Glossary of Real Estate and Mortgage Terms

The mortgage world has unique terms and calculations that we feel every First Time Home Buyer should be aware of and the context that they most mortgage terms might be used. Here are the most common terms you should know if you’re seeking down payment assistance.



Acceleration Clause

A contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment. Also known as "acceleration covenant".


To be accepted, a real estate Purchase Offer must at a minimum identify: 1) the Subject of the offer: the Property; 2) the Consideration: the purchase price to be paid; 3) the Time for performance: the closing date 4) it must be in writing; and 5) it must be delivered to the Seller or their authorized agent. Once a Purchase Offer is delivered, the Seller then has a “Power of Acceptance”. They can accept it as is or they can reject it totally; or they can respond with different terms such as a counter-offer. If the offer is accepted before another offer is presented, it must be signed by both the Seller and the Buyer to be valid.

Residential Appraisal

A home appraisal is an unbiased estimate of the true (or fair market) value of what a property is worth. All lenders order an appraisal during the mortgage loan process so that there is an objective way to assess the home's market value and ensure that the amount of money requested by the borrower is appropriate. The Buyer general pays for the appraisal before the appraiser goes to the property.


Because an acre is a measure of area, not length, it is defined in square feet. An acre can be of any shape—a rectangle, a triangle, a circle, or even a star—so long as its area is exactly 43,560 square feet. The most standard shape for an acre is one furlong by one chain, or 660 feet by 66 feet.


The addendum becomes part of the legal contract. in real estate purchase agreements, an addendum is a document containing any changes or modifications negotiated in the original lease or purchase.

Adjustable rate mortgage

An ARM, short for "adjustable rate mortgage", is a mortgage on which the interest rate is not fixed for the entire life of the loan. The rate is fixed for a period at the beginning, called the "initial rate period", but after that it may change based on movements in an interest rate index. ARMs are contrasted with fixed-rate mortgages (FRMs) on which the quoted rate holds for the entire life of the mortgage.

Ad valorem tax

The phrase ad valorem is Latin for "according to value". Property taxes, property owners have their property assessed on a periodic basis by a public tax assessor. The assessed value of the property is then used to compute an annual tax, which is levied on the owner by his or her municipality.

Amortization Schedule

An amortization schedule is a table detailing each periodic payment on an amortizing loan (typically a mortgage), refers to the process of paying off a debt (often from a loan or mortgage) over time through regular pre calculated payments.


Mortgage interest in the U.S. is paid in arrears, which means that in the case of monthly payments, each payment covers principal repayment and mortgage interest for the month preceding the payment due date. In other words you pay the interest and principle at the end of the month not the beginning of the month. Most First Time Home Buyers think they pay for the month to follow but that’s not the case.

Associate Broker

Someone who has taken additional education classes and earned a broker's license but chooses to work under the management of a Principle or Managing Broker.

Assumption of mortgage

The seller agrees to let the buyer take over his or her house payments with the same interest rate that they’ve had since they first bought the house. They are assuming the existing mortgage. The Buyer agrees to pay the Seller the amount of equity the Seller has accumulated outside the assumed mortgage.


Back up offer

A backup offer is a “place holder” that tells the seller that you’ve both agreed on a price and terms if the scenario arises that the seller’s accepted offer is cancelled. When a property receives multiple offers, if the winning purchase offer falls through, the back-up offer automatically becomes the new winning purchase offer.


If the buyer withdraws from a real estate deal, he/she usually forfeits the earnest money. It is common in real estate. Earnest money reduces the risk to the seller. It is also called a binder.

Bi weekly loan payment

A biweekly mortgage is a mortgage for which one-half payment is made every other week instead of a full payment made once per month. The homeowner makes 13 payments per year instead of the usual twelve, which accelerates the loan's payoff schedule by approximately 6 years. This is a great idea for First time homebuyers to pay off their mortgage early without consciously sacrificing income.

Blended mortgage rate

The high price of homes has many buyers trying to get 100 percent, or near 100 percent, financing. Many times First Time Home Buyers can do this by receiving down payment assistance in the form of a second mortgage or grant that has 0% interest. When this happens the blended rate becomes the combined interest rate on the first mortgage amount for the first mortgage and the First Time Home Buyer gets for the 0% second mortgage. In the State of Florida, the down payment assistance mortgage generally has a 0% interest rate.

Florida Bond Down Payment Assistance program

The Florida Bond money is accumulated through the State Bond program by receiving a portion of the deed stamps from all the properties that are sold with the exception of the Florida State Bond Down Payment Assistance programs. The bond is secured as a second mortgage at 0% interest and is paid back at the time of the sale. This is a great situation for a buyer because he/she gets to use money at 0% interest to purchase a house and doesn't have to pay it back until the house is sold. There are no payments necessary until the home is sold and then the bond money is being paid back from the proceeds. Once the money is paid back to the State of Florida, it goes back into the Down Payment Assistance programs for someone else to use.

Buyer breach of contract

When a buyer breaches a real estate purchase contract, the seller still retains the property, which can be used in any manner the owner desires and may be sold to another buyer. Typically the Buyer loses all their earnest money deposit if the financing contingency time period has passed.

Buy down

This occurs when either the interest rate is temporarily bought down or the mortgage insurance is split paid or bought out completely so the buyer no longer has to pay mortgage insurance.

Buyers Market

A buyer's market is a situation in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations. Buyer's Market is commonly used to describe real estate markets and means that the advantage go to the Buyer in the negotiations because there are more houses for sale than Buyers.


Call provision

(aka acceleration clause ) The clause in a mortgage or trust deed that stipulates the entire debt is due immediately if the mortgagor (First Time Home Buyer) defaults under the terms of the contract.


a ceiling or limit on the adjustments made in the payments, interest rate or balance of an adjustable rate loan. Cap does not apply to fixed rate mortgage terms.

