- Abstract of Judgment: A summary of
the essential provisions of a court judgment. When recorded, an
abstract of judgment creates a general lien on all of the real
property of the judgement debtor in the county in which it is
recorded.
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- Acknowledgment: A formal
declaration made before a duly authorized officer (usually a notary
public) by a person who has executed an instrument that such
execution is his or her act and deed.
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- Adjustable Rate Mortgage (ARM): A mortgage in which the interest
rate is adjusted periodically according to a preselected index. The
terms, adjustment schedule and index to be used can vary based on
the particular lender.
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- Agency: A
relationship created when one person (the principal) delegates to
another (the agent) the right to act on his or her behalf in
business transactions.
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- All-Inclusive
Trust Deed (wrap-around mortgage): A financing technique which
involves the creation of a new trust deed which includes the balance
due on the existing note plus any new funds
advanced.
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- American Land Title Association
(ALTA): A national association of title insurance companies,
abstractors, and agents. The association adopts standard title
policy forms.
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- Amortization: The process
of paying off a debt in installments over a given period of time
without a final balloon payment.
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- Annual
Percentage Rate (APR): An expression of the percentage relationship
of the total finance charges to the total amount to be financed, as
required under the federal Truth-in-Lending
Act.
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- Appraisal: An opinion of the value
of property resulting from an analysis of facts affecting market
value.
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- Assessed Valuation: The value that
a taxing authority places upon real or personal property for the
purpose of taxation.
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- Assumable: A
mortgage loan which can be transferred to another person without a
change in the terms of the loan.
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- Balloon
Payment: The unpaid principal amount of a loan due on a specific
date in the future. Usually the amount that must be paid in a lump
sum at the end of the term.
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- Beneficiary: The person who is entitled to receive funds or property under the
terms and provisions of a will, trust, insurance policy or security
instrument. In connection with a mortgage loan the beneficiary is
the lender.
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- Beneficiary's Statement: The
statement of a lender which gives the remaining principle balance
due on a note and other information concerning the loan. It is
usually obtained in escrow when the owner wishes to sell or
refinance.
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- Bill of Sale: An instrument by
which title personal property is transferred or
conveyed.
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- Bona Fide Purchaser (BFP): One
who buys property in good faith, for fair value, and without notice
of any adverse claim or right of third
parties.
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- Broker: A person licensed to act
as an agent for another in negotiating the sale or purchase or real
property in return for a fee or
commission.
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- Buydown: A financing
technique used to reduce the monthly payment for the home buying
borrower during the initial years of ownership. Under some buydown
plans, a residential developer, builder, or the seller will make
subsidy payments (in the form of points) to the lender that
"buydown," or lower, the effective interest rate paid by the home
buyer, thus reducing monthly payments for a set period of
time.
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- California Land Title Association
(CLTA): A statewide association of title insurers and underwritten
title companies. The association adopts standard title policy
forms.
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- CC&R's and RSV (Covenants,
Conditions and Restrictions): Limitations placed on the use and
enjoyment of real property. These are found most often in
condominiums and planned unit
developments.
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- Chain of Title: A
chronological list of recorded instruments tracing title to land,
from the original owner to the present
owner.
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- Cap: The maximum which an
adjustable rate mortgage may increase, regardless of index
changes.
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- Clear Title: Title to property
which is free from liens, defects or other
encumbrances.
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- Closing: The process of
completing a real estate transaction during which the seller
delivers title to the buyer in exchange for payment of the purchase
price. Called a "settlement" in some
areas.
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- Closing Costs: Expenses, beyond
the selling price, such as loan fees, title fees, etc. Paid when
documents are executed and/or recorded and the sale is
complete.
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- Closing Statement: A summary,
in the form of a balance sheet, showing the amounts of debits and
credits to which each party to a real estate transaction is entitled
upon closing.
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- Cloud on Title: Any
document, claim, unreleased lien or encumbrance, which, if valid,
would affect or impair title to a
property.
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- Commission: Compensation due a
real estate broker for acting on behalf of the
principal.
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- Community Property: Property
acquired during a marriage by either a husband or wife, or both,
which is not separate property.
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- Comparables: An abbreviation for comparable properties used for
comparative purposes in the appraisal
process.
