Real Estate / Mortgage Terminology Index

Terms & Phrases

A

Abstract-  Brief history of all transactions shown in the public records affecting a particular tract of land.

Adjustable Rate Mortgage (ARM)-  These Mortgage loans have an interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates.  At time of creation of loan, the extent and number of these adjustments are agreed upon.

Adverse Possession-  Possession, by one person, of land belonging to another in a manner deemed adverse to the interest of the owner. Often, by operation of law, title to the land becomes vested in such person after a fixed number of years if the owner fails to assert his or her rights.

Affidavit-  Written statement which is made under oath before a notary public or other judicial officer.

Agreement-  Legally binding contract made between two or more persons.

ALTA (American Land Title Association)-  A trade association of the title insurance industry, which created certain insurance policy forms to standardize coverage on a national basis.

Amortization-  Scheduled payments reducing the principal of a debt.

Appraisal-  Evaluation report from an independent third party detailing the estimated value of real estate.

Appurtenance-  Right or privilege that is a part of the ownership of property, such as a right of way to a highway across the land of another. Water rights are also an appurtenance example.

Assessment-   A valuation of real estate for purpose of taxes and/or special improvement charges. Also it can refer to the amount of taxes or special improvement charges. Special improvement charges are generally used for the costs of streets, sidewalks, sewers, etc.

Assignment-  An act of transferring an interest, such as a loan secured by a mortgage, from one person to another.  It can also mean an instrument or legal paper by which one person transfers such ownership to another.

Attorney's Opinion-  Statements by an attorney as to the validity of a title, determined after an investigation of the history of the title as recorded in the public records.

B

Back Title Letter-  Also know as "back title certificate" in some areas, and "starter" in others.  Often when titles have previously been examined up to a certain date by reliable examiners, title companies can give subsequent examiners of such titles a letter that sets forth the condition of the title at the time of the previous examination and authorizes them to begin their subsequent examination with the terminal date of the previous examination.

Balloon Note-  This type of promissory note calls for the minimum payment of principal and the payment of interest at regular intervals. Balloon Notes requires a substantial final payment, which represents all the principal.

Bankruptcy-  Legal procedure in U.S. District Court wherein assets of an insolvent debtor are protected and distributed in an equitable manner.

Binder-  Often called "preliminary certificate" or "commitment" a Binder is a preliminary report as to the condition of a title and a commitment to issue a title insurance policy in a certain manner when specific conditions are met.  Also it can mean a deposit in escrow of a small part of the purchase price of real estate as evidence of good faith and to bind an agreement to purchase.

C

Certificate of Title-  When a title examiner issues a certificate stating the condition of a title.

Chain-  In real estate survey terminology, a chain is 66 feet long or 100 links, each link being 7.92 inches.

Chain of Title-  A complete list of ownerships or transfers in the history of title to a tract of land.

Claim-  An adverse right or interest asserted from one party against another or against an insurer or indemnitor. Claims may arise from numerous events, such as unpaid debts or taxes, fraud, forgery, missing heirs, etc.

Clear Title-  When real property ownership is free of liens, defects, encumbrances or claims.

Closing-  Also known as "settlement" this is when all parties involved in a property transaction during which the transaction is consummated.

Clouded Title-  When a possible claim or encumbrance, if valid, would adversely affect or impair the title.

Coinsurance-  When two or more policies of title insurance issued by different insurers, each title insurer covers a portion of the same risk, which together provide total coverage of the risk.

Commitment-  Also know as "binder" this is a document issued by a title insurance company that contains the conditions under which a policy of title insurance will be issued.

Condemnation-  This is the act of taking of private property for a public purpose, with compensation to the owner under the right of eminent domain. Governmental units, railroads and utility companies have the right to condemn and take private property with appropriate compensation.  Also, condemnation means the destruction by government of private property that imperils the life, health or safety of the public.

Conventional Loan- This is a loan secured by a mortgage or deed of trust for which the loan-to-value ratio is within an acceptable range determined by a particular lending institution.

