Real Estate Glossary

Acceleration Clause

A clause in a mortgage that allows the lender to demand full repayment of the outstanding loan balance under certain conditions — most commonly if the borrower defaults or transfers title to another person without notifying the lender.

Adjustable-Rate Mortgage (ARM)

A mortgage in which the interest rate changes periodically according to fluctuations in a financial index. All ARMs are tied to specific indexes and typically offer a lower initial rate than fixed-rate mortgages.

Adjustment Date

The date on which the interest rate changes on an adjustable-rate mortgage.

Amortization

The gradual repayment of a loan through scheduled payments that cover both interest and principal. Early in the loan, most of each payment covers interest; over time, more goes toward principal.

Amortization Schedule

A table showing how much of each loan payment applies toward principal versus interest over the life of the loan, along with the declining remaining balance.

Annual Percentage Rate (APR)

A standardized measure of the true annual cost of borrowing, expressed as a percentage. The APR is always higher than the stated interest rate because it accounts for fees and other costs of obtaining the loan.

Application

The form used to apply for a mortgage loan, containing information about the borrower's income, savings, assets, debts, and more.

Appraisal

A professional estimate of a home's current market value performed by a licensed appraiser. During a divorce, an appraisal is often used to determine the home's value so assets can be divided fairly.

Appraised Value

An opinion of a property's fair market value based on an appraiser's knowledge, experience, and analysis of comparable sales. Since appraisals are primarily based on comparable sales, the appraised value typically aligns with the purchase price.

Appraiser

A qualified individual who estimates the value of real property using education, training, and market experience. Some work directly for mortgage lenders; most are independent.

Appreciation

An increase in the value of a property over time due to market conditions, inflation, improvements, or other factors. The opposite of depreciation.

Assessment

The process of placing a value on property for the purpose of taxation by a public official.

Assessed Value

The value assigned to a property by the local taxing authority for property tax purposes. This number is often different from the home's market value or appraised value.

Assessor

A public official who establishes the value of a property for taxation purposes.

Asset

Items of value owned by an individual. Liquid assets — such as bank accounts, stocks, and mutual funds — can be quickly converted into cash. Other assets include real estate and personal property.

Assignment

The transfer of ownership of a mortgage from one company or individual to another.

Assumable Mortgage

A mortgage that can be taken over by the buyer when a home is sold. The buyer must typically qualify for the existing loan terms, and lender approval is generally required.

Assumption

The process by which a buyer takes over a seller's existing mortgage.

Balloon Mortgage

A mortgage that requires the remaining principal balance to be paid in full at a specific point in time — for example, at the end of year 10 on a loan structured with 30-year amortization.

Balloon Payment

The final lump-sum payment due at the end of a balloon mortgage term.

Bankruptcy

A federal legal process through which an individual can restructure or discharge certain debts. The most common type for individuals is Chapter 7, which relieves most unsecured debts. A bankruptcy typically affects mortgage eligibility for two years after discharge.

Bill of Sale

A written document that transfers title to personal property. Lenders may require a bill of sale when the proceeds from selling personal property are used as part of a down payment.

Biweekly Mortgage

A mortgage in which payments are made every two weeks instead of monthly. This results in 26 half-payments per year — the equivalent of 13 full monthly payments — which reduces the principal faster and shortens the loan term.

Bond Market

The daily market for buying and selling treasury bonds. Because fixed mortgage rates tend to move in tandem with 30-year treasury bond yields, lenders track this market closely.

Bridge Loan

A short-term loan used by buyers who have not yet sold their current property but need funds for a down payment on a new purchase. Bridge loans have become less common as second mortgage options have expanded.

Broker

In real estate, a licensed professional who operates independently or employs agents. In the mortgage industry, a broker originates loans and places them with other lenders rather than funding them directly.

Buydown

A financing arrangement — typically in a fixed-rate mortgage — where the interest rate is temporarily reduced for an initial period (usually one to three years) in exchange for an upfront lump-sum payment, often paid by the seller.

Buyout

When one spouse keeps the home and compensates the other for their share of the home's equity. A buyout may involve refinancing the mortgage or using other marital assets to offset the value.

Call Option

Similar to an acceleration clause — a provision that allows the lender to require full repayment of the loan balance under certain conditions.

Cap

A limit on how much an adjustable-rate mortgage's interest rate can increase or decrease — whether per adjustment period, per year, or over the life of the loan.