Cashier’s check

A cashier's check is a draft guaranteed by a bank, drawn from the bank's own funds and signed by a cashier or teller. It's used in place of cash, personal checks, credit cards or money orders. In today’s real estate market this instrument isn’t used as often as wired funds into the Title companies Escrow account. The Cashier’s Check is now used almost exclusively as the Earnest Money deposit on REO Properties.

Caveat Emptor

A principle in Real Estate that means, let the buyer beware: the principle that the seller of a product cannot be held responsible for its quality unless it is guaranteed in a warranty. This is particularly important for First Time Home Buyers to understand.

Certificate of eligibility

For all VA loans, You must have suitable credit, sufficient income, and a valid Certificate of Eligibility (COE) to be eligible for a VA-guaranteed home loan. The home must be for your own personal occupancy. This document must be obtained by the veteran whether or not they are first time home buyers or not. If they have use the COE before and this is not their first home purchase with a COE, the Veteran may have to reapply for the COE.

Certificate of occupancy

In Florida, a certificate of occupancy is a legal recognition issued by a local governing body, (such as the local building Inspector) that states a structure is ready to be used and occupied. The certificate may also outline the uses and restrictions of the structure. It distinguishes whether the building can be used for commercial or residential purposes.

Certificate of title

A Certificate of Title is a legal document that is used to establish the ownership of a piece of property. While identifying the ownership, the Certificate of Title has other information relevant to the property. This may include easements and buildings. The Certificate of Title is an effective tool for potential buyers when determining whether to continue with the transaction.

Chain of title

A chain of title is a list of the people who have owned a piece of real estate. In a typical chain of title, the owner of the property (“A”) will convey the property by a properly executed deed which is recorded in the public records to a buyer (“B”). Subsequently there will be a recorded deed from B to C, then from C to D, and so on.

Clearing title

A critical step for the sale of any home is the review of the property’s title report. A buyer, their mortgage lender and the title insurance company will want to review the current title history of the property to make sure that the next buyer can purchase the property free of any unnecessary liens and encumbrances. Property taxes are an ongoing lien that cannot be removed, and there are many title restrictions that will stay with the property if it has easements, condo restrictions or other agreements with neighbors or municipalities. It is important for all Buyers, not just first time home buyers to make sure they have clear title before purchasing their new home.

Client Trust account or Title Companies Escrow Account

Real estate trust fund accounts, also called earnest money or escrow accounts, are accounts that a brokerage company will set up at a bank or some other recognized depository. They are money or other things of value that are received by a broker or salesperson on behalf of an individual (usually the buyer) that is held for the benefit of others in the performance of any acts for which a real estate license is required.


This is the final step in executing a real estate transaction. The closing date is set during the negotiation phase, and is usually several weeks after the offer is formally accepted. On the closing date, the ownership of the property is transferred to the buyer.

Closing Agent

The Title Company in a residential property sale is the Closing Agent. The actual closing is conducted by the Title Officer of the company.

Buyers Closing Costs

These are the typical Buyers Closing Costs that you will see on a Settlement Statement or Closing Disclosure; total mortgage fees, settlement fees, owners tile insurance, owners title search fee, lenders policy, pud or condo HOA annual payment, Florida form 9, state and/or county recording fee, intangible tax, appraisal fee, documentation stamps on deed, survey. In the case of SOME Down Payment Assistance program, the intangibles tax and Deed/Doc stamps are exempt such as the State of Florida conventional or FHA Bond Loan programs.

Cloud on title

A cloud on title is defined as an actual or apparent outstanding claim on the title to real property. "Clouds" can include old mortgages or deeds of trust with no recording showing the secured debt was paid off, a failure to properly transfer all interests in the real property (such as mineral rights) to a former owner, a previous deed which was improperly written or signed, an unresolved legal debt or levy by a creditor or a taxing authority, or some other doubtful link in the chain of title. A few of the examples of Clouds on Title would be: Insufficient Deed: The form and/or content of a deed are insufficient to actually convey the property. This may result in the conveyance being nullified. Marriage: A single person is selling or mortgaging property, but the title search reveals there are two persons on the deed and it says they are married. Death: The children of a widowed woman, who is now deceased, mortgaged the property, but the title search reveals there is no recorded will or deed from the decedent's estate to these children. Money liens: A man who had purchased the property before marriage thereafter mortgaged the property. He then gets married. Florida recognizes a spouse's interest in this property if it is classified as homestead property. Mechanic's lien: An owner fails to pay the contractor who built the pool in the backyard. This contractor can place a lien on the property for his/her unpaid labor. Tax liens: The owner failed to pay his/her taxes and a certificate was sold in the amount of the unpaid taxes. Often the "cloud on title" can be removed by the institution of a quiet title action, by the execution and recordation of a valid deed, or by the recordation of a document proving a debt has been paid. If you do not know the cloud on title exists, you purchase the property subject to this cloud.

Common area

means all real property within a community which is owned or leased by an association or dedicated for use or maintenance by the association or its members, including, regardless of whether title has been conveyed to the association: (a) Real property the use of which is dedicated to the association or its members by a recorded plat; or (b) Real property committed by a declaration of covenants to be leased or conveyed to the association.

Community Reinvestment Act

The Community Reinvestment Act (CRA), enacted by Congress in 1977 (12 U.S.C. 2901) and implemented by Regulations 12 CFR parts 25, 228, 345, and 195, is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate. This act is the basis for all down payment assistance programs for first time home buyers.

