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Foreclosure Glossary

Woman Reading a Glossary


Adjustable Rate Mortgage (ARM): Adjustable Rate Mortgages are loans in which the interest rate will change periodically (dependent upon the agreement) based on the current interest rates.

Agreement of Sale: The agreement of sale is a document that the buyer initiates that contains the terms and conditions associated with the transfer of the title of the property.

Amortization: Amortization refers to the decreasing principle throughout the duration of the loan. Equal payments are made throughout the duration of the loan and includes both principal and interest payments. Loans are to be paid in full at the conclusion of the amortization period.

Asking Price: Also frequently referred to as the listing price, the asking price is the price that is advertised.

As Is: When a property is sold “as is,” the buyer obtains the property in its current state without modifications.


Bankruptcy: Bankruptcy is a legal proceeding when an individual or business is unable to pay existing debts and request for the reorganization or discharge their current credit obligations.

Bargain Sale: A bargain sale property is a home that is listed below the current market value.

Bidding War: A bidding war is when multiple people are making offers on the same property.

Book Value: The book value is basically the value of the home plus any additions that have been made to the home minus the depreciation of the property over time.

Buyer’s Broker: A buyer’s broker helps the person seeking a property find the home to meet his or her needs. These individuals earn commission once the home is sold, which is paid by the seller. Therefore, buyers are able to use buyers’ brokers without having to pay for their services.


Cancellation Clause: A cancellation clause is a clause in the contract that provides an opportunity for either party to terminate the contract and the agreement in case specified instances occur.

Capital Gain: A capital gain simply refers to the profit that a real estate investor makes when they sell a property.

Cashier’s Check: A cashier’s check can be obtained from your bank and essentially provides proof that funds are available for the amount of the check.

Closing Costs: The closing cost consists of the amount that is due at closing and includes an assortment of fees. For example, appraisal fees, inspection fees, attorney fees, etc.

Credit Report: A credit report is information that includes your past credit history and is utilized by lenders to help determine your credit score.


Days on the Market: The number of days on the market refers to the amount of time between when the home is originally listed on the market to when it is removed from the market.

Deed: A deed is a legal document that denotes that the property has transferred ownership from one individual to another.

Default: A default occurs when a homeowner does not pay monthly mortgage payments when they are due.

Distressed Property: Distressed properties refer to homes that are either in unfortunate financial or physical condition. For example, foreclosures and short sales are often referred to as distressed properties.

Down Payment: A down payment refers to the amount of money that the buyer pays on the property that is not included in the loan. The down payment requirement varies depending upon the type of loan.


Earnest Money: Earnest money - also known as a good faith deposit - is a deposit that the potential homebuyer makes to show that he or she truly intends to buy the property. More often than not, this money is either applied to closing costs or refunded to the buyer if closing costs are paid by the seller.

Equity: Equity is the “cash value” of a home after liens are subtracted.

Escrow: When money is put in escrow, it is held by a third party and is released only once all of the terms and conditions are met.

Estimated Closing Costs: The estimated closing cost is an approximation of the amount of money that will be due at the closing table.

Eviction: Eviction is a legal procedure that removes a tenant from the home or property.


Fannie Mae: Fannie Mae is the Federal National Mortgage Association, it is a government-sponsored enterprise that purchases mortgages and then sells them as securities.

Federal Housing Administration (FHA): The Federal Housing Administration was created in 1934 and is the largest mortgage insurer in the world.

Finder’s Fee: When someone acts as the intermediary between the buyer and seller, they often receive a percentage of the transaction - this is called the finder’s fee.

Fixed-Rate Mortgage: A fixed-rate mortgage has the same interest rate throughout the duration of the loan.

Fixer-Upper: Fixer-upper properties are homes that will need minor to moderate renovations and are therefore often sold below market value.


Government National Mortgage Association (GNMA): Also frequently referred to as Ginnie Mae, GNMA purchases mortgages from government-backed lenders and then sells them to investors.

Grace Period: In real estate, the grace period is the amount of time from the deadline of a mortgage payment to when penalties start to incur.

Grantee: The grantee is the person receiving the title of the property (the buyer).

Grantor: The grantor is the person who is transferring the title of the property to another (the seller).

Gross Income: The gross income is the household’s total income before taxes.


Hazard Insurance: Hazard insurance for a home is designed to help provide financial protection for homeowners against hazards (fires, storms, vandalism, etc.). This is also frequently referred to as homeowners insurance.

Home Equity Loan: A home equity loan refers to when a homeowner borrows against their home’s equity.

Home Inspection: A home inspection is conducted by a home inspector and involves closely examining the physical condition of the home. Buyers are encouraged to obtain a home inspection before purchasing a home.

