginning of the loan, then added to the principal, so that all must be repaid, even if the loan is paid off early.

adjudicated newspaper
A newspaper that has met certain judicial requirements to be an official newspaper for the publication of legal notices.

A judicial determination.

adjustable rate mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.

adjusted book basis
The purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale.

adjustment date
The date the interest rate changes on an ARM (adjustable rate mortgage).

adjustment interval
For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

adverse possession
A possession that is inconsistent with the right of possession and title of the true owner. It is the actual, open, notorious, exclusive, continuous, and hostile occupation and possession of the land of another under a claim of right.

A written statement made under oath before an officer of the court or a notary public.

a-frame design
An interior style that features a steeply peaked roofline and a ceiling that is open to the top rafters.

The relationship that exists by contract where one person is authorized to represent and act on the behalf of another person in various business transactions.

agreement of sale
A written agreement between seller and buyer in which the buyer agrees to buy the prescribed real estate and the seller agrees to sell upon the terms of the agreement.

alt-a loans
Mortgage loans in which one or more borrower or loan characteristics are weaker than required for conforming mortgage loans. These loans generally carry an interest rate of about .5 percent higher than conforming loans.

alternative mortgage instrument (AMI)
Any mortgage other than a fixed interest rate, level payment amortizing loan.
    Types of AMIs:
    • Variable rate mortgages
    • Rollover loans
    • Adjustable rate mortgages

A change, correction, or extension of an agreement that does not modify the basic thrust of the agreement.

Features that add to a property’s desirability. Natural amenities include waterfront property and scenic views. Improvement amenities include swimming pools, fireplaces, wood floors, decks, patios, and stainless steel appliances.

american society of home inspectors
A nonprofit society of professional home inspectors who are paid to look at houses to identify problems or potential problems.

A gradual paying off of a debt by periodic installments. The payments are structured so that the borrower pays both interest and principal with each equal payment.

amortization schedule
A detailed table showing the amortization of a loan, which includes the beginning principal amount, period payments, the interest portion of each payment, the principal reduction portion of each payment, and the ending balance.

amortization table
A mathematical formula for calculating a borrower’s monthly payments, based on the amount borrowed, the interest rate and the term of the loan.

amortization term
The amount of time it takes to pay off a loan through periodic payments.

annual percentage rate (APR)
A figure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points, and any other add-on loan fees and costs. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. Keep in mind, however, that most mortgages are not held for their full 15 or 30-year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years.

A series of income payments of receipts over a period of years.

A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more.

application fee
The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs.

The determination of property value based on recent sales information of similar properties.

appraised value
An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property.

Increases in property value due to fluctuations in the market, inflation, et al.

A dispute-resolution method in which an impartial third-party makes a decision.

Amount past due on mortgage installments.

Overdue mortgage payments including interest.

as is
Without guarantees as to condition of property at the time of the sale. A buyer accepts the property as it is, including physical defects.

asking price
Also known as the list price, this is the price the property is selling for.

An uncontested agreement to undertake a legal act or wavering a particular legal right.

assessed value
A state or local government’s determination of a property’s worth for tax purposes.

Determining a property's value for the purpose of taxation.

A municipal employee who estimates the value of properties for the purpose of taxes.

assessor’s parcel number (APN)
The identifying number given by the County Assessor to a piece of property and used by the County Tax Collector on the tax bill.

Valuable items, encumbered or not, owned by a person, corporation, or entity.

To transfer one’s property rights or contract rights to another. Contracts commonly assigned include leases, mortgages, and deeds of trust.

The person to whom the agreement or contract is sold or transferred.

The transfer of a mortgage or other asset, contract, or legal right from one party to another.

A party who assigns or transfers an agreement or contract to another.

assumable loan
A mortgage loan that allows a new home purchaser to undertake the obligation of the loan with no change in loan terms. The buyer usually must meet qualification standards to assume a loan.

assumable mortgage
A mortgage that provides for a buyer to "assume" all outstanding payments when a home is sold. The buyer usually must meet qualification standards to assume a loan.

Buying property and assuming the responsibility of the exiting mortgage.

assumption clause
A provision in an assumable mortgage that allows a buyer to assume the responsibility of the mortgage from the homeowner.

assumption of mortgage
The purchase of mortgage property whereby the buyer accepts liability for the dept that continues to exist. The seller remains liable to the lender unless the lender agrees to release them.

The seizing by a Sheriff or other authorized person or property belonging to the defendant as security for any judgment the plaintiff may get in a court action.

The public sale of property to the highest bidder.

automated valuation model (AVM)
Computerized method for estimation the value of a property.

automatic stay
A bankruptcy provision that stops any act that can be construed to be an act against the interest of the debtor or the debtor’s property.

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back title letter
A letter that a title insurance company gives to an attorney who then examines the title for insurance purposes.

back-up offer
A secondary bid for a property that the seller will accept if the first offer fails.

balance sheet
A financial statement in table form showing assets, liabilities, and equity in which assets equal the sum of liabilities plus equity. This is generally required to underwrite alternate documentation borrowers who are self-employed.

balance transfer
The movement of outstanding balances from other lenders to a home equity line of credit.

balloon mortgage
Behaves like a fixed-rate mortgage for a set number of years (usually five or seven) and then must be paid off in full in a single "balloon" payment. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time.

balloon payment
The final lump sum that is paid at the end of the balloon mortgage.

A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of credit.

bargain sale
The sale of a piece of property for less than market value.

basis point
Used to describe mortgage yield, one basis point equals one one-hundredth of a percentage. The difference between 6.01 percent and 6.02 percent is one basis point.

bedroom community
A suburb in which most of the residents commute to the city to work.

One who benefits from an insurance policy, will or deed of trust. If the security instrument in a mortgage is a deed of trust the beneficiary is the lender. In a foreclosure under a deed of trust or other instrument, the lender is the beneficiary of any proceeds derived from the foreclosure sale.

beneficiary’s demand
Payment required by a beneficiary under a deed of trust/mortgage before authorizing a re-conveyance.

beneficiary’s statement
Statement by a beneficiary under a deed of trust regarding the total balance due on a promissory note and other information about the loan.

best faith estimate
An estimate of the total costs for securing a real estate loan, that is given to borrowers prior to closing.

An improvement that increases property value as distinguished from repairs or replacements that simply maintain value. A betterment would be an addition or a pool.

To offer an amount of money for a property at auction.

bidding war
Offers from multiple buyers for a piece of property. Agents also sometimes compete to list a house for sale.

bilateral contract
A contract in which the parties involved give mutual promises. Also called “reciprocal” contracts.

bill of sale
A written document that transfers a title to personal property.

  1. An agreement accompanied by a deposit, for the purchase of real estate, to evidence good faith on the part of the purchaser.
  2. A preliminary report regarding the condition of a title and a commitment to issue a title insurance policy in a pre-determined manner when conditions are met.

bi-weekly mortgage
Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.

blanket insurance policy
A single policy usually covering liability or hazard that typically covers more than one piece of property.

blanket mortgage
A single mortgage that covers more than one parcel of real estate.

blended payments
A repayment method by which the same amount is paid each month, but the composition of the interest and principal changes with each payment. With each payment, the amount allocated to the principal increases as the amount allocated to interest decreases. Most mortgages use blended payments because it provides a consistent monthly payment amount for the borrower.

blighted area
An ugly, run-down neighborhood.

The drawing of a building by an architect, used for construction and permits.

blue-ribbon condition
The state of a house or other item looking brand-new.

board of equalization
A government agency whose purpose is to assure uniform property tax assessments. This agency hears appeals of property valuations and classifications.

Form language used in deeds, mortgages and other documents. Individual parties can add details.

bona fide
In good faith without fraud. A bona fide purchaser is one involved in a long distance transaction.

An agreement that insures one party against loss by acts or defaults of another party.

bond market
Generally refers to the daily buying and selling of thirty-year treasury bonds. Lenders follow this market because as bond yields go up and down, fixed rate mortgages go up and down. The same factors that affect the Treasury Bond market also affect the mortgage rates.

book cost
The acquisition cost of a property as reflected on accounting statements. Generally includes the purchase price, installations, and indirect costs such as interest during construction.

book value
The value of a property as a capital asset based on its cost plus any additions, minus depreciation.

To receive money in the form of a loan from a lending institution or mortgage company.

A person who applies for and receives a loan.

Brokers Price Opinion

To break or violate an agreement.

breach of contract
A violation of the terms of a legal agreement; default. Breach of contract allows the non-breaching party to rescind the contract, sue for damages, or sue for performance of the contract.

breach of covenant
Violation of a promise made in a contract or property deed.

breach of warranty
The sellers’ inability to pass clear title of a property to a buyer.

bridge loan
An equity loan secured to solve short-term financing problem.

An individual in the business of assisting in arranging, funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

broker premium
Amount paid to a mortgage broker who acts as the “middleman” in the mortgage process between the lender and the borrower. Lenders offer brokers wholesale rates; brokers add a surcharge to cover the cost of underwriting to arrive at the rates charged to borrowers.

broom clean
Ready to be cleaned and painted. It does not mean that the house is immaculate or spotless or even necessarily clean.

A vintage row house constructed of red sandstone.

In real estate terminology a bubble is a rapid increase in home prices followed by a steep decline. Housing bubbles are uncommon. Most booms end when home prices plateau for a few years. Bubbles occur in only about twenty percent of booms.

An itemized list of expected income and expenses prepared weekly, monthly, or annually. A budget can provide guidelines for managing future expenses.

budget mortgage
A mortgage that includes a portion for taxes and insurance as well as principal and interest.

building code
Regulations established by local governments describing the minimum structural requirements for buildings; includes foundation, roofing, plumbing, electrical, and other specifications for safety and sanitation.

building inspection
A physical review of property as it proceeds under construction to ensure that each major component meets building codes.

bundle of rights
The various interests or rights an owner has in a property.

A small one-story house or cottage.

butterfly roof
A roof formed by two gables that dip in the middle to resemble the wings of a butterfly.

buy-down mortgage
Allows loans to be made at less-than-market interest rates by paying front-end discounts. The interest rate is brought down for a temporary period, usually from one to three years. In order to acquire this discount, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. After the discount period, the payment is calculated as the note rate.

buyer broker
A real estate broker who represents the buyer’s interests in a transaction exclusively. The buyer rather than the seller pays the buyer broker’s commission.

buyer’s market
The condition when sellers significantly outnumber buyers, driving prices down.

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call option
A clause in a mortgage that gives the lender the right to request the balance at any time.

callable debt
A debt security in where the issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity date.

cancellation clause
A clause that details the condition under which each party may terminate the agreement.

cape cod style
An early American style one-and-a-half story wood frame or shingled house with a steep gable roof.

A sum of money used to purchase long-term assets.

capital expenditure
The cost of an improvement made either to extend the life of a property or to increase its value.

capital gains
The profit that an owner makes when selling real estate or other property.

capital gains tax
A tax placed on the profits from the sale of real estate or investments.

capital improvement
Any item, structure or addition - which is a permanent improvement to the property - that extends the life or increases the value of the property.

A mathematical formula used to estimate the value of a rental or commercial property using the rate of return on the investment and the property’s yearly net operating income.

capitalization rate
The estimated percentage rate of return that a property will produce on the owner’s investment.

The top limit on the amount the interest rate or monthly payment can increase during a single time period of an Adjustable Rate Mortgage. Every ARM has two caps: a periodic cap, which limits the periodic changes to the interest allowed in the loan agreement, and a lifetime cap, which governs the total increase that can be imposed during the life of the loan.