Comparables or Comparative Market Analysis

When you purchase a home, you will come to appreciate neighborhood sold comparables or comps for short. These comps are regarded as the single-best tool in determining a home's value. They contrast criteria from recently-sold properties in a neighborhood, such as sale price, age of house, size, and square footage. Real estate agents use comps to prepare a Comparative Market Analysis (CMA) for their clients. Every address has a set of nearby recently sold homes, generally less than 1 mile if possible. Since these homes might not exactly match yours, adjustments are made for any differences when your realtor gathers the comps.. For example, there might be a recently-sold home nearby just like yours, but it has one more bedroom, has more square footage, has a pool, recently updated, etc….Therefore, that house would probably be valued higher.


The concept that a property will probably increase in value if its size, age, condition, and style are similar to other properties in the immediate area.


A provision or provisions in a contract that must be met for the contract to be considered enforceable. For example, a buyer may offer a contract that is contingent upon the buyer's obtaining suitable financing; if financing is not obtained, the buyer may back out of the agreement without penalty.


The transferring of a property title from one individual to another.


An individual other than the borrower who signs a promissory note and thereby assumes equal liability for it. This person is also called co-maker. With regard to down payment assistance, many programs do not allow cosigners on loans. Lease check with your Lender as sometimes this is a specific Lender overlay.

Counter offer

A higher or lower offer made in reply to the original offer.


The person to whom the person owes the debt. In closing statements that which is due and payable to either the buyer or seller. This is the opposite of the charge or debit.



on MLS sheets this refers to days on market which is how long the property has been exposed on Multiple Listing Service.


a charge on an accounting statement or balance sheet (appearing on the left hand column) the opposite of a credit. This term is also used along with credit when preparing the Closing Disclosure.

Debt service

The amount of money needed to needed to meet the periodic payments of principle and interest on a loan or debt that is being amortized. Your mortgage payment would be part of the amount of your overall debt service. If your down payment assistance loan has a 0% interest and no regular payments have to be made, then your debt service would not include any amount from the down payment assistance loan.

Declaration of restrictions

This is a statement of all the covenants, restrictions and conditions that runs with the land and is always found in an organized HOA if one exists for your subdivision. These restrictions are aimed for uniformity in the buildings and exterior appearances of the properties of the subdivisions and they are filed at the local courthouse.

Debt to income ratio

This calculation determines the amount of money the Borrower is qualified to borrow. Generally for all Florida Down Payment Assistance programs, the Borrowers must have a debt to income ratio of less than 45%. The calculation works like this: total pre-tax Borrower income for the month, and then multiply that figure by .45%. Then subtract all Borrower obligation’s that would be reflected on a credit report along with the new Principle + Interest + Property Taxes + Hazard Insurance + Mortgage Insurance + any applicable HOA fees. If you have more than $1 left, you’re debt to income ratio should be fine and under 45%. If however, your calculation goes into the negative side, you need to look at less expensive homes.


If you are either a self employed borrower or a Borrower that has deductions that are outside the standard deductions for an easy form 1040, you have itemized deductions and many of these deductions will actually reduce the amount of home you can purchase because all deductions that are outside the standard deductions will be subtracted from your income. An example: If you’re business gross sales were $100,000 in 2015 but you took itemized deductions of $45,000, then your income per underwriting guidelines is only $55,000 for 2015. Typically a Borrowers income is averaged over a two year period for qualification purposes.

Dee in lieu of foreclosure

The act of giving or transferring a property back to the lender without undergoing foreclosure. While the end result is the same - the lender regains possession of the property - the expense and repercussions of the foreclosure proceedings are avoided.

Deed restrictions

Deed restrictions are rules and regulations that govern one or more lots or parcels of land. Deed restrictions “bind” land. Typically, a deed restriction is created in a document that is recorded with the county register of deeds records where the property is located. Many time this is the basis of neighborhood HOA’s.

Demand note

A promissory note that permits the holder, upon notice to debtor, to call in the loan at any time. A typical FHA, FHLMC or FNMA mortgage loan does not have this clause unless the Borrower defaults ion the loan.

Direct endorsement

Certain financial institutions that offer FHA-insured loans are termed "Direct Endorsement Lenders." What this signifies is that the lender has previously met HUD regulations and obtained prior approval from the FHA. To become designated as a Direct Endorsement Lender, the financial institution submits a certain number of its loan files for FHA review, which HUD calls "test case" loans. Once these loans meet the agency's approval, the lender qualifies for Direct Endorsement selection, after which the lender can approve loans for FHA backing prior to submitting the paperwork for review. Although the FHA grants Direct Endorsement status to the lender and not the actual underwriters, the financial institution must employ a registered Direct Endorsement underwriter to assess and review each loan application. Also termed “Full Eagle” Lenders are direct endorsement lenders. Not all Lenders are direct endorsement lenders. For the most part, all approved and qualified Florida Down Payment Assistance Lenders are direct Endorsement Lenders.

Discharge of Contract

Cancellation and Termination of a real estate contract. Some common grounds on which the obligations of the contract may be discharged are mutual cancellation; recession; performance or non-performance, accord and satisfaction, illegality, and in some circumstances when the court will not enforce the contract.


to reveal or make known. A recognized risk reduction tool for Real Estate Brokers.

Discount points

An added fee charged by the mortgage company to increase the yield on a lower than market interest loan and make the loan more competitive with higher interest loans. Borrowers often pay discount points upfront in order to gain long term lower interest rate. This cannot be done on down payment assistance programs but conventional mortgage insurance premiums can be reduced or eliminated all together using a similar concept.

Down payment

The amount of cash a Borrower will pay at the time of purchase. Florida’s down Payment Assistance programs are the best in the country. Most are specifically targeted towards First Time Home Buyers, but there are a few programs that do not have that requirement.