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- Consideration: A required
settlement in all contracts by which something of value, including a
promise, is exchanged for the act or promise of
another.
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- Contingency: Action conditioned
upon a certain event. Acceptance of the terms of a contract based on
something else happening or certain conditions being
met.
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- Conveyance: The transfer of title or
an interest in real property by means of written instrument such as
a deed of trust.
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- Deed of Trust: A
security agreement creating a lien by which title to real property
is transferred to a third-party trustee as security for an
obligation owed by the trustor (borrower) to the beneficiary
(lender).
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- Demand: The lender's statement
of the amount due to pay off a loan.
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- Documentary Transfer Tax: The tax, based on sales price, less loans
which are being assumed, which is charged by the city and/or county
on the transfer of real property.
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- Due-on-Sale-Clause: A clause in a mortgage loan which gives the
lender the right to demand payment in full when the property changes
ownership. Not applicable to FHA or VA
loans.
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- Earnest Money: The cash deposit
paid by a prospective buyer as evidence of good faith to bind a sale
of real estate.
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- Easement: A limited right
or interest in land of another that entitles the holder of the right
to some use, privilege or benefit over the
land.
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- Encumbrance: A claim, right or lien
upon real property, held by someone other than the
owner.
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- Endorsement: A rider attached to
an insurance policy to expand or limit coverage. Also spelled
indorsement.
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- Equity: The value of a
person's interest in real property after all liens and charges have
been deducted.
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- Escrow: The process in
which a disinterested third party holds money and documents for
delivery to the respective parties in a transaction on performance
of established conditions.
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- Exception: A
provision in a title insurance binder or policy which excludes
liability for a specified title defect or an outstanding lien or
encumbrance.
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- Fair Market Value: An
appraisal term for the price which a property would bring in a
competitive market given a willing seller and willing buyer, each of
whom has a reasonable knowledge of all pertinent facts, with neither
being under any compulsion to buy or
sell.
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- Fee Simple: An estate under which
the owner owns a complete interest in the property and is entitled
to the unrestricted use and enjoyment of the property, including the
right to dispose of the property.
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- Federal
Home Loan Mortgage Corporation (FHLMC, Freddie Mac): A
quasi-governmental agency that purchases conventional mortgages in
the secondary mortgage market from depository institutions and
Department of Housing and Urban Development (HUD) approved mortgage
bankers.
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- Federal Housing Administration
(FHA): A division of the Department of Housing and Urban Development
(HUD). Its main activity is the insuring of residential mortgage
loans by private lenders.
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- Federal
National Mortgage Association (FNMA, Fannie Mae): A tax paying
corporation created by Congress to support the secondary mortgage
market. It purchases and sells residential mortgages insured by FHA
or guaranteed by VA as well as conventional home
mortgages.
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- Finance Charge: A total of all
costs imposed directly or indirectly by the creditor and payable
either directly or indirectly by the customer, as defined by the
federal Truth-in-Lending laws.
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- First
Mortgage: A mortgage on property that is superior in right to any
other mortgage.
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- Fixed Rate Loan: A loan
on which the same rate of interest is charged for the life of the
loan.
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- Fixture: Personal property which is
permanently attached to real property, and, as such, becomes part of
real property.
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- Grantee: One to whom a
grant is made. The purchaser of real
property.
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- Grantor: One who has made a
grant. The seller of real property.
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- Hidden Defect: An encumbrance on a title that is not apparent in the
public records; for example, unknown heirs, secret marriages and
forged instruments.
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- Impound Account: An
account held by a lender for the payment of taxes, insurance or
other periodic debts against real
property.
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- Joint Tenancy: A means of
ownership in which two or more persons own equal shares in real
property. Upon the death of one tenant, his/her share passes to the
remaining tenant(s) until title is vested in the last
survivor.
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- Legal Description: A
description by which property can be definitely located by reference
to surveys or recorded maps. Sometimes referred to simply as the
legal.
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- Lien: A recorded document which
claims an interest in real property as security for a debt owed.
Such liability may be created by contract, such as a deed of trust,
or by a court judgement.
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- Lis Pendens: Legal notice that a lawsuit is pending. Also called a notice of
action.
