Real Estate Glossary


Acceleration Clause 

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. 


An offeree’s consent to enter into a contract and be bound by the terms of the offer. 

Additional Principal Payment 

A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan. 

Adjustable Rate Mortgage (ARM) 

A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index. 

Adjusted Basis 

The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken. 

Adjustment Date 

The date on which the interest rate changes for an adjustable-rate mortgage (ARM). 

Adjustment Period 

The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM). 


A person appointed by a probate court to administer the estate of a person who died intestate. 


A formal sworn statement of fact. As part of the closing process, you’re likely to sign numerous affidavits. You may be required, for example, to sign an affidavit of occupancy. It states that you will use the property as a principal residence. Or you and the seller may have to sign an affidavit stating all of the improvements to the property required in the sales contract were completed before closing. 

Your lender can provide additional information regarding any of these documents you will sign. 

Affordability Analysis 

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. 


A feature of real property that enhances its attractiveness and increases the occupant’s or user’s satisfaction although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities. 


The gradual repayment of a mortgage loan by installments. 

Amortization Term 

The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months. 


To repay a mortgage with regular payments that cover both principal and interest. 

Amortization Schedule 

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 Mortgagor Statement 

A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year. 

Annual Percentage Rate (APR) 

The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points). 


An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis. 


A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security. 

*See also “Loan Application” entry. 


A written analysis of the estimated value of a property prepared by a qualified appraiser. Contrast with home inspection. 

Appraised Value 

An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property. 


A person qualified by education, training, and experience to estimate the value of real property and personal property. 


An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation. 

Assessed Value 

The valuation placed on property by a public tax assessor for purposes of taxation. 


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. 

Assessment Rolls 

The public record of taxable property. 


A public official who establishes the value of a property for taxation purposes. 


Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on). 


The transfer of a mortgage from one person to another. 

Assumable Mortgage 

A mortgage that can be taken over (“assumed”) by the buyer when a home is sold. 

A provision in an assumable mortgage allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon the sale or transfer of the property. 


The transfer of the seller’s existing mortgage to the buyer. 

*See also “Assumable Mortgage” entry. 

Assumption Clause 

A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property. 

Assumption Fee 

The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage. 


One who holds a power of attorney from another to execute documents on behalf of the grantor of the power. 

Automated Underwriting 

After you complete your loan application with a lender, it is sent to “underwriting” for review. In short, underwriting is the process used to analyze how you have managed credit obligations in the past, whether you have the ability to repay the mortgage loan you are applying for (i.e., your income and assets), and whether the price you are willing to pay for the home is supported by the price of the property. 



Balance Sheet 

A financial statement that shows assets, liabilities, and net worth as of a specific date. 

Balloon Mortgage 

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 

The final lump sum payment that is made at the maturity date of a balloon mortgage. 


A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee. 


A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee. 

Before-Tax Income 

Income before taxes are deducted. 


The person designated to receive the income from a trust, estate, or a deed of trust. 


To transfer personal property through a will. 


An improvement that increases property value as distinguished from repairs or replacements that simply maintain value. 

Bill of Sale 

A written document that transfers title to personal property. 


A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate. 

Biweekly Mortgages 

Your lender will probably tell you that a biweekly mortgage is structured just like a traditional fixed-rate, level-payment, fully amortizing mortgage. However, you make your payments every 14 days (about 2 weeks) instead of once a month. The monthly payment is split in half, resulting in the same total monthly mortgage, but the resulting 26 and sometimes 27 biweekly payments a year translate into 13 monthly payments, or one extra monthly payment per year. 

Borrowers can qualify for a 30-year monthly payment amount but get a loan that pays off in approximately 22 years at current interest rates. At higher rates, the actual term declines. 

If you are looking to build up equity in your home faster without the higher mortgage payments that come with a shorter-term mortgage, you may want to consider the biweekly mortgage. Payments can be deducted from your bank account and scheduled to coincide with your payroll deposits to simplify budgeting. Lenders may charge an initial set-up fee to automatically debit your checking account. 

Blanket Insurance Policy 

A single policy that covers more than one piece of property (or more than one person). 

Blanket Mortgage 

The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project. 

Bona Fide 

In good faith, without fraud. 


An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust. 


A violation of any legal obligation. 

Bridge Loan 

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.” 


A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. 


A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses. 

Budget Category 

A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all the budgets you create. “Rent” is an example of an expense category. “Salary” is a typical income category. 

Building Code 

Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards. 

Buydown Account 

An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect. 

Buydown Mortgage 

A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage. 



Call Option 

A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason. 


A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. 

*See also “lifetime payment cap,” “lifetime rate cap,” “periodic payment cap,” and “periodic rate cap”. 


Lenders will want to know if you can repay the mortgage debt you incur -- this is known as your capacity. Lenders will base their evaluation on employment information, how long you have worked, and how much you are paid. Lenders will also review your expenses and any other debt obligations you have. This means they will want to know how many dependents you have and whether you pay any alimony or child support, for example. 


1.     Money used to create income, either as an investment in a business or an income property. 

2.     The money or property comprising the wealth owned or used by a person or business enterprise. 

3.     The accumulated wealth of a person or business. 

4.     The net worth of a business represented by the amount by which its assets exceed liabilities. 

Capital Expenditure 

The cost of an improvement made to extend the useful life of a property or to add to its value. 

Capital Improvement 

Any structure or component erected as a permanent improvement to real property that adds to its value and useful life. 

Cash-Out Refinance 

A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose. 

CD-Indexed (Certificate of Deposit) ARMs 

The Certificate of Deposit index represents the weekly average of secondary market interest rates on six-month negotiable CDs. 

The initial interest rate and payments adjust every six months after an initial six-month period. 

ARMs with this index typically come with a per-adjustment cap of 1 percent and a lifetime rate cap of 6 percent. 

Certificate of Deposit 

A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period. 

*See also “Adjustable-Rate Mortgage” entry. 

Certificate of Deposit Index 

An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. 

*See also “Adjustable-Rate Mortgage” entry. 

Certificate of Eligibility 

A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage. 

Certificate of Reasonable Value (CRV) 

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