Conveyance-  The act of transferring title to property from one person to another.

Covenant-  Formal agreement / contract between two parties in which one party gives the other certain promises and assurances, such as covenants of warranty in a warranty deed.

D

Dedication-   Setting aside certain land by the owner and declaring it to be for public use. Examples would be a dedication for parks, sidewalks and streets.

Deed-  Document through which a conveyance of property is effected.

Deed Restriction-  Covenant contained in a deed imposing limits on the use or occupancy of the real estate or the size, type, purpose or location of improvements to be constructed on the real estate.

Defect-  Any blemish, imperfection or deficiency.  Defective title is one that is irregular and faulty.

Depreciation-  A Loss in value occasioned by ordinary wear and tear, functional or economic obsolescence, or destructive action of the elements.

Devise-  In a will, the act of giving a piece of real estate.

Dominant Estate-  Property for the benefit of which a right-of-way easement exists across another's adjoining piece of land is said to be the dominant estate.

E

Earnest Money-  Funds deposited by the purchaser of a piece of real estate as evidence of good faith.

Easement-  The right to use all or part of the land owned by another for a specific purpose. An easement may entitle its holder to install / maintain sewer or utility lines.

Eminent Domain-  The government's right to take privately owned property for public purposes under condemnation proceedings subject to payment of its fair market value.

Encroachment-  Any structure, improvement located on one property that intrudes upon the property of another.

Encumbrance-  A lien, interest, right, or liability attached to a parcel of land that constitutes or represents a burden or charge upon the property.

Equity-  Market value of real property, less, if any, the amount of existing liens.

Escheat-  Reversion of property to the state when an owner dies leaving no legal heirs, devisees or claimants.

Escrow-  Method of closing a real estate transaction requiring all documents and funds are placed with a third party for processing and disbursement.

Estoppel-  Legal restraint stopping or preventing person(s) from contradicting or reneging on their previous position or previous assertions or commitments.

Examination-  Review of the instruments and muniments incident to a chain of title to determine their effect and condition in order to reach a conclusion as to the status of the title.

Exception-  Within a title insurance binder or policy, any provision that excludes liability for a specific title defect or an outstanding lien or encumbrance.

Execute-  The signing of a legal instrument.  A completed deed is executed when it is signed, sealed, witnessed and delivered.

F

Fannie Mae (FNMA)-  Federal National Mortgage Association is a private corporation dealing in the purchase of first mortgages.

Fee Simple Deed-  Absolute ownership of a parcel of land. This is the highest degree of ownership that a person can have in real estate, which gives the owner unqualified ownership and full power of disposition.

FHA (Federal Housing Administration)-  Federal agency that insures first mortgages, enabling lenders to lend a very high percentage of the sale price.

Fixed Rate Mortgage-  Mortgage loan having a rate of interest that remains the same for the life of the mortgage.

Fixtures-  Any personal property that is attached to real property and is legally treated as real property while it is so attached.

Foreclosure-  Legal proceeding in which real estate secured by a mortgage or deed of trust is sold to satisfy the underlying debt.

Forgery-  Fraudulent signing of another's name to an instrument such as a deed, mortgage or check.

Freddie Mac (FHLMC)-  Federal Home Loan Mortgage Corporation is a federal agency that purchases both conventional and federally insured first mortgages from members of the Federal Reserve System and the Federal Home Loan Bank System.

G

Ginnie Mae (GNMA)- Government National Mortgage Association is a federal association working with the FHA that offers special assistance in obtaining mortgages and purchases mortgages in the secondary market.

Grant-   Confer or bestow, with or without compensation, a gift such as land or money by one having control or authority over the gift.

Grantee-  The person to whom a grant is made.

Grantor-  The person who makes a grant.

H

Hereditaments-  All kinds of estates, interest and rights in real estate that can be inherited.

Homeowners Insurance- Real estate insurance protecting against loss caused by fire, most natural causes, vandalism, depending on the terms of the policy.