Due on sale clause

The "due on sale" (aka "acceleration clause") is a provision in a mortgage document that gives the lender the right to demand payment of the remaining balance of the loan when the property is sold. It is a contractual right, not a law. This means that if title to the property is transferred, the bank may (or may not), at its option, decide to "call the loan due." An "assumable" loan is one that is secured by a mortgage which contains no "due on sale" provision. FHA-insured mortgages originated before Dec. 1989 and VA-guaranteed loans originated before Feb. 1988 don’t contain such provisions. Nearly all loans originated today contain a standard "due on sale" clause which usually reads something like: "If all or any part of the property herein is transferred without the lender's prior written consent, the lender may require all sums secured hereby immediately due and payable." Banks began inserting "due on sale" clauses in their mortgages in the 1970s when interest rates rose dramatically. Home buyers were assuming existing loans rather than borrowing new money from banks because the interest rates on existing loans were lower. The banks used the clause as a way to kill their own worst competition. They argued that the reason for the restriction was to be able to police who was living in the property -- the collateral for their loan.


Early occupancy

This term refers to the practice of allowing buyers to take possession of real property before closing. Such a practice should be carefully evaluated because of risks like: mechanics liens, buyer’s remorse, inadequate insurance coverage. If this is done, both parties should sign a written agreement before it happens. First time home buyers frequently want to do this because they can become frustrated how long the Lending process can take. However, most Sellers will not allow this to take place for many of the reasons above.,

Earnest money deposit

This is the cash deposit that the Buyer gives to the Title Agent, to be placed in the Title Companies Escrow account for a deposit on the property they wish to purchase. This can also be called the binder or good faith money. This money will eventually become part of the down payment on the property at closing.

Effective age

This is the apparent improve age of a building that is in better condition than the chronological age would be. Homes that have been renovated and sold have a much newer effective age than a building in its original condition.


The way to exit a building, opposite of ingress.


The unwanted or unauthorized intrusion of an improvement or other real property onto another’s. Examples are driveways and fences that are place on someone else’s land.


This refers to any lien, claim, charge or liability attached to and binding on real property that might lessen its value or burden or obstruct or impair the use of the property but not necessarily prevent the transfer of title.

Evidence of title

Proof of ownership of property.

Executed contract

A contract is said to have been executed when both parties have completed their obligations. In the case of a real estate contract, that milestone comes at closing. Until payment and title change hands, the contract is merely "executory" -- capable of being executed.

Executed document

To execute a document means to sign it. People who refer to an executed real estate contract actually mean that the document -- the paper or digital copy of the contract -- has been signed. In this sense, the date of execution is the date on which all parties' signatures appear on the contract. It's the contract's starting date.


Real estate sales contracts typically state deadlines for attorney reviews, home inspections, mortgage approvals, and closings dates. Buyers and sellers can agree to extend deadlines by amending their purchase agreements to reflect new dates for completing tasks. Buyers and sellers should also consult with third parties who may be affected by contract extensions. For example, a buyer's lender may have conflicting expiration dates for things such as interest rate guarantees or mortgage approvals.

External obsolescence

This is a factor that reduces the value of an improvement because of something external to the property itself. It's not about whether the house is outdated or not, but rather something outside of the home that is causing a lower value. It's usually something that cannot be cured.


Fair market value

This is the price that a specific property would bring in the marketplace, if the following conditions are true: Prospective buyers and sellers are reasonably knowledgeable about the asset; they are behaving in their own best interests and are free of undue pressure to trade. A reasonable time period is given for the transaction to be completed. Given these conditions, an asset's fair market value should represent an accurate valuation or assessment of its worth.

Fannie Mae

Fannie Mae (FNMA) is the federal national mortgage corporation and is an active buyer of mortgages on the secondary market. They have their own set of lending guide lines that are more restrictive than FHA. Fannie Mae and FHA guide lines are used for deterring whether or not First Time Home Buyers are qualified to receive down payment assistance loans and/or grants.

Freddie Mac

Freddie Mac (FHLMC) Along with Fannie Mae, Freddie also purchases mortgages on the secondary market and they too have their own set of Lending guidelines which are similarly restrictive as FNMA guidelines.

Federal Housing Administration

FHA which is division of HUD is a federal agency established in 1934 under the National Housing Act to encourage improvement in housing standards, to also provide an adequate home financing system through the insurance of housing mortgages and credit, and to exert an influence over the mortgage market. FHA was the governments answer to a lack of quality housing, excessive foreclosure and a collapsed building industry during the depression.

Federal Home Loan Bank

Or commonly known in banking sectors is FHLB, is a class of federally chartered savings institutions and banks that provide a credit reserve for its member institutions. There are 12 Federal Home Loan Bank districts or regions that provide credit reserve to each of its member institutions. There are down payment assistance programs sponsored by FHLB that serve the low to lower moderate income borrower.

Federal tax lien

This is a federal tax lien that attaches to the residential or commercial property of someone who is delinquent in payment of their federal taxes. This lien must be cleared or satisfied with the consent of the IRS before it can be lawfully sold. All other liens junior and are subject to a federal tax lien.

Fee Simple

This is the maximum possible “estate” that one can own. A fee simple estate is the least limited interest and most complete ownership of land. This “estate” normally applies to single Family homes, and some townhomes. Rarely does it apply to condominiums.

FICO scores

These are mathematical scores developed by the Fair Isaac Company that are used by the three credit bureau’s. Fico scores are used by Lenders to evaluate the risk associated in lending money. The higher the score the less the risk. Most Down Payment Assistance programs today require a FICO score of at least 640.


Gap in title

This is a break in the chain of title, such as when records don’t reflect a transfer to a particular grantor (person or entity). This could happen if the Grantor failed to record the deed after the last sale. Typically in modern times the Title Company or Closing Attorney assumes this task.


This legal process is designed to provide a means to creditors to be made whole from Borrowers who fail to pay their legal debts. Wages and property can be garnished by the courts.

General liens

These liens are rights of a creditor to have all the debtor’s property, real and personal sold to satisfy a debt. Unlike a specific lien against a specific piece of property, a general lien is taken on the debtor and applies to all of their property.

