GLOSSARY OF REAL ESTATE TERMS Understanding the Language
Lock-In The fixing of an interest rate or points at a certain level , usually during the loan application process . It is usually done for a certain period of time , such as 60 days , and may require a fee or premium in the form of a higher interest rate .
Margin The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment .
Mortgage Insurance Premium ( MIP ) The mortgage insurance required on FHA loans for the life of said loans ; MIP can either be paid in cash at closing or financed in its entirety in the loan . The premium varies depending on the method of payment .
Mortgage Life Insurance A type of term life insurance often bought by home buyers . The coverage decreases as the mortgage balance declines . If the borrower dies while the policy is in force , the mortgage debt is automatically covered by insurance proceeds .
Negative Amortization Occurs when monthly payments fail to cover the interest cost . The interest that isn ’ t covered is added to the unpaid principal balance , which means that even after several payments the borrowers could owe more than they did at the beginning of the loan . Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren ’ t high enough to cover the interest .
Origination Fee A fee or charge for work involved in evaluating , preparing , and submitting a proposed mortgage loan . The fee is limited to one percent for FHA and VA loans .
Payment Cap The maximum amount the payment can adjust in any given time frame .
PITI Principal , Interest , Taxes and Insurance .
Planned Unit Development ( PUD ) A zoning designation for property developed at the same or slightly greater overall density than conventional development , sometimes with improvements clustered between open , common areas . Use may be residential , commercial or industrial .
Point An amount equal to one percent of the principal amount of the investment or note . Lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investment .
Prepayment Penalty A fee charged to a borrower who pays a loan before its due . Not allowed for FHA or VA loans .
Private Mortgage Insurance ( PMI ) Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage .
Purchase Agreement A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions . Also called a sales contract , earnest money contract , or agreementfor sale .
Rate Gap The difference between where the rate is now and where it could adjust to on an ARM . Also used to compare the difference between a current conventional rate and that of an ARM .
REALTOR ® A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors ® .
Regulation Z The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act .
Tenancy by the Entirety A form of property ownership in Missouri , in which the property belongs to the marriage , which means that both husband and wife own the property as one person , and thus , both of them own 100 % interest in the property .
Tenancy In Common A type of joint ownership of property by two or more persons with no right of survivorship .
TILA-RESPA TILA refers to the Truth in Lending Act and RESPA stands for the Real Estate Settlement Procedures Act . Together they require lending institutions to disclose all fees and costs associated with a borrower ’ s transaction and settlement .
Title Insurance Policy A policy that protects the purchaser , mortgagee or other party against losses .
TRID Stands for TILA-RESPA Integrated Closing Disclosures . TRID is a newer rule which combines the Good Faith Estimate , Truth in Lending statement , and the HUD-1 into two new forms : the Loan Estimate and the Closing Disclosure .
VA Loans A loan , made by a private lender , that is partially guaranteed by the Veterans Administration .
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