HUD (Department of Housing and Urban Development)-  Federal department responsible for the major housing programs in the United States.

I

Index-  Alphabetical listing in the public records of the names of parties to recorded real estate instruments together with the book and page number of the record.  Additionally, an index can be the listing in abstract and title plants of recorded real estate instruments in groups according to land descriptions, known as a geographic index.  Also, index can be the alphabetical listing in abstract and title plants, by names of the parties, of all recorded instruments that affect but do not describe particular real estate, such as judgments, powers of attorney, wills and probate proceedings.

Instrument-  Written document having a legal effect.

J

Judgment-  A court ruling regarding the rights of parties in an action.  Judgment of debt on a property owner can create a lien on all of that owner's land within a certain jurisdiction.

Junior Mortgage-  Mortgage lower in lien priority than another.

L

Leasehold-  Right to possession and use of land for a fixed period of time.  The creation of the lease is the agreement that creates the right.

Lessee-  Tenant holding a leasehold.

Lessor-  Landlord; one who gives a leasehold to a lessee.

License-  The permission to go upon or use the land of another, the permission being a personal privilege and not constituting an owner interest in the land.

Lien-  Monetary charges imposed on a property, usually coming from a debt or obligation.

Lien Waver-  Also known as "waiver of liens" is a waiver of mechanics' lien rights, signed by contractors or subcontractors.

Link-  With regards to surveying land, a length of 7.92 inches.

Loan Policy-  Also known as "mortgage policy"  is a title insurance policy insuring a mortgagee, or beneficiary under a deed of trust, against loss caused by invalidity or unenforceability of a lien, or loss of priority of the mortgage or deed of trust.

Lis Pendens-  Legal notice intending to bind third parties of litigation claiming an interest in real estate.

Lot-  Generally, any portion of a subdivision or parcel of real property.

M

Market Value-  Average of the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing but not compelled to sell, would accept.

Mechanic's Lien-  Lien on real estate, created by operation of law, securing the payment of debts due to persons who perform labor or services or furnish materials incident to the construction of buildings / improvements on the real estate.

Metes and Bounds-  Land description in which boundaries are described by courses, directions, distances and monuments.

Mortgage-  Conditioned pledge of property to a creditor as security for the payment of a debt.

Mortgage Insurance-  A type of Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, therefore, enables the lender to lend a higher percentage of the sale price.

Mortgagee-  Holder of a mortgage, is the party to whom a mortgage is made, generally the lender.

Mortgagor-  Person who mortgages property is the one who executes a mortgage, generally the property owner.

Multiple Listing-  A central bureau of listings of properties for sale.  These listings are held individually by members of a group of real estate brokers, with the agreement that any member of the group may sell the properties and, in the case of a sale, the commission will be divided between the broker making the sale and the broker who filed the listing.

Muniments of Title-  A written document that an owner possesses to prove his or her title to property.

N

Note- Also known as "promissory note" is a written promise to pay a sum of money, usually at a specified interest rate, at a stated time to a named payee.

O

Owner's Policy-  Policy of title insurance insuring the owner of real estate against loss occasioned by defects in, liens against or non marketability of the owner's title.

P

Plat-  Also known as "plat map" is a map dividing a parcel of land into lots, as in a subdivision.  Plat book contains the plat maps for a given area.

Point-  Also known as "commission points" or "discount points" is one percent of the amount of the loan.

Premium-  Amount payable for an insurance policy.

Prescriptive Easement-  Right to use another's property that is not inconsistent with the owner's rights and is acquired by an open, notorious, adverse and continuous use for the statutory period.

Principal-  Sum of money owed as a debt on which interest is payable.  Also known as a person who empowers another to act as his representative or agent.  Additionally, the Principal is the person having prime responsibility for an obligation as distinguished from one who acts as a surety or endorser.

Purchase Money Mortgage-  Mortgage given by a purchaser to a seller on the subject property to secure payment of a part of the purchase price.

