REIhomesales Investor Theme

A lot has been happening at REItrainer.com. A few weeks ago, we added a new section to REItrainer.com to focus on using WordPress for real estate investing. We also updated the site’s look and began offering our free WordPress themes designed just for real estate investors. In the short time since the update, we have gotten a lot of great feedback and made many improvements to our WordPress themes for real estate investors. We also added a few new resources unlike anything we have seen out there. The best part… as usual, everything is FREE.

The most exciting new item that I want to mention is the new WordPress Investor Theme. The new theme takes the core functionality of our original HomeBuyer theme and combines it with a bunch of new features to make the ultimate WordPress Theme for real estate investors. This new theme allows you to generate any type of real estate investor leads. It can be easily customized to focus on home buyer, home seller, wholesale buyer, private money lender, or any other type of real estate leads… or you can use it to generate them all on one site!

Easily add iconic links to your social network site profiles like Facebook, Twitter, Myspace, LinkedIn, YouTube and more with our new social network integration features.

Add Google Adsense ads, or any other ads, quickly and easily with our easy to use theme admin controls. You can also add Google Analyitics, YouTube videos or playlists, as well as easy to set up forms from our new REIhomesales WordPress Form Pack presets. It also now has the ability to generate squeeze pages super easily to allow you to capture any type of real estate leads or sell any product that you want to sell.

At REIcreator, we have built many websites for real estate investors, and this theme seriously has everything a real estate investor could need on their website. All built in, and all for free. To learn more about this fantastic website solution for real estate investing, you can visit REItrainer.com and read all about it.

Once you see the theme, you might think we are crazy for giving it away for free, but just wait until you see what else we are now offering on REItrainer.com. We are now giving away easy to install page content presets for WordPress that contain all of the basic page structure and content needed for any type of real estate investor website. Combined with our awesome FREE WordPress themes, the REIhomesales WordPress Content Pack for Real Estate Investors creates a fully functional, easy to edit real estate investor website with all the pages and content you need to get your site online in lightning speed. Once you have a WordPress site and our Investor Theme installed, simply import the Content Pack Page Preset file, and it will automatically fill in all the pages and content for you.

You might think that we couldn’t give away anything cooler… but we have even more to give. On top of the theme, and the full content pack, we are now offering pre-written form presets to use with the theme and the cForms II plugin. This allows you to add any type of lead generation form that a real estate investor site could need. The presets have everything including the forms themselves, pre-written auto responder messages, the ability to store form data in your WordPress database and they email you automatically every time someone fills out a form on your site.

With the REIhomesales Investor WordPress Theme, the WordPress Content Pack and Form Pack, you can put together any type of real estate site you want. You can set it up in different configurations to generate specific types of leads, or you can leave all the features turned on to create a full featured real estate website for you business.

On top of all these new products, we also added a nice new section to tell you all how to use and set up all of our new WordPress products. We go through the set up process step by step, telling you all you need to know to get your site set up in no time. We also added a new help form to REItrainer.com for anyone to ask us anything about our themes, our content, our form presets, or anything else about using WordPress for real estate investor websites, or anything about real estate marketing. At REItrainer, we are serious about creating ground-breaking tools for real estate investors and we give almost everything away for free… for real.

If our new products and support don’t make it easy enough for you, don’t forget that we offer full WordPress setup and hosting solutions at very competitive prices. Ask us about how we can help you turn your site into a lead generating machine for next to nothing. Not only do we know how to make a truly effective website for any business, we specialize in creating websites for generating real estate leads. Don’t waste your time or money on generic web designers that don’t know the real estate business, or website systems built by real estate gurus that don’t know how to make websites… at REItrainer.com we have everything you need, and all of our products are FREE.

Abstract of Title – A summary of all recorded proceedings and investments that affect a property’s title.

Accelerated Cost Recovery System – A tax calculation that provides greater depreciation in the early years of ownership of real estate or personal property.

Acceleration Clause - A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

Acceptance – An offeree’s consent to enter into a contract and be bound by the terms of the offer.

Accrued Interest – Earned but unpaid interest.

Accumulated Depreciation – In accounting, the amount of depreciation expense that has accumulated to date.

Acknowledgment - A declaration by a document’s signer that he or she voluntarily signed the document, made before a duly authorized person.

Acquisition Cost - The price and all fees required to purchase a property.

Acquisition Loan - Money which is borrowed for the specific purpose of buying a property.