Capital Gains Tax

A tax that may apply when selling a property for more than its adjusted purchase price. Certain exemptions may apply for primary residences, but divorce can affect eligibility. Consult a tax professional for guidance specific to your situation.

Cash-Out Refinance

A refinance that allows a homeowner to borrow more than the current mortgage balance and receive the difference in cash. This may be used to fund a divorce buyout, though qualification depends on income, credit, and lending guidelines.

Certificate of Deposit (CD)

A time deposit held at a bank that pays a fixed interest rate over a specified term.

Certificate of Deposit Index

An index used to determine interest rate changes on certain adjustable-rate mortgages, based on the average rate banks pay on certificates of deposit.

Certificate of Eligibility

A document issued by the Department of Veterans Affairs certifying a veteran's eligibility for a VA loan.

Certificate of Reasonable Value (CRV)

Issued by the VA after an appraisal is completed on a property being purchased with a VA loan.

Chain of Title

A historical record of all transfers of ownership for a piece of property, tracing title from the original owner to the present.

Clear Title

A title that is free of liens, claims, or legal questions regarding ownership of the property.

Closing

The final step in a real estate transaction where documents are signed, funds are exchanged, and ownership officially transfers. In some states, closing is not complete until the documents record at the county recorder's office.

Closing Costs

The expenses associated with buying or selling a home, including title fees, lender fees, escrow fees, recording fees, and other transaction costs. Lenders are required to provide a Good Faith Estimate within three days of receiving a loan application.

Co-Borrower

An additional individual who is both obligated on the loan and listed on the property title.

Collateral

In a home loan, the property itself serves as collateral. If the borrower defaults, the lender has the right to foreclose on the property.

Collection

The process a lender initiates when a borrower falls behind on payments — including contact attempts and the preparation of documents that may eventually be used in a foreclosure proceeding.

Commission

A fee paid to real estate and other professionals involved in a transaction. REALTOR® commissions are typically the largest, followed by lender and title fees. Commissions are paid from the proceeds of the transaction.

Common Area Assessments

Also called HOA fees, these are charges paid by owners in a condominium or planned unit development (PUD) to maintain shared spaces and amenities.

Common Areas

Portions of a building, land, or amenities — such as pools, corridors, and parking areas — that are shared by all residents in a condominium or PUD.

Common Law

An unwritten body of law based on general custom, originating in England and still referenced in some U.S. states.

Community Property

In certain states, including Texas, property acquired during a marriage is generally considered jointly owned by both spouses. How marital property is divided during divorce depends on state law and the terms of any court order or settlement agreement.

Comparable Sales

Recent sales of similar properties in nearby areas used to help determine the market value of a property. Also referred to as 'comps.' The foundation of both appraisals and Comparative Market Analyses.

Comparative Market Analysis (CMA)

A report prepared by a REALTOR® that estimates a home's likely market value by comparing it to recently sold similar properties. A CMA is not the same as a formal appraisal.

Condominium

A type of real property ownership in which each owner holds title to an individual unit while sharing ownership of common areas and structures with all other unit owners.

Condominium Conversion

The process of converting an existing building — often a rental property — into individually owned condominium units.

Condominium Hotel

A condominium project that operates as a commercial hotel with short-term rentals, registration desks, and daily services — even though units are individually owned. Often found in resort areas.

Construction Loan

A short-term interim loan used to finance the cost of building a home. The lender makes periodic disbursements to the builder as construction progresses.

Contingency

A condition that must be satisfied before a real estate contract becomes legally binding. Common contingencies include financing approval, a satisfactory home inspection, and an acceptable appraisal.

Contract

An oral or written agreement between parties to do — or refrain from doing — a specific thing. In real estate, most contracts must be in writing to be enforceable.

Conventional Mortgage

A home loan that is not insured or guaranteed by a government agency. Contrast with FHA and VA loans, which are government-backed.

Convertible ARM

An adjustable-rate mortgage that includes an option for the borrower to convert to a fixed-rate mortgage within a specified time frame.

Cooperative (Co-op)

A type of ownership in which residents own shares in a corporation that owns the entire property, giving each resident the right to occupy a specific unit.

Cost of Funds Index (COFI)

An index used to set interest rates on certain adjustable-rate mortgages, based on the weighted average cost of savings and borrowings for financial institutions in the 11th Federal Home Loan Bank District.

Credit

An arrangement in which a borrower receives something of value — money, goods, or services — in exchange for a promise to repay the lender at a later date.

