Actual Title & Abstracting, L.L.C.

• Abstract (of title) is a historical summary of all the recorded transactions that affect the title to the property.
• Acceleration clause is 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.
• Adjustable-rate mortgage (ARM) is a mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.
• Amortization is the gradual repayment of a mortgage loan by installments.
• Amortization schedule is a timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
• Annual percentage rate (APR) is the cost of credit expressed as an annual rate. It must be calculated by using a formula set by federal law and disclosed to the borrower to aid in comparing different credit plans. All finance charges imposed by a lender are included in this calculation, and an APR is always higher than the simple interest rate when such finance charges like points, origination fees or mortgage insurance are charged by a lender.
• Appraisal is a written analysis of the estimated value of a property prepared by a qualified appraiser.
• Assessment is process of placing a value on property for the strict purpose of taxation.
• Attorney-in-fact is one who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
• Balloon mortgage is a mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
• Balloon Payment is the final lump sum payment that is made at the maturity date of a balloon mortgage.
• Borrower is one who applies for a loan secured by real estate and is responsible for repaying the loan.
• Bridge loan is a form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."
• Broker is a person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. See mortgage broker.
• Buy down mortgage is obtaining a lower interest rate (buying down the rate) by paying additional points to the lender. The lower rate may apply for the full duration of the loan or for just the first few years. A buydown may be used to qualify a borrower who would otherwise not qualify. This is because a buydown results in lower payments which are easier to qualify for.
• Certificate of title is a statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
• Chain of title is the history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
• Clear title is a title that is free of liens or legal questions as to ownership of the property.
• Closing is a meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."
• Closing costs are expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs are usually about 1% to 2% of the mortgage amount.
• Closing statement See HUD-1 statement.
• Cloud on title is any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.
• Commitment letter is an agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork and compliance with stated conditions.
• Condemnation is the determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.
• Condominium is a real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
• Construction Loan is a short-term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.
• Contingency is a condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
• Contract is an oral or written agreement to do or not to do a certain thing.
• Conventional mortgage is a mortgage that is not insured or guaranteed by the federal government. Contrast with government mortgage.
• Convertible ARM is an adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
• Cooperative (co-op) is a type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
• Credit report is a report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. See merged credit report.
• Debt-to-income ratio is the ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by the gross monthly income.
• Deed is the legal document conveying title to a property.
• Deed of trust is the document used in some states instead of a mortgage; title is conveyed to a trustee.
• Default is the failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
• Depreciation is a decline in the value of property; the opposite of appreciation.
• Discount points are fees paid to lenders. Each point is equal to 1% of the loan amount. On a $100,000 loan 1 point is $1000. Points may be further classified into origination points or discount points.
• Down payment is the part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. Down payments are usually 5% to 20% of the sales price on conventional loans.
• Due-on-sale clause is a provision in the Deed of Trust or mortgage that states the entire loan is due upon the sale of the property.
• Earnest Money is a deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate brokers or the escrow company.
• Easement is the right to use the land of another for a specific purpose. Easements may be temporary or permanent. Example : The utility company may need an easement to run electric lines.
• Eminent Domain is the right of the government or a public utility to acquire property for necessary public use by condemnation, with proper compensation to the owner.
• Encroachment is a building, a part of a building, or an obstruction (e.g.. a fence or a wall) that physically intrudes upon or overlaps into the property of another.
• Encumbrance is a legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.
• Equity is the difference between the fair market value and current indebtedness; also referred to as the owner's interest.
• Escrow is a neutral third party that handles all funds in a real estate transaction. The buyer puts his deposit into escrow, the lender funds the loan into escrow. Escrow pays the real estate brokers commission, pays off any loans/liens against the property, pays real estate taxes and any other fees associated with the transaction and sends the balance of the money to the seller.
• Executor is a person named in a will to carry out its provisions for the disposition of the estate.
• Federal Home Loan Mortgage Corporation (Also known as "Freddie Mac") is a Quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.
• Federal Housing Administration (FHA) is an agency within the U.S. Department of Housing and Urban Development (HUD) that administers loan programs, issues loan guarantees to make more housing available.