A roof that covers a driveway or other parking area.

A loan in which a seller agrees to finance a buyer in order to complete a property sale. A carry-back-loan contains a promissory note placed within the loan. The promissory note is a contract that details the terms of a commitment from the buyer to pay the seller for a property. The terms of the note or contract contains the purchase price, the interest rate, and the date that the loan must be paid in full.

cash flow
The revenue generated over a period of time from an investment or rental property after subtracting expenses. The revenue generated should be enough to pay for expenses for that property.

cashier’s check
A check drawn on the issuing bank’s funds, signed by a cashier or bank officer, and guaranteed payable. A cashier’s check is used to guarantee funds are available. A fee is usually charged for the check.

cash-out refinance
Refinancing of a mortgage in which the new loan is larger than the outstanding balance of the old loan. As a result, the borrower receives additional cash excess of closing costs. The money received from the cash-out refinance can be used for anything.

cathedral ceiling
A high ceiling that is slanted toward a central point or that takes in two levels.

  1. A warning or a caution.
  2. A formal notice that asks a court to suspend action until the party that filed the challenge can be heard.

caveat emptor
A legal term derived from Latin that means the buyer beware.

certificate of deposit (CD)
A type of savings account that carries a specified minimum deposit and term and generally provides a higher yield that a regular savings account.

certificate of deposit index
A table of interest rates paid on certificates of deposit that are used to determine interest-rate changes for adjustable-rate mortgages.

certificate of eligibility
A certificate that verifies that the holder is eligible for a VA guaranteed loan.

certificate of occupancy
A document issued by a local governmental agency that states that a home or a building has met all building codes and is suitable for habitation.

certificate of reasonable value (CRV)
An appraisal that has been performed on a property that is being paid for by a VA loan. After the property has been appraised, the Veterans Administration issues a CRV.

certificate of sale
A document issued at a judicial or tax auction sale that entitles the buyer to receive a deed after court confirmation of the purchase of the property.

certificate of title
A document provided by a title company or attorney that confirms that the current owner legally holds the title of a property.

certified mail notice
A notice sent through the USPS that requires the signature of the recipient. The signature of the recipient certifies that the notice was received. Certified mail is used in the foreclosure process by the court and trustees to send out foreclosure notices and other important documents.

chain of title
Legal records that trace ownership of a property from the most recent owner to the original owner.

change frequency
The scheduled period in which an adjustable-rate mortgage adjusts.

circuit court
A state court that holds sessions at several different locations within a judicial district in which most judicial foreclosures are filed and adjudicated.

classified property tax
A tax that varies in rate depending on the use of the property.

clear title
A title that is free of liens or any legal question as to the ownership of the property.

The final meeting that legally completes the sale of the property. The buyer signs the lender agreement for the mortgage and pays closing costs and escrow amounts. The buyer and seller sign documents to transfer ownership of the property.

closing agent
Conducts the final meeting that completes the sale of the property. Depending on State law, a closing agent can be an attorney, title agent, title company, or a real estate agent.

closing costs
Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non-recurring," and "pre-paid."
    • Non-recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee.
    • Pre-paid charges are those that recur over time, like insurance and property taxes.

closing statement
Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.

clouded title
A cloud is any condition discovered during a title search that could negatively influence the property’s salability or value. Any outstanding encumbrance or claim could affect the title.

Is a person who is individually and jointly obligated to repay a mortgage loan and may or may not share ownership of the property with one or more borrowers.

Property, real or personal, pledged as a security to back up a promise. In a home loan, the property is considered collateral that can be revoked if loan is not repaid according to the terms of the mortgage or deed of trust.

collateral security
A separate obligation attached to a contract to guarantee its performance; the transfer of a property or of other valuables to ensure the performance of a principal agreement.

The series of steps a lender takes to bring a delinquent mortgage up to date.

combined loan-to-value ratio
An individuals overall mortgage debt load, expressed as a percentage of the home’s fair market value.

A fee paid to a real estate agent or a broker. The commission is often a percentage of the selling price or the amount borrowed.

A written letter of agreement detailing the terms and conditions by which the lender agrees to lend money to the borrower.

commitment period
The length of time that the lenders loan commitment is valid. The borrower must accept the commitment before the time allotted expires.

common area
An area inside a housing development that is owned by all residents.

common area assessments
Charges paid to the Homeowners association by the owners of the individual units in a condominium or planned unit development and are generally used to maintain the property and common areas.

common law
A body of laws based on custom and usage and judgments by courts in various jurisdictions.

Properties used as comparisons to determine the value of a particular property. They are generally recently sold properties that are similar in size, location and amenities to the home for sale. Comparables help appraisers determine the fair market value of a property.

competitive market analysis
An estimate of what a property might bring based on the sale or offering of similar properties. Usually compiled by a real estate agent.

compound interest
Interest paid on both the original principal balance and on the accrued and unpaid interest of a loan.

Incentives paid for or given by a landlord or seller to entice prospective tenants or buyers to sign a lease or purchase a property.

  1. The taking of private property for public use by the government, against the will of the owner, but with “payment of just compensation” under the government’s power of eminent domain.
  2. A declaration by a government agency that a property is unfit for use.

conditional offer
An offer that requires certain conditions to be fulfilled before the contract is binding.

A type of property in which owners hold title to the space they occupy in a multi-unit dwelling. The property is divided between living units and common areas. The common areas are owned collectively by all of the residents.

confession of judgment
A written agreement in which the borrower admits liability and accepts the amount of agreed-upon damages that they must pay to the lender in the event of a default of an underlying loan obligation, including the note that may be secured by a mortgage, and agrees that the statement may be filed as a court judgment against them if they do not pay or perform as agreed. This avoids further legal proceedings and may prevent a legal judgment being filed if the borrower fulfills all of the terms.

conforming mortgage
Mortgage loans that meet Fannie Mae (FNMA) or Freddie Macs (FHLMC) criteria for guarantee as “standard” or “regular” mortgage loans at attractive rates and terms and conditions.

consent foreclosure
Forecloses the interests of the mortgagor and any other lien claimant. The party being foreclosed upon agrees not to contest the proceeding or the eventual sale of the property involved.

consent judgment
A judgment issued by a judge based on an agreement between parties of a lawsuit to settle the matter. It is aimed at ending the lawsuit with a judgment that is enforceable.

construction loan
A short-term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.

Adjoining pieces of real estate.

A condition that must be met before a contract is legally binding.

contingency listing
A property listing with a special condition attached.

In real estate the contract is the legal document by which the buyer and seller make offers and counteroffers. The contract describes the property, includes or excludes items in the property, names the price, divides up the closing costs, and sets up a closing date.

contract for deed
An agreement between the buyer and seller regarding the sale of the property. The buyer takes possession of the house and makes payments towards the property but the seller holds the title until the property is paid in full.

Oversees construction of a house or a large renovation.

contractual lien
A legal claim against a property as a result of a voluntary contract.

conventional financing
A mortgage that is not insured or guaranteed by a government agency.

conventional mortgage
Refers to a fixed-rate, 30-year mortgage that is not insured by a government agency and meets conventional underwriting standards.

conversion clause
A clause in some adjustable-rate loan agreements allowing the loan to be changed to a fixed-interest rate loan at a specified time.

convertible ARM
An adjustable-rate mortgage that can be changed into a fixed-rate mortgage at a specified time.

A written document, which transfers real property or real property interests from one party to another. This document must be accepted before a notary public and recorded with the county recorder.

conveyance tax
A tax imposed on the transfer of real property.

cooperating broker
A real estate broker who finds a buyer for a property that another broker has listed.

A person who signs a promissory note that can be signed by one or more other parties. All parties take responsibility for the debt if any of the others default.

cost basis
The original cost of building, land, or piece of equipment.

cost of funds index (COFI)
One of the indexes that is used to determine interest rate changes for adjustable-rate mortgages. It represents the weighted-average cost of savings, loans, and advances of the San Francisco Federal Home Loan Bank District.

A small, one-story house.

An offer made in response to a previous offer by another party during negotiations for a property. Making a counter offer automatically rejects the prior offer, and requires an acceptance under the terms of the counter offer or you lose the property.

Rules and restrictions governing the use of property.

craftsman style
An architectural style that evolved as part of the Arts and Craft movement near the turn of the century.

creative financing
A new or unusual way of structuring a home loan so that a buyer can buy the house.

Money given to a borrower by a lender on condition of repayment over a certain period of time.

credit bid
The opening bid at a trustee’s sale made on behalf of the lending institution. If it is less than the total amount of money owed to the lender it will be made on a credit basis. But once the bid surpasses the amount of the total payoff the lender must begin to bid with cash in hand.

credit bureau
A company that collects and sells information about an individuals credit history. It issues credit reports that list how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The reports are made available to individuals and to creditors who profess to have a legitimate need for the information. The three major national credit bureaus are Equifax, Experian, and TransUnion. Often called credit-reporting agency.

credit history
A record of a persons repayment of debt. Credit histories ore looked at by mortgage lenders as one of the underwriting criteria in determining credit risk.

credit life insurance
A type of life insurance that helps re-pay a loan if the borrower becomes disabled. It is an optional coverage. When a borrower takes out the insurance the cost of the policy is often rolled into the loan principal amount.

credit loan
A credit loan is a mortgage that is issued on only the financial strength of a borrower, without great regard for collateral.

credit rating
Borrowers are rated by lenders according to their credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower.

credit report
A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here.

credit-loss ratio
The ratio of current credit-related losses to the current value of a mortgag-backed security (MBS), or the ratio of total credit-related losses to the original value of an MBS.

An entity or individual to whom money is owed.

credit-related expenses
The sum of foreclosed property expenses plus the provision for losses.

credit-related losses
The sum of foreclosed property expenses plus charge-offs.

curable defect
A problem with a property than can be remedied.

curb appeal
The first impression of a house as seen from the street.

cure the default
Reinstate or payoff the loan.

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An extension to the title search that is commissioned during the foreclosure process by a trustee’s sale guaranty. A date down is commissioned to make sure all lien holders receive notification of the foreclosure action.

days on the market
The period between the listing and the sale, or the listing date and the date the listing is taken off the market.

Amount of money one person or entity owes to another person or entity.

debt-to-income ratio
The percentage of before-tax monthly earnings that goes towards paying off loans or other obligations. Debt-to-income ratio is used by lenders to evaluate a borrower’s ability to pay mortgage payments.

A written statement made “under penalty of perjury”, signed and sworn to its truth before a notary public.

decree of foreclosure
A court order to set out the outstanding amount on a delinquent mortgage in order to sell the property to pay the lending institution.

A legal document, which transfers title or an interest in real property from the seller to the buyer. The deed must describe the property, name the individual or entity transferring the property (grantor), the individual or entity receiving the property (grantee) and be signed by the grantor, who must acknowledge before a notary public that they have executed the deed. To complete the transaction the deed must be recorded at the office of the County Recorder or Recorder of Deeds.

deed in lieu of foreclosure
The processes whereby the owner, with the permission of the lender, transfers the title of the mortgaged property to the lender to avoid foreclosure and to satisfy the loan obligation.

deed of re-conveyance
A document that releases a deed of trust, when the mortgage has been paid in full.

deed of trust
Used in title theory States. A deed of trust is a three party security instrument through which real property is given as security for a debt. The three parties involved are the borrower, the trustee, and the lender. In the transaction, the borrower transfers the legal title of the property to the trustee, who holds the property in trust as security for the payment of the debt to the lender. After the borrower has met all of their obligations the third party must return the title back to them. If the borrower becomes delinquent on the loan, the lender can instruct the trustee to file a notice of default in the county in which the property is located. The deed of trust contains the power-of sale provision that authorizes the lender to sell the borrower’s property through a trustee rather than a judge. If the borrower defaults on their payments the trustee, at the lenders request, will begin the foreclosure proceedings. If the loan is not cured or the borrower has failed to make any arrangements with the bank – during a set period of time, determined by State law - the trustee may sell the property at a public auction sale.