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- Loan-to-Value Ratio: The ratio of
the mortgage loan's principal to the property's appraised value or
its sales price, whichever is lower.
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- Marketable Title: Title which is free from defects which would allow
a purchaser to be released from his obligation to
purchase.
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- Market Value: An appraisal term
denoting the highest price that a buyer, willing but not compelled
to buy, would pay, and the lowest a seller, willing but not
compelled to sell, would accept.
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- Mechanic's Lien: A lien on real estate which secures the payment of
debts due to persons who perform labor or services or furnish
materials incident to the construction of buildings and improvement
on real estate.
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- Metes and Bounds: A form
of land description in which boundaries are described by courses,
directions, distances and monuments.
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- Mortgage: A legal document used to secure the performance of an
obligation.
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- Notarization: The
certification by a Notary Public that a person signing a document
has been properly identified. Notarization does not certify the
content of a document, only validity of
signature.
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- Perfecting Title: Process
involving the elimination of any adverse claims against a
title.
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- PITI: Refers to principle,
interest, taxes and insurance, the four major components of a usual
monthly mortgage payment.
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- PITI Ratio: The
principal, interest, tax and insurance payment to income ratio. Used
in mortgage lending decisions.
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- Points: A
fee charged by the lender to fund a loan, in addition to and
separate from other fees charged. One point equals one percent of
the amount of the loan.
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- Principal: The
sum of money outstanding upon which interest is payable. Also refers
to one who is served by an agent.
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- Private
Mortgage Insurance (PMI): Insurance written by a private mortgage
insurance company protecting the mortgage lender against loss
occasioned by a mortgage default and
foreclosure.
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- Proration: The method used
in dividing charges into that portion which applies only to a
party's ownership up to particular date.
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- Qualification: The process of reviewing a prospective borrower's
credit and payment capacity prior to approving a
loan.
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- Quitclaim Deed: A deed
relinquishing all interest, title or claim in a property by a
grantor. Accomplished without representing that such title is valid,
nor containing any warranty or covenants of
title.
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- Real Estate Settlement Procedures
Act (RESPA): A federal statute requiring disclosure of certain costs
in the sale of residential, improved property which is to be
financed by a federally insured lender.
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- Reconveyance: The conveyance to the landowner of the title, held by
a trustee under a deed of trust, when the performance of the debt is
satisfied.
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- Recordation: Involves filing
for record in the office of the county recorder for the purpose of
giving constructive notice of title, claim or interest in real
property.
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- Record Order: The owner of
property as shown by an examination of the public
record.
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- Statement of Information: A
confidential information statement completed by the buyer, seller
and borrower in every transaction where a policy or policies of
title insurance are requested. Allows the title company to
competently search documents affecting the property to be insured,
documents which may not refer to said property. Allows title
companies to differentiate between parties with similar names when
searching matters such as liens and court
decrees.
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- "Subject To" Clause: A clause in
a contract of sale setting forth any contingencies or special
conditions of purchase and sale, such as an offer made and accepted
subject to financing, securing certain zoning or similar
requirements.
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- Subordination Agreement: An
agreement under which a prior or superior lien is made inferior or
subject to an otherwise junior lien.
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- Tax
Lien: A statutory lien imposed against real property for nonpayment
of taxes.
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- Tenancy in Common: Co-ownership
in a property by two or more persons, each of whom has an undivided
interest in the whole property.
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- Title
Plant: The information warehouse of a title company in which it has
accumulated and is constantly updating title records of properties
in its area which it can use to search title to real
property.
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- Trustee: A person who holds
title in trust for the benefit of another. In a deed of trust, the
trustee is the person named to hold title in trust for the benefit
of the lender until the loan is paid off.
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- Trustor: The borrower under a deed of trust. One who deeds their
property to a trustee as security for repayment of a
loan.
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- Uniform Settlement Statement: The
Standard HUD Form 1 required to be given to the borrower, lender and
seller at, or prior to, settlement.
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- Unmarketable Title: Title which contains defects that would allow a
purchaser to be released from his obligation to
purchase.
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- Vesting: Denotes the manner in
which title is held. Examples of common vestings are: Community
Property, Joint Tenancy and Tenancy in Common.
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