Real estate glossary A-F

Basic Terms Used for Mortgage & Real Estate Transactions

Terms: A – F ~ G – M ~ N – S ~ T – Z

Real estate and mortgage transactions may involve other terms. In the event you don’t understand some of these terms, ask for help from your Realtor®, Lender or Attorney.

Click on the first letter of the term you want defined to jump to that alphabetical category.

A ~ B ~ C ~ D ~ E ~ F

Abstract (of Title)

The title to the property is a synopsis of all recorded transactions that an attorney or title company has to analyze to find out whether there are any unsuitable problems influencing the title to the property. All problems are then validated before the buyer is issued the title.

Acceleration Clause

A loan provision allowing the lender to have credibility to render all assets owed to the lender promptly. The renter is in infraction of the loan provision, such as the sale of the property, or unable to make payments on time.


Enlarging the amount of land through innate forces (water, wind, erosion, etc).

Example : location of new soil by a stream.

Agreement of Sale

A written signed agreement between the seller of a property and the purchaser in which the purchaser agrees to buy real estate and the seller agrees to sell upon the terms of the agreement.


A person who acquires or is going to acquire benefits from indisputable events.

Example : The beneficiary on a mortgage loan is the lender.

Bi-weekly Mortgage

A mortgage which requires 1/2 the normal monthly payment every two weeks. Over the course of the year, 26 half payments are made which is equivalent to 13 full mortgage payments. As a result of this extra payment the loan amortizes much faster than a loan with normal monthly payments.

Blanket Mortgage

A contract comprising of multiple amounts of property.

Example : A man gets a blanket mortgage for his 3 tracts of land.


A person who receives a loan and is responsible to make mortgage payments.

Bridge Loan

A loan used for someone who is having trouble selling his/her current home and needs money to buy a new home. Once the current home is sold the loan is then paid off.

Buy Down

A lower interest rate is offered through a point system set by the lender (buying the rate lower). The rate may last through the life of the loan or for only a year or so. The buy down system is a method for someone to qualify who is not suitable as a potential borrower. With a buy down the monthly payments are lowered.

Buyers Broker

A buyer seeks someone, usually an agent, to find and locate property that is for sale. The broker, a delegate on the behalf of the buyer, tries to deal with the sellers brokers to achieve the best possible deal.

Buyers Market

When buyers are able to bargain with sellers for a lower prices over property this may be a cause known as the buyers market (more sellers then buyers). The market is in favor of the buyers since more property for sale is in abundance. This type of buyers market may be seen during an economic drop or widespread developments.


How an establishment/organization handles business (set of regulations), e.g. a condo community constructs bylaws that define the number of people that may live in one household.

Capital Gains

The money gained from the sale of the property. A seller can delay the taxes on the capital gain by two years if they purchase a more expensive home within that time.

Cash Flow

The money accumulated over a given amount of time from an income producing property. The amount of money coming in from the property should be able to cover the cost of the income producing property (mortgage, basic upkeep, etc.).

Caveat Emptor

Actual definition meaning “let buyer beware”. Pre-purchasing and examination of the property is done at the buyers own risk. e.g. a property can be shown/represented without the assurance of condition or quality.

Covenants, conditions, and restrictions – CC&Rs.

The basic rules establishing the rights and obligations of owners of real estate in a condominium, townhouse, PUD, subdivision or other tract of land. An association is organized in order to maintain the property commonly owned by the individual owners. The association is typically made up of all of the home owners.

Certificate of Reasonable Value (CRV)

Appraisals given by an approved VA (Veterans Administration) appraiser. They are to set the maximum value on the VA mortgage loan principal.

Certificate of Occupancy

A form that must be given to the lender prior to closing a loan. The document must state the number of people living in one residency and that the home meets public health and building codes.

Certificate of Title

A statement by an attorney stating the status to the title of property. This certificate does not give the same benefits and protection as title insurance.

Clear Title

A retail title, clear of questionable and controversial issues. Some lenders have a clear title as a requirement before closing.


Changing ownership of land from the current owner to the buyer.

Closing Costs

Expenses incurred by the buyer and seller in a real estate or mortgage transaction. Types of costs are recurring and non-recurring.

Non-recurring costs are one time costs which include discount and origination points.

Lender fees – underwriting, processing, document preparations, flood certificate, tax service, wire transfer, courier, etc.

Title insurance fees

Escrow, attorney or closing agent fees

Recording fees

Inspection and appraisal fees

Real estate brokerage commissions

Recurring fees are costs associated with owning the property and they recur month after month. These costs may include hazard insurance, interest, property taxes, mortgage insurance (PMI), and association fees. A pro-rated amount of these fees may have to be paid at closing including Pre-paid interest – interest charges from the date of closing to the end of the month

Cloud on Title

Questionable claims that could jeopardize the owner’s title.


A lender agreeing or committed to specific terms, on a written document, to a contractor or borrower.


Using private property for public use while providing a considerable amount of compensation (usually money) to the owner. The land in turn is usually used for schools, streets and other community projects.