Acre - A two-dimensional measure of land that is equal to 43,560 square feet or 4,840 square yards.

Addendum – An additional article or provision which has been attached to an existing contract.

Additional Principal Payment – A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

Adjoining – Land which is attached, contiguous, or shares one or more borders.

Adjustable Rate Mortgage (ARM) – A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

Adjusted Basis – The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Adjusted Cost Basis – See Adjusted Basis.

Adjusted Tax Basis – The original cost of the property, reduced by depreciation deductions and increased by capital expenditures.

Adjustment Date – The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Period – The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

Administrator – A person appointed by a court to administer the estate of a deceased person who left no will.

Administrator’s Deed – A legal document used to transfer property by the administrator of an estate.

Adverse Possession – A method of acquiring a property when an occupant has been in legal occupancy of the property for a set period of time (variable by state).

Affidavit – a written statement, sworn to or affirmed before a legally authorized officer or agent.

Affordability Analysis – A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.

Agency – the relationship between a principal and his agent as defined by a contract in which the principal asks the agent to perform certain deeds on behalf of the principal.

Agreement for Deed – see Contract for Deed.

Alienation – to transfer title and possession of property to another party.

All Inclusive Trust Deed – An all inclusive trust deed is identical to a wraparound mortgage. It is used in states that use trust deeds instead of mortgages.

Amenity – A feature of real property that enhances its attractiveness and increases the occupant’s or user’s satisfaction although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Amortization – The gradual repayment of a mortgage loan by installments.

Amortized Loan – a loan that is repaid in several installments, each containing a portion used to reduce the principal amount of the loan and a portion that is applied to pay interest. Each payment designates a larger portion to principal reduction and a smaller portion to interest payment, until the outstanding balance is eventually paid off in full.

Amortization Term – The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Amortization Schedule – A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.
Amortize – To repay a mortgage with regular payments that cover both principal and interest.

Annual Cap – the maximum amount by which the interest rate on an adjustable rate mortgage can increase or decrease during a one-year period.

Annual Mortgagor Statement – A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

Annual Percentage Rate (APR) -This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual note rate on your loan.The Truth-in-Lending Law requires the disclosure of this rate.

Annuity – An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.

Anticipatory Breach – A preliminary notification that informs one party that the other party will not fulfill the obligations of their original contract.

Application – A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.

Appraisal - A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.
Appraised Value - An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.
Appraiser – An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.
Appreciation – An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
Arrears – Extra payments, such as prior months’ interest or overdue payments in default.
As-Is – A property offered with no guarantees related to its condition
Assessed Value -The valuation placed on property by a public tax assessor for purposes of taxation.
Assessment – The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assessment Rolls – The public record of taxable property.

Assessor – A public official who establishes the value of a property for taxation purposes.

Asset – Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assignee – The party to whom an Assignor sells or transfers an agreement or contract.

Assignment – When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment.

Assignor – The party who assigns or transfers a contract or agreement to another party (the Assignee).

Assumable Mortgage – An existing mortgage in which the new purchaser of a property is made liable for the payments and any other obligations of the note and mortgage. Depending on the type of loan, the new purchaser’s assumption of these obligations may require a process of approval, and may or may not release the original borrower from future liability. A written release from the mortgagee (lender) is required for the original borrower to be relieved of responsibility for the payments.

Assumption -The transfer of the seller’s existing mortgage to the buyer. See assumable mortgage.

Assumption Clause – A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

Assumption Fee – The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Attorney-In-Fact – One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.

Attornment – The formal agreement of a tenant to be a tenant to a landlord.

Balance – See Principal Balance.

Balance Sheet – A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon Loan – A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

Balloon Payment -Â The final lump sum payment that is made at the maturity date of a balloon mortgage.

Bankrupt – A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

Bankruptcy – A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

Bankruptcy Discharge – After a bankruptcy proceeding is completed, the debtor is released from an obligation to repay his or her debts.

Basis Point – one hundredth of one percent.

Before-Tax Income – Income before taxes are deducted.

Beneficiary -Â The person designated to receive the income from a trust, estate, or a deed of trust.

Bequeath -Â To transfer personal property through a will.

Betterment – An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.

Bilateral Contract – a contract under which both parties are obligated to conduct certain deeds or tasks.

Bill of Sale – A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

Binder – A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

Bird Dog – a person who identifies a beneficial real estate investment opportunity and passes information about the deal on to another investor for a fee.

