Glossary

HARD MONEY GLOSSARY

ABSTRACT OF JUDGMENT: A written summary of a judgment that states the amount of money that is due to the losing counterpart of a lawsuit.

ABSTRACT OF TITLE:  A summary of all the documents and proceedings used as evidence of an effective title to a property.

ACCRUED INTEREST: Interest accumulated from the starting date of a loan, but not paid yet.

ADDENDUM: Something added to the original documents. It modifies terms or conditions of contracts.

ADJUSTABLE RATE MORTGAGE (ARM): A type of mortgage in which the interest rate can be changed at specific intervals throughout the entire life of the loan, based on a monitored index.

ADJUSTMENT PERIOD: In an adjustable-rate mortgage, the adjustment period is the time between interest rate adjustments

AMORTIZED MORTGAGE: A loan with periodic payments that consist of both interest and principal.

ANNAUL PERCENTAGE RATE (APR): The annual rate of interest charged or earned through investment. It is a percentage that represents the cost of funds over the term of a loan.

APPRAISAL: A valuation of property by a licensed professional appraiser.

APPRAISED VALUE: The estimated market value of a property performed by a professional appraiser.

ARREAS: A payment made at the end of a term. Sometimes used to signify default of a payment overdue.

ASSESSED VALUE:  The Value of a property in term of dollars according to jurisdictional tax assessment.

ASSIGNEE: The entity who receives a property, interest in a property, title or rights from a contract. 

ASSIGNMENT: A transfer of an estate or rights from an individual to another.  When the assignment is transferred the counterpart has the obligation to complete the requirements of the contract.

BALLOON LOAN: A type of loan that has a series of monthly payments, leaving the remaining principal balance payment due at the end of the term.

BALLOON PAYMENT: A large payment required at the end of a balloon loan.

BENEFICIARY: A party who has the advantage of receiving benefits of a trust.

BLANKET LOAN / MORTGAGE: A mortgage that covers two or more properties. The properties are considered collateral, as security for the debts, and the pieces of the real estate may be sold without withdrawing the entire mortgage.

BOND: A fixed instrument given by an investor to a borrower as evidence of a debt and as a detailed guarantee of performance.

BRIDGE LOAN: A mortgage that bridge the gap in between the termination of one loan and the beginning of another loan. They are short-term and they have relatively high interest rates.

BROKER: An individual or firm that negotiate loan amounts, interest rates and loan terms between borrowers and lenders.

BROKER PRICE OPINION (BPO): Estimated value of a property determined by a real estate broker.

BUY DOWN: A financing technique with which the buyer tries to obtain a lower interest rate over the first few years of the loan. The buyer’s monthly interest rate and therefore the monthly payment is reduced due to the seller initial payment.

CAPITALIZATION: The amounts and types of assessments of a firm’s structure.

CAPITALIZATION RATE: The rate of interest that is expected to be generated on a real estate investment (return on the investment).

CASH FLOW: The net amount of cash that is transferred into and out of a business. The amount of money generated by a property before its decrease in value.

CASH OUT REFINANCE: A mortgage transaction, through which a person can borrow money over a pre-existing lien, usually reducing the interest rate

CERTIFICATE OF INSURANCE: A document issued by an insurance company to verify the existence of coverage.

CERTIFICATE OF OCCUPANCY: A document issued by a local government which permits a structure to be occupied by the general public

CHAIN OF TITLE:  A record that summarizes historical transfers of title to a property.

CLOSING COST: The expenses that buyers and sellers incur to complete a loan transaction. These costs may include loan origination feed, title searches, title insurance, closing fees, recording fees and processing fees

CLOSING DATE: The date on which the ownership of the property is transferred to the buyer, and when the deed is delivered to the buyer.

CLOSING STATEMENT: A document that provides the closing details on a transaction. This document is issued by real estate as completion of the sales process.

COLLATERAL: A property that a borrower provides to secure the loan.

COMBINED LOAN-TO-VALUE (CLTV):  The ratio between the total loan and the market value of the property.