Gift letter

This is a letter provided to the Lender by the Borrower acknowledging that the money being used, generally part of the down payment, to purchase real property was a gift from a relative and has no stipulation or obligation to repay it. Typically this situation arises with First Time Home Buyers whether or not they use some form of down payment assistance. Gift letters can also come from employers under some circumstances.

Good Faith Estimate or GFE

This is an itemized document of loan fees that the Lenders give their borrowers so the borrowers know how much money the Lender will charge for the service of Originating their mortgage loan(s). This document is typically sent out to the Borrower with the initial disclosure package. Per the Real Estate Settlement Procedures Act, the Lender has 3 business days to send out this disclosure after filling out a loan application.

Government Sponsored GSE

Fannie Mae, Freddie Mac, FHLB and the Farm Credit System. These are the financial services corporations established and chartered by the U S Congress. Although they seem to be departments of the Federal Governments, GSE Securities are not backed by the “full faith” and “credit” of the Federal Government.


This has a dual meaning. The first is where the Seller, (Grantor) conveys or transfers or “grants” the Buyer (Grantee) title to the property. The second meaning has come to mean that in some down payment assistance programs, the sponsoring lending or governmental entity “grants” part of the down payment to the Buyer. A grant sometimes has a clause that the Buyer has to live in the property for the full grant to be forgiven. Florida has some of the best First Time Home Buyer grant programs in the entire country.

Gross income

This term refers to the entire pre-tax income which has been derived by wages, business, income producing property, child support etc…When applying for down payment assistance, the gross income from all sources is always used for down payment Assistance qualification. However, that isn’t always true when qualifying for regular Conventional or FHA financing.


This is water just below the surface of the earth. Because of the high water table in Florida, a home buyer should be aware if there’s water below their feet.


Hard Money Mortgage

This is borrowed money from a private investor at a very high interest rate that generally involves Investors as purchasers. The Investor purchasers don’t mind paying the agreed upon high interest rate because they are usually short term loans and the money is generally used to purchase the property and possibly renovate it. After the property is renovated the property is sold and the high interest loan is repaid in full. Institutional down payment assistance loans are not hard money.

Hazard insurance

These are commonly known as Homeowners or HO-3 insurance policies. They cover physical destruction of the property and insure both the Lender as an additional payee as well as the Insured who is the owner of the property. All mortgage loans including down payment assistance loans require this form of insurance.

Hip roof

This is a pitched roof with sloping sides and ends. This roof carries the lowest insurance cost in the State of Florida.

Holding Escrow

This is an arrangement where an escrow Agent holds the final title documents to a contract for deed. Holding escrows are often the solution for the problems that arise under a contract for deed when the Buyer is ready to pay off the balance owning on the contract but the Seller either cannot be found or is not cooperative about executing the deed. Under a holding escrow arrangement, at the time of closing, the seller deposits with the Escrow Agent an executed deed and instructs the Escrow Agent to deliver the conveyance to the Buyer when full payment is made under the contract to purchase.

Holding Period

In the case of many down payment assistance loans, the holding period without penalties is 5 years. That is if you purchase the property and you live in the house for 5 years, you may never have to pay the second mortgage off. This of course depends on which down payment assistance program you used when the original mortgage loan was signed and when the property was closed on. Terms of the down payment assistance loans never change but sometimes the Borrower has to sell or move out before the 1st mortgage is paid off.

Home equity line of credit loan (HELOC)

This is a form of revolving credit, which attaches a lien on your house, generally in the second mortgage lien position. However, those Borrowers/ Buyers that have used down payment assistance loans that are still active in the 2nd mortgage position will probably not be able to use a HELOC until after the existing 2nd mortgage is paid off from the down payment assistance mortgage has been paid off or satisfied.

Home Inspection

Home Inspections on properties to purchase are necessary for two reasons. The first is that in Florida the Hazard / Homeowners Insurance premiums will be based in large part by the report that the Home Inspectors send to the Insurance Companies prior to writing and binding the policy. The second reason of course is so the Buyer will know what needs repair to the house. We recommend all Florida First Time Home Buyers have an inspection done before your Contract Inspection period is over.


Immediate Family Member

In Lenders terms; the Borrowers spouse, child, parent, step parent, legal guardian, grandparent, brother, or sister. Frequently First Time Homebuyers will need to obtain some money from an immediate family member prior to being pre-approved. Sometime this will satisfy the down payment assistance sometimes they will also need to use on of the many Florida down payment assistance programs as well.

Impact fees

This is a local municipal assessment against new residential, industrial or commercial development projects to compensate for the added public services such as water and sewer lines, roads , signage and drainage fields.

Implied easement

This is an easement that arises by implying the acts or conduct of the Parties. An example would be if a Buyer was acquiring mineral rights to a piece of property, the implied easement would be that they have to enter the property to get the minerals.

Improved land

Real property (Real Estate/land ) that has been improved by adding streets, lights, utilities and buildings such a s houses.

Imputed notice

This means that a Listing Agents knowledge that is binding on the Principle because of the agency relationship between the Principle/Owner/ Seller of the property. If the Buyers Agent receives verbal notice from the Listing Agent that the property offer has been accepted, then the Buyer cannot legally withdraw the offer without the withdrawn offer being in the specified timelines of the Offer to Purchase contract.

Income Statement

This is basically a Profit and Loss statement and it is required by Lenders from Buyers/Borrowers who are self employed. This document strengthens the financial portfolio of the Buyer and Lending Underwriters require it on all self employed mortgage loans.

Incurable obsolescence

This is an appraisal term that that means the property has functional or external obsolescence of an improvement to the structure that is not easy to repair. If the loss of in value is due to functional obsolescence it is treated as incurable. An example of this would be to have a power line running through the backyard of a residential single family home. This would be incurable obsolescence. First Time Home Buyers should stay away from these sorts of incurable scenarios’.