Biweekly Mortgage – A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

Blanket Insurance Policy – A single policy that covers more than one piece of property (or more than one person).

Blanket Mortgage – a single mortgage that covers multiple properties.

Board Of Equalization – A committee of persons at the state level who ensure that local property taxes are assessed in a uniform manner.

Board of Realtors – A group of real estate professionals who hold membership in the state and national Associations of Realtors.

Bona Fide – In good faith, without fraud.

Bond – An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Bond Market - Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.

Breach of Contract – a violation of a legal agreement or contract. Also, a default on a loan or other payment.

Bridge Loan – Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property . The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.

Broker – Broker has several meanings in different situations. Most Realtors are “agents” who work under a “broker.” Some agents are brokers as well, either working for themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

Budget – A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.

Budget Category – A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. “Rent” is an example of an expense category. “Salary” is a typical income category.

Building Code – Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Building Permit – A statement of permission, in writing, from a local government or agency allowing the recipient to build a particular structure at a particular site.

Bundle of Rights – A group of implied rights in the ownership of any real estate property. These include the owner’s right of occupancy, use and enjoyment, the right to sell in whole or in part, the right to lease any or all of the rights, the right to the benefits derived by occupancy and use of the property, and so on.

Buy Down – Usually refers to a fixed rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A “lender funded buydown” is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to “qualify” at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

Buydown Account - An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.

Buydown Mortgage – A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

Cancellation Clause – A stipulation in a contract that gives one or both parties the right to terminate its obligations if a specific condition or event occurs.

Cap – A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. See lifetime payment cap, periodic payment cap, and periodic rate cap.

Capital -Â (1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure - The cost of an improvement made to increase the value or a property or extend its useful life, for example, by adding a new room. Costs associated with repair are not a capital expenditure. Capital expenditures are appreciated over their useful life; repairs are subtracted from income for the current year.

Capital Improvement - Any permanent improvement to a structure or component that adds to a real property’s value and useful life. (See Capital Expenditure).

Capitalization (Cap) Rate – The rate of return used to calculate the capital value of an income stream. To find the cap rate, net operating income is divided by annual income.

Carrying Charges – The expenses necessary for holding a property. These may include interest and taxes on an idle property or one under construction.

Cash Flow – The total of all debt service payments subtracted from the net operating income will yield the cash flow. (See definition of “net operating income” below.)

Cash Flow Basis – A calculation that shows when your monthly payment savings will exceed your estimated closing costs and discount points. The cash flow basis does not take into account the tax impact or differences in principal balance reduction between your current loan and refinancing suggestions.

Cash Out – Cash paid to the borrower from the proceeds of a loan. While quite frequently seen in refinancing situations, cash out may also occasionally be seen as a benefit of a small percentage of non-conforming loans used for a purchase.

Cash-Out Refinance -Â A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Caveat Emptor – A Latin phrase meaning, “Let the buyer beware.”

Certificate of Deposit – A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of Deposit Index – An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. See adjustable-rate mortgage (ARM).

Certificate of Eligibility – A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.

Certificate of Insurance – A document verifying a policy’s coverage issued by an insurance agency.

Certificate of Occupancy (C.O.) – A document that permits a structure to be occupied by members of the general public. A local government or agency issues this certificate.

Certificate of Reasonable Value (CRV) – Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

Certificate of Title – A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.

Certified Commercial Investment Member (CCIM) – One of several designations awarded by the Realtors National Marketing Institute, an affiliate of the National Association of Realtors.

Certified Residential Broker (CRB) – One of several designations awarded by the Realtors National Marketing Institute, an affiliate of the National Association of Realtors.

Certified Residential Specialist (CRS) - One of several designations awarded by the Realtors National Marketing Institute, an affiliate of the National Association of Realtors.

Chain of Title -Â The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Frequency – The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

Chattel – Another name for personal property.

Clear Title – A title that is free of liens or legal questions as to ownership of the property.

Closing - This has different meanings in different states. In some states a real estate transaction is not consider “closed” until the documents record at the local recorders office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.
Closing Cost – Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney’s fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors® often provide estimates of closing costs to prospective homebuyers.

Closing Cost Item – A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney’s fees. Many closing cost items are included as numbered items on the HUD-1 statement.

Closing Date – The seller delivers the deed and the buyer pays for the property on this date.

Closing Statement – An accounting of funds for a real estate transaction. This may also be known as a HUD-1.

