Dealer – A person who holds real property with the primary purpose of selling it to customers. A dealer treats his or her profit from a sale as ordinary income.

Debt – An amount owed to another.

Debt Coverage Ratio (DCR) – A ratio that is used to underwrite loans for income producing property. To calculate DCR, divide net operating income by total debt service. Ratios of at least 1.10 are generally required, with ratios of 1.20 and higher considered the norm. (See definition of “underwriting” below.).

Debt Ratio (DR, D:I) – Also known as debt to income. The ratio of the total of minimum monthly debt payments to gross monthly income. If a person’s minimum monthly payments on a credit card, auto lease, and mortgage (PITI) were $30, $220 and $750 respectively, and his/her gross monthly income was $3000, his or her debt ratio would be calculated as 33.33%. Non-fixed payments for things such as food, utilities, medical bills, and entertainment are not included in the calculation. However, contractual obligations such as a lease are included. The housing ratio in this example would be 25% ($750 / $3000). Preferred candidates for loans usually have debt ratios of 28% or less for housing, and 36% or less in total. The maximum ratios that lenders will allow are generally around 30% housing and 40% total, though lenders may consider extenuating circumstances when making their decision. Confirming loans such as FHA and VA loans allow a total of approximately 41%, while non-conforming loans sometimes allow total debt ratios as high as 55%.

Decree – an order issued from an authority; for example, a court order.

Deed – The legal document conveying title to a property.

Deed-in-Lieu – A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a “voluntary conveyance.”

Deed of Trust -The document used in some states instead of a mortgage; title is conveyed to a trustee.

Deed Restriction – see Conditions, Covenants, and Restrictions.

Default – Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage. Defeasance – A clause in a mortgage that gives the borrower the right to redeem the property after default by paying the entire debt plus any additional fees incurred.

Deferred Maintenance – Physical depreciation of a property due to lack of normal upkeep.

Deferred Payments – Payments that will be made at a date in the future.

Deficiency Judgment – A court order stating that the borrower is still obligated to repay a certain amount of money. Used when a loan’s security does not completely cover a defaulted debt.

Delinquency – Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a “late fee” for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

Density – The intensity with which land is used.

Density Test – A soil test that is conducted in order to find out whether the surface can support a house or other structure to be built in the future.

Deposit – A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan. See earnest money deposit.

Depreciation – A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

Depreciation Recapture – A situation in which the owner is required to pay tax at normal rates of income to the extent of the excess accelerated depreciation. This occurs when a party sells real property at a gain and claims accelerated depreciation.

Discount Points – In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any “points” paid in addition to the one percent loan origination fee. A “point” is one percent of the loan amount.

Document Preparation – A fee is often charged to cover the expenses of preparing some of the legal documents that need to be signed at closing, such as the note, mortgage, and truth-in-lending statement.

Dower – The rights of a widow in the property of her husband at his death.

Down Payment – The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage..

Draw – an occasional advance of funds.

Due Diligence – The act of carefully checking, reviewing, and verifying all facts and important aspects of a deal before proceeding. In lending, this includes verification of employment, income and savings; obtaining a credit report; review of the appraisal; and status of the title.

Due-on-Sale Provision – A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

Due-on-Transfer Provision – This terminology is usually used for second mortgages. See due-on-sale provision.