The failure to make payments on a loan.

default judgment
A judgment against a defendant who failed to make an appearance in court.

deficiency judgment
A judgment entered against the borrower for the amount remaining due when a property is sold at a foreclosure auction sale for less than the remaining balance on the loan.

Late or non-payments of principal, interest, taxes, or insurance.

demand letter
Notice to the borrower, sent by the lender or trustee, that she is in default and that the loan must be cured or foreclosure proceedings will begin.

Money given by a buyer when making a formal offer to bind the sale.

A decline in the value of a property.

Payments made during the course of an escrow or at closing.

  1. A statement listing defects to a property.
  2. A statement required by the Truth-in-lending act that requires a lender to inform a borrower about the APR, finance charges, and other terms of a loan.

Difference between the face amount of a note or mortgage and the price at which the instrument is sold in the secondary market.

discount points
A term used in government-subsidized loans, such as FHA and VA loans. Refers to any "points" (one percent of the loan amount) paid in addition to the one percent loan origination fee.

distressed property
A property in poor condition, or whose owner is in poor financial condition.

document needs list
An inventory of papers a lender needs to underwrite a loan. This inventory usually includes; pay stubs, bank statements, and tax returns.

documentary stamps
A state tax in the form of stamps required on deeds and mortgages when real estate title passes from one owner to another. Price of these stamps varies from state to state.

An individuals’ permanent residence.

down payment
It is the amount of money initially paid towards the price of the property. The down payment generally comes from the homebuyers own funds but can come from an outside sources such as from a down payment assistance program.

due-on-sale provision
A provision in a mortgage that allows a lending institution to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

One building that contains two housing units.

dutch auction
The auction sale price is gradually lowered until a purchase occurs.

dutch colonial style
An early American design that features a barn-like gambrel roof, a ground-level front porch, and dormers.

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early occupancy
A condition in which the seller allows the buyer to move in before closing.

earned income
All of the money you earn.

earnest money deposit
A deposit made by a potential homebuyer to show that they are serious about purchasing the property.

Giving other persons, other than the owner, access to a property.

effective age
An appraiser’s opinion of the physical condition of a building, regardless of the actual age of the property.

effective federal funds rate
The average interest rate that federal funds actually trade at in a day. The federal funds rate remains stable for months at a time, but the effective rate is often volatile and will vary from day to day.

effective gross income
Additional income that a lending institution considers when assessing a loan application of a potential borrower.

eminent domain
The government right to take private property for public use in exchange for “just compensation.”

An improvement that illegally extends onto or impedes the use of another persons’ property.

Any lien against a property or any restriction in it its use, such as an easement; a right or interest in a property held by one who is not the legal owner.

Guaranteeing a loan in the event that a borrower defaults on a loan.

A person who signs over ownership of a property to another person.

english tudor style
An architectural design that features stone or brick exterior walls and exposed beams.

A Veterans Administration home loan benefit.

environmental hazard
Natural or man-made conditions that may be hazardous to the health or safety of a homeowner. These conditions may adversely affect the value of the property.

environmental impact statement
A government-mandated study of all the aspects and effects a development will have on the environment of a proposed construction site.

equal credit opportunity act (ECOA)
A federal law that prohibits discrimination in credit transaction on the basis of race, color, religion, sex, marital status, national origin, and source of income.

One of the three largest credit bureaus.

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

equity line of credit
A homeowner borrows money as needed, up to a pre-negotiated limit. Interest is paid only on the amount of the loan used and the borrower can pay off the balance at-their-own-pace.

escalator clause
A clause in a loan providing for increases in payments or interest based on pre-determined schedules or on a specific economic index, such as the consumer price index.

A third party agent that receives, holds, and/or disburses certain funds or documents upon the performance of certain conditions. For example, an earnest money deposit is put into escrow until the transaction is closed. Only then can the seller receive the deposit.

escrow account
An account that a borrower can hold with a lender once a purchase transaction is closed. This requires borrowers to pay more than the principal and interest each month. The overage is put into escrow, which the lender uses to pay items like property taxes and homeowner's insurance when they are due. This eliminates the actual number of payments that a homeowner has to worry about, but not the amount that has to actually be paid.

escrow analysis
An analysis performed by a lender each year to escrow accountholders to ensure that the correct amount of money is being collected to cover anticipated payments.

escrow closing
The transfer of title to the buyer after all conditions of the sale as been met.

escrow company
A third-party that holds the documents and money in a real estate transfer until all conditions are met.

escrow payment
Funds that a third-party withdraws from an escrow account to pay property taxes, insurance and assessments.

escrow fee
These costs cover the preparation and transmission of all home purchase related documents and funds. Escrow fees range from several hundred to over a thousand dollars, based on the purchase price of your home. Not all states require funds to be put into escrow accounts for closing.

Everything that a person owns in real property, personal items, and other assets.

The legal removal of an occupant from real property. The reason for removal is generally based on failure to pay rent or for violating the terms of a lease.

examination of title
A review of public records and title abstracts to determine the chain of ownership of a property.

exception in deed
A notation in a deed that excludes certain interests, such as easements, and mineral rights from the transfer of title.

exclusive listing
A legal agreement that gives a real estate agent or broker the exclusive right to sell a property for a specified period of time. The owner retains the right to the property himself without paying the agent any commission.

exotic mortgage
A term that is used to describe non-traditional mortgages. These mortgages allow more homeowners to be able to afford homes priced above their means. These loans are risky for the borrower and the lending institution.

One of the three largest credit reporting agencies.

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An investment plan sponsored by employers that allows individuals to set aside tax-deferred income for retirement or emergency purposes. A 401(k) applies to private corporations, while a 403(b) applies to non-profit organizations.

401(k)/403(b) loan
A loan that can be taken against the amount accumulated in the 401(k)/403(b) plans, if so allowed by the plan administrator. Loans against these plans are an acceptable source of down payment for most types of other loans.

The feature on a building that faces the street or courtyard.

fair credit billing act
A federal law that governs credit and credit card billing errors. If a credit or charge card company violates the provisions covered in the law, consumers can sue the companies to recover the damages.

fair credit reporting act
A federal law that protects the consumer, regulates the reporting of consumer credit by agencies and establishes procedures for correcting errors on an individuals’ record.

fair debt collection practices act
A federal law that strictly prohibits certain methods of debt collection.

fair housing act
A federal law that prohibits discrimination in housing based on race, color, religion, sex, marital status, and disability.

fair market value
The price established in a free market between a buyer and a seller in an arms length transaction where neither one is forced to by or sell. Fair market value in real estate is established by comparing the prices of similar properties sold close to the proximity where your property is located.

fannie mae (FNMA)
The Federal National Mortgage Association is a congressionally chartered, shareholder-owned company. This organization insures residential mortgage loans made by private lenders and buys mortgages from lenders, bundles them into investments and sells them on the secondary mortgage market.

farm service agency
Is a branch of the U.s. Department of Agriculture that provides loan guarantees to farmers and rural residents.

farmer’s home administration (FMHA)
Now known as Rural Economic and Community development. Guarantees mortgages secured by residential properties located in rural areas. This government agency concentrates on borrowers with income less then HUD’s local median income for the area in which they live.

federal emergency management agency (FEMA)
This agency oversees the administration of flood insurance programs and the designation of areas as flood prone.

federal housing administration (FHA)
An agency under the U.S. Department of Housing and Urban Development (HUD), that insures loans made by approved lenders to qualified borrowers, in accordance with its regulations. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

federal home loan mortgage corporation
Also known as Freddie Mac, buys mortgages from lending institutions, pools them with other loans and then sells shares to investors.

federal style
An architectural style that evolved after the Revolutionary War. This architectural style has bigger windows and a front doorway surrounded by glass and topped with an arched window.

fee simple
The best title that one can obtain; unqualified and conveys the highest bundle of rights.

Up-front costs associated with a loan.

feng shui
An ancient Chinese belief that the physical characteristics of a house and the positioning of the home will affect the fortunes of the owner.

fha loan
Mortgages that are insured by the Federal Housing Administration and made by approved private lenders to qualified borrowers, in accordance with its regulations. The down payment on an FHA loan is usually less than that of a conventional mortgage. The FHA does not lend money, but it does nominate approved lenders.

A person who is entrusted with a property; a trustee who holds, controls or manages for another.

finance charge
The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.

finder’s fee
A sum paid for finding a buyer or seller.

firm commitment
A lender's agreement to provide a loan to a specific borrower on a specific property.

first mortgage
A mortgage that has priority over other mortgages.

fixed installment
A monthly payment on a loan that stays the same through the life of a loan.

fixed-rate mortgage
A Fixed Rate Mortgage offers an interest rate that will never change over the life of the loan, regardless of any interest rate fluctuations in the future. As a result, monthly payments on the principle and interest throughout the life of the loan, whether 30, 20, or 15 years, are also fixed for the life of the loan. With a FRM mortgage the borrower will have a predictable monthly house payment for as long as they have the loan. The term of your FRM can be 30, 20, or 15 years.

A house that needs a lot of work that generally sells for less money.

Personal property that becomes real property when attached permanently to a property.

flat fee
A set fee that a broker charges instead of a commission.

Buying a property with the intention of reselling it quickly at a profit, after fixing it up.

Between the time of application and closing, a borrower may choose to bet on interest rates decreasing by electing to float. Floating is essentially choosing not to lock the interest rate. Since it is the borrower's responsibility to lock his or her rate before (or at) closing, choosing to float is considered risky and may result in a higher interest rate. Request information from your lender regarding lock procedures.

flood insurance
A policy that reimburses the policy owner for the damage cased by rising water.

fnma’s community home buyer’s program
An income-based lending model, under which mortgage insures and FNMA offer flexible underwriting guidelines to increase low-to-moderate income families ability to buy homes and decrease the total amount of cash needed to buy a home. Homebuyers who borrow from this program are required to attend pre-purchase homebuyer education classes.

for sale by owner (FSBO)
A home that is being sold by the owner without the assistance of a real estate agent.

An agreement not to initiate the foreclosure process against a delinquent borrower provided the borrower complies with an alternate repayment plan.

forced sale
A sale of property seized by the sheriff to satisfy a judgment.

Used to describe the process in which legal action is taken by a lender when the terms of the mortgage or trust deed are not met and the borrower is in default. A borrower is in default when the repayment terms stipulated in the trust deed or mortgage are not fulfilled. When the borrower defaults the loan becomes a non-performing asset and is no longer earning interest for the lending company. If the loan is no longer earning interest then it is not producing income for the lender. In order to recoup its losses the bank starts the foreclosure process. State foreclosure law dictates the path the foreclosure process takes. If the borrower is unable to cure the loan before the end of the foreclosure process, the property is sold at auction. Proceeds from the auction sale are applied to the defaulted mortgage debt.

foreclosure auction sale
A public auction sale of a property held to recover the debt owed from a defaulted loan. The manner in which the auction sale is officiated is subject to State foreclosure laws.

The loss of property because of a violation of law or contract.

