Real Estate Terms
Click on a link below for
an alphabetized list of Real Estate and Mortgage Terms.
A mortgage loan that requires the remaining principal
balance be paid at a specific point in time. For example,
a loan may be amortized as if it would be paid over
a thirty year period, but requires that at the end of
the tenth year the entire remaining balance must be
The final lump sum payment that is due at the termination
of a balloon mortgage.
By filing in federal bankruptcy court, an individual
or individuals can restructure or relieve themselves
of debts and liabilities. Bankruptcies are of various
types, but the most common for an individual seem to
be a "Chapter 7 No Asset" bankruptcy which
relieves the borrower of most types of debts. A borrower
cannot usually qualify for an "A" paper loan
for a period of two years after the bankruptcy has been
discharged and requires the re-establishment of an ability
to repay debt.
Bill of sale
A written document that transfers title to personal
property. For example, when selling an automobile to
acquire funds which will be used as a source of down
payment or for closing costs, the lender will usually
require the bill of sale (in addition to other items)
to help document this source of funds.
A mortgage in which you make payments every two weeks
instead of once a month. The basic result is that instead
of making twelve monthly payments during the year, you
make thirteen. The extra payment reduces the principal,
substantially reducing the time it takes to pay off
a thirty year mortgage. Note: there are independent
companies that encourage you to set up bi-weekly payment
schedules with them on your thirty year mortgage. They
charge a set-up fee and a transfer fee for every payment.
Your funds are deposited into a trust account from which
your monthly payment is then made, and the excess funds
then remain in the trust account until enough has accrued
to make the additional payment which will then be paid
to reduce your principle. You could save money by doing
the same thing yourself, plus you have to have faith
that once you transfer money to them that they will
actually transfer your funds to your lender.
Usually refers to the daily buying and selling of thirty
year treasury bonds. Lenders follow this market intensely
because as the yields of bonds go up and down, fixed
rate mortgages do approximately the same thing. The
same factors that affect the Treasury Bond market also
affect mortgage rates at the same time. That is why
rates change daily, and in a volatile market can and
do change during the day as well.
Not used much anymore, bridge loans are obtained by
those who have not yet sold their previous property,
but must close on a purchase property. The bridge loan
becomes the source of their funds for the down payment.
One reason for their fall from favor is that there are
more and more second mortgage lenders now that will
lend at a high loan to value. In addition, sellers often
prefer to accept offers from buyers who have already
sold their property.
Broker has several meanings in different situations.
Most Realtors are "agents" who work under
a "broker." Some agents are brokers as well,
either working form themselves or under another broker.
In the mortgage industry, broker usually refers to a
company or individual that does not lend the money for
the loans themselves, but broker loans to larger lenders
or investors. (See the Home Loan Library that discusses
the different types of lenders). As a normal definition,
a broker is anyone who acts as an agent, bringing two
parties together for any type of transaction and earns
a fee for doing so.
Usually refers to a fixed rate mortgage where the interest
rate is "bought down" for a temporary period,
usually one to three years. After that time and for
the remainder of the term, the borrower’s payment
is calculated at the note rate. In order to buy down
the initial rate for the temporary payment, a lump sum
is paid and held in an account used to supplement the
borrower’s monthly payment. These funds usually
come from the seller (or some other source) as a financial
incentive to induce someone to buy their property. A
"lender funded buydown" is when the lender
pays the initial lump sum. They can accomplish this
because the note rate on the loan (after the buydown
adjustments) will be higher than the current market
rate. One reason for doing this is because the borrower
may get to "qualify" at the start rate and
can qualify for a higher loan amount. Another reason
is that a borrower may expect his earnings to go up
substantially in the near future, but wants a lower
payment right now.