CONFORMING LOAN: A loan that has underwriting criteria set by The Federal Housing Finance Agency ( FHFA). Conforming loans are advantageous due to their relatively low interest rates.

CONTINGENCY: A potential negative event that may occur before a contract is legally tied up.

CONTRACT: An agreement between competent parties to do or not do certain things.

CONTRACT FOR DEED: A faster and less costly transaction contract than a traditional mortgage agreement.

CONVENTIONAL LOAN: A type of loan made without any governmental underwriting such as FHA insurance or VA guarantee, and conform to the lender’s own standards.

COUNTEROFFER: An offer made as a proposal in response to the initial undesirable offer. 

CREDIT LINE: A loan that allows borrowers to use the credit as needed and then repay immediately over a specific period of time.

DEBT RATIO: The ratio of total debt to total assets. It measures the extent of a company’s leverage.

DEBT SERVICE: The cash paid by a debtor to repay borrowed money.

DEED: Written and properly signed document that assign title or ownership interest on a real property.

DEED IN LIEU OF FORECLOSURE: A deed instrument in which the borrower conveys all interest in a property to the lender, satisfying a loan in default by avoiding the foreclosure.  

DEED OF TRUST (DOT): As mortgages do, they are used as security real estate transaction. It usually involves three parties (borrower, Lender and trustee). The Trustee holds the property as security for the payment of the debt and he can sell the property if the borrower defaults.

DEFAULT: The failure to meet all of the obligations specified in the mortgage or deed of trust.

DISCOUNT POINTS: Type of prepaid interest or fees mortgage that borrowers can purchase in order to lower the amount of interest in subsequent payments.  

DOWN PAYMENT: A type of payment paid by a buyer to a seller from sources of funds outside of those provided by a lender. It usually decreases the amount of interest paid over the lifetime of the loan.

DUE DILIGENCE: Investigation of a potential investment to verify all of the facts and issues before proceeding. (ex: verification of employment, financial records, income)

EARNEST MONEY: Amount of money made by a buyer as eveidence of good faith to buy a property.

EASEMENT: Agreement between the owner of a property and another party, that establishes the right of the other party to utilize the property by paying a fee.

ENCUMBRANCE: A claim against a property by parties other than the owner. It can be a financial and a non-financial claim (mortgage loans, unpaid taxes, easements, junior liens)

EQUAL CREDIT OPPORTUNITY ACT (ECOA): A federal law that aims to give all legal individuals an equal opportunity to apply for loans.

EQUITY: The value left by subtracting the total of the unpaid mortgage balances and current liabilities

ESCROW: Agreement that provide that certain instruments or assets are held by a third party during the process of completing a transaction

FIXED RATE MORTGAGE: A mortgage that has fixed rate and instalment payments for the entire life of the loan.

FORECLOSURE: A legal process in which the borrower’s right to a property is terminated. 

GRANTEE: The party to whom title to real property is conveyed.

GRANTOR: The party who gives the deed. 

HARD MONEY LOAN: Type of loan primarily upon collateral’s equity rather than the credit availability of the borrower.

INTEREST RATE: The amount charged by borrowing money, express in percentage.

LOAN ORIGINATION FEE: A fee charged by a lender for processing and creating a new mortgage loan. It is usually quoted as a percentage of the total loan.

LOAN TO VALUE RATIO (LTV): The ratio of the amount of the loan and the value of the property. The higher is the LTV ratio, the riskier the loan is for a lender

MORTGAGE: A lien against real property given by a borrower to a lender as security for money borrowed.

PROMISSORY NOTE: Document signed by a buyer as a promise to pay a specific amount of money under specific conditions.

TRUSTEE: A person or a firm that holds a property for a third part to secure performance of an obligation.

UNRECORDED DEED: A deed that transfers the ownership from the grantor to the grantee without providing public evidence of the change in ownership.

WARRANTY DEED: A document where is provided promises of protection by the grantor to the grantee against any claims.

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