The entrance hall to a home or building.

full disclosure
Revealing all know facts which may affect the decision of a buyer or tenant.

full market value
The tax rate applied to 100 percent of the properties value.

fully amortized (ARM)
A mortgage that amortizes, or pays down, the balance of a loan.

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A triangular wall enclosed by the sloping ends of a ridged roof or a triangular decorative feature.

gable roof
A ridged roof that forms a triangle at each end.

gambrel roof
A roof with two slopes, often seen on barns.

The entire process of petitioning and getting a court order to take money from a persons’ salary for payment of a debt. State law sets the amount that can be taken. In most states a judgment is necessary before money can be taken.

general contractor
In charge of hiring all of the subcontractors and suppliers for a project.

general lien
A lien such as a tax lien or judgment lien that is attached to all property of the debtor.

general warranty deed
A lien against an individual. This lien will attach to any real property the individual owns or comes to own, once the lien is recorded and becomes part of the public record.

georgian style
Gained popularity in the 18th century, this type of architecture is distinguished by a symmetrical façade, prominent front entrance and quoins-decorative blocks of masonry or wood set in the corners of the house.

In mortgage banking a gift is a donation of money that does not have to be repaid. It is used for a down payment or closing costs.

gingerbread decoration
An intricate, almost lacy, wood trim.

good faith estimate
A written estimate of expected closing costs that lender must provide a prospective homebuyer within three days of the submission of a mortgage loan application.

government mortgage
A type of mortgage insured by the FHA (Federal Housing Authority), VA (Veteran's Administration), or RHS (Rural Housing Authority).

government national mortgage association (Ginny Mae)
A government owned agency that acts as a secondary market conduit for FHA and VA loans. Ginny Mae guarantees securities backed by mortgages that are insured or guaranteed by other government agencies.

grace period
A time allowed, usually 15 days, for making late payments without a penalty.

graduated-payment mortgage
A home loan that starts out with low payments that gradually increase at a pre-determined rate over the first few years of the loan, and then remains fixed for the remainder of the loan.

granny flat
A slang term for a separate unit within a house or above the garage.

grant deed
A deed used in several States to transfer title from on party (grantor) to another (grantee). The deed must describe the property by legal description of the boundaries and/or parcel numbers, be signed by all of the people transferring the property, and by witnessed and signed before a notary public. The transfer is finalized by recording the deed with the County recorder or Recorder of deeds.

The person receiving the title of real property by a deed.

The person transferring title to real property by a deed.

greek revival style
A style that was introduced to the U.S. at the end of the 18th century. The most prominent feature of this architectural style is a pillar-anchored pediment forming a portico in front of the house.

Any stretch of park, open space or other natural setting in a community.

gross monthly income
The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.

guaranteed mortgage
A home loan guaranteed by a government agency or other third-party.

A collateral agreement to pledge or agree to be responsible for another persons’ debt. In foreclosure proceedings the guaranty can be used as a basis for obtaining a deficiency judgment.

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hard-money lender
An institution or private investor who makes high-interest loans to borrowers who are unable to borrow money through more traditional sources.

hard-money loan
Cash loan to a borrower.

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.

high density
The concentration of housing in a specific area or on a specific property.

Any building higher than six stories.

historic preservation
A movement to protect buildings with historic value from destruction or extensive renovation.

historic structure
A home or building listed in the National Registry of Historic Places and certified as historic by the U.S. Secretary of the Interior.

home equity
The part of a homes value that the homeowner owns outright. It is the difference between the fair market value of the home and the principal balance of all of the mortgage loans.

home equity conversion mortgage (HECM)
Also known as the reverse annuity mortgage. This mortgage provides that instead of making payments to a lender, the lender makes payments to the individual. Older homeowners are able to convert home equity into cash this way, in the form of monthly payments. Borrowers don't qualify on the basis of income, but on the value of his or her home. Such a loan does not have to be repaid until the borrower no longer occupies the property.

home equity line of credit
A mortgage loan in second position that allows a borrower to obtain cash drawn against home equity, up to a certain amount.

home equity loan
A loan that allows homeowners to borrow against the equity in their homes.

home inspection
A thorough assessment by a professional regarding the structural and mechanical condition of a property.

home rule
The power of a local government to adopt its own land-use regulations.

homebuyer education learning program (HELP)
An educational program initiated by the FHA that teaches people about the home buying process. This program covers topics like budgeting, finding a home, getting a loan, and home maintenance. This program is a requirement for people applying for an FHA insured loan. Many who complete the program may be entitled to a reduced initial FHA mortgage insurance premium – from 2.25% to 1.75% of the home purchase price.

homeowners association
A nonprofit association that governs a subdivision or planned community. This association collects fees from owners to maintain common areas and enforce covenants, conditions and restrictions set by the developer and the association itself.

homeowners association dues
Monthly or quarterly fees paid to a homeowners’ association that pay for operating expenses.

homeowners’ insurance
An insurance policy that combines personal liability insurance and hazard insurance for a home and its contents.

homeowners’ warranty (HOW)
An insurance policy that is purchased by a buyer that covers certain repairs, should they be necessary over a certain period. The insurance may be provided by the builder of the property or the previous owner as a condition of the sale. The costs are included in the purchase price.

Under some state laws, a property that carries specific privileges and tax advantages to an individual who owns and occupies the house on the land.

household income
The total combined income of all the members of a household.

housing and urban development (HUD)
  1. Established in 1965, HUDs mandate is to create a decent home and suitable living environment for everyone in the U.S. This is accomplished through addressing housing needs, improving and developing communities, and enforcing fair housing laws. HUD oversees the FHA, Fannie Mae, and Ginny Mae.
  2. The Department of Housing and Urban Development or HUD is a government agency that sells foreclosed homes that were secured by FHA insured mortgages. HUD pays the original lender the amount due on the loan plus any additional expenses. HUD homes are handled by property management companies and are sold at auction to the highest bidder.

housing counseling agency
Provides counseling and assistance to people on a variety of housing issues, such as loan default, fair housing, and home buying.

housing expense-ratio
The ratio of the monthly housing payment to total gross monthly income. Also called Payment-to-Income Ratio or Front-End Ratio.

hud median income
Median family income for a particular county or metropolitan statistical area, as estimated by HUD. This number is used to qualify individuals for mortgages.

hud-1 statement
An itemized listing of closing costs that are payable at closing or at a settlement meeting when buying a property. The closing costs can include a commission, loan fees and points, sums set aside for escrow payments, taxes, and insurance. The document is signed by both the buyer and the seller.

hybrid financing
The joining together of two forms of finance, such as combining a convertible loan with a participation loan, under which the lender has the right at loan maturity to convert the debt to a 50 percent ownership in the property.

To pledge something as security without having to give up possession of it. Through a mortgage or deed of trust, the borrower hypothecates his/her new home to the lender or trustee and still retains control the home.

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impact fees
Fees that municipal government collect from housing developers to pay for schools, parks, road improvements, and other facilities.

Additions to real property that enhance its marketability and value.

in lieu of
Instead of or in place of.

income property
Property that the owner does not occupy that has been developed and improved to produce income.

incurable defect
A flaw in real property that cannot be repaired or is too expensive to repair in relation to the value of the property.

A published interest-rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments - such as one, three, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans – that is used to determine interest-rate changes for adjustable-rate mortgages and other variable rate loans such as credit card debt.

The number of dollars in circulation exceeds the amount of and goods and services available for purchase. It is the sustained increase in prices for goods and services and is measured as an annual percentage increase. As the inflation-rate increases the purchasing power of a dollar decreases.

initial interest-rate
The starting interest-rate a borrower pays, to a lender, for the use of borrowed money on an adjustable-rate mortgage.

A court decision intended to prevent harm. In judicial foreclosure an injunction is used to postpone an ongoing foreclosure action so that a judge can determine that the proceedings are just and proper.

inside lot
A lot that is surrounded on each side by other lots, which has road frontage on at least two sides.

inspection report
The documentation of an objective visual inspection of a homes structure and systems. An inspection report is complied to determine if there are any problems or conditions that exist at the time of the inspection. The inspection is conducted before the home is purchased. Inspections include areas of a homes interior and exterior, from the roof to the foundation and the exterior drainage and retaining walls.

The regular monthly payment that a borrower agrees to make to a lender to payoff a loan or outstanding debt.

installment contract
A purchase agreement in which the buyer makes a series of payments and does not receive title to the property unit all of the installments are paid.

A written legal document such as a deed, trust deed, lease, re-conveyance or a contract.

insurable title
Title to real property that a title insurance company agrees to insure against defects and disputes.

A policy that provides protection against specified losses over a period of time that is secured by monthly payments or a lump sum payment of a regularly scheduled premium. Insurance policies guarantee compensation for loses specified in the policy.

insurance binder
A temporary insurance policy used until a permanent policy can be put into effect.

insured mortgage
A mortgage protect by mortgage insurance through the by the Federal Housing Administration or by private mortgage insurance. If the loan is defaulted, the insurer is required to pay the lender the lesser of the loss incurred or the insured amount.

intent to sell
A notice made by a lender or other secured party as part of the initiation of foreclosure proceedings of the intent to sell the secured property at a public or private sale at the conclusion of foreclosure proceedings.

  1. The fee charged by a lender for the use of borrowed money, usually a percentage of the amount borrowed.
  2. The profit in goods or money that is made on invested capital.
  3. A legal right to claim a share in real property.

interest accrual-rate
The rate at which interest accrues on a mortgage.

interest only loan
A term loan arrangement calling for payments of interest only, not to include any amount for principal.

Is the yearly price charged by a lender for the use of borrowed money. This is usually expressed as a percentage of the total amount loaned. It is calculated by dividing the amount of interest by the amount of principal. Interest rates change as a result of inflation and Federal Reserve policies.

interest-rate buy-down plan
In order to sell their home quickly some sellers are willing to advance funds from the sale of the home to buy down the interest rate and reduce the buyer’s monthly obligation.

interest-rate cap
A limit on how much a borrowers interest-rate can increase at rate adjustment periods and over the life of the loan.

interest-rate ceiling
The highest interest a lender can charge for an adjustable-rate mortgage.

interest-rate swap
A transaction between two parties, in which each agrees to exchange payments tied to different interest rates or indices for a specified period of time.

intermediate-term mortgage
A mortgage loan with a stated maturity at the time of purchase that it is equal to or less than 20 years.

The procedure occurs when two parties are involved in a lawsuit over the rights to collect a debt from a third party. The third party admits that money is owed but does not know whom to pay. The third party or debtor deposits the funds owed with the court and asks the court to dismiss them from the lawsuit and lets the two parties fight over the money in court.

investment property
Real estate purchased to generate income, such as an apartment building or rental house.

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jalousie window
A window made up of vertical rows of horizontal glass slats that opens and closes by a crank mechanism that connects all of the slats.

joint liability
The responsibility of two or more people to fulfill the terms of a home loan or repay a debt.

joint tenancy
Ownership of real property between two or more people in which each person has an undivided interest in the entire property.

joint venture
An agreement between two or more properties who invest in a single business or property.

A floor or ceiling support member that is supported by foundation walls, piers or beams. Sub-flooring is connected to floor joists.

The finial decision by a court in a lawsuit. In foreclosure cases it is a decree stating that an individual owes money to the lender. A lien may be placed against the debtors real property as collateral for the judgments creditor.

judgment lien
The claim upon the property of a debtor resulting from a judgment. The lien will bind the debtors real property once an abstract of judgment is recorded.

judicial foreclosure
A foreclosure that is filed as a formal lawsuit in a state court. The procedure involves filling a complaint, sending per notice to the interested parties, entry of a judgment, sale of the property at an auction sale, and confirmation of the sale by the court. The process varies from State to State and is determined by State law.

jumbo loan
A loan that exceeds the maximum underwriting limits set by Fannie Mae and Freddie Mac. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate. Jumbo loans must be maintained in the lenders portfolio or sold t private investors.

junior lien
A lien whose claim against the property will be satisfied only after prior liens have been repaid.

