georgia real estate glossary
Whether you are purchasing your first home or your 10th home, sometimes the real estate terminology can get a bit confusing. To follow you will find a comprehensive glossary of many common real estate terms.
If you do not find what you are looking for, please don’t hesitate to call The URBANEST Real Estate Group — we would be honored to assist you!
— A —
The voluntary surrender of property, owned or leased, without naming a successor as owner or tenant.
An auction in which the subject property is sold to the highest bidder regardless of the amount of the winning bid.
An estimate of the expected annual sales of a particular type of land use. Also used an indicator of the current real estate market, by calculating homes sold during a particular time period and dividing that into the current number of homes on the market.
A fee related to the title insurance required by the lender. A public record search exam is done to insure that both you and the lender are aware of any liens or encumbrances that could affect the property.
A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
Date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract (also known as the “Binding Agreement Date”)
Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.
A fee charged by a lender to cover the administrative costs of processing your loan request. For our comparison purposes, this fee is typically a lender fee.
A person appointed by a probate court to administer the estate of a person who died intestate.
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.
Adjustable Rate Mortgage (ARM)
A mortgage that permits the lender to adjust the mortgage’s interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change
A loan repayment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principals and shows the remaining balance after each payment is made.
A loan that is paid in equal installments during its term.
An estimate of real estate value, usually issued to standards of FHA, VA and FHMA. Recent comparable sales in the neighborhood is the most important factor in determining value. Typically your loan officer / mortgage company will order the appraisal on the home you would like to purchase.
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
APR (Annual Percentage Rate)
To make it easier for consumers to compare mortgage loan interest rates the federal government developed a standard format, called an “Annual Percentage Rate” or APR, to provide an effective interest rate for comparison shopping purposes. Some of the costs that you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.
The valuation placed on property by a public tax assessor for purposes of taxation. [This is not the same as a home appraisal]
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.
Purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage. [FYI — Currently, FHA loans are assumable]
One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
— B —
A contract to buy property that becomes effective if a prior contract fails to be agreed upon.
A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.
The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.
A person, company, or corporation that, through formal court proceeding, is relieved from the payment of all debt after the surrender of some or all assets to a court-appointed trustee.
A court proceeding in which a debtor, who owes more than his assets, can relieve the debts by transferring his assets to a trustee.
Bill of Sale
Document used to transfer ownership of PERSONAL property during a real estate transaction
Breach of Contract
A violation of the terms of any legal obligation or agreement.
Sometimes called a “swing loan”, a bridge loan is generally a loan that is secured by a borrower’s current residence to obtain the funds needed to purchase a new home if the current residence will not be
sold prior to the purchase of a new home.
A state-licensed agent who, for a commission or a fee, represents property owners in real estate transactions.
A small, one-story, compact, early-twentieth-century house. [FYI – Many Craftsman Bungalows were ordered from the Sears & Roebuck Catalog between 1910 and 1937]
Check with your lending institution to find out what days it considers as business days under the Truth in Lending and Electronic Fund Transfer Acts. Usually excludes weekends and holidays.
— C —
A small, one-story, compact, early-twentieth-century house.
A one-story, post-World War II style, ground-hugging house with a low, pitched roof.
A provision in a home loan that gives the mortgagee the right to call the mortgage due and payable at the end of a specified time period for any reason.
A contract provision that gives the right to terminate obligations upon the occurrence of specified events.
A title that is free of clouds, liens, disputed interests or legal questions as to ownership of the property.
Close of Escrow
A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the close of escrow involves the borrower and the lender. Sometimes referred to as the settlement or closing.
A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a home or condo purchase, a closing usually involves the seller, the buyer, the real estate broker, the lender and the closing attorney. In the case of a refinance, the closing involves the borrower and the lender.
Closing Cost Item
A single fee that a home buyer must pay at closing. Closing costs are made up of individual closing cost items such as origination fees, escrow fees, underwriting fees and processing fees. Most closing cost items are included as numbered items on the HUD-1 Settlement Statement.
The total of all the items that must be paid at closing related to your new mortgage.
Also referred to as the HUD-1 or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
Cloud on Title
Any condition that affects the clear title to real property (for example, a tax lien, workman’s lien)
An abbreviated form of comparable properties. Comparables are used for comparative purposes in the appraisal process and are properties that are very similar to the property being appraised. They have been sold recently and have approximately the same size, location and features. Comparables help the appraiser determine the approximate fair market value of the subject property. Often just called “comps”.
A form of real estate ownership in which each owner has title to a specific unit in a project and joint ownership in the common areas of the project.
Anything of value to induce another to enter into a contract (i.e., money, services, a promise)
— D —
A written instrument, which when properly executed and delivered, conveys title to real property. [Once you purchase your new home, please keep your deed in a safe place.]
A loan fee charged by a lender of FHA, VA or conventional loans to increase the yield on the investment. One point = 1% of the loan amount.
— E —
The right to use the land of another. [It is common to have an easement in your yard so that utility companies have the right access power lines]
A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The earnest money is deducted from the purchase price at closing and is not an additional cost. Sometimes referred to as a binder deposit. [In Metro Atlanta, home sellers usually expect that buyers will offer earnest money equal to 1% of the purchase price — but this is not required.]
