REALTOR® Serving the San Francisco Bay Area Communities
Terms You Want to Know E - N
- 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. This is often called a "deposit".
- Easement: A right of way giving persons other than the owner access to or over a property.
- 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.
- Encroachment: An improvement that intrudes illegally on another's property.
- Encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
- 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 of funds.
- 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.
- 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.
- FHA Loan: A loan insured by the Insuring Office of the Department of Housing and Urban Development; the Federal Housing Administration.
- 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 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.
- Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit.
- First Mortgage: The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions.
- Fixture: Personal property that becomes real property when attached in a permanent manner to real estate.
- Government Loan (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). Mortgages that are not government loans are classified as conventional loans.
- Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.
- Grantee: The person to whom an interest in real property is conveyed.
- Grantor: The person conveying an interest in real property.
- Hazard Insurance: Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
- Home Equity Conversion Mortgage (HECM): Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. 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.
- Home Equity Line of Credit: A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.
- 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.
- Homeowners' Association: 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.
- 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.
- Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.
- Judicial Foreclosure: A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.
- Jumbo Loan: A loan that exceeds Fannie Mae's and Freddie Mac's loan limits, currently at $227,150. Also called a non-conforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
- Leasehold Estate: A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
- 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 origination: How a lender refers to the process of obtaining new loans.
- Loan-To-Value Ratio(LTV): The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.
- Lock-in: An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.
- Lock-in Period: The time period during which the lender has guaranteed an interest rate to a borrower.
- Margin: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
- Mortgage: A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, California and other states use First Trust Deeds.
- Mortgage Broker: A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
- Mortgagee: The lender in a mortgage agreement.
- Mortgage Insurance (MI): Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. It is often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time home-buyer programs require mortgage insurance regardless of the loan-to-value.
- Mortgagor: The borrower in a mortgage agreement.
- Negative Amortization: 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 you could owe more than you 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.
- No-Cost Loan: Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
- No-Points Loan: Almost all lenders offer loans at "no points." You will find the interest rate on a "no points" loan is approximately a quarter percent higher than on a loan where you pay one point.
- Note: A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
- Note Rate: The interest rate stated on a mortgage note.
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