A geographic or topical area of authority for a specific government entity.

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key lot
The one property in a development that is essential to the developments success.

A fee or rebate paid to an agent or other participant in a transaction as an incentive to refer customers to a particular vendor. The referring party provides not service to the customer other than referral. Kickbacks to brokerage agents from mortgage lenders are prohibited by the Real estate Settlement Procedures Act (RESPA).

A payment that is required by a mortgage in addition to the normal principle and interest.

kick-out clause
A provision in a sales contract that allows the seller to void the agreement if a better offer is received before the sale is closed.

kit home
A structure that contains prefabricated components and is put together by a contractor.

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Is the solid part of the surface of the earth, any ground, soil or earth whatsoever regarded as the subject of ownership and everything annexed to it.

land contract
An agreement for the sale of the property where the buyer receives possession of the property while making payments, and the seller holds the title until full payment is made.

land survey
A detailed mapping and drawing of a property.

late charge
A penalty fro failure to pay an installment on time.

late payment
A payment received after the due date has passed.

latent defect
A hidden structural defect.

A binding agreement between a property owner and a tenant that contains the terms and conditions under which the tenant may occupy the property.

lease option
A rental agreement indicating a tenant's option to purchase a property. Monthly payments consist not only of rent, but an overage that can be applied towards a down payment on an already established amount.

leasehold estate
An arrangement in which the borrower does not own the property but possesses a long-term lease.

legal blemish
A problem with a property, such as a lien on the title.

legal description
A specific way of identifying and locating a piece of real estate that is acceptable to a court of law.

The bank, mortgage company, or mortgage broker that offers home loans. Many institutions only "originate" loans and then resell the obligation to third parties.

The person who signs the lease.

The person who grants a lease.

letter of intent
A formal notification that a buyer intends to buy a property. It is not legally enforceable.

The use of a small down payment and a large loan to buy a piece of property.

A borrower’s debts and financial obligations.

liability insurance
Insurance that protects property owners against any claims of negligence, inappropriate action that resulted in bodily injury, or property damage to another party.

libor rate
LIBOR stands for London Interbank Offered Rate. It is an average of the interest rates that major international banks charge each other to borrow U.S. dollars in the London money market. Like the U.S. treasury CD indexes, LIBOR tends to move and adjust quite rapidly to changes in interest rates. It is an index that is used to set the cost of various variable-rate loans, including credit cards and adjustable-rate mortgages.

A legal claim against property for payment of a debt or for services rendered. The person or entity who holds a lien has the legal right to sell the property to obtain money or recover money when the property is sold.

lien theory
Is a legal concept where a property acts as the security for a loan transaction. The lending institution, in the name of the borrower, holds the title of the property until the property is paid off and the lien can be released.

life of loan cap
The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial loan rate. For example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime cap will never adjust above a rate of 13.25% (7.25+6.0).

limited partnership
A partnership consisting of one or more partners who conduct the business and are responsible for losses, and one or more special partners, who contributes capital and are liable only to the amount contributed.

line of credit
An agreement by a financial institution to extend credit up to specified maximum amount to a customer during a specified period of time.

liquid asset
A cash asset and other property that can easily be converted into cash.

liquidated damages
An amount specified in a purchase agreement that one party must pay the other if the contract is breached.

lis pendens
A pending lawsuit. It is a written notice that a lawsuit has been filed which concerns the title to real property. Lis pendens is filed with the clerk of the court, certified that it has been filed, and is then recorded at the County Recorders office.

Property placed on the market by a listing agent.

listing agent
A real estate agent hired to sell a property. The property being sold is listed on the Multiple Listing service (MLS).

listing agreement
Agreement between a property owner and a real estate broker that authorizes the broker to find a buyer for the property. If the broker finds a buyer for the home, the broker will be compensated.

The principal, or amount of total borrowed money, that is repaid with interest.

loan amount
The amount of money that you intend on borrowing from a financial institution for the purchase of your home. Subtracting the down payment from the purchase price of the home will provide you with the loan amount.

loan officer
An intermediary between lending institutions and borrowers, loan officers solicit loans, represent creditors to borrowers, and represent borrowers to creditors.

loan origination
What the process of obtaining new loans is called.

loan servicing
A service performed by a lender to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.

loan term
The length of time written in the terms of a loan, by the lender and the borrower, to pay off a mortgage.

loan-to-value ratio
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the value of the property and paying 10% as a down payment. For purchases, the value of the property is assumed to be the purchase price, for refinances the value is determined by an appraisal.

The period, expressed in days, during which a lender will guarantee a rate. Some lenders will lock rates at the time of application while others will allow the borrower to lock the rate after the application is taken.

lock-in clause
Clause in a loan agreement that states that the borrower cannot repay a loan prior to a specified date.

loss mitigation department
A department that attempts to help a borrower avoid foreclosure. The lender tries to help a borrower who has been unable to make their loan payments and is danger of defaulting on their loan.

lot and block number
Method of locating a parcel of land. The description refers to a map of a subdivision that numbers each lot and block.

low-documentation loan
Low-doc or no-documentation mortgage applicants have to have excellent credit histories but their income and assets are not verified. Low-documentation loans are designed for the entrepreneur or the self-employed. A substantial down payment is needed and a higher interest rate will be charged.

low-down payment loan
A mortgage or loan in which the buyer puts down a small down payment and borrows a very high percentage of the purchase price.

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The amount a lender adds to the quoted index rate for an adjustable rate loan to determine the new interest rate.

market price
The price paid for a property.

market value
The price a property can realistically sell for, based on comparable selling prices in the area.

marketable title
A title that is free and clear of liens, clouds or other title defects. A Marketable title enables an owner to sell her/his property freely and without objection.

The date the loan is due and payable in full.

mechanic’s lien
A legal claim against a property to secure payment for the price or value of work performed and material furnished in construction or repair on a property.

median price
The price of the house falls in the middle of the total number of homes for sale in the area.

memorandum of agreement
A written document meant to memorialize the essentials of a transaction or act as an actual contract.

merged credit report
A credit report that reports data from two or more major credit bureaus.

metes and bounds
An old fashioned land surveying method of describing land in terms of shape and boundary dimensions.

minimum credit
The minimum credit rating requirements a borrower can have to qualify for a loan.

minimum payment option mortgage
A mortgage where the borrower can choose to pay a low monthly payment. The payment, in most cases, will be insufficient to pay the interest due and will result in a higher loan balance the following month.

mint condition
A house that looks like new.

mixed-income housing
A neighborhood where residents earn widely varying wages and salaries.

mixed-use development
A construction project that combines several different functions, such as residential space above a commercial business or an entire development that combines commercial, residential and public buildings.

Any change to the original terms of a mortgage.

money market account
Work like money market funds and allow individual investors to participate in certain managed investments and with draw funds under most conditions.

money market funds
A mutual fund that pools the resources of individuals to invest in managed investments.

monthly housing expense
Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.

A legal document that pledges property to a creditor for the repayment of the loan, and is the term used to describe the loan itself. Some states use the term First Trust Deeds to refer to mortgage loans.

mortgage acceleration clause
A provision in a loan agreement that lets a lender demand payment of the full balance under specified circumstances, such as sale of the property, default or refinancing.

mortgage banker
A financial intermediary that originates or funds loans, collects payments, inspects the property, and forecloses if necessary. The main difference between a mortgage banker and a loan officer is a banker funds their own loans and sell them on the secondary market.

mortgage broker
A person finds lenders for prospective borrowers who meet the lenders’ criteria, joining the borrower and lender for a real estate loan. A mortgage broker earns a placement fee.

mortgage constant
The factor used for rapid computation of the annual payment needed to amortize a loan.

mortgage insurance (MI)
Insurance that covers the lender against losses incurred as a result of a default on a home loan. This is usually required on all loans that have a loan-to-value higher than eighty percent. Mortgages that have an 80% LTV that do not require mortgage insurance have higher interest rates. The lenders then pay the mortgage insurance themselves. Private mortgage insurance (PMI) is required for all conventional loans with less than a 20% down payment. In addition, FHA loans and some first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

mortgage insurance certificate (MIC)
A certificate that shows that the FHA has agreed to insure a loan.

mortgage insurance premium (MIP)
The amount paid by a borrower for mortgage insurance, either to a government agency or to a private mortgage insurance company.

mortgage loan
A loan secured by real property using a mortgage instrument.

mortgage modification
A loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan.

mortgage note
A written promise to repay funds advanced by the mortgage lender on the agreed upon terms.

mortgage refinance
An old loan paid off with a new loan. Individuals who refinance a mortgage are generally doing so to get lower interest rates, lower their payments, or to take cash out of their equity.

The lender in a mortgage agreement.

The borrower in a mortgage agreement.

motivated buyer
A buyer with a strong incentive to purchase a property.

motivated seller
A seller with a strong incentive to make a deal and sell a property.

move-in condition
A house that is ready for the new homeowners to move into without any extra work.

move-up buyer
A homebuyer who is looking for an upgrade from his/her current home.

multi-dwelling units
Properties that provide separate housing units for more than one family, although only a single mortgage is secured.

multi-family mortgage
A loan to buy an apartment building using the property as collateral.

multiple listing service (MLS)
A directory compiled by the Board of Realtors that lists all of the properties available in an area that are being sold by realtors. For sale by owner properties are excluded from this list.

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national foundation for consumer credit (NFCC)
The NFCC is a nonprofit organization that educates consumers about using credit wisely. The NFCC is the parent group for the Consumer Credit Counseling Service.

needs-based pricing
A sellers asking price based on funds needed to pay off the mortgage, cost of remodeling, and/or the purchase price of another home.

negative amortization
Occurs when a borrower is paying less interest than what is being charged for the mortgage loan. The unpaid interest is added to the loan’s principal. The borrower ends up owing more than the original amount of the mortgage loan.

net cash flow
Incremental after-tax income plus depreciation expense resulting from an investment.

net income
Gross income less federal income tax.

net worth
The total value of all assets minus all debts.

neutral market
A real estate market that doesn’t favor buyers or sellers. Basically it is a flat market.

new urbanism
Planning of a community that favors the return of new home development with traditional such as; grid-street patterns, prominent front porches, backyard garages, multi-use buildings, and housing clustered near shopping and business centers.

no cash-out refinance
A refinance transaction that is not intended to put cash in the hand of the borrower, but instead calculates a new balance to cover the balance due on a current loan and any costs with obtaining a new mortgage.

no-cost loan
A no-cost loan can either be:
  1. A loan that has no "lender costs" associated with it or
  2. A loan that also covers purchases or refinancing costs, which may be incurred in buying a home, obtaining and/or refinancing a loan, but are not directly charged by the lender. The interest rate on this type of loan is higher.

no-documentation loan
A mortgage in which an applicant provides a minimum of information. The underwriter bases his/her decision on the applicant’s credit history, the appraised value of the house, and down payment amount.

non-assumption clause
A loan provision that strictly prohibits the transfer of a mortgage to another borrower with out the lenders permission.

non-conforming loan
A loan that does not conform to Fannie Mae or Freddie Mac guidelines because the loan amount is to high or the underwriting or other criteria are not met.

