Debt-to-Income ratio—A comparison of gross income to housing and non-housing expenses. With the FHA, the monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.
Debtor—One who owes something, normally money, to another.
Declaration of Homestead—The act of applying for homestead protection.
Declaration of Restrictions—A statement of all the conditions, covenants and restrictions affecting a piece of property.
Deed—A formal written instrument by which title to real property is transferred from the owner to the grantee. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (SEE: the various types of deeds such as General Warranty, Special Warranty, or Quit Claim.)
Deed, General Warranty—A deed containing warranties or guarantees of clear title and the right to convey, as well as the grantor's willingness to defend against claims that the title conveyed is not good. This is the type of deed used most commonly used in Minnesota.
Deed-In-Lieu—to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.
Deed, Quit Claim—A deed which operates to convey and release any interest in a piece of real property which the grantor may have. It contains no warranties of any kind, but does transfer any right, title, or interest the grantor has at the time the deed was executed.
Deed Restrictions—Limitations in a deed limiting or restricting the use of the property, such as residential only or no building over 35 feet in height.
Deed Tax—The deed given to the successful bidder when property is sold to satisfy unpaid property taxes.
Default—Failure to fulfill an obligation, duty or promise. The most common default is probably failure of a borrower or lessee to pay money when due.
Delinquency—Failure of a borrower to make timely mortgage payments under a loan agreement.
Delivery—The legal transfer of an instrument evidencing title or ownership. A deed must be delivered and accepted to convey title.
Demise—A transfer of an estate or interest in real property to another for years, for life or at will.
Density—The term refers to the number of buildings per acre or the number of occupants per unit of land, square mile, acre, etc. Zoning ordinances are designed to control not only the manner in which the land is used, residential, industrial or agricultural, but also the number of buildings situated on the land and the number of people using it.
Depreciation—A loss in value. Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.
Detached Residence—A home physically separated from and not connected to another by a common wall.
Developer—One who makes changes to bring land to its most profitable use by subdividing and/or improving it.
Devise—Gift of real property through a will. The donor is the testator and the recipient is the devisee.
Devisee—Recipient of real property under a will.
Disbursements—Term used in accounting to describe money paid out or expended.
Discount Point—Generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.
Down Payment—The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.
Due on Sale Clause—A clause in a loan agreement which states that the entire amount of the loan shall be due and payable if the security property is sold.
Duplex—A single structure that contains two separate housing units, with separate entrances, living rooms, baths and kitchens.
Dwelling—A building or part of a building used or intended to be used as living quarters.
Earnest Money—A deposit or down payment made by the prospective purchaser of real estate as evidence of good faith in completing the purchase.
Earnest Money Agreement—A contract of purchase and sale wherein the buyer deposits an amount of money as evidence of his good faith intent to purchase; commonly called a purchase agreement in Minnesota.
Easement—A right to use some part of the property of another for a particular purpose, such as for a driveway or for installing and maintaining a water line.
Egress—A passageway leading from property; a means of exiting. It is the opposite of ingress. The terms ingress and egress usually refer to easements.
Emblements—Crops which are produced annually through the labor of the cultivator, such as wheat.
Eminent Domain—The power of the government to take (condemn) private property for public use, upon payment of just compensation to the owner. The power may be delegated to public corporations, such as utilities, or to public service corporations, such as railroads.
Encroachment—Unlawful physical intrusion upon the property of another, usually the result of mistake. An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.
Encumbrance—A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.
Equity—The value of a homeowner's unencumbered interest in real estate. The difference between the value of a piece of property and the charges against it. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.
Escalator Clause—A clause in a contract or mortgage providing for the adjustment of payments or interest in the event of certain contingencies, such as changes in taxes or the prime interest rate.
Escape Clause—A clause in a sales contract allowing the buyer to terminate the contract if the appraised value is significantly below the purchase price. Required for FHA and DVA loans where applicant has signed the contract prior to receiving the appraisal.
Escrow—1. The process in which something of value (such as money or documents) is held by a disinterested third party until certain conditions contained in the escrow instructions have been complied with. 2. A deed or money or piece of property delivered into the keeping of a third party, called an escrow agent, pending compliance by all parties to the real estate agreement.
Exclusive Agency Listing—A Written listing agreement giving one broker the right to sell a piece of property; the broker is entitled to a commission if the property is sold by and one besides the seller.
Exclusive Right to Sell—Written listing agreement giving one agent (broker) the right to sell a piece of property for a specified period of time and giving the broker the right to receive the commission if the property is sold during that time, regardless of who sells it.
Execute—To do, to perform or complete as in executing a deed by signing and acknowledging it.
Fair Market Value—The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
Fannie Mae—A popular name for the Federal National Mortgage Association. Also called F.N.M.A.
Farmer's Home Administration (FmHA)—A federal agency of the Department of Agriculture that provides or assists in providing credit to farmers and others in rural areas, where reasonable financing from private sources is not readily available.
Fee—An estate of inheritance in real property.
Fee Simple, or Fee Simple Absolute—The greatest estate one can have in real property; of indefinite duration; with no conditions or restrictions on the use of the land other than public ones, such as zoning regulations; freely transferable or inheritable. Also known as the Fee.