Independent Contractor

Many First Time Home Buyers don’t understand that if they are 1099 employees, they are actually classified as being in business for themselves and must have at least two years tax returns to verify income. This is true not only for down payment assistance programs but for regular mortgage loans as well.


a way to enter a property

Inheritance tax

This is a state tax that is imposed on heirs to a property. The tax isn’t levied on the property itself but on the individual heir to the property. Because of this, the tax rates may vary from heir to heir on the same property.

Institutional Lender

A financial institution such as a bank or mortgage broker whose loan is regulated by law. All down payment assistance programs are originated by institutional lenders.


Joint Tenancy

A unit of real estate that is owned by two or more natural people all owning equal shares of the property with rights of survivorship. The idea of joint tenancy is unity of ownership: Title is held as though all owners constituted one person, a fictitious entity. The death of one of one joint tenant does not destroy the owning unit, it only reduces by one the number the number of persons who jointly own the unit. This form of ownership would be for Husband and Wife or roommates who jointly and equally owned the property


A formal decision of the court on the respective rights and claims of the parties to an action or suit. A judgment that has been entered and recorded with the county recorder usually becomes a general lien on the property of the defendant. Someone with a judgment on their credit report cannot obtain an FHA, Conventional, VA,USDA mortgage. The judgment must be satisfied. First time homebuyers should make sure that they do not have any judgments n their credit file.

Judgment lien

A general lien on real and person property belonging to a debtor. Usually the lien only covers real estate in the county that the judgment was rendered.

Judicial foreclosure

In Florida a method of foreclosing on real property on real property by means of a supervised sale. In a judicial foreclosure an appraisal is obtained after which the court determines the price that the property is to be sold. Florida is a judicial State which means when a property is foreclosed on, it must pass through the court system which can take up to three years before the property can be sold.

Junior mortgage

A mortgage such as a second mortgage, that is subordinate in right or lien priority to the first mortgage. In the event of a foreclosure, the second or third liens are only repaid if there is enough money left over from the sale to satisfy the first mortgage. All down payment assistance loans or grants are in the second lien position.



Land contract

An installment contract for sale with the buyer receiving equitable title (right to possession) and the seller retaining title.


Real property that has no access to a public road or way or through easement of necessity.

Land trust

A trust originated by the owner of real property in which real estate is the only asset. The legal and equitable title is to the property is in the trustees name under a deed in trust. The beneficial interest in the trust property is in the beneficiary, who is usually the trustor (that is the person who created the trust). Generally only living persons can create a trust, but corporations may as well with living persons as the beneficiaries.

Late charge

An added charge a borrower is required to pay for failure to pay a regular loan installment when due. It is generally not treated as interest but as a service charge for the extra work and inconvenience of the creditor. Many times first time homebuyers will not realize that the first payment on their mortgage is due even though they haven’t been sent a payment coupon book by the new servicing lender.

Latent defects

These are hidden structural defects known to the seller but not to the buyer and not readily discoverable by inspection. The seller or listing agent broker who is aware of such defects such as termite damage, defective water heater, must disclose them to the prospective purchaser. Failure to do so is a tacit misrepresentation and grounds for the buyer to rescind the offer. Many times first time home buyers don’t want to spend the money for a home inspections but this is a mistake. All potential home buyers should have the prospective homes professionally inspected.


Maggie Mae

This is the trademark owned by the MGIC Mortgage Marketing Corporation. It is a Mortgage insurance company that offers an approved Buyers education class to all Florida Conventional Bond Down payment assistance Buyers. MGIC is a nonfederal secondary market for conventional mortgages.


The age at which a person is no longer a minor and thus able to move freely into contracts. In most states the age of majority is 18.


The person or borrower who executes a promissory note and thus becomes primary liable for payment to the payee (lender). The maker of a check is known as the drawer.

Manufactured housing

A type of factory built housing unit that is built to the specifications of the Federal Manufactured Home Construction and Safety standards on a permanent chassis and containing at least 320 square feet. This type of building is not accepted when using municipal down payment assistance loans.


This is a term that’s associated with adjustable rate mortgages. It is the amount that is added to the index rate of the interest rate. The margin covers the lenders profits and cost of doing business. There are no adjustable rate mortgages when using down payment assistance programs. Down payment assistance programs always use fixed rate interest rates.

Marketable title

Good or clear salable title reasonably free of risk of litigation over possible title defects. It is free from undisclosed encumbrances, discloses no serious defects will not expose the purchaser to the hazards of litigation and would be accepted by reasonably well informed persons. Marketable title does not mean perfect title. It just means its free from plausible or reasonable objections.


negative amortization

A financing arrangement where the monthly payments are less than the true amortized amount in which to pay off the loan or even pay the interest. Instead the portion of the interest that is not paid is added to the back end of the loan.

negotiable instrument

A written document that is transferable by endorsement or delivery so as to vest legal title in the transferee. Typical examples of these are promissory notes, checks, publicly traded stocks.


This is the quality of a negotiable instrument that allows the instrument or document to be traded as money does.

netting out

This is real estate slang that refers to the amount of money that the Seller wants to walk away with after they sell their property and have paid for all expenses including realtor commissions and any taxes and or liens.

nominal interest rate

This is the actual interest rate that the Borrower is paying interest on. It is not the APR rate which is a rate that includes APR items that are associate with a mortgage loan. These items are termed APR items and are generally paid by either the Seller or part of a grant as in some of the down payment assistance programs. The effective rate of interest is the nominal interest rate not the APR rate.

notice of assessment Term

A notice issued by the state or county to the owner of real property specifying the assessed valuation of the property. For example: Assume that the market value of the property is $170,000 of which $40,000 is allocated to the fee simple land and $130,000 towards the actual improvements or building(s).Per the local tax assessed value is 70% of the market value. Consequently, the assessed valuation for the improvements would be $91,000 and the land would be $28,000.



