GLOSSARY OF REAL ESTATE TERMS Understanding the Language
Due-On-Sale Clause A clause that requires a full payment of a mortgage or deed of trust when the secured property changes ownership .
Earnest Money The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith .
Escrow A procedure in which a third party acts as a stakeholder for both the buyer and the seller , carrying out both parties ’ instructions and assuming responsibility for handling all of the paperwork and distribution funds .
Equity The difference between what is owed and what the property could be sold for .
FHA Loan A loan insured by the Federal Housing Administration ( of the Department of Housing and Urban Development ).
Federal Home Loan Mortgage Corporation ( FHLMC ) Called “ Freddie Mac ”; a part of the secondary market , particularly used to purchase loans from savings and loan lenders within the Federal Home Loan Bank Board .
Federal National Mortgage Association ( FNMA ) Popularly known as “ Fannie Mae ”; a privately owned corporation created by Congress to support the secondary mortgage market . It purchases and sells residential mortgages insured by the FHA or guaranteed by the VA , as well as conventional home mortgages .
Fee Simple An estate in which the owner has unrestricted power to dispose of the property as he wishes , including leaving by will or inheritance . It is the greatest interest a person can have in real estate .
Finance Charge The total cost a borrower must pay , directly or indirectly , to obtain credit according to Regulation Z .
Fixed Rate Mortgage A conventional loan with a single interest rate for the life of the loan .
Fully Indexed Rate The maximum interest rate on an ARM that can be reached at the first adjustment .
Gift Letter A letter from a relative stating that an amount will be gifted to the buyer , and that said amount is not to be repaid .
Government National Mortgage Association ( GNMA ) Called “ Ginnie Mae ”; a government part of the secondary market that deals primarily in recycling VA and FHA mortgages , particularly those that are highly leveraged .
Graduated Payment Mortgage A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate .
GRI Graduate , Realtors Institute . A professional designation granted to a member of the National Association of Realtors who has successfully completed courses covering Law , Finance and Principles of Real Estate .
HOAs Homeowners ’ associations are formal legal entities created in many singlefamily subdivisions and condominium / townhome / villa developments to maintain common areas and enforce the Covenants , Conditions & Restrictions of the community .
Home Inspection Report A qualified inspector ’ s report on a property ’ s overall condition . The report usually includes an evaluation of both the structure and mechanical systems .
Home Warranty Plan Protection against failure of mechanical systems within the property . Usually includes plumbing , electrical , heating systems and installed appliances .
Index A measure of interest rate changes used to determine changes in an ARM ’ s interest rate over the term of the loan .
Initial Interest Rate The introductory interest rate on a loan ; signals that there may be rate adjustments later in the loan .
Joint Tenancy An equal undivided ownership of a property by two or more persons . Upon the death of any owner , the survivors take the decedent ’ s interest in the property .
Jumbo Loans Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market ; these jumbos must be packaged and sold differently to investors and therefore have separate underwriting guidelines .
Lien A legal hold or claim on property as security for a debt or charge .
Loan Commitment A written promise to make a loan for a specified amount on specified terms .
Loan-To-Value-Ratio The relationship between the amount of the mortgage and the appraised value of the property , expressed as a percentage of the appraised value .
Loan Estimate The Loan Estimate form is received by the consumer within three days of applying for a mortgage . It includes everything they need to know about the loan they applied for ( estimated interest rate , monthly payment , closing costs , etc .).
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