Credit History

A record of an individual's repayment of debts over time. Mortgage lenders review credit history as part of their underwriting criteria.

Credit Report

A report of an individual's credit history prepared by a credit bureau, used by lenders to evaluate a borrower's creditworthiness.

Credit Repository

An organization that gathers, records, and stores financial and public records information about individuals' payment histories — used in evaluating credit risk.

Creditor

A person or institution to whom money is owed.

Debt

An amount owed to another party.

Debt-to-Income Ratio (DTI)

A calculation lenders use to compare a borrower's total monthly debt payments to gross monthly income. This ratio plays a central role in qualifying for a mortgage or refinance, particularly after a divorce changes household income.

Decree of Divorce

The final court order that legally ends a marriage. When real estate is involved, the decree typically specifies whether the home will be sold, transferred to one spouse, or retained jointly.

Deed

The legal document that conveys ownership of real property from one party to another. Must be properly executed and recorded to be effective.

Deed-in-Lieu

Short for 'deed in lieu of foreclosure' — a process where the borrower transfers title to the lender voluntarily to avoid formal foreclosure. The lender may or may not stop foreclosure proceedings in exchange.

Deed Transfer

The legal process of changing ownership of a property. Even after a divorce decree, a separate deed transfer may be required to complete the change in title.

Default

Failure to meet the legal obligations of a mortgage — typically by missing payments. A loan is generally considered in default if a payment has not been made within 30 days of its due date.

Delinquency

Failure to make a mortgage payment within the required time frame. Delinquency typically begins at 30 days past due and can escalate toward default and foreclosure.

Deposit

A sum of money given in advance of a larger payment — in real estate, commonly called an earnest money deposit. It demonstrates the buyer's good faith and is applied toward closing costs or the purchase price at closing.

Depreciation

A decline in the value of a property — the opposite of appreciation. Also an accounting term reflecting the declining monetary value of an asset over time.

Discount Points

Upfront fees paid to a lender at closing in exchange for a lower interest rate on the loan. One point equals one percent of the loan amount. Common on FHA and VA loans.

Down Payment

The portion of a home's purchase price paid in cash by the buyer. The remainder is financed through a mortgage.

Due-On-Sale Provision

A mortgage clause that allows the lender to require full repayment of the loan if the property is sold or transferred.

Earnest Money

A deposit made by a buyer to demonstrate good faith and seriousness when making an offer on a home. The funds are typically applied toward closing costs or the purchase price if the transaction closes.

Easement

A legal right allowing a person or entity other than the owner to use a portion of a property for a specific purpose — such as a utility company accessing power lines.

Effective Age

An appraiser's estimate of a building's physical condition relative to its chronological age. A well-maintained older home may have an effective age younger than its actual age.

Eminent Domain

The right of a government to take private property for public use, provided it pays the owner fair market value. The legal basis for condemnation proceedings.

Encroachment

An improvement — such as a fence or structure — that extends onto an adjoining property without legal right.

Encumbrance

Any claim, lien, easement, or restriction that affects a property's title or limits the owner's full use of the property.

Equal Credit Opportunity Act (ECOA)

A federal law requiring lenders to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or income from public assistance.

Equity

The difference between a home's current market value and the amount still owed on the mortgage.

Escrow

A neutral third party — typically a title or escrow company — that holds funds and documents during a real estate transaction until all conditions have been met and the transaction can close.

Escrow Account

An account held by your mortgage lender that collects a portion of each monthly payment to cover property taxes and homeowner's insurance when they come due. Also called an impound account.

Escrow Analysis

An annual review conducted by the lender to ensure the correct amount is being collected in your escrow account to cover anticipated taxes and insurance.

Escrow Disbursements

Payments made from an escrow account to cover property taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Estate

The total of all real and personal property owned by an individual. In real estate, also refers to the ownership interest a person holds in property.

Eviction

The lawful process of removing a tenant or other occupant from a property.

Examination of Title

A review of public records or an abstract to determine the current ownership status and any liens, encumbrances, or defects affecting a property's title.

Exclusive Listing

A written contract giving a licensed real estate agent the sole right to market and sell a property for a specified period.

Executor

A person named in a will to administer a deceased person's estate. If no executor is named, the court appoints an administrator. The feminine form is 'Executrix.'

Fair Credit Reporting Act

A consumer protection law that regulates the disclosure of credit reports by credit bureaus and establishes the process for correcting errors on a person's credit record.

Fair Market