A cause of depreciation to a property. Functional Obsolescence (both curable and non-curable)is a loss of value due to a structural defect in the property, such as outmoded plumbing, no central HVAC system, inadequately designed layout of kitchen etc... External Obsolescence is due to the in the neighborhood or area but outside of the property itself such a cell towers being built, a landfill being constructed.

Occupancy permit or certificate of occupancy

This refers to the local governing building inspector confirming the home is ready for occupancy. This needs to be done on new homes as well as renovated homes by investors.

offer and acceptance

The two components of a valid contract. A written offer that shows intent to enter into a contract to purchase. The offer must be communicated to the Offeree. Upon acceptance of the notice by the offeree a valid contract is created.

off record title defect

A defect in title to real property that is not apparent to the examination of public records. A recorded document may not transfer title to the property if it was forged, was never delivered to the grantee, or was signed by an incompetent party.

open mortgage

A mortgage that may be repaid in full at any time over the life of the loan without a prepayment penalty. All down payment assistance loans have this quality.

opinion of title

An opinion by a person competent in examining titles, such as a title attorney, as to the status of the record title of a property. An opinion is not a guarantee of title. Examiners only assert that they are competent in examining titles and that they have used care and diligence in examining the abstract of title.


packaged mortgage

The mortgage loan that finances the purchase of a home also finances the purchase of personal items such as appliances. The mortgage instrument describes the real property and enumerates the personal items in the appraisal as part of the mortgaged property. As a matter of course this happens all the time when First Time Home Buyers are purchase their first home. However, the personal items are never listed separately in the mortgage.


The average or equal amount. In the world of mortgages, par means that the interest rate that neither favors the lender or the borrower.


The specific portion of a larger tract.

patio home

A land conserving small lot housing design in which part of the home is built close to or at the lot line. A patio is built on each side of each home.


The person to whom a debt instrument, such as a check or promissory note is made payable, the receiver of the funds.

percolation test

A hydraulic engineers test of soil to determine the ability of the ground to absorb and drain water, a perk test. This information helps to determine the suitability of a site for certain kinds of development and for the installation of septic tanks, or injection wells for sewage treatment plants.



The process a Lender uses to determine a prospective borrowers credit and payment capacity before approving a loan.

qualified acceptance

An acceptance in law of a contract where there is a counter offer to the preceding offer or a number of conditions that the original offer must agree to before the offer can be accepted.

quiet enjoyment

The right of an owner or lessee legally in possession of property to uninterrupted use of the property without interference from the former owner, lessor or any third party.

quiet title action

A court action intended to establish or settle the title to a particular property, especially where there is a cloud on title. All parties with a possible claim or interest in the property must be joined in the action.

quitclaim deed

A deed of conveyance that operates in effect, as a release of interest the grantor has in the property; sometimes called the release deed. The quitclaim deed has contains similar languauge to a deed with the important exception that rather than using the words grant and release, it contains language such as remise, and quitclaim. Grantors do not warrant title or possession. Grantors only pass whatever interest they may have. In effect, a grantor forever quits whatever claim they have to the deed.


The minimum legal number of people required to be present before a specified meeting can officially take place or authorized business can be transacted. An HOA meeting may be required to have a quorum.



A colorless, odorless gas naturally occurs in ground, rock and sediment in every state in the union. It is carcinogenic and implicated in lung cancer deaths. In sufficient quantities it may be harmful. There are tests that homebuyers can have done to the property to determine if the level of radon is hazardous to ones health.


Real Estate Owned. A term used by lenders to describe real property involuntarily acquired by them through foreclosure. Lenders often use Brokers to market their REO properties.


Real Estate Settlement Procedures Act. A federal law enacted in 1974 that ensures that the buyer and seller in a residential real estate transaction receive information of all settlement costs when the purchase of a one to four unit property is financed by a federally related mortgage loan.

reciprocal easement

These are easements that found in planned urban developments or PUD's in which easements and restrictions are found in the restrictive covenants of the subdivision.


The act of entering into the book of public records the written instruments affecting the title of real property, such as deeds, mortgages, contracts for sale, options and assignments.

real property

The earths surface, the air above and the ground below as well as all the appurtenances or improvements to the land, structures, fixtures, buildings, fences and improvements erected upon or affixed to the same. It does not include growing crops. The term real property includes the interests, benefits and rights inherent in the ownership of real estate. That which is not real estate is personal property.



The payment of a debt such as a judgment. When people first become homebuyers many times they don't realize they have collections or judgments that must be satisfied before the can obtain a mortgage.

satisfaction of mortgage

A certificate that is issued by the mortgagee when a mortgage is paid in full. This document is called the release of mortgage or discharge of mortgage.

seasoned mortgage

This term refers to a loan that was obtained and has been paid as agreed for a period of at least 12 months and if an investor wanted to purchase the mortgage, so it would be at minimal risk.

secondary mortgage market

A market for the purchase and sale of existing mortgages. The system is generally designed to provide greater liquidity for selling mortgages to ordinary people. In the case of down payment assistance loans, US Bank is a large investor of first time home buyer loans.

secondary financing

A junior mortgage placed on the property to help finance the purchase price, such as a down payment assistance second mortgage or a second mortgage that would provide a smaller portion of the financing for a primary home, less commonly used for investment or second homes.

second mortgage

A mortgage or a trust deed that is junior or subordinate to the first mortgage, typically a loan imposed on top of the first mortgage and taken out when the borrower needs more money, either to close the purchase transaction or later in the form of a Home Equity Line of Credit, either fixed payments or revolving debt.


tax and lien search

A title search issued to cover property registered in the Torrens system. Because the Torrens certificate of title does not reflect certain encumbrances such as real property taxes, city and county assessments, and federal tax liens or bankruptcies, the tax and lien search is used to provide this information.

