You are hereGlossary G – L

Glossary G – L

gap:  a defect in the chain of title such as a missing document which raises doubt as to true ownership of a property. 

gap loan:  temporary financing which bridges the difference between a construction and permanent loan.  Sometimes referred to as a bridge or standby loan. 

general lien:  a lien which includes all of the property a debtor owns versus a specific property.  May be obtained either via a judgment or through federal or state tax liens. 

general warranty deed:  A deed in which the grantor fully warrants clear title to a property.  This is the best protection of any deed. 

G.I. Loan:  loan made through the Department of Veteran Affairs(VA). 

Ginnie Mae:  The common nickname for the Government National Mortgage Association(GNMA).  Ginnie Mae was created by Congress in 1968 as a wholly owned corporation within the Department of Housing and Urban Development (HUD), formerly administered by Fannie Mae.  Ginnie Mae does not loan money for mortgages. Instead, it operate in the secondary mortgage market, buying loans and selling mortgage-backed securities investors, which in turn, increases the availability of mortgage credit. 

good faith estimate:  a written estimate from a lender of the costs a borrower will incur to get a home loan. This disclosure must be provided by the lender under varying timing dates.  More information to follow as this is a big part of the RESPA changes implemented the first the year 2010. 

government mortgage:  a mortgage that is insured by the Federal Housing Administration(FHA) or guaranteed by the Department of Veteran Affairs(VA) or Rural Housing Service(RHS). 

grace period:  period of time during which a loan payment may be made after its due date without incurring a late penalty.  This period is specified as part of the terms of the loan in the lending agreement. 

graduated payment adjustable rate mortgage(GPARM):  an adjustable rate mortgage(ARM) that has lower payments in the early years of the loan.  The payments increase gradually. 

grant deed:  deed containing an implied promise that the person transferring the property actually is the owner and that property is not encumbered in any way, except as described in the deed.  This is the most commonly used type of deed. 

grantee:  a person to whom an interest in a piece of real estate is conveyed, the buyer. 

grantor:  the person or party who is conveying interest in a piece of property to another. 

gross income:  for qualifying purposes the total revenue of a household before expenses and taxes are subtracted. 

growing equity mortgage:  a mortgage that provides payment increases over a pre-determined period of time with the increased amount of that payment applied directly to reducing the balance of the mortgage. 

guarantee mortgage:  a loan that is guaranteed by a third party such as a government institution. 

hazard insurance:  contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, wind, etc.), for a premium.  Basically this is Homeowners insurance. 

hectare: metric measurement equaling 2.471 acres or about 107,637 square feet or 10,000 square meters. 

heir:  a legal entity entitled to inherit money and or property on the death of another person. 

heirs and assigns:  this is language commonly associated with a fee simple title conveyance.  The issue is whether the title is clear and can be passed on to the purchaser’s estate which includes all the heirs and anybody else who may have interest in the estate. 

hereditaments:  property, personal and real, tangible or intangible which is capable of being inherited. 

hiatus:  gap in between two parcels of land which is not included in the legal description of either parcel. 

hidden clauses:  ambiguous contractual language which might result in an unsuspecting purchaser of real estate taking on obligations and or risks not clearly evident. 

highest and best use:  term used by appraisers which means the use of a real property which will produce the greatest current value.  Factors included in consideration are deed restrictions, location, neighboring properties and local zoning regulations. 

holder in due course:  legal ruling providing protection to homebuyers from defective homes bought from a seller who then sold the contract to a third party. 

home equity conversion mortgage:  this is also known as a reverse mortgage.  This is a loan made to older owners, 62 and over, to convert their equity into a stream of income or a lump sum.  The loan is done based on the value of their home but is different from a Home Equity Loan.  The loan doesn’t have to be repaid until the borrower no longer occupies that property.  There are guidelines which were set forth by FHA which are strictly adhered to. 

home equity line of credit(HELOC):  this is an open ended line of credit based on a homeowner’s equity position and are limited as to the maximum loan to value allowed. 