Federal Housing Administration—(FHA); established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.
Fiduciary—A relationship of trust and confidence, often existing where one person is allowed to represent, transact business, or hold or manage property for another. Also, the person holding such a position.
Finance Charge—All charges assessed a borrower, directly or indirectly, in connection with the credit extended.
Firm Commitment—A definite agreement by a lender to make a loan to a particular borrower on a particular piece of property. Also, an agreement by the F.H.A. to insure a loan made to a specified borrower on a particular piece of property.
Fixed-Rate Mortgage—A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Fixed Term—A period of time which has a definite beginning and ending.
Fixture—Personal property which has become so affixed to real property that it has become real property.
Flood Insurance—Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.
Foreclosure—Legal action instituted by the mortgagee, in the county where the property is located, whereby property used as security for a debt is sold to satisfy the debt following default by the debtor either in payment or other terms of the mortgage.
Forfeiture—Loss of a right or something else of value as a result of failure to perform an obligation or condition.
Freddie Mac—Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers.
Free and Clear—Title, or ownership, of real property that is completely free of an encumbrance, such as mortgages, liens and so forth.
Freehold—An ownership estate in real property; can be either a Fee Simple or Life Estate. The holder of a freehold estate has title, as opposed to the holder of a less-than-freehold estate (leasehold estate), who is a tenant.
Frontage—The distance a piece of property extends along a street or body of water.
Funding Fee—A fee charged in connection with DVA loans; the funding fee can be financed along with the loan.
Gain—That portion of the proceeds from the sale of a capital asset, such as real estate, that the I.R.S. recognizes as taxable profit.
General Warranty Deed—A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.
Ginnie Mae—Government National Mortgage Association (GNMA); a government-owned corporation over seen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.
Good Faith Estimate—An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.
Graduated Payment Loan—A loan providing for lower payments at the beginning of the loan increasing gradually until they level off in five to seven years.
Grant—To transfer or convey real property or an interest therein.
Grantee—1. That party in the deed who is the buyer or recipient. 2. The one who receives a grant of real property, regardless of the type of deed used.
Grantor—1. That party in the deed who is the seller or giver. 2. The one who conveys or transfers real property or an interest therein.
Hazard Insurance—Protects against damages caused to property by fire, windstorms, and other common hazards.
Home Inspection —An examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.
Homestead—A limited exemption against the claims of unsecured creditors for property used as the debtor’s residence. A means of protecting the debtor's home from a forced sale to satisfy certain debts.
Home Warranty—Offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance; coverage extends over a specific time period and does not cover the home's structure.
HUD—U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.
HUD1 Statement—also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing.
HVAC—Heating, Ventilation and Air Conditioning; a home's heating and cooling system.
Improvements—Man'made additions to real property.
Income Approach to Value—A method of appraising property basing the value upon the net amount of income produced by the property. It is calculated by subtracting the expenses of the property from the total income to determine the net profit. Also known as the Capitalization Method or Investor's Method.
Income, Gross—Total income before deductions for expenses, depreciation, taxes and so forth.
Income, Net—Income after deductions for expenses, depreciation, taxes, etc
Income, Spendable—The money that remains after deducting operating expenses, principal and interest payments, and income tax from the gross income. Also called Net Spendable income or Cash Flow.
Incompetent—A person not legally qualified to reach proper decisions, such as a minor, insane person or one who is feeble minded.
Index—A measurement used by lenders to determine changes to the interest rate charged on an adjustable rate mortgage.
Inflation—The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.
Ingress—Refers to access to property by a dominant tenant while exercising his use right (easement). Sometimes refers to the access a tenant has to leased property. Opposite of egress.
Insurance—Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.
Insurance, Private Mortgage—Insurance available to conventional lenders who are willing to make real estate loans exceeding the standard 80% loan-to-value ratio. The excess amount is insured by a private mortgage insurance company.
Insurance, Title—An insurance policy under which the insured is protected against any loss suffered as a result of the title to land not being as represented in the policy.
Insurance, Title, Alta Policy—An extended coverage policy of title insurance issued to lenders, protects against title defects not covered by the standard policy. ALTA; American Land Title Association.
Interest—A fee charged for the use of money.
Interest, Compound—Interest computed both on the principal and its accrued interest.
Interest, Prepaid—Interest on a loan which is paid at the time of closing or settlement; sometimes called an interim interest.
Interest, Simple—Interest that is computed on the principal amount of the loan only. The type of interest charged in connection with real estate loans.
Interest rate—The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
Intestate—The characterization of a person who has died without leaving a valid will.
Inventory—A detailed list of the stock–in-trade of a business.
Investment Property—Unimproved property that produces no income, but is held for capital growth through increases in price.
Judgment—The final consideration and determination by a court as to the rights and responsibilities of the parties in dispute. If the court's finding includes an award of money as damages, it becomes a general lien on the debtor's property.
Judgment Creditor—A person to whom money is owed by virtue of a judgment in a lawsuit.
Judgment Debtor—A person who owes money by virtue of a judgment in a lawsuit.
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