Cloud on Title -Â Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

Co-borrower – An additional individual who is both obligated on the loan and is on title to the property.

Coinsurance – A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.

Coinsurance Clause – A provision in a hazard insurance policy that states the amount of coverage that must be maintained — as a percentage of the total value of the property — for the insured to collect the full amount of a loss.

Collateral – An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Collection -The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
Collectors Deed – The holder of the Certificate of Purchase may apply for and receive a Collectors Deed to the property in the event that the property has not been redeemed during a one-year redemption period.

Co-maker – A person who signs a promissory note along with the borrower. A co-maker’s signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.

Combined Loan-to-Value (CLTV) – The total of all loans, stated as a percentage of the value of a property. For example, if a property is valued at $100,000 and has three loans totaling $125,000, the CLTV is 125% ($125,000 : $100,000).

Commission – The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

Commitment – The notification that a lender has approved a loan. Virtually all commitments are issued on condition of a list of requirements that must be satisfied prior to funding actually taking place. Conditions may include but are not limited to appraisals of a certain value, a clean title, verification of representations by the borrower, and so on.

Commitment Letter – A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a “loan commitment.”

Common Area Assessments – Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners’ association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common Areas – Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project’s homeowners’ association (or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common Law – An unwritten body of law based on general custom in England and used to an extent in the United States.

Community Home Improvement Mortgage Loan® – An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.

Community Land Trust Mortgage Loan – An alternative financing option that enables low- and moderate-income home buyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.

Community Property – In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

Community Seconds® – An alternative financing option for low- and moderate-income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate at all). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.

Comparables - An abbreviation for “comparable properties”; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Comparable Sales – Recently sold properties that will be compared with a property being appraised for the purpose of determining the value of the property in question. When appraising a city property, comparable sales must have the same use as the property being appraised, and many similarities in the size of the house, size of the lot, amenities, etc. and be in the same neighborhood and have been sold in the recent past (usually no more than six months) to someone who is not a friend or relation. The comparable property must also be located within one mile of the subject property. More liberal standards will apply for rural property and some suburban properties. However, the value assigned to the subject property will be more accurate the more similar the comparable sales are to the subject property. Lenders will often compensate for the less precise nature of rural appraised values by allowing only lower loan-to-value ratios than those in urban settings, usually 10% lower. (See definition of “loan-to-value” below.)

Compound Interest – Interest paid on the original principal balance and on the accrued and unpaid interest.

Condemnation – The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.

Conditions, Covenants, and Restrictions (CCR’s) – promises written into deeds and other instruments agreeing to performance or nonperformance of certain acts, or requiring or prohibiting certain uses of the property.

Condominium – A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Condominium Conversion – Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel - A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.

Conforming Loan – A loan which meets the strict underwriting criteria and guideless of Fannie Mae, Freddie Mac, FHA or VA loans. These are typically low-interest rate loans with very good terms. (See definitions of “Fannie Mae”, “Freddie Mac”, “FHA”, “VA” and “underwriting” below.).

Consideration – Anything of value given to induce a party to enter into a contract.

Construction Loan – A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Consumer Reporting Agency (or Bureau) – An organization that prepares reports that are used by lenders to determine a potential borrower’s credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Contiguous – Two sides that actually touch and/or share a common boundary.

Contingency – A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract – An oral or written agreement to do or not to do a certain thing.

Contract For Deed - a real estate installment selling arrangement whereby the buyer may use and occupy the land or property, but no deed is actually given by the seller until all or part of the sale price (specified in the contract) has been paid. Same as land contract.

Contractor – A person who provides specific goods or services under the terms of a contract.

Conventional Mortgage – Refers to home loans other than government loans (VA and FHA).Conversion – the act of changing a property to a different use or type of ownership.

Convertibility Clause – A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.

Convertible ARM – An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Convey – The act of transferring a title to another party.

Cooperative (co-op) – A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Cooperative Corporation – A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.

Cooperative Mortgages – Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.

Cooperative Project – A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.

Corporate Relocation – Arrangements under which an employer moves an employee to another area as part of the employer’s normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.

Cost of Funds Index (COFI) – An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).

Counteroffer – The act of rejecting an offer, but making an immediate new offer in its place.

Covenant - A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Creative Financing – Refers to any financing arrangement other a traditional mortgage supplied by a third party institution.

Credit -An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit History -A record of an individual’s open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Life Insurance -A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.