Two or more parcels of property that are not connected.

non-dischargeable debt
A debt that cannot be eliminated in bankruptcy.

non-judicial foreclosure
Does not involve a court action. This foreclosure process occurs in the presence of a third-party trustee as set forth in the deed of trust. Non-judicial foreclosure is practiced in title theory states, or those that use a deed of trust to secure a lien against real property rather than a mortgage. In title theory states the deed is placed in trust with a third party until all obligations contained in the promissory note have been satisfied. After the borrower has met all of their obligations the third party must return the title back to them. If the borrower becomes delinquent on the loan, the lender can instruct the trustee to file a notice of default in the county in which the property is located. The deed of trust contains the power-of sale provision that authorizes the lender to sell the borrower’s property through a trustee rather than a judge.

non-liquid asset
An asset that is not easily turned into cash.

non-recurring closing costs
One-time fees paid at a real estate settlement including appraisal, loan points, title insurance, home inspection, and credit report.

notary public
A person authorized by the state in which the person resides to administer oaths, take acknowledgments, certify documents, and take depositions if the notary is also a court reporter. The Secretary of State of each state appoints notaries public for a specified term of years. A notary public must see proof of identity of those swearing in and keep an official journal of documents notarized.

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

note rate
The stated interest rate on a mortgage note.

notice of default (NOD)
A publicly recorded formal written notice to a borrower, with a property used as security under a mortgage or deed of trust, that he/she is delinquent on her/his payments. If the delinquency and the costs of preparing the legal papers for the default are not paid within a specified time, foreclosure proceedings may move forward.

notice of foreclosure sale
Also known as Notice of Sale. Used in Judicial Foreclosure it is the final judgment of foreclosure. It is a public notice announcing the sale of a property to recover a debt from a defaulted mortgage. The notice indicates the time, date, description of the property, and the location of the sale. The Notice of Foreclosure Sale is mailed to all of the parties involved in the foreclosure action, advertised in the local papers, and recorded in public records.

notice of intent to cure
Notifies the lender, trustee or any other party involved in the foreclosure process of the intent of the borrower to cure a pending default or bring a defaulted loan current. In some areas this notice is required to reinstate the loan.

notice of intent to foreclose
An alternate term for Notice of Default used in title theory states to notify borrowers that they are delinquent on their payments. If the delinquency and the costs of preparing the legal papers for the default are not paid within a specified time, foreclosure proceedings may move forward.

notice of intent to redeem
Notifies the lender, trustee or any other party involved in the foreclosure auction sale that the borrower, who has been foreclosed upon, intends to exercise their right of redemption and reclaim the foreclosed property. In order to reclaim the property the borrower has to pay the loan in full and any other costs incurred during the foreclosure process.

notice of sale
Also known as Notice of Foreclosure Sale. Generally used in Judicial Foreclosure it is the final judgment of foreclosure and announces the public sale of a property to recover a debt owed by the owner of the property. The Notice of Sale specifies the time, date, description of the property, gives an estimate of the unpaid debt, and the location of the sale. It is mailed to all of the parties involved in the foreclosure action, advertised in the local papers, displayed in public view at the county courthouse, and recorded in public records.

notice of trustee
A written document used in the Non-Judicial Foreclosure process that contains the name and contact information of the trustee in a foreclosure.

notice of trustee sale (NTS)
The final phase in the Non-Judicial Foreclosure process. It announces the public sale of a property to recover a debt owed by the owner of the property. The Notice of Trustee Sale gives an estimate of the unpaid debt, describes the property and specifies the time, date, and location of the auction sale. It is mailed to all of the parties involved in the foreclosure action, advertised in the local papers, recorded in public records, and displayed in public view at the county courthouse.

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off calendar
A foreclosure that has been removed from the trustee’s sale calendar. A new Notice of Trustee’s Sale notice will have to be filed in order to set a new sale date.

A written document submitted by the buyer to the seller that indicates his/her interest in buying the sellers home at a specific price, and with specific conditions.

one-price bids
A single bid at an auction sale that is based on a fixed written submission.

open house
A selling tool in which a real estate agent advertises a property for sale and invites the public to view the property without an appointment.

open listing
A property given to a number of brokers to market and sell for a commission at the same time.

open space
Open land or common areas in a planned community that is reserved for parks and walking paths.

open-end credit
A line of credit that can be used to set a limit.

Is when a buyer puts down money for the right to purchase, sell, or lease a property within a set time period but does not have an obligation to buy.

oral agreement
Contractual arrangements that are not in writing and are usually not legally binding. Oral agreements are not enforceable in real estate transactions.

original principal balance
The amount of principal owed on a loan before the borrower makes any payments.

origination fee
The fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned.

Money bid in excess of the auction sales minimum bid. It is distributed to the various equity holders.

owner carry back
When a property owner takes back a portion of their sales price in the form of a deed of trust.

owner financing
A property purchase that is partly or wholly financed by the seller.

owner of record
The person named on a deed that has been recorded at the county courthouse.

owner's title policy
A policy protecting the buyer for the amount of the purchase price in the event of a future title dispute.

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package mortgage
A mortgage that /includes equipment and appliances located on the premises in addition to the real property itself.

An officially described piece of land.

partial claim
A loss mitigation option offered by the FHA that allows a borrower, with the help of a lender, to get an interest free loan from HUD to bring their mortgage payments up to date.

partial entitlement
Under VA loans, the amount of guarantee still available to an eligible veteran who has used his previous entitlement.

partial payment
A payment that is not sufficient enough to cover the month payment. During times of economic hardship, a borrower can ask the loan servicing collection department that a partial payment be accepted as a monthly payment.

participation financing
A loan in which more than one mortgagee or more than one mortgagor harbors an interest. It can also be a loan in which the mortgagee receives partial ownership of the property being financed.

payment change date
The date when a new monthly payment amount takes effect on an adjustable rate mortgage (ARM) or a graduated payment mortgage (GPM). The payment change date occurs the month immediately after the interest rate adjustment date.

perfected title
A title interest that has been recorded.

periodic payment cap
The limit on the amount that payments can increase or decrease during any one adjustment period for an adjustable-rate mortgage (ARM) where the interest rate and principal fluctuate independently of one another.

periodic rate cap
The limit on the amount that payments can increase or decrease during any one adjustment period in an ARM (adjustable rate mortgage), regardless of how high or low the index fluctuates.

personal property
Movable or harvested property.

A formal, written request to an authority that something needs be done or some action needs to be taken.

petition for foreclosure
The lenders application to the court to initiate foreclosure proceedings. This document is filed with the local county courthouse and names all of the parties that have an interest in the defaulted property.

piti reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI (principal, interest, taxes, and insurance) must equal the amount that the borrower would have to pay for PITI for a determined number of months.

planned unit development (PUD)
A type of ownership where individuals actually own the building or unit they reside in, but shared areas are owned jointly with the other members of the development or established association.

A map that shows a parcel of land and how it is subdivided into separate lots. Plat maps will also show the locations of streets and easements.

pledge account mortgage (PAM)
Combines GPM (graduated payment mortgage) with a subsidizing savings account to provide the borrower with a low payment plan, the lender with amortizing payments and the seller with cash.

Fees charged by lenders at the time a loan is originated. A point is 1% of the amount of the loan.

portfolio loan
A loan that a lender holds in inventory rather than resell in the secondary market.

Placing a foreclosure notice on a bulletin board and attaching it to the foreclosed property.

An announcement that reschedules a foreclosure auction sale.

power of attorney
A legal document that authorizes one person to enter into agreements and sign documents on behalf of another.

power of sale
A clause found in mortgages and deeds of trust that gives the trustee the right to sell the mortgaged property at a public auction to satisfy a debt.

A term used to mean that a borrower has completed a loan application and provided debt, income, and savings information that has been reviewed and pre-approved by an underwriter.

predatory lending
Making unaffordable loans based on the assets of a borrower rather than the borrowers ability to repay a loan.

A pre-foreclosure is the period before the foreclosure auction when the borrower is more than 90 days delinquent on their mortgage payment and a notice of default has been recorded. The main purpose for this phase of foreclosure is to give the borrower time to sell their property or to pay back their loan to the lender. This is often the first phase that an investor or homebuyer has an opportunity to negotiate with the homeowner or lending institution to purchase the property.

pre-foreclosure sale
A procedure in which the borrower is allowed to sell his or her property to satisfy the loan and avoid foreclosure.

preliminary title report
A title company report made before title insurance is issued that shows an open title record of a property.

Expenses such as taxes, insurance, and assessments, which are paid in advance of their due date, and on a prorated basis at closing.

Any amount paid to reduce the principal before the due date.

prepayment penalty
Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all-of their loan in advance of the regular schedule.

After a loan officer has made inquiries about a borrower's debt, income, and savings, he or she can write a written statement (pre-qualification) about the borrower's chances for qualifying for a home loan.

prime rate
Interest charged by financial institutions to top-rate borrowers.

The amount of debt, not counting interest, left on a loan.

principal, interest, taxes, insurance (PITI)
The four components of a monthly mortgage payment.

priority clause
A clause in a subordinate lien that states that it is subject to a prior lien.

private mortgage insurance (PMI)
Paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-to-Value Ratio is greater than 80%.

The process of establishing the validity of a will before an officer of the court. Once validity is confirmed, the probate court will then administer the sale of the property as directed by the will or as authorized by the court to settle any financial obligations.

probate sale
The sale of property after the death of an owner. It is supervised by the court and the proceeds are divided amount the creditors and heirs.

promissory note
A written promise between a borrower and seller to repay a specified amount over a specified period of time that is secured by a deed of trust.

  1. A piece of land or a home that is owned by a person.
  2. Something of value – personal or monetary - that is owned.

property disclosure
A statement that lists information regarding the problems and hazards related to a piece of property.

property line
The official dividing line between properties.

property profile
Contains documents regarding the ownership, legal description, concurrent liens, and property data of a specific piece of land. A tax roll, plat map, and comps are also generally included.

property tax deduction
Written into the U.S. tax code, property owners can deduct the amount of money they have paid in property taxes.

property taxes
A tax levied by the local municipality or county on real and personal property.

property value
The value of a piece property is based on the price a buyer will pay at a certain time.

Agreed upon percentages of specified expenses associated with a piece of property that needs to be paid by the buyer or seller at the time of closing.

public auction
An auction sale of a foreclosed property that is announced to the general public in newspapers, posted on the property that is being auctioned, and at the county courthouse.

public record
In real estate, this term usually refers to land transaction records maintained at the county courthouse.

punch list
A list compiled by a buyer before the sale detailing items that need to be fixed before closing.

purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

purchase-money mortgage
Mortgage given by a borrower to the seller as part of the purchase price of the property.

purchase-money transaction
The acquisition of property through the payment of money or its equivalent.

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Determined by the lender. Based on the ability of a borrowers ability to repay a mortgage using the borrowers credit history, employment history, assets, debts, income, and other factors.

qualifying ratios
Debt and income calculations that are used to determine whether a borrower can qualify for a mortgage. Qualifying ratio calculations are made up of a housing expense ratio and total expenses ratio.

queen anne style
A Victorian-era style that originated in England during the reign of Queen Anne and was revived in both England and America in the late 19th century.

quiet enjoyment
The right of an owner to use his or her property without interference.

quiet title suit
A lawsuit filed to ascertain the legal rights of an owner to a certain parcel of property.

quitclaim deed
A deed that transfers, without warranty, whatever interest or title a grantor may have at the time the conveyance is made.