Q

Quit Claim Deed-  Deed that does not imply the grantor holds title, but surrenders and gives to the grantee any possible interest or rights the grantor may have in the property.

R

Real Estate-  Also known as "real property" is land and anything permanently affixed to the land, such as building, fences and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items would be personal property if not attached.  Also may refer to rights in real property as well as the property itself.

Recording-   Posting in a public office of the details of a legal document - such as a deed or mortgage - affecting the title to real estate. When an instrument is properly recorded, it is considered to be a matter of public record. Legally,  means all subsequent purchasers are deemed to have constructive knowledge of that information.

Reinsurance-  Contractual relationship between two insurance companies under which one insurer assumes a portion of the risk of the insurance policy written by the other.

Release-  Relieving from debt, security or abandon a right, such as the release of a mortgage lien from a part or all of the land mortgaged.  Also refers to the instrument effecting a release.

Restrictions-  Any limitations on the use of property imposed or created by deeds or other documents in the chain of title.

Riparian Rights-  Rights of owners of lands bordering watercourses which relate to the water and its use.

S

Sale Agreement-   Contract entered into between a buyer and seller, setting forth all terms, provisions and conditions of a sale of real estate.

Sale and Leaseback-  Sale of an asset to a buyer who immediately leases it back to the seller.

Search-  A complete review of the public records in an effort to find all recorded instruments relating to a particular chain of title.

Second Mortgage-  Mortgage ranking in priority immediately below a first mortgage.

Subordination-  Act or process by which a person's rights are ranked below the rights of others.

Surety-   Person who agrees to be responsible for a debt or obligation of another.   Surety is a pledge or agreement by which one undertakes responsibility for the debt or obligation of another.

T

Title-  Combination of all the elements constituting the highest legal right to own, control, use, possess, enjoy and dispose of real estate or an inheritable right /  interest therein.   Title is the rights of ownership recognized and protected by the law.

Title Covenants-  Covenants are ordinarily inserted in conveyances and in transfers of title to real estate for the purpose of giving protection to the purchaser against possible insufficiency of the title received.   Group of such covenants known as "common law covenants" includes: covenants against encumbrances; covenants for further assurance; covenants of good right and authority to convey; covenants of quiet enjoyment; covenants of seisin; covenants of warranty.

Title Defect-  All possible or patent claims or rights outstanding in a chain of title that is adverse to the claim of ownership. Title Defect is any material irregularity in the execution / effect of an instrument in the chain of title.

Title Insurance Policy-   Contract of title insurance under which the insurer, in keeping with the terms of the policy, agrees to indemnify the insured against loss arising from claims against the insured interest.

Title Plant-   Also known as "abstract plant" is a geographically filed assemblage of title information that helps in expediting title examinations, such as copies of previous attorneys' opinions, abstracts, tax searches and copies or take-offs of the public records.

U

Underwriter-  Insurance company issuing insurance policies to the public or to another insurer.

V

Variable Interest Rate-  Also known as "flexible interest rate" is an interest rate fluctuating as the prevailing rate moves up or down. In most mortgages, there are usually maximums as to the frequency and amount of fluctuation.

Veterans Administration (VA) Loans-  Housing loans to Veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans Administration.  Thus, enabling Veterans to buy a home with little or no down payment.

Waiver-  Voluntary and intentional relinquishment of a known right, claim or privilege.

Warranty-   An agreement or undertaking by a seller to be responsible for present or future losses of the purchaser occasioned by deficiency or defect in the quality, condition or quantity of the item sold.  The provision or provisions in a deed, lease or other instrument conveying or transferring an estate or interest in real estate under which the seller becomes liable to the purchaser for defects in or encumbrances on the title.

Will-  Testamentary disposition of property, usually in a form prescribed by law, that takes effect upon death.

Z

Zoning-  Collection of laws passed by local governments regulating the size, type, structure, nature / use of land or buildings.