A home in violation of housing codes and consequently goes under government regulation.

Conditional Commitment

A lender making a commitment to a loan however, certain conditions must be meet before the closing date of the property.


Single ownership of a property unit with a shared interest in commonly owned areas and facilities which appeal to everyone in the condo community.

Construction loan

This type of loan is temporary and used for construction of buildings and homes. A construction loan also gives the contractor small amounts of money over the construction period. It is not till the job is completely finished when a permanent loan is used to pay off the rest of the construction.


Anything that would entice a seller into a contract (example: money deposits).


Contingencies are conditions usually set forth in the contract that must be met before the buyer will close the purchase of the property. E.G. if the sales contract stated the buyer has 21 days to check all necessary repairs needed to the property and asks the seller to perform them. If the buyer is not pleased with the repairs or if they were not performed the buyer is then allowed to back out of the contract. However, after the 21 days are up the buyer can not back out due to the condition of the property.


A mutual agreement between the two parties which are involved in buying and selling property. E.G. an acceptable contract for sale contains: an offer, an acceptance, competent parties, consideration, legal purpose, written documentation, description of the property, signatures by principals.

Contract sale or deed

An installment arrangement between the buyer and seller stating that the buyer may reside on the property but the seller holds the title till sale is official and paid.

Conventional Loan

Their are two types of conventional loans: conforming and non-conforming. This is any type of mortgage other then VA and FHA loans.


The change of a real estate title from one party to another.

Co-op – cooperative

In a cooperative, an apartment building is owned by a corporation that holds the title to the property or real estate. A resident however, is able to buy stock from the corporation which in turn allows him to live in the building unit owned by the cooperative. The person owning the stock does not have a title to the property but they are allowed to remain in their unit as long as they still hold stock.

Convertible ARMs

Certain loans are able to be converted to a fixed loan provided it follows a set formula.

Credit Report

A detailed report showing someone’s credit history such as credit cards (revolving accounts) and car loans (installment accounts). Some reports will also show detailed descriptions from tax liens and judgments.


The title of property, normally changed from one owner to another at closing. The deed contains information about the property and the location. It is given to the buyer at closing.

Deed Restriction

Limiting the use of land by a clause, e.g. not permitted to construct a new road through the land.

Defective Title

The inability to give a clear title.

Deficiency Judgment

Personal claim made against a debtor when the sale of a foreclosed property does not yield sufficient proceeds to pay off mortgages, accrued interest, legal fees, …


The decreasing value of a house caused by damages to the house or other means.

Discount Points

Decreasing an interest rate by paying fees to a lender.

Documentary Tax Stamps

Stamps on a deed showing the total amount of a transfer tax.

Down payment

The amount paid in advance on a property.

Earnest Money

Money showing evidence of good faith. The money is usually kept in safe keeping with a real estate broker or escrow company.


Using land for a specific purpose, the easement can either be temporary or permanent.

Eminent Domain

The governments ability to take over property (condemnation) for public use with compensation to the property owner.


Anything that physically lays or touches on the property of another.

Example: A fence being built.


A legal right or interest in land/property that affects a good or clear title, and reduces the land/properties value. Such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance will not legally prevent the transfer of the property. A title search is typically done to find the existence of encumbrances. It is up to the buyer to determine whether he wants to purchase an encumbered land/property and what can be done to remove the encumbrance.


Equity (usually given in a percentage) is equal to the property value minus any liens.


A neutral third party that deals with the financial aspects of a real estate transaction. A deposit is put into escrow, the mortgage lender funds the loan into escrow, escrow pays the realtor commission, pays of any liens/loans on the property and any property taxes and other costs associated with the transfer. The remaining funds are then transferred to the property seller.


Federal National Mortgage Association (FNMA, Fannie Mae)

Purchases loans from lenders and then sells FNMA mortgage backed securities on Wall street.

Federal Home Loan Bank Board (FHLBB)

Financing for farmers.

Farmer’s Home Administration (FMHA)

Programs that assist people who want to buy farms and homes in rural areas.

Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)

Purchases loans from members of the Federal Reserve and the Federal Home Loan Bank Systems, and sells FHLMC mortgage backed securities on wall street.

Federal Housing Administration (FHA)

An agency that issues loan guarantees and administers loan programs which makes more housing available.

Federal Reserve System

Provides regulation of the federal bank and gives services to commercial banks. Also sets the nations monetary policy as well.

Fee Simple

The owner that has absolute ownership of the property in the case of this person’s death the property is given to their heirs.


Someone who is to act in the best interest of a client. A realtor is a fiduciary for his/her clients.

Finance Charge

Interest charged by a lender.

First Mortgage

A mortgage with precedence over the second mortgage. In the case of closing on property the first mortgage will we covered before the second.

Flood Insurance

Insurance that covers the cause of damage to a home due to flooding.


Forcing the sale of property by a default stated in a mortgage, e.g. not meeting payments on time.

Free and clear

A property that has no liens.


For sale by owner.