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radon gas
Radon is a radioactive that comes from the natural decay of uranium that is found in nearly all soils. It enters homes through gaps, cracks in the foundation, and other inlets. Radon, if found in sufficient concentrations may cause health problems.

rate lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

real estate
A portion of the earth's surface extending downward to the center to the earth and upward into space, including all things permanently attached thereto by nature or man and all legal rights therein.

real estate agent
A person licensed to negotiate and transact the sale of real estate.

real estate owned (REO)
A property that the bank purchased at auction or went back to the mortgage company after an unsuccessful foreclosure auction. The bank now owns the foreclosure and the mortgage no longer exists.

real estate settlement procedures act (RESPA)
An act requiring the revelation of all costs involved in a real estate closing to all participants.

real property
See real estate.

A real estate agent, broker, or associate that holds an active membership in a local real estate board that is affiliated with the National Association of Realtors®.

To redesign an existing loan balance into a new loan for the same period or longer, to reduce payments and help a distressed borrower.

Determining the final estimate of value by weighing the results of the various approaches in an appraisal.

re-conveyance clause
The clause in a trust deed that gives the title back to the borrower when the loan is paid in full.

A public official responsible for keeping the records of all real estate transactions.

The formal filing of documents affecting a property's title.

recording fees
Money paid to the lender for recording a auction sale with local authorities, making it public record.

redemption period
Occurs after the auction sale. It is the period during which a former owner can reclaim a foreclosed property after paying all defaulted sums, costs, and fees.

The process of paying off one loan with the proceeds from a new loan, using the same property as security.

regulation z
A truth-in-lending provision that requires lenders to reveal the actual costs of borrowing.

Paying enough money to cure all amounts past due including fees and costs incurred on a defaulted loan.

Occurs in the pre-foreclosure phase. It is the period after foreclosure begins when a borrower can still avoid losing his/her home by paying the overdue balance and other fees incurred.

To relieve from debt or security or to abandon a right.

release fees
A fee charged by a lien holder to release a secured property from a lien.

remaining balance
Unpaid principal on a loan.

remaining term
The amount of time it will take to pay off the rest of an installment loan as scheduled.

rent-loss insurance
Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty, resulting in the tenant being excused from paying rent.

repayment plan
An agreement between a lender and a delinquent borrower regarding mortgage payments, in which the borrower agrees to make additional payments to pay down past due amounts while still making scheduled payments.

replacement reserve fund
Money set aside by a homeowners association or condominium board to replace common property.

Taking back property from a borrower after they have defaulted on a loan.

resale value
The future value of a piece of property that can be affected by many factors, including the surrounding neighborhood, schools in the neighborhood, and economic and housing market conditions.

Cancellation of a contract by agreement of the parties involved.

Money set aside to cover recurring expenses such as property repairs and improvements.

residential trust property
A residential property secured by a deed of trust.

residual qualifying
Under a VA loan, using specified housing expenses to qualify for a loan payment.

Rules imposed on the use of real estate in an effort to preserve property values.

reverse annuity mortgage (RAM)
A system developed for an elderly property owner in which regular monthly payments can be received from a lender. When the total reaches a pre-determined amount, the owner begins repaying the loan or sells the property.

reverse mortgage
A loan that allows a homeowner to convert built-up equity into cash. The loan is due when the owner dies, sells the house, or moves out.

revolving debt
A credit arrangement that allows a customer to borrow against a pre-approved line of credit used to purchase goods and services. The borrower is responsible for the actual amount borrowed plus any interest due.

right of ingress or egress
The right to enter or leave a property.

right of redemption
The borrowers right to reacquire title to a property in a judicial foreclosure within a year, depending on the state, of the judgment.

right of rescission
A provision in the federal Truth in Lending Act that allows borrowers to cancel a loan within three days of signing.

right of survivorship
In joint tenancy, the right of a survivor to gain the interest of a joint tenant who has passed away.

right-of-first refusal
A provision that states that a property to be first offered to a specific person before it can be offered for sale or lease to other parties.

rollover loan
A loan that includes a call date earlier than its normal amortization period.

rule of 78
Calculates proportionate amount of interest due on a loan being paid in full before its maturity.

rural housing service
A U.S. Department of Agriculture program that provides financing to farmers and certain borrowers to purchase rural property when other funds are not available.

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A financing arrangement in which an investor buys property from a developer and immediately sells it back under a long-term sales agreement, wherein the investor retains legal title.

A financing arrangement whereby a buyer leases the purchased property back to the seller for a specified period of time.

sales contract
A written agreement between buyer and seller that details price and other terms and conditions of the sale.

satisfaction of mortgage
A document that is issued by a lending institution when the mortgage is paid in full.

savings and loan association
A state or federally charted depository financial institution that was originally primarily a provider of mortgages. Since deregulation in the 1980s Saving and loan associations now offers services similar to commercial banks.

schematic designs
Structural plans for a building’s mechanical systems, such as its plumbing and electrical functions.

scire facias
A judicial writ that requires a defendant to appear in court to prove why an existing judgment should not be executed against her/him. It is brought in a case that has already been before a court and commands the person that it is being brought against to appear before the court and show why the judgment brought against them should not stand. In some states this writ is used in foreclosure proceedings. It requires the defaulting borrower to prove that the loan is not in default as opposed to the defaulting lender being required to prove that the loan is in default.

sealed bids
Offers submitted in a closed envelope so that other bidders do not see what they are willing to pay.

second mortgage
A mortgage using a home’s equity as collateral and has a lien position subordinate to the first mortgage.

secondary financing
A loan that is secured by a mortgage or a trust deed that has a lien that is junior to another mortgage or trust deed.

secondary market investors
An entity that buys and sells mortgage loans for investment or sells them to another secondary market investor. Secondary market investors do not service loans and do not collect payments from borrowers.

secondary mortgage market
A market of packaged home loans that are resold as securities to investors. Major players are Fannie Mae and Freddie Mac. By selling loans in the secondary market, lenders obtain the funds needed to distribute new loans.

section 8
A government rental assistance program for low-income families.

secured loan
A loan that is backed by collateral.

Property or assets designated as collateral for a loan.

security agreement
A document of a section of a note between a lender and borrower that states that the lender can repossess the property used as collateral if the borrower defaults on the loan.

security deed
Transfers legal title to the lender for the term of the mortgage or loan. If the borrower defaults a security deed provides the lender and opportunity to foreclose or seize a property without having to take the borrower to court. A security deed is used in non-judicial foreclosures.

security instrument
The mortgage or trust deed that is the evidence of the pledge of real estate as security, as distinguished from the note or other credit instrument.

self-amortizing mortgage
A loan that will retire itself through regular principle and interest payments.

seller broker
Is legally bound to represent the interests of the seller and only the interests of the seller.

seller carry-back
An agreement in which the owner of a property provides financing for a home purchase. Used often in combination with an assumable mortgage.

seller financing
The seller allows the borrower to use a portion of the equity in the property to finance the purchase.

seller take-back
See seller carry-back.

seller’s market
A hot real estate market in which sellers have the advantage and multiple offers are common. The demand for property is greater than supply driving prices up.

selling agent
A real estate broker or agent who writes a purchase offer for a buyer in a real estate transaction, but may or may not represent the buyer.

senior loan
A real estate loan in first priority position.

A third party organization that collects mortgage payments and manages borrowers’ escrow accounts. These organizations generally service mortgages that have been purchased by an investor in the secondary mortgage market.

The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

The final meeting between the buyer and seller that completes the real estate transaction.
See closing.

settlement agent
Conducts the final meeting that completes the sale of the property.
See closing agent.

settlement costs
Fees paid by the borrower when a property is purchased or refinanced.
See closing costs.

settlement statement
An itemized listing of closing costs that are payable at closing or at a settlement meeting when buying a property.
See HUD-1 statement.

shared-appreciation mortgage
A loan that allows a lender or other party to share in the borrowers’ profits when the home is sold.

shared-equity transaction
An arrangement in which two buyers purchase a property, one lives on the property and the other has an ownership stake as an investor. The partners split the profits when the property is sold.

The top law enforcement officer for a county. The position is usually an elected position and is responsible for police protection outside of incorporated cities, management of the county jail, providing bailiffs for protection of the courts, and such civil activities as serving summonses, subpoenas and writs, conducting judgment sales, and fulfilling various functions ordered by the courts.

sheriff’s deed
A deed given at the sheriff’s sale to the person who had the highest bid and purchased a foreclosed property. Evidence of ownership given by a court in the sale of property for unpaid taxes or a foreclosed property sale.

sheriff’s sale
  1. An auction held by the sheriff following a writ of execution to seize and sell real property to satisfy a judgment, after notice to the public has been posted.
  2. A sheriff’s sale is used in judicial foreclosure and is the auction sale of real property used to secure a defaulted mortgage sold as a result of a foreclosure judgment.

short sale
A short sale is a sale of a property in which the sale price is less than what the owner still owes on the mortgage. It is a procedure that is sometimes agreed to by lenders, who would rather take a small loss than go through costly and lengthy foreclosure process.

simple assumption
A loan assumption in which the original borrower remains secondarily liable should the individual who assumed the loan defaults on the loan.

simultaneous priority
Two or more liens recorded one right after the other in the same transaction, against the same property, are of equal parity unless there’s a written indication on one of them as to their respective priorities.

sinking fund
Monies deposited in advance in anticipation of satisfying a debt in the future.

soldier’s and sailor’s relief act
Protects certain military personnel from losing their homes to foreclosure while they are on active duty.

sole ownership
Real property owned by one person.

spanish mission style
A design that is derived from the missions established by the Spanish in the Southwest.

special assessment
Money levied upon owners in a homeowners’ association for the purpose of public improvements.

special deposit account
An account that is required in rehabilitation mortgages. Restoration and remodeling funds are disbursed from the account to the appropriate contractors as work is completed.

special forbearance
A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments

split-level style
A home that is a ranch-style house stacked to fit on a smaller lot and perhaps to accommodate a garage.

square footage
The area within a building, calculated by measuring the rooms by length and width.

standard payment calculation
A calculation used to determine the monthly payments, based on the beginning loan balance, the term and the interest rate.

state and local housing programs
Unique housing finance programs to assist first time homebuyers and low to moderate housing groups. Each state and local group has different sets of criteria.

statutory lien
An involuntary lien. It includes tax liens, judgment liens, and mechanic liens.

statutory redemption
The right of a borrower to regain property that was foreclosed, according to written law.

A fixed-rate home loan on which payments are lower at the beginning, typically for two years, and which then rise.

stop date
Date on a term loan when the balloon payment is due.

straight purchase
A transaction in which the buyer gives a new-home builder a deposit to begin building and the balance when the sale of the house closes.

strict foreclosure
A court action foreclosure proceeding in which the lender has the right to possess the mortgaged property directly upon default on the mortgage agreement. The lending institution obtains title directly without the requirement of holding a foreclosure auction sale. This type of foreclosure is rarely used.

The process in which the owner of a large piece of property into smaller parcels.

The transfer of rights to pay a debt from one party to another, with the original party remaining liable for the debt if the second party defaults.

subordinate financing
Any mortgage or other lien that has a priority lower than that of the first mortgage, or senior loan. See second mortgage.

subordinate loan
A second or third mortgage.

subprime borrower
A borrower with less-than-perfect credit due to late payments or a default on debt payments. Lenders often grade them based on the severity of past credit problems.

subprime lending
Mortgage loans and lending that does not meet conforming loan standards.

subsequent rate adjustments
The interest rate for Adjustable Rate Loans adjusts at regular intervals. This adjustment period could in some cases differ from the initial interest rate duration period.

subsequent rate cap
A limit defined by most Adjustable Rate Loans for the maximum amount the interest rate may increase during annual interest rate adjustment dates. The limit often differs from the initial rate cap.

substitute of trustee
A document that is recorded to change the trustee under the deed of trust.