• Federal National Mortgage Association (Also known as "Fannie Mae") is a corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA.
• Fee Simple absolute ownership of real property is when the owner is entitled to the entire property with unconditional power of disposition during the owners life and upon his death the property descends to the owner's designated heirs.
• Fiduciary is a person in a position of trust or responsibility with specific duties to act in the best interest of a client. A real estate broker is a fiduciary for his/her clients.
• First Mortgage is a mortgage that has priority as a lien over all other mortgages. In the case of foreclosure the first mortgage will be satisfied before other mortgages. See also second mortgage.
• Fixed-Rate Mortgageis a mortgage on which the interest rate is set for the term of the loan.
• Fixture is personal property that becomes real property when attached in a permanent manner to real estate.
• Flood Insurance is an insurance policy that covers property damage due to natural flooding. Flood insurance may be required on properties in a flood zone.
• Foreclosure (Repossession) is a legal process by which the lender forces a sale of a property because the borrower has not met the terms of the mortgage.
• Grantee is the person to whom an interest in real property is conveyed.
• Grantor is the person conveying an interest in real property.
• Gross monthly income is the total amount the borrower earns per month, before any expenses are deducted.
• Hazard insurance is insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
• Homeowners' association is 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.
• HUD-1 statement is a document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet."
• Income property is real estate developed or improved to produce income.
• Index is a number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM.. This interest rate is subject to any caps that are associated with the mortgage.
• Joint and Several Liability is when a creditor can demand full repayment from any and all of those who have borrowed. Each borrower is liable for the full debt, not just the prorated share.
• Joint Tenancy is a form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.
• Judgment is the decision of a court of law stating that one individual is indebted to another and fixing the amount of indebtedness. Judgments, when recorded, become a lien on real property owned by the defendant.
• Judgment Lien is the claim on the property of a debtor resulting from a judgment.
• Jumbo Loan is loan size that is larger than the limit established by Fannie Mae or Freddie Mac.
• Junior Mortgage is a mortgage subordinate to another mortgage. In the case of a foreclosure a senior mortgage will be paid prior to a junior mortgage.
• Land Contract is a real estate installment selling arrangement whereby the buyer may use and occupy land, but no deed is given by seller until the sales price has been paid.
• Lease with Option to Purchase is a lease under which the lessee has the right to purchase the property. The option may run for a portion or for the full length of the lease.
• Legal Description is a property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
• Lien is a claim against the property for the payment of a debt, judgment, mortgage or taxes.
• Life Estate or Usufruct is an estate in real property for the life of a living person. The estate then reverts back to the grantor or to a third party.
• Lis Pendens (Latin for "lawsuit pending") is a recorded notice that litigation is pending on a property. Most lenders will require the clearance of the Lis Pendens prior to closing.
• Loan to Value Ratio (LTV) is the relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
• Loan Servicing is the act of collecting loan payments, handling property tax and insurance escrow's, foreclosing on defaulted loans and remitting payments to the investors.
• Market value is the highest price that you would pay and the lowest price the seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.
• Margin (For an adjustable-rate mortgage (ARM)), it is the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.
• Mortgage is a legal document that pledges a property to the lender as security for payment of a debt.
• Mortgage banker is a company that originates mortgages exclusively for resale in the secondary mortgage market.
• Mortgage broker is an individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.
• Mortgagee is the lender in a mortgage agreement.
• Mortgage insurance is a contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan.
• Mortgagor is the borrower in a mortgage agreement.
• Negative amortization is a gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.
• Note is a legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
• Notice of default is a formal written notice to a borrower that a default has occurred and that legal action may be taken.
• Original principal balance is the total amount of principal owed on a mortgage before any payments are made.
• Origination fee is a fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
• Partial Release is a provision in a mortgage that allows some of the property secured to be freed from serving as collateral.
• PITI is an abbreviation for principal, interest, taxes and insurance, which may be combined in a single monthly mortgage payment.
• Planned Unit Development (PUD) is a zoning classification that allows flexibility in the design of a subdivision. PUD's include individually owned units as well as some common space that is jointly owned.