Credit Line – A loan that allows revolving use of the credit. After the borrower repays borrowed funds, he or she may borrow funds again without needing to apply for a new loan. There is usually an established limit of available credit and some or all of the available funds can be optionally disbursed at closing. Undisbursed funds are available for the borrower’s use at any time. Payments are required only on the outstanding balance. A credit line resembles a credit card except that the borrower usually uses checks to access the funds. Credit lines are inexpensive and useful tools for investors.

Creditor - A person to whom money is owed.

Credit Report – A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness. See merged credit report.

Credit Repository – An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

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.

Earnest Money – A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Easement – A right of way giving persons other than the owner access to or over a property.

Easement by Necessity – The right of an owner to enter another’s property for a certain necessary purpose.

Easement by Prescription – By meeting certain conditions, an owner may convert continued use of another’s property (for a special purpose) to permanent use.

Effective Age – An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Effective Gross Income – Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Egress – A method of access and/or exit.

Eminent Domain – The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.

Employer-Assisted Housing – A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.

Encroachment - An improvement that intrudes illegally on another’s property. A building or any part of a building that physically overlaps, intrudes upon, or trespasses upon the property of another. This also may include other fixtures or obstructions on the property that are not actually part of the building.

Encumbrance – Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

Endorser – A person who signs ownership interest over to another party. Contrast with co-maker.

Equal Credit Opportunity Act (ECOA) – A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equitable Conversion – a legal doctrine effective in certain states. Equitable conversion laws state that under a contract of sale, buyers and sellers are treated as if a closing has taken place in the sense that the seller in possession is required to take adequate care of the property.

Equitable Title – The interest held by a party who has agreed to purchase a property, but has not yet actually closed the transaction.

Equity -Â A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage..

Escheat – In the event that the owner of a property dies without leaving a will and has no legal heirs, ownership of the property will revert to the state.

Escrow -Â An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Escrow Account – The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.

Escrow Analysis – The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow Collections – Funds collected by the servicer and set aside in an escrow account to pay the borrower’s property taxes, mortgage insurance, and hazard insurance.

Escrow Disbursements -The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow Payment – The portion of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as “impounds” or “reserves” in some states.

Estate – The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Estate at Sufferance – A tenant’s unlawful occupancy of a property after his or her lease has expired.

Estate for Life – See Life Estate.

Estate Tax – a tax that is applied to a property left behind by a deceased party. This is subject to certain tax rules that may vary by state.

Estoppel – A doctrine that states that a person may not acknowledge facts as true and later deny them.

Eviction – The lawful expulsion of an occupant from real property.

Examination of Title – The report on the title of a property from the public records or an abstract of the title.

Exchange – Like-kind property that is used in a business or trade or held as an investment may be exchanged without any tax applied to the transaction, subject to certain conditions, under Section 1031 of the IRS Tax Code.

Exclusive Listing -Â A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner’s right to sell the property alone without the payment of a commission.

Exculpatory Clause – A stipulation in a mortgage that allows a borrower to surrender the property to the lender with no personal liability.

Executor – A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. “Executrix” is the outdated feminine form.

401(k)/403(b) loan -Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans — monies must be repaid to avoid serious penalty charges.

Facade – A building’s outside wall that faces the street.

Face Value – The dollar amount of a property’s value. It is indicated by numbers or words on a document.

Fair Credit Reporting Act – A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.

Fair Market Value – The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae – Fannie Mae is a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation’s largest source of financing for home mortgages. Over the past 30 years, Fannie Mae has provided nearly $2.5 trillion of mortgage financing for over 30 million families.

Fannie Mae’s Community Home Buyer’s Program SM – An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family’s buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

Fannie 97® -A financing option for a fixed-rate mortgage that offers home buyers a 3 percent down payment loan with either a 25- or 30-year term. The mortgage features a loan-to-value (LTV) percentage of 97 percent, and is designed to expand homeownership opportunities for people with modest incomes. Borrowers must take a pre-purchase home-buyer education session to qualify for a Fannie 97 mortgage.

Federal Fair Housing Law – a federal law that forbids renters or sellers from discriminating on the basis of race, color, sex, religion, or national origin.

Federal Housing Administration (FHA) -An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

Fee Agreement – An agreement between a borrower and a broker which normally specifies the relationship between them and the amount of compensation to the broker.

Fee Simple – absolute ownership of real property.

Fee Simple Estate – An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA Coinsured Mortgage – A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor’s default.

FHA Mortgage -A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.