tax certificate

The document issued to a person as a receipt for paying delinquent taxes on a piece of property owned by another person or entity. This entitles the person to receive a deed on the property if the property is not redeemed within a certain period of time.

tax credit

a dollar for dollar offset against taxes due. Sometimes the IRS uses tax credits as incentives to develop low income housing, historic properties, housing for the elderly, or to encourage businesses to make alterations in compliance to the ADA accessibility rules.

tax lien

A statutory lien imposed against real property for non-payment of taxes that remains on the property until the taxes are paid even if the property is conveyed to another person or entity. A local tax lien for unpaid real property taxes general takes priority over state liens. However non-payment or delinquent state tax liens can cause the property to be sold at auction. A federal tax lien results from a failure to pay IRS income, estate or revenue or property taxes. A federal tax lien priority depends on the number of liens that have previously been filed.

Tax Relief Act of 1997

Tax rules that provided tax relief for persons selling their primary residence, investment homes, farms and businesses. The act changed the capitol gains taxes when selling a primary residence. If the owners live in the house for 2 of the last 5 years there is no gains tax for single people up to $250,000 and for couples up to $500,000.

tax search

A specific part of a title search that determines whether there are any unpaid taxes real property tax liens or special assessments that may be a tax lien against the property.


underwater loan

A term indicating a higher loan balance than what can be realized by the sale of the property. This may occur because of the security of the loan has depreciated, as in the property has suffered some sort of obsolescence, the economy has taken a major downturn, or the property has not been properly maintained.

undisclosed agency

A situation where a Listing Agent deals with a third person without notifying that person of the agency that already exists between the seller and the listing agent. Even is the agent has been instructed by the seller not to reveal the name of the seller, the listing agent must indicate agency status. Agents who sign their own name to a contract become fully liable for any breach of contract or failure to perform on the contract. Typically in real estate transactions, there is a buyers agent and a sellers agent. This prevents violations of dual agency.

unenforceable contract

A contract that was valid when made but either cannot be proved or will not be enforced by the court. A contract may not be enforceable because it is not in writing, as may be required under the statutes of frauds or because the statute of limitations has elapsed.


An appraisal term used in tax assessment practice to describe assessed values that have the same relationship to market value and thus imply the equalization of the tax burden. Properties in an appraisal must be uniform in structure and size in similar areas.

unmarketable title

A title to a property that contains substantial defects such as undisclosed encroachments, building code violations, easements or outstanding dower. A title acquired by adverse possession is usually not marketable until a quiet title suit is brought.

useful life

An appraisal term that notes the period of time that the building or structure has is expected to remain economically feasible to the owner. Because the annual amount of tax depreciation results from an apportionment of the investment in the improvement or building over its useful life, it has traditionally been important to determine its proper useful life; the shorter the life the more the annual deductions.



legally sufficient or effective, such as a valid contract: a contract that in all respects must comply with the provisions of contract law.

valuable consideration

The granting of some beneficial right, interest, profit or the suffering of some legal detriment or default by one party in return for the performance of another.

variable interest rate

A modern and unusual approach to finance buildings and some residences. The Lender is permitted to alter the interest rate but not the payment with a certain amount of advance notice. The additional money would be added to the back end of the loan. This is different from an adjustable rate mortgage in that the adjustable rate mortgage has a set amortization schedule. Down payment assistance loans do not allow for such creative financing.


Permission obtained from various governmental zoning agencies to build a structure or conduct a use that is expressly prohibited by current zoning laws.


The purchaser of the real estate. The buyer under contract for deed.


The seller of the real property. The seller under contract for deed. In some cases, the vendor may not be the owner, but might be the holder of an option.



To give up a right or surrender voluntarily.


The final inspection of a property just before closing. This assures the buyer that the property has been vacated, and any required repairs have been satisfactorily completed and otherwise the property is in essentially the same condition as when the offer to purchase was engaged.


A promise that certain stated facts as in a Title are true. A guaranty by the seller covering the title as well as the condition of the property. In contract law a warranty is basically a written or oral undertaking or stipulation that a certain fact in relation to the subject matter of the contract is or will be as stated or promised to be.

warranty deed

A deed in which the grantor fully warrants good clean title to the premises. This is also called a general warranty deed. A warranty deed only warrants the title not the structure of the property. This is the typically warranty deed between occupied seller and buyer. An REO warranty is usually a special warranty deed which is the least coving of all the warranty deeds. The general warranty deed is the strongest deed you can possess.

without recourse

A form of qualified endorsement relieving the borrower of personal liability. In a promissory note secured by a mortgage on real property, a without recourse note means that the mortgagee can satisfy only the claim against the property. That means that the defaulting mortgagor cannot be sued by the mortgagor for a deficiency judgment.

writ of execution

A court order directing an officer of the court to levy and sell the property of the defendant to satisfy the judgment. The officer may be required to give prior notice of the sale and first attempt to sell enough personal property to satisfy the judgment before imposing a levy.



yield spread premium

This is the upfront loan charge expressing the difference between the market interest rate and the generally higher interest rate charged to the buyer. This YSP can be used a s lender credit for the buyers benefit and can be applied to the buyers closing cost. The higher the rate the more YSP or lender credit can be given by the lender. Down payment Assistance mortgage loans usually do not have this option as the rates are set by the sponsoring entity and the there is no YSP available for a lender credit.


zero lot line

A term that usually refers to villas. It describes the position of the structure in relation to the distance of one of the boundary lines of the property. One side of the structure usually is on one of the boundary lines, normally a side.

zoning estoppel

This refers to a rule that bars the government from enforcing a new down zoning ordinance against a landowner who had accrued substantial costs in reliance of the governments assurances that the landowner had met all the zoning requirements before the new down zoning requirements took place.