• Plat is a plan or map of a specific land area.
• Points are fees paid to lenders. Each point is equal to 1% of the loan amount. On a $100,000 loan 1 point is $1000. Points may be further classified into origination points or discount points.
• Portfolio Loan is a loan that is held as an investment by a bank or savings and loan, and NOT sold on the secondary market to investors.
• Power of Attorney is a written document authorizing a person to act on the behalf of another person. That person does not have to be an attorney.
• Prepaid Interest is the interest charged to borrowers at closing to pay for the cost of borrowing for a balance of the month. For example, if a loan closes on the 19th of the month and the first payment is due on the 1st of the following month, the lender will charge 12 days of prepaid interest.
• Prepayment is a privilege in a mortgage permitting the borrower to make payment in advance of the due date. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan.
• Prepayment Penalty is fees paid by the borrower if they pay the loan before its due date.
• Primary Mortgage Market are companies that originate and service mortgage loans (banks, savings & loans, credit unions, mortgage bankers, institutional lenders) make up the primary mortgage market.
• Prime Rate is the lowest commercial interest rate charge by a bank on short term loans to their most credit worthy customers.
• Principal is the outstanding balance on a loan.
• Private Mortgage Insurance (PMI) is what may be required by your lender if the loan you apply for cannot be granted because the loan does not meet the normal standards for the lender. The most common reason for this requirement is a smaller down payment than the lender usually requires (around 20%). This insurance protects the lender from loss if the borrower defaults. It does not protect the borrower though it may allow the borrower to qualify for a loan.
• Purchase Money Mortgage is a mortgage used to finance the purchase of a property.
• Property Tax is a government levy based on the market value (as assessed by the county assessor's office) of the property.
• Purchase Agreement is a written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
• Quit Claim Deed is a deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.
• Realtor is a real estate professional who is a member of the National Association of Realtors.
• Real Estate Settlement Procedure Act (RESPA) is a law that states how mortgage lenders must treat those who apply for real estate loans on property with 1-4 units. Example : A lender is required to provide a good faith estimate of closing costs within 3 days of an application being filed.
• Refinancing is repaying an existing loan from the proceeds of a new loan on the same property.
• Recording is the act of entering into a book of public records instruments affecting title to the real property. A lender requires that a deed of trust or a mortgage be recorded to evidence the debt against the property.
• Rescission is the cancellation of a contract. When refinancing a mortgage on a principal residence the law gives the homeowner three days to cancel the contract.
• Recourse is the right of the holder of a note secured by a mortgage or deed of trust to claim money from the borrower in default in addition to the property pledged as collateral.
• Reverse Mortgage is a mortgage used by the elderly that provides income as long as they live in exchange. Payments made cause the loan principal to increase.
• Second mortgage is a mortgage that has a lien position subordinate to the first mortgage.
• Secondary mortgage market is the buying and selling of existing mortgages.
• Security is the property that serves as collateral for a loan.
• Servicing is the collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
• Settlement See closing.
• Settlement sheet See HUD-1 statement.
• Sheriff's Deed is a deed given at the sheriff's sale in the foreclosure of a mortgage.
• Subdivision is a housing development that is created by dividing a tract of land into individual lots for sale or lease.
• Survey is a drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
• Sweat equity is a contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
• Tenancy by the entirety is a type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.
• Tenancy in common is a type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenancy.
• Title is a legal document that gives evidence of an individual's ownership of property.
• Title insurance is insurance policy that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
• Title search is an examination of municipal or county records to determine the legal ownership of property, usually performed by a title company.
• Transfer tax is State or local tax payable when title passes from one owner to another.
• Truth-in-Lending is a federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
• Two-step mortgage is an adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
• Trustee is a fiduciary who holds or controls property for the benefit of another.
• Underwriting is the decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc.
• VA mortgage is home loan guaranteed by the Department of Veterans Affairs (VA), enabling a veteran to buy a home with no money down.
• Warranty deed is a deed conveying the title to a property with a warranty of a clear marketable title.
• Wraparound mortgage is a loan arrangement whereby the existing first mortgage loan is retained and a new loan is added to the property.

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