Fiduciary Responsibility – An obligation for a party to act in the best interest of another party. This kind of obligation usually exists when one person places special confidence and trust in another person.

Finder’s Fee – A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

Firm Commitment – A lender’s agreement to make a loan to a specific borrower on a specific property.

First Mortgage – The earliest mortgage on the property. This is determined only by the time of recording, not the size of the loan or mortgage type. When the first mortgage is paid off in full by the buyer, the second mortgage, if extant, becomes the first mortgage.

Fixed Installment -The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.

Fixed Payment Mortgage – a loan featuring a periodic, consistent payment of interet and principal. It is secured by a real property or properties.

Fixed Rate Mortgage -Â A mortgage in which the interest rate does not change during the entire term of the loan .

Fixture – Personal property that becomes real property when attached in a permanent manner to real estate.

Flood Insurance – Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Floodplain – A level land area that may occasionally face the threat of a flood from a nearby body of water.

Forbearance – In the event that a borrower becomes delinquent, a lender may pursue forbearance as a course of action to delay foreclosure.

Foreclosure -Â The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt .

Forfeiture – The loss of money, property, rights, or privileges due to a breach of legal obligation.

FRBO – for rent by owner.

Freddie Mac (FHMLC) – Federal National Mortgage Association, a federally chartered corporation that buys mortgages, then packages them to sell as securities to buyers.

FSBO – for sale by owner.

Fully Amortized Adjustable-Rate Mortgage – An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term .

Gable Roof – a triangular shaped roof with the ridges creating an angle at the top and the eaves creating an angle at the bottom.

Gain – an increase the value of a property.

Garden Apartments – a housing complex that contains a lawn area that all or some of the tenants can access.

General Contractor – a person who constructs a building, improvement, etc. for a property’s owner or developer.

General Lien – a lien that encompasses every property owned by the debtor instead of a single specific property.

General Warranty Deed – a deed in which the the grantee is protected by the grantor against any other claims against the property.

Gentrification – The phenomenon of higher income residents displacing lower income residents in a neighborhood.

Government Mortgage – A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortgage.

Government National Mortgage Association (Ginnie Mae) – A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.

Graduated-Payment Mortgage(GPM) – A mortgage in which a borrower makes increasingly larger monthly payments over the loan term. For the first few years, the payment is very low, then rises gradually until the third or fifth year and remains constant thereafter.

Grantee -Â The person to whom an interest in real property is conveyed.

Grantor - The person conveying an interest in real property.

Gross Debt Service – the amount of money that is required to pay principal, interest and taxes. Also occasionally includes energy costs. If the unit is a condominium, all or part of the common fees are excluded, depending on which expenses are covered.

Gross Monthly Income – A person’s income before deducting taxes, saving plans, social security, etc.

Gross Rent Multiplier – Sales price of a property divided by the gross annual rental rate.

Ground Lease – A lease that rents only the land of a property.

Ground Rent – The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.

Group Home – A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.

Growing-Equity Mortgage (GEM) – A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.

Guarantee Mortgage – A mortgage that is guaranteed by a third party.

Guaranteed Loan – Also known as a government mortgage.

Habendum Clause – “To have and to hold.” The clause in a deed that defines the quantity of the estate granted.

Hard Money Loan – A loan underwritten with the value and condition of the property as the most important criteria for approval. Other issues may include the borrower’s credit, the ability of the borrower to repay the loan, and/or the ability of the borrower to either manage the property or successfully sell the property, making any necessary repairs. In a hard money loan, issues such as owner occupancy, debt ratios, etc are usually not considered. Appraisals rather than purchase prices are used to determine value. Hard money loans often offer cash out purchases as a key benefit. These loans are usually approved within just a few days and funded very quickly as well—usually in less than two weeks. Disadvantages of this loan type include a relatively high interest rate (13-16%) and high points (usually 5 to 10). (See definition of “underwriting” below.)

Hazard Insurance – Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

Hereditaments – property, personal and real, capable of being inherited.

Hiatus – A gap between two land parcels that the legal description does not include.

Highest and Best Use – the use of a parcel of land that is most likely to produce the greatest net return to the land or building over a given time period.

Holdover Tenant - a tenant who remains in possession of the leased property after the expiration of the lease term.

Home Equity Conversion Mortgage (HECM) – A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.

Home Equity Line of Credit – A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in a property.

Home Inspection - A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.

