GLOSSARY OF REAL ESTATE TERMS Understanding the Language
Adjustable Rate Mortgage ( ARM ) A mortgage with an interest rate that changes over time in line with movements in the index . ARMs are also referred to as AMLs ( adjustable mortgage loans ) or VRMs ( variable rate mortgages ).
Adjustment Period The length of time between interest rate changes on an ARM . For example , a loan with an adjustment period of one year is called a one-year ARM , which means that the interest rate can change once a year .
Amortization Repayment of a loan in installments of principal and interest , rather than interest-only payments .
Annual Percentage Rate ( APR ) The total finance charge ( interest , loan fees , points ) expressed as a percentage of the loan amount .
Appraisal An estimate of the property ’ s value provided by a professional appraiser .
Assumption of Mortgage A buyer ’ s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust . The lender must approve the buyer in order to release the original borrower ( usually the seller ) from liability .
Balloon Payment A lump sum principal payment due at the end of some mortgages or other long-term loans .
Buydown Permanent - prepaid interest that brings the note rate on the loan down to a lower , permanent rate . Temporary - prepaid interest that lowers the note rate temporarily on the loan , allowing the buyer to more readily qualify and to increase payments as income grows .
Cap The limit on how much an interest rate or monthly payment can change , either at each adjustment or over the life of the mortgage .
Cash Reserves The amount of the buyer ’ s liquid cash remaining after making the down payment and paying all closing costs .
CC & Rs Covenants , conditions and restrictions . A document that controls the use , requirements and restrictions of a property .
Certificate of Commitment The lender ’ s approval of a VA loan , which is usually good for up to six months .
Certificate of Reasonable Value ( CRV ) A document that establishes the maximum value and loan amount of a VA guaranteed mortgage . Chattel Personal property .
Closing Disclosure The Closing Disclosure is received by the consumer at least three days prior to closing . It includes loan terms , projected monthly payments , and closings costs . This is usually compared to the Loan Estimate received earlier to ensure accuracy .
Closing Statement The financial disclosure statement that accounts for all of the funds received and expected at the closing , including deposits for taxes , hazard insurance , and mortgage insurance .
Commitment Period The period during which a loan approval is valid .
Condominium A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas . The unit itself is generally a separately owned space whose interior surface ( walls , floor , ceilings ) serve as its boundaries .
Consumer Fraud Protection Bureau Is an independent agency of the United States government responsible for protecting consumers from unfair , deceptive , or abusive practices from the financial sector such as banks , lenders , and other financial companies .
Contingency A condition that must be satisfied before a contract is binding . For instance , a sales agreement may be contingent upon the buyer obtaining financing .
Conversion Clause A provision in some ARMs that enables home buyers to change an ARM to a fixed rate loan , usually after the first adjustment period . The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages . This conversion feature may cost extra .
Cooperative A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements .
CRB Certified Residential Broker . To be certified , a broker must be a member of the National Association of Realtors , have five years experience as a licensed broker and have completed required Residential Division courses .
CRS Certified Residential Specialist . This designation is recognized industry-wide as the symbol of excellence in residential sales and is the highest designation awarded in the residential real estate sales industry .
Debt Ratios The comparison of a buyer ’ s housing cost to his or her gross or net effective income , and the comparison of a buyer ’ s long-term debt to his or her gross or net effective income . The first ratio is housing ratio ; the second ratio is total debt ratio .
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