home equity loan:  fixed or adjustable rate loan obtained for a variety of purposes and is secured by the equity in the home.  Interest paid is normally tax-deductible but professional consultation is required to verify eligibility.  This loan was used by many to replace or substitute consumer loans whose interest was not tax-deductible, such as auto or credit card debt. 

home improvement loan:  a loan which was created to help homeowners pay for major remodeling or reconstruction.  Normally these are a second position mortgage loan. 

home inspection:  an examination of a home’s overall condition which includes internal systems or construction prior to purchase.  These reports are normally very specific and detailed performed by a home inspection professional.  Prospective buyers should view the home inspection report as a way of evaluating a house from a professionals point of view and use it to help negotiate adjustments to the purchase price. 

home inspector:  a professional trained for home inspections and valuating a houses structural soundness and operating systems. 

home loan:  commonly known as a mortgage it is a lien that makes the property it is used for as collateral for the repayment of a debt such as the one incurred to purchase that home. 

home warranty:  a service contract that covers major housing components such as plumbing or electrical wiring for a set period of time from the date a house closes escrow. The warranty guarantees repairs to the covered system and most of the time is renewable.  Covered components and limitations will vary by policy. 

homeowners' association (HOA):  a group comprising neighbors concerned with managing the common areas of a subdivision or condominium complex.  Some associations take on issues such as maintaining common areas, legal and safety issues, and collecting dues from residents. The homeowners' association is also responsible for enforcing any covenants, conditions & restrictions that apply to the property. 

homeowners’ fee:  the fee charged to a homeowner to belong to their Homeowners’ Association which includes the cost of maintenance and other services. 

homeowners' insurance policy:  a type of insurance policy designed to protect homeowners from financial losses related to the ownership of real property.  In addition to covering losses due to vandalism, fire, hail, etc., most policies also provide theft and liability coverage.  Flood related damage requires a separate flood insurance policy or rider. 

Homeowner’s Protection Act of 1997:  this act requires providers of private mortgage insurance to tell borrowers of their right to cancel the mortgage insurance once the value of the house provides for at least a 20% equity position which is normally verified by appraisal. 

homeowner’s warranty program:  a private insurance program that protects purchasers of newly constructed against structural and mechanical defects and provides for payment of remedying any situation if the builder fails to do so. 

home sale exemption:  the Taxpayer Relief Act of 1997 which dramatically changes the way primary residences are taxed upon sale.  Did away with the old way of rolling over gains and replaced them with a new exclusion.  Call your tax professional for more details. 

homestead:  land, and the improvements thereon, designated by the owner as his homestead and, therefore, protected by some state law from forced sale by certain creditors of the owner.  Other taxing authorities, such as cities and counties, may offer additional property tax exemptions on homesteads.   

Homestead Law:  the law that exempts a homestead from forced sale to meet general debts. 

house poor:  the act of purchasing a more expensive house than a buyer can afford based on his/her income. 

housing expense ratio:  gross monthly income divided by the house payment. 

Housing and Urban Development, Department of (HUD):  This is the agency responsible for enforcing the federal Fair Housing Act

HUD-1 Settlement Statement:  this is an itemized list of the funds that are payable at the close of escrow.  Typical items can include loan fees, buydown points, escrow and title fees.  Each item on the statement has a separate code from a standardized numbering system. 

implied warranty:  under the law there is an express warranty which states that real estate sold is appropriate for the sale and is in proper condition irregardless if it’s stated or not. 

impound account:  see escrow account. 

improvement:  changes to a house which adds value, prolongs its use or allows it to adapt to a different use. 

incidents of ownership:  any control over property.  An example of this would be if you were to give away property but keep an incident of ownership.  Let’s say you give away an apartment building but retain the right to receive rent then legally you haven’t given a gift.  This distinction can be important if you're making large gifts to reduce your eventual estate tax. 

income property:  any property that is used to generate income such as a property that is rented to others as either commercial or residential usage. 

income stream:  a regular flow of money generated by a business or investment. 

incurable defect:  defect in a property that cannot or is too expensive to be repaired. 

