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53

GLOSSARY OF TERMS

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA):

Also known as

“Fannie Mae.” A U.S. government sponsored corporation

dealing in the purchase of first mortgages for the secondary

market.

FEE SIMPLE DEED:

The absolute ownership of a parcel of land.

The highest degree of ownership that a person can have in real

estate, which gives the owner unqualified ownership and full

power disposition.

JOINT TENANCY:

An equal undivided ownership of property by two

or more persons. Upon death of any owner, the survivors take

the decedent’s interest in the property.

LIEN:

A claim upon a piece of property for the payment or

satisfaction of a debt or obligation.

LOAN-TO-VALUE RATIO:

The relationship between the amount of

the mortgage loan and the appraised value of the property

expressed as a percentage.

MORTGAGE:

A conditioned pledge of property to a creditor as

security for the payment of a debt.

NEGATIVE AMORTIZATION:

Occurs when your monthly payments are

not large enough to pay all the interest due on the loan. This

unpaid interest is added to the unpaid balance of the loan. The

danger of negative amortization is that the home buyer ends up

owing more than the original amount of the loan.

PERSONAL PROPERTY:

Any property which is not real property, e.g.,

money, savings accounts, appliances, cars, boats, etc.

POINTS (ALSO CALLED “COMMISSION OR DISCOUNT” POINTS”):

Each point is

equal to 1% of the loan amount (e.g., two points on a $100,000

mortgage would cost $2000).

PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI):

Also called monthly

housing expense.

PRIVATE MORTGAGE INSURANCE (PMI):

In the event that a buyer does

not have a 20% down payment, lenders will allow a smaller

down payment—as low as 3% in some cases. With the smaller

down payment loans, however, borrowers are usually required

to carry private mortgage insurance. Private mortgage insurance

will usually require an initial premium payment and may

require an additional monthly fee, depending on the loan’s

structure.

REALTOR®:

A real estate broker or an associate holding active

membership in a local real estate board affiliated with the

National Association of Realtors®.

SUBDIVISION:

A tract of land surveyed and divided into lots for

purposes of sale.

TENANCY IN COMMON:

An undivided ownership in real estate

by two or more persons, without right of survivorship –

interests need not be equal.

TRUST ACCOUNT:

An account separate and apart and physically

segregated from the broker’s own, in which the broker is

required by law to deposit all funds collected for clients.

TRUSTEE:

The neutral third party in the deed of trust with

limited powers. When the loan is paid in full, the property

is reconveyed by the trustee back to the person or persons

legally entitled to the land, or if delinquent, the property

will be conveyed pursuant to non judicial foreclosure

proceedings, to the highest bidder in a public sale.

TRUSTOR:

The borrower, owner and guarantor of the property

conveyed in a deed of trust.

VETERANS ADMINISTRATION LOAN (VA LOAN):

Housing loan to

veterans by banks, savings and loans, or other lenders that

are guaranteed by the Veterans Administration, enabling

veterans to buy a residence with little or no down payment.

WARRANTY:

In a broad sense, 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 thing sold. In a stricter

sense, 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 defect in or encumbrances on the title.