Homeowners Insurance: Homeowners insurance, also called hazard insurance, helps protect homeowners financially for everything from fires and storms to theft.

HUD: HUD stands for the Department of Housing and Urban Development. HUD’s mission involves everything from community planning and development to overseeing the Federal Housing Administration.


Impact Fees: When a new development is being planned or built, the local government will impose fees to help provide for the costs of public services. These fees are known as impact fees.

Income Property: An income property simply refers to a property that is purchased by an investor in an effort to earn income (commercial property). The income can come from house flipping, leasing, or renting.

Inspection Report: A detailed report of the findings of the home inspection. This report will provide you with essential details about the home as well as any areas of concern.

Interest Rate: The interest rate of your home is an annual percentage of the principal that is charged by the lender.

Investment Property: An investment property is the same as an income property - it is a property was purchased and is used to provide income.


Joint Liability: Join liability means that more than one person is responsible for the terms and conditions of loan.

Judgment: A judgment refers to the court’s decision. For example, if a court decides that debt must be repaid by the individual in order to avoid a lien being placed on the person’s property - this is the court’s judgment (decision).

Judicial Foreclosure: A judicial foreclosure means that the matter must go through a court. (Check our Foreclosure Laws Page to learn more.)

Jumbo Loan: Jumbo loans, also commonly referred to as jumbo mortgages, are loans that exceed conforming loan limits.

Junior Mortgage: A junior mortgage is typically used to refer to a second mortgage; however, it can also be the third, fourth, etc. mortgage. This mortgage is subordinate to the senior mortgage (first mortgage).


Keystone: A keystone is the top part of an arch that holds it all together.

Kick-Out Clause: This is a clause that is typically found in a contract, allowing the seller to continue to market the home and move onto the next buyer if the buyer in certain situations.

Kit Home: A kit home is prefabricated and is assembled by a contractor.

Knee Wall: A knee wall is a structure that is typically 3ft or less in height, typically used for supporting rafters.

Knob-and-Tube Wiring: Knob-and-tube wiring was an early method of electrical wiring for buildings that was primarily used in homes and buildings built between 1880 and the 1930s.


Lender Approval: Lender approval refers to when a lender reviews your credit documents, current income, etc. and decides that you are approved for the home loan in which you applied.

Letter of Intent: A letter of intent is a formal declaration of your intent to purchase the property for a given price at a given date (this will be the final sale price and the closing date).

Lien: A lien is a hold on a property as collateral for money owed.

Line of Credit: The line of credit refers to the maximum amount of credit that the individual is allowed.

Loan Application: This is an application to borrow money from a lender.


Manufactured Homes: These are homes that are mostly assembled at factories and then are shipping to the construction site to be built by a contractor.

Market Value: Market value, also known as fair value, refers to how much the property is worth in the current real estate market.

Mortgage: A mortgage is a loan that is used for purchasing real estate and includes everything from the purchase price and interest rates to the payment requirements. A lien is placed on the property by the lender as collateral; therefore, if the payments are not made over a specified amount of time, the lender can file a notice of default and proceed with foreclosure procedures.

Mortgage-Interest Deduction: The mortgage-interest deduction refers to the ability to write off interest paid on your mortgage throughout the year on your taxes.

Multiple Listing Service (MLS): Multiple listing services provide detailed information on properties for sold in the area. However, it is important to note that these listing services do not include homes that are being sold by the owner without the help of an agent.


National Association of Realtors (NAR): The National Association of Realtors is a group of real estate agents and brokers that are governed by a strict code of ethics.

Net Worth: A person’s net worth is determined when you take assets and subtract liabilities.

Nonassumption Clause: The nonassumption clause prevents someone from transferring a property from one person to another without allowing the lender to provide consent.

Non-Judicial Foreclosure: Foreclosure procedures that do not require a court order or legal proceedings.

Notice of Default: A document that is sent to a homeowner when he or she is behind on mortgage payments. This document frequently obtains information regarding the grace period, penalties, and what will occur if the debt is not paid.


Online Real Estate Listings: These are homes that you can find for sale online.

Open House: An open house is a time that is set aside for those interested in viewing the property without having to schedule an appointment with an agent. Open houses are open to the public.

Open Listing: An open listing refers to a home that is being marketed by more than one broker.

Origination Fee: The origination fee is simply a fee that is designed to cover the cost of creating and processing the loan.

Owner Financing: Owner financing refers to when the homeowner actually finances the property, or a portion of the property. In these situations the buyer will make payments directly to the owner for the amount financed by the homeowner.


Power of Attorney: A power of attorney document allows an individual to make decisions and act on behalf of another person.

Pre-Approval Letter: A pre-approval letter is provided by the lender denoting how much the borrower can borrow.