Anything that burdens (limits) the title to property, such as a lien, easement, or restriction of any kind.
The value of real estate over and above the liens against it. It is obtained by subtracting the total liens from the value. [To determine how much equity you have in your Atlanta home, just subtract the current mortage owed — and any tax burdens — from a current appraisal]
Portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, hazard insurance and other items as they become due.
— F —
The nickname for the Federal National Mortgage Corporation (FNMA), a tax-paying corporation created by congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional loans.
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.
Fixed Rate Mortgage
A loan that fixes the interest rate at a prescribed rate for the duration of the loan. [When applying for a mortgage, ask the loan officer if the loan has a “Fixed Rate”]
Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.
The nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
— G —
Graduated Payment Mortgage
Any loan where the borrower pays a portion of the interest due each month during the first few years of the loan. The payment increases gradually during the first few years to the amount necessary to fully amortize the loan during its life. [FYI — Many student loans have a graduated payment plan]
— L —
Lease Purchase Agreement
Buyer makes a deposit for future purchases of a property with the right to lease property in the interim [FYI – Often the deposit is non-refundable if you are not able to purchase the home at the end of the lease, so please be careful and make sure you have a licensed Georgia real estate professional representing you.]
Loan to Value Ratio (LTV)
The ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.
— M —
Legal document that pledges a property to the lender as security for payment of a debt.
Mortgage Insurance Premium (MIP)
The amount paid by a mortgagor for mortgage insurance. This insurance protects the investor from possible loss in the event of a borrower’s default on a loan. [ FYI – On a conventional loan, typically you won’t have to pay MIP if you financing 80% or less of the home’s mortgage. Be sure to check with your lender!]
— N —
A fee for a licensed notary public to certify your signature on the loan documents.
The written agreement signed by the borrower at closing that contains the promise to repay the loan. The note also contains the terms of the loan, such as interest rate, payment, and term.
The interest rate stated on a mortgage note. Also called nominal rate or face interest rate.
Notice of Default
Formal written notice to a borrower that a default on a loan has occurred and that legal action may be taken.
— O —
A fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan. [FYI – Typically origination fees are tax deductible, so after you purchase a home, be sure to check with your CPA or accountant.]
— P —
P&I (Principal and Interest)
The monthly principal and interest payment required when repaying a mortgage in accordance with its terms. [FYI — The faster you pay down the principal, the less interest you will have to pay over the life of the mortgage]
Private Mortgage Insurance (PMI)
See Mortgage Insurance Premium.
— S —
An agreement between a buyer and seller to purchase real estate.A sales contract, also known as an offer to purchase or a binder, secures the right to purchase real estate upon agreed terms for a limited period of time.If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
Sales Disclosure (or Seller’s Disclosure Letter)
A state specific form that may need to be filed, disclosing everything about the sale of the home. [FYI – When you find a home you are interested in, ask your REALTOR to request a copy of the Seller Disclosure Letter]
A person who is licensed to make real estate transactions while under the supervision of a broker licensed by the state. [Also known as a real estate agent!]
Second Mortgage / Second Deed of Trust / Junior Mortgage / Junior Lien
An additional loan imposed on a property with a first mortgage. Generally, a higher interest rate and shorter term than a “first” mortgage.
Settlement Statement (HUD-1)
A financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.
— T —
Tenancy In Common
Ownership by two or more persons who hold an undivided interest without right of survivorship. (In event of the death of one owner, his/her share will pass to his/her heirs.
Tenancy by the Entirety
Type of joint tenancy that provides the right of survivorship and is available only to a husband and wife. Compare with tenancy in common.
Insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title. [FYI — Your lender will require a title insurance policy for the property, but the owner title policy is
optional… but highly recommended professionals in the real estate industry]
Total Closing Costs
This is the total of all the items that must be paid at closing related to your new mortgage. Since the exact charges for some of these items cannot be obtained until the time of closing, the figure may only be an estimate.
Total Debt Ratio
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance plus all other monthly debt obligation) by the borrower’s monthly gross income. Also referred to as a back end ratio or a bottom ratio.
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee. May also be referred to as an Intangible Tax.
Truth in Lending Act
Also known as Regulation Z, this federal regulation requires a lender to provide borrowers with a disclosure estimating the costs of the loan including your total finance charge and the Annual Percentage Rate (APR) within three business days of the application for a loan. This act is designed to provide consumers with a standard method of comparing the financing costs from lender to lender.
— V —
A mortgage for veterans and service persons. The loan is guaranteed by the Department of Veterans Affairs (VA) and requires low or no down payment. [Currently, the VA Loan requires NO downpayment! Lending standards do change, so be sure to check with your mortgage broker.]
— W —
Wire Transfer Fee
A fee charged by some lenders to cover the cost of wiring the mortgage funds to the appropriate parties, such as the title company or attorney, so that they are available for closing. For our comparison purposes, a wire transfer fee is considered to be a third party fee. However, some lenders may not charge for this service.
A loan that includes the remaining balance on an underlying first loan. Instead of having separate first and second mortgages, a wraparound loan has both.