indemnify:   to protect another against loss or damage or to compensate a party for a loss sustained. 

indenture:  an agreement between two or more parties conveying real estate where both parties assume obligations.  Similar to a contract. 

independent appraisal:  an appraisal done by an appraiser who has no interest in the ownership or disposition of the subject property. 

index:  a number, usually a percentage, upon which future interest rates for adjustable rate mortgages are partially based.  The other component is the margin. 

indexed loan:  a loan in which the term, payment, interest rate or principal amount may actually be adjusted periodically according to a specific index and schedule. 

in-file credit report:  a computer generated report which is received from one of the credit repositories which is regarded as an objective history or a persons credit. 

ingress and egress:  access from a land parcel to a public road or other means of exit.  The right to exit and enter via land owned by another. 

initial interest rate:  original interest rate of the mortgage at the time of closing.  This rate can change in the case of an adjustable rate mortgage(ARM).  That is called a teaser rate. 

initial rate:  the interest rate assessed during the first fixed period of an ARM loan. 

initial rate cap:  limit of the maximum interest rate change which can take place after the expiration of the original interest rate. 

initial rate duration:  the period of time the initial interest rate is fixed for prior to the first adjustment taking place. 

inspection clause:  stipulation in an offer to purchase that makes the sale contingent on the findings of a home inspector. 

inspection fee:  the fee paid to a professional home inspector to help determine the physical condition of a property which supplements the information in an appraisal. 

inspection report:  the written report done by a professional home inspector to help evaluate the physical condition of a property.  The report includes conditions of the home’s foundation, framing, plumbing, electrical, heating and air conditioning, fireplace, and other vital systems in the property. 

institutional lender:  a financial institution  that invests either directly or indirectly, in mortgages and other mortgage-backed securities on behalf of its depositors. 

insurable title:  title which a title company will insure. 

insurance binder:  temporary insurance arrangement which is used until a permanent policy can be issued. 

insured mortgage:  mortgage that is protected by the Federal Housing Administration(FHA) or by private mortgage insurance(PMI).  Should the borrower default, the insurer must pay the lender the lesser of the loss incurred or the insured amount. 

interest:  the charge assessed on a loan and is the amount a lender charges for the privilege of borrowing the money. 

interest-only loan:  loan where the payment is based on the periodic interest and does not reduce the principal when the minimum payment is made. 

interest rate:  percentage expressing the relationship between the interest for one year and the principal. 

interest rate cap:  the maximum an interest rate can increase on an adjustable rate mortgage(ARM) during an adjustment period or over the life of the loan As an example if a period cap is one percent and the current rate is 5.5%, that new adjusted rate must be between 4.5% and 6.5% irregardless of the actual change in the complying index. 

interest rate ceiling:  the maximum interest rate that can be charged on an adjustable rate mortgage(ARM) as per the Mortgage Note. 

interest rate floor:  the lowest interest rate that can be charged on an adjustable rate mortgage(ARM) as per the Mortgage Note. 

interim financing:  short term financing to cover the gap between the purchase of a property and the sale of that property.  Sometimes referred to as bridge loans.  Construction loans are considered interim financing. 

interim loan:  any loan that is to be replaced by permanent financing upon the completion of specific events such as occupancy on a construction loan. 

intestate:  person who dies without a formal will and unknown intentions regarding the disbursement of their estate. 

intimidation:  defined in the Fair Housing Laws as the illegal act of coercing, intimidating, threatening, or interfering with a person in exercising or enjoying any right granted or protected by federal, state or local fair housing laws. 

in toto(Latin):  as a whole 

investment property:  real estate such as rental properties which when purchased are intended to generate income. 

involuntary alienation:  loss of property due to one of the following condition;

attachment, condemnation, foreclosure, tax sale, or any other involuntary transfer of title. 

involuntary lien:  a lien put on a property such as the nonpayment of property taxes or a mechanic’s lien applied by a creditor who didn’t get paid for services. 

joint and several liability:  situation where each borrower on a note is held fully liable for the entire amount of the debt and not just part.  Creditor can demand full payment from either party. 