HomeKeeperSM – Fannie Mae’s adjustable-rate conventional reverse mortgage, which allows older homeowners to borrow against the value of their homes and receive the proceeds according to the payment option they select. The amount available is based on the number of borrowers and their ages and the adjusted property value. Anyone 62 years or older who either owns his or her own home free and clear or has very low mortgage debt is eligible.

Homeowners’ Association (HOA) – A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Homeowner’s Warranty (HOW) – A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

Homeowner’s Insurance – An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents (see also Hazard Insurance).

Homeowner’s Warranty – A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.

Homestead – a status provided to a homeowner’s primary residence by certain state statutes to protect the home against judgments up to amounts specified in the statutes.

Homestead Exemption – A reduction in some jurisdictions in the assessed value that is allowed for a homeowner’s personal residence.

HomeStyle® Mortgage Loan - A mortgage that enables eligible borrowers to obtain financing to remodel, repair, and upgrade their existing homes or homes that they are purchasing. The financing takes the form of a conventional second mortgage or a Federal Housing Administration (FHA) Section 203(k) first mortgage.

Housing and Urban Development (HUD) – a federal government agency that implements certain federal housing and programs encouraging community development.

Housing Code – An ordinance created by local government that sets specific, minimum standards of safety and sanitation for existing residential buildings.

Housing Expense Ratio – The percentage of gross monthly income that goes toward paying housing expenses.

Hypothecate – The act of pledging something as security without being required to give up possession of it.

HUD median income – Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

HUD-1 statement – A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the “closing statement” or “settlement sheet.”

Implied Warranty of Habitability – A legal doctrine that states that landlords must offer and maintain livable premises for their tenants. If a landlord does not provide habitable housing, tenants in most states may legally withhold rent or take other measures, including hiring someone to fix the problem or moving out.

Impound Account – See Escrow Account.

Improvements – Any additions to raw land, such as buildings, streets, sewers, etc. that will increase the property’s value.

Incidents of Ownership – Any control over property. If you give away property but keep an incident of ownership, then no gift has legally been made. For example, you may give away an apartment building but retain the right to receive rent form the property. This distinction can be important for those attempting to make large gifts to reduce your eventual estate tax.

Income Property – Real estate developed or improved to produce income.

Indemnify – To protect someone against damage or loss.

Index – A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM.. This interest rate is subject to any caps that are associated with the mortgage.

In-File Credit Report – An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.

Inflation – An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Initial Interest Rate – The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as “start rate” or “teaser.”

Initial Note Rate – With regard to an adjustable rate mortgage, the note rate upon origination of the mortgage. This rate may be different from the fully indexed note rate.

Installment – The regular periodic payment that a borrower agrees to make to a lender.

Installment Contract – See Contract for Deed.

Installment Loan -Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.

Installment Sale – The act of paying tax on the gain as the mortgage principal is collected. This occurs when a seller accepts a mortgage for part or all of the sale.

Insurance Binder – A document stating that temporary insurance is in effect. Since the coverage will expire by a certain date, a permanent policy must be obtained before the expiration date.

Insured Mortgage – A mortgage protected by either private mortgage insurance (PMI) or the Federal Housing Administration (FHA). If the borrower defaults on the loan, the insurer must pay the lender the loss incurred or the insured amount, whichever is less.

Insurable Title – A property title that a title insurance company agrees to insure against defects and disputes.

Insurance – A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Insurance Binder – A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured Mortgage – A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Interest -The fee charged for borrowing money.

Interest Accrual Rate – The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.

Interest Rate – The rate of interest in effect for the monthly payment due.

Interest Rate Buydown Plan – An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage. During the specified period, the mortgagor’s effective interest rate is “bought down” below the actual interest rate.

Interest Rate Ceiling – For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest Rate Floor – For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Interest Accrual Rate – the percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.

Interest Rate – The percentage of the loan amount that is charged for borrowing money; the cost of the money in a percentage.

Interest Rate Buydown Plan – The seller, lender, or borrower pays an initial lump sum, which will entitle the borrower to a reduced monthly payment during the first few years of a home loan. A permanent buydown is paid in the same way, but it reduces the interest rate over the entire life of a home loan.

Interim Financing – A loan that is used when the property owner is unwilling or not able to arrange permanent financing.

Inter Vivos – A Latin phrase meaning “during one’s life.”

Intestate – A person has left no valid will.

Investment Property – A property that is not occupied by the owner.
IRA (Individual Retirement Account) – A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.