A drawing or map the shows the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

All rights of a joint tenant passes to the surviving joint tenant.

sweat equity
Increase in property value due to improvement by owners.

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take-out mortgage
A permanent mortgage, obtained by pre-arrangement between a builder and a financial institution, to repay the interim mortgagee at the completion of construction.

An enforced charge imposed on persons, property, or income to be used to support the State. The State in turn uses the funds in the best interest of the general public.

tax assessed value
The value of taxable property as determined by the county or municipal property assessor.

tax code
The official body of tax laws and regulations.

tax deduction
A tax break given by the government. Mortgage interest, loan points, and property taxes can be deducted.

tax deed
A deed on property issued when the property is purchased at a foreclosed property auction sale for nonpayment of taxes.

tax hold back
When property taxes are included with the mortgage payments, lenders withhold funds from the disbursement to cover interim or final taxes payable to municipality. The amount depends on the month that the mortgage was funded and the dates when interim and final taxes are due. Tax hold backs are used to pay for the current year’s taxes while monthly tax installments are used to pay the tax bill for the following year.

tax lien
A claim against real estate for the amount of its unpaid taxes. A municipality’s claim against a property for real estate taxes is a first and paramount lien, whether or not the taxes are due. A lien can also attach to property for non-payment of federal or state income taxes.

tax sale
The public sale of a property by the government for nonpayment of taxes.

teaser rate
A low, short-term interest rate offered on a mortgage to entice the borrower.

temporary buy-downs
A loan on which the interest rate has been bought down for a temporary period of time at the beginning of the loan by the escrowing funds at the time of closing, which will be applied to the total monthly mortgage payment as each becomes due.

tenancy by the entirety
Ownership by a husband and wife in which they together hold title to the whole property with right of survivorship.

tenancy in common
A form of ownership in which two or more owners hold an interest in a property, with no right of survivorship.

Any person in possession of a property with the permission of the owner.

tenant at sufferance
A tenant who after rightfully being in possession of a rented or leased residence continues to live in that residence after their rights have been terminated.

tenant at will
A person who legally possess real property with the owners’ permission.

The time to maturity of a loan or deposit, expressed in month or years.

term amortization
The period of time during which principal and interest payments must be made; generally, the time needed to amortize the loan fully.

term loan
A loan with a maturity of usually three to five years, during which time interest is paid, but no payments to reduce the principal are made. The entire principal is due and payable at the end of the loan term.

term mortgage
See term loan.

The details, specifications, obligations, and conditions of an agreement or contract.

third-party origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Ownership that involves the acquisition of a specific time period, or a percentage of interest in a vacation home or resort.

A legal document showing evidence of a person’s right to own or claim ownership of a property.

title company
A company that specializes in examining and insuring titles to real estate.

title defect
A legal claim by others to a property, or the right to make demands upon an owner.

title examination
An examination of the public record to determine that the seller is the legal owner and that there are no encumbrances (such as claims or liens) affecting the property.

title insurance
Title Insurance policies typically insure a homebuyer against any title-search errors or mistakes, and against loss due to disputes over property ownership. Title Insurance can additionally offer protection to the lender under similar circumstances. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.

title owner
Is the one who holds the greatest number of rights or the most important rights in a piece of real property.

title report
A written statement by a title company that reports the condition of a title to a specified piece of real property as of a certain date.

title risk
Possible impediments to the transfer of title from one owner to another.

title search
A detailed examination of the title records to make sure that the buyer is purchasing a property from the legal owner and that there are no additional liens or other outstanding claims against the title than those already disclosed by the legal owner.

title theory
A property-law doctrine that a mortgage transfers title to a property to the lender, who holds it until the mortgage has been paid off, at which time the title passes to the borrower. Only a few states use this theory, and are known as title states or title theory jurisdictions. Lien theory used in most jurisdictions provides that a lender holds only the lien not the title to the property until the borrower pays the mortgage in full. Once the loan is paid in full the lien is removed.

total debt ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.

total expense ratio
The percentage of monthly debt payments compared to total before-tax income.

total loan amount
The base loan amount plus any financed closing costs.

total paid at closing
All closing costs, prepaid fees, and the down payment.

An attached home that is not a condominium.

tract home
A mass-produced housed constructed by one builder in a project.

trade equity
An exchange of property as part of a down payment for other real estate.

trading down
Buying a home that is less expensive than the current residence.

trading up
Buying a home that is more expensive then the current home.

trans union corporation
One of the big three credit-reporting bureaus that operate nationwide.

transfer of ownership
The means by which the ownership of a property changes hands. Examples of such include the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchases, and any exchange of possession of the property under a land sales contract or any other land trust device.

transfer tax
State or local tax payable when the title passes from one owner to another.

treasury index
A table of yields being paid on government debt, used to determine interest-rate changes for adjustable-rate mortgages and other variable rate loans.

trust account
An escrow account.

trust deed
A written instrument legally conveying property to a trustee often used to secure an obligation such as a mortgage or a promissory note.

A legally empowered person who holds or controls a piece of property for another person.

trustee’s deed
The deed issued by a trustee to the highest bidder at a trustee’s sale.

trustee’s sale
A non-judicial auction sale of real property, conducted by a trustee in the exercise of the power of sale clause, in accordance with the terms of the defaulted deed of trust.

trustee’s sale guarantee (TSG)
A special title report, for trustees, that discloses all items regarding the ownership interests and encumbrances on a property in foreclosure. It also includes a list of all parties who have recorded a request to be notified if any NOD or NTS are filed against a particular trust deed in foreclosure. Furthermore it gives the trustee a list of all the local publications that qualify to advertise the Notice of Trustee’s Sale.

truth-in-lending law
Provision that requires lenders to reveal the actual costs of borrowing.

two-step mortgage
A loan where the interest rate is fixed for the first seven years and then is adjusted one time for the balance of the loan period.

two-to-four-family property
A piece of property that is owned by one person but provides housing for up to four households.

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A minimum bid that only reflects the lenders actual cost in the defaulted loan and does not include the unpaid interest. Executed when the lender believes that they will not be out bid at the trustee’s sale. If another bidder does bid for the property the lender will instruct the trustee to increase its opening bid to include any unpaid interest.

A professional who approves or denies a loan to a potential homebuyer based on the homebuyers’ credit history, employment history, assets, debts, property appraisal and other factors such as loan guidelines.

The process of analyzing a loan application to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan. It includes a review of the potential borrowers’ credit history and a judgment of the property value.

underwriting fee
A fee charged by the lender to verify information the loan application, authenticate the property’s worth as collateral, and make a final determination about whether to grant a loan to the applicant.

underwriting requirements
The standards established by a lender to determine if a person qualifies for a loan. The criteria is generally based on a property appraisal, a review of the buyers’ current credit history (usually 2 years) and their capacity and willingness to repay in a timely manner.

uniform settlement statement
A standard document prescribed by the Real Estate Settlement Procedures Act disclosing all costs paid in connection with the settlement of a real estate transaction. Also called a HUD-1 or a HUD-IA.

unlawful detainer
An eviction lawsuit brought to recover the possession of real property from a holdover occupant.

unrecorded deed
A document that transfers title to a property, but is not filed with a county recorder.

unsecured loan
A loan that is not backed by collateral.

upset price
Also known as reserve price. It is the opening minimum bid for a property at a foreclosure auction sale. Generally, it is the total amount of the defaulted loan, and any interest incurred.

Illegally excessive interest charged on any loan.

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va loan
The Veterans Administration (VA) has been assisting veterans in purchasing homes since 1944. The program is available to veterans, active-duty personnel, and to some members of the reserve and National Guard. The VA provides lending institutions with a guaranty that loans made to veterans will be repaid in full if a veteran defaults on their loan. The VA does not issue loans, it guarantees or insures loans provided by private lenders to eligible veterans for the purchase of a home. Veterans who receive a VA guaranteed loan are required to occupy the residence that they purchase.

va specified bid
On VA insured loans, the VA tells the beneficiary how much the opening bid should be at the trustee’s sale. This amount is lower than the amount advertised in the Notice of Sale.

To make vacant or empty.

The estimated worth or price. The act of valuation by appraisal.

variable interest-rate
Percentage a borrower pays for the use of money, usually expressed as an annual percentage, and which fluctuates in tandem with a rate index.

variable rate
An interest rate that changes with fluctuations in such indexes as the U.S. Treasury bill index.

variable rate mortgage
See Adjustable Rate Mortgage.

vaulted ceiling
An elongated half-cylinder that arches above the floor.

A buyer of property, goods or services.

A seller of property, goods, or services.

vendor’s lien
The right of a seller who has not yet been paid to take back possession of sold property until its purchase price has been received from the buyer.

A designation of ownership or possession of a property.

Having the right to use or borrow against a portion of a fund, such as an individual's retirement fund.

vested interest
Having an interest in the property.

Present owner of record.

veterans administration (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

victorian style
An architectural style that dates from the mid-19th century.

voluntary lien
Any lien placed on property with the consent and cooperation of the owner.

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Wood paneling, tongue-and-groove boards, or similar material installed between a baseboard and chair rail.

A release or abandonment of a right or privilege.

waiver of tax lien
A form to be signed by a taxing jurisdiction stating that it will not file a lien. This form is typically needed when real estate is sold by an estate.

A buyer’s final inspection of the home to determine if conditions in the purchase agreement have been satisfied.

warranty deed
A deed that contains expressed and implied covenants as to good title and right of possession.

white elephant
A property that is too expensive to maintain or generates too little rent to pay for itself.

wild deed
An improperly recorded deed.

workout agreement
A mutual effort by a borrower and lender to avoid foreclosure or bankruptcy following a default; generally involves substantial reduction in the debt service burden during an economic depression.

wraparound mortgage
A loan given to a buyer for the remaining balance on a sellers’ first mortgage and an additional amount requested by the seller. Payments on both amounts are made to the lender who holds the wraparound loan.

writ of execution
A court order to a sheriff to enforce a judgment by levying on real or personal property of a judgment debt to obtain funds to satisfy the judgment amount.

To diminish in amount on the records, generally to reflect a market value loss.

An accounting procedure where an asset whose value has declined is reserved or taken off the books.

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Open grounds of a property.

The return on an investment expressed as a percentage of the cost of the investment, paid in dividends or interest. Also known as rate of return.

yield curve
A graph of current interest rates of similar obligations, arranged by maturity.

yield to maturity
The internal rate of return on an investment. Considers all inflows and outflows of investment returns and their timing.

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zero percent financing
A loan with no interest in the contract. The IRS imputes 10 percent for both borrower and lender.

zero-down-payment mortgage
A mortgage in which the buyer does not make a down payment and borrows the entire purchase price.

zero-lot line
The positioning of a house near or on top of the lot boundary, resulting in little or no space between houses.

When the seller receives little or no net proceeds from the property sale.

A special type of metal flashing that protects horizontal joints between siding panels that don’t overlap. It has a Z-shaped profile and is designed to tuck up under the upper panel and overlap the lower one.

Area in the community that is designated for a specified use and purpose.

The right of a community, under its police power, to dictate the use of property within its boundaries.

zoning map
A map of the local jurisdiction that indicates current zoning designations.

zoning ordinances
The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.

zoning variance
A one-time modification of existing zoning law.

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