Principal, Interest, Taxes, and Insurance (PITI): PITI refers to the amount the homeowner is responsible for monthly. This amount includes the principal, interest, taxes, and insurance.

Property Value: The property value is the same as market value, which is how much the property is worth in the current real estate market.

Purchase Agreement: The purchase agreement includes terms and conditions as well as the purchase price for the property.


Qualifying Ratio: The qualifying ratio is used by the lender to determine how much the homeowner can borrow, which is then sent out in a pre-approval letter.

Quiet Enjoyment: Quiet enjoyment refers to the grantee’s right to use the property without disturbances.

Quiet Title Suit: A quiet title suit is a lawsuit that aims to determine who has legal rights to the property.

Quitclaim Deed: A quitclaim deed is a document that transfers the title from one person to another.


Real Estate Agent: A real estate agent is licensed by the state and represents the home buyer or home seller in the transaction. These individuals are paid commission.

Real Estate Broker: A real estate broker can also represent the buyer or seller throughout the real estate transaction, but is also often responsible for overseeing a team of real estate agents.

Refinancing: Refinancing refers to replacing the own loan requirements (i.e. interest rates) with new requirements.

Release Clause: A release clause is part of mortgage terms that allows the homeowner to fully purchase a portion of the mortgage. This release clause is typically used when a homeowner is looking to sell off part of his or her property.

Return on Investment: The return on investment (ROI) is the gain from the investment minus the cost of the investment. Therefore, ROI is the profit.


Sales Contract: The sales contract is a document that both the homebuyer and homeowner sign with terms and conditions associated with the purchase.

Secondary Market: The secondary market, which is often referred to as the aftermarket, refers to loans that are sold to investors - specifically, investors purchase directly from primary lenders.

Second Mortgage: A second mortgage, or junior mortgage, is a mortgage that is in addition to the first mortgage. Second mortgages are subordinate mortgage to the first mortgage.

Sellers’ Market: In a sellers’ market, the seller tends to have the advantage and often receive multiple offers on the property. The opposite is referred to as a buyers’ market.

Survey: A survey details the properties area and property lines.


Tax Lien: When a tax lien is placed on the property, it means a hold is being placed on the property due to unpaid taxes.

Title: A property’s title is the document that denotes ownership.

Title Search: A title search involves obtaining records on the title to make sure the title is clean (does not have any liens) that would make a property exchange more difficult.

Total Loan Amount: The total loan amount refers to the amount of the loan as well as any closing costs that are financed.

Townhouse: A town house is often called a row house. These houses are situated beside one another and share a common wall.


United States Department of Housing and Urban Development (HUD): The U.S. Department of Housing and Urban Development (HUD) oversees the Federal Housing Administration and is responsible for many community development initiatives and programs.

Underwriting: During the underwriting process, the lender thoroughly reviews the loan information and individual’s credit history and makes a final decision on whether to approve the loan.

Underwriting Fee: Many lenders charge a few for the underwriting process (including verifying information and making a final decision); this fee is called the underwriting fee.

Underwater Home: An underwater home, also frequently referred to as an upside-down home, refers to a property that has a loan amount that exceeds the value of the home.

Unsecured Loan: An unsecured loan is a loan that does not have security (meaning that it is no collateral).


VA Loan: A VA loan refers to a loan that is guaranteed by the Department of Veteran Affairs (VA).

Variable Interest Rate: A variable interest rates means the interest rates goes up at specified times based on specified factors.

Verification of Deposit: The verification of deposit process involves having the lender sign a statement that confirms the account balances of the borrower(s).

Verification of Employment: The verification of employment involves contacting the employer to obtain proof of employment and verification of salary for lending purposes.

Voluntary Lien: A mortgage loan is a voluntary lien in which there is a consensual agreement that the lender places a lien on the property in exchange for financing the purchase.


Warehouse Fee: This fee is associated with the lender holding the loan before the loan is sold on the secondary market.

Wild Deed: A wild deed is a deed that has been recorded, but improperly.

Wraparound Mortgage: A wraparound mortgage refers to a new loan that includes already existing loans. For example, a wraparound mortgage can include the existing balance on the first mortgage as well as the new, second mortgage. The payments would be made to the lender holding the wraparound mortgage.

Writ of Execution: A writ of execution is a legal order that authorizes the holder to not only obtain but also sell the debtor’s property in an effort to pay off the judgment.


Zero-Lot Line: A zero-lot line is when the property is positioned in a manner that provides very little space between houses.

Zero-Net: Zero-net means that the seller either makes a very small profit or no profit on the home sale.

Zoning: Zoning is used by local government for land-use planning. Maps are broken into zone and the process of modifying these zones and the regulations pertaining to these areas is referred to as zoning.

Zoning Variance: Zoning variance is when an exception to zoning laws is granted.

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