REAL ESTATE GLOSSARY

Appraisal - an estimte of what apiece of property would sell for in the current market

Assessed value - The value of a property, established for tax purposes, as determined by the local property appraiser's office

Closing - A meeting to sign documents, settle closing costs, and transfer property from a seller to a buyer.

Commission - A percentage of the sales price, paid to a real estate broker as compensation for services

Contingencies - a home-sale agreement is often contingent on the buyer's obtaining a mortgage, and the home's passing inspections, etc.

Equity - the market value of real estate, ess the amount of outstanding secured loans against it.

Escrow account - A separate bank account that a broker uses to collect and disburse funds of clients. Also, an account set up by most lenders to which the borrower makes monthly payments for such obligations as real estate taxes, homeowners insurance and special assessments. The lender disburses funds from these accounts on behalf of the borrower.

Hazard insurance - Insurance that protects against damage caused by fire, windstorm and other common hazards. Many lenders require homeowners to carry it in an amount at least equal to the mortgage.

Housing finance agency - A state agency that offers below-market-rate home financing for low- and moderate-income households.

Inspections - Generally required in a sales contract to ensure soundness of the structure pinpoint any mechanical defects, and check for termites.

Lease with option to purchase - A lease that gives the renter the right to buy the property at an agreed-upon price under certain conditions. The price ad terms of the purchase must be spelled out for the option to be valid. The option can run for the length of the lease or for only a portion of the lease.

Market value - The most probable price a willing buyer would pay and a willing seller would accept.

Title - Evidence of property ownership, usually a deed.

Title insurance - A policy that protects the holder against defects in the title.

MORTGAGE TERMS

Adjustable-rate mortgage (ARM) - A loan with changeable rates and terms

Annual percentage rate (APR) - A mortgage's yearly interest rate. The APR represents the actual annyual cost of credit over the life of the loan including interest, service charges, points, loan fees and other items.

Assumable mortgage - A mortgage that may be taken over by another buyer without having the balance on the mortgage come due.

Balloon mortgage - A mortgage with monthly payments, followed by a lump sum due at the end of the loan

Cap - A limit placed on adjustable-rate mortgages to protect the borrower from large interest-rate increases. A limit on the amount an interest rate or a monthly payment can increase during the adjustment period and over the life of a loan. Usually used in reference to an adjustable-rate loan.

Conventional loan - A fixed-rate, fixed-term mortgage loan not obtained under a government-insured program.

Fixed-rate mortgage - A mortgage whose interest rate does not change during the life of the loan.

Index - A statistic that indicates current economic or financial conditions. Adjustable-rate mortgages are based on the movement of a specific independent index.

Mortgage broker - A broker who, for a fee, places loans with different investors.

Mortgage company - A company that borrows money from a bank, lends it to home buyers to purchase a residence, and then sells the loan to investors.

Mortgage insurance - Lenders often require private mortgage insurance (PMI) when a homebuyer obtains a loan that exceeds 80 percent of a property's value; for example, putting down 10 percent instead of 20 percent.

Negative amortization - An increase in a mortgage's outstanding balance, caused when the monthly payments do not cover the monthly interest due.

Origination fee - A charge for the work involved in preparing and servicing a mortgage application (usually 1 percent of the loan amount).

Points - Fees paid to induce lenders to make mortgage loans. Each "point" represents 1 percent of the mortgage amount.

Principal - The amount of a mortgage, not including interest. The face value of a note or mortgage.