jointly owned property:  a property held in the name of more than one person. 

joint note:  two or more makers on a note who would be sued jointly in the case of default on that note rather than just one to make restitution. 

joint ownership:  two or more individuals having equal ownership.  Upon the death of one owner, the property is transferred to the survivor. 

joint tenancy:  form of joint ownership.  Each individual has an undivided interest in the property.  Upon death of one of the owners the survivor becomes the owner of the whole estate. 

judgment creditor:  the party who is the recipient of a court awarded financial judgement against a debtor. 

judgment debtor:  the party against whom the court has issued a financial judgment. 

judgment lien:  a court order in which the judgment creditor  is granted a lien against a property of the judgment debtor for the nonpayment of the amount due. 

judicial foreclosure:  type of foreclosure proceeding which is in use in selected states, is handled as a civil lawsuit and conducted entirely under the auspices of a court. 

jumbo loan:  loan that exceeds the limits set by Fannie Mae and Freddie Mac. 

junior mortgage: loan that is subordinate to a senior loan and can’t be satisfied until the primary loan is paid. 

just compensation:  the fair market value of a property, paid to the owner when it is acquired in an eminent domain action. 

kicker:  payment in addition to the normal principal and interest.  Sometimes referred to as an equity kicker or participation loan, it allows the mortgagee to participate in income from the mortgagor. 

laches:  the delay or negligence in asserting one’s legal rights, potentially leading to estoppel, of the negligent party’s suit. 

land contract:  type of creative financing where a down payment is made and periodic payments are made to pay off the balance.  No deed is given by the seller until the mortgage is paid off in full. 

land loan:  loan used to purchase land.  By nature land loans have a higher risk factor which reflects in a higher interest rate. 

land-sale leaseback:  the sale of land where the original owner leases back the land immediately as part of the transaction.  This allows the original owner to capitalize on the sale yet still  retain its use. 

late charge:  penalty  assessed to a borrower what a payment is made a stated number of days(usually 10 or 15 days) past the due date. 

latent defect:   a problem this is not obvious and is hidden or overlooked but might manifest itself at a later point in time such as lead paint or bad wiring.   

lease:  written agreement between owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time. 

leasehold:  the tenant interest in a property for the specified period of time when they lease a property.   

leasehold estate:  way of holding title to a property wherein the mortgagor doesn’t actually own the property but instead has a long-term lease on it.  

leasehold mortgage:  mortgage collateralized by a tenant’s interest normally structural improvements, in a leased parcel of property. 

lease option:  owner and lessee contract which the two parties enter into and at a pre-specified period and monthly rent gives the lessee the right to buy the house at the end of the lease period for a pre-determined price.  This allows a potential home buyer to move into a house they may wish to eventually buy without having to come up with a normally prohibitive down payment amount or financing. 

lease-purchase mortgage loan:  alternative financing option that allows low and moderate income home buyers to lease a home from a nonprofit organization and includes an option to buy.  Those payments include principal, interest, taxes, and insurance(PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which the money for a down payment will accrue. 

lease purchase:  contract in which an owner leases his house (usually for one to five years) to a tenant for a higher monthly rent, and which gives the tenant the right to buy the house at the end of the lease period for a pre-determined price, with the higher rent being used to form a down payment.  This type of contract should be really scrutinized by the lessee since they could lose their extra rent money should the owner suffer financial setbacks before the purchase has been completed. 

legal description:  a legally acceptable description of real estate including metes and bounds, governmental surveys, or lot numbers of a recorded play.  All property deeds will carry a legal description. 

legal residence:  one’s permanent residence. 

legal title:  rights of ownership as defined by law of that could be successfully defended in court. 

legatee:  person who inherits property from a will. 

lender:  a bank, mortgage company, or mortgage broker offering the loan. 

lender participation:  mortgage that permits the lender to share in part of the income or resale proceeds. 

lending agreement:  the contract with which a borrower agrees to the terms of a loan which include payment dates, interest rate, total costs of the loan and provisions for late payments. 

lessee:  party who rents a property from another.  In real estate also known as a tenant. 

lessor:  person or party who leases property to a tenant. 

let:  rent a property to a tenant. 

letter of attornment:  letter outlining a tenant’s formal agreement to be a tenant of a new landlord. 

letter of commitment:  a lender’s letter which is the official notice to a borrower of it’s intent to grant a loan which usually specifies the terms and timing of that loan. 

level payment mortgage:  mortgage which has the same payment for each period. 

leverage:  use of borrowed funds to finance an investment and to magnify the rate of return. 

LIBOR-based ARMs:  the adjustable rate mortgage(ARM) which is tied to the London Interbank Offered Rate(LIBOR).  The LIBOR is similar to the other prime-lending rates posted by major U.S. Bank but represents the interest rate at which major international banks are willing to lend and borrow funds for a specified period of time in the London Interbank market.  The loan is similar to other ARM’s in that it adjusts at pre-determined intervals such as every six months.  Caps usually apply. 

licensed appraiser:  an appraiser who meets certain state requirements but is not at the level of a certified appraiser. 

lien:  legal monetary claim against a property that must be paid off prior to a sale of that property. 

lien, junior:  a lien that will be paid after other senior liens have been paid off. 

lienholder:  one who holds a lien. 

lien period:  the time period in which one may carry out a lien on property. 

lien release:  written document terminating the terms of a lien, normally after being paid. 

life cap:  the limit on the amount that a loan rate can change during the term of the loan. 

life estate:  freehold equity in an estate limited to the duration of the life of the grantee o other specified individual. 

life tenant:  person who is allowed the use of real estate during his or her lifetime or the lifetime of another designated party. 

lifetime rate cap:  the maximum interest rate that may be charged on an adjustable rate mortgage(ARM) during the life of that loan as specified in the Loan Agreement. 

limited equity housing:  arrangement designed to encourage low-and moderate-income families to purchase housing.  The housing is offered at an extremely favorable price with a low down payment.  The big provision is that when the owner sells the property, they do not share in the profit if the property has increased in value.  Profits return to the organization that built the home, which then resells the unit at an affordable price. 

liquidate:  conversion of assets to money. 

liquidation price:  in a forced sale of assets, it is the cash value or other consideration for that asset.  The liquidation value is typically less than the value if it were not forced to be sold. 

liquidity:  the ability to obtain close to the true value of an asset by converting it into cash quickly. 

lis pendens(Latin):  suit pending. 

loan application:  itemization of basic financial and personal information which is presented by a borrower for consideration of a loan by a potential lender. 

loan application fee:  fee charged by some lenders which they rationalize covers the initial costs of processing a loan application.  Most of the time is not refundable. 

loan commitment:  a letter from a lender stating amounts, terms and timing of an applied for loan to a borrower. 

loan officer:  official representative of a lending institution who is empowered to lend money within certain guidelines. 

loan origination:  process by which a mortgage lender brings into existence a mortgage secured by real estate. 

loan origination fee:  this fee covers the administrative costs of doing a loan which is paid to the originator of the loan(the lender or broker).  One point is equal to 1% of the loan amount. 

loan rate:  interest rate charged for a loan. 

loan term:  the period of time that is agreed upon by the borrower and lender for the repayment of the loan. 

loan-to-value ratio (LTV):  the ratio of the amount being loaned in respect to the appraised value of the property.  This is usually expressed as a percentage.  This ratio can effect the interest rate charged, loan qualifying criteria, and lender requirements for PMI and impound or escrow accounts. 

lock or lock in:  the commitment you obtain from a lender assuring a particular interest rate for a definite time period.  This provides protection against a rise in interest rates during the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds you have borrowed.  

long-term financing:  normally a mortgage that lasts at least ten years. 

low-documentation loan:  mortgage requiring minimum verification of income and assets. 

low down payment loan:  mortgage requiring minimum down monies to obtain financing for the purchase of a home.  In many cases it is dependent on the mortgage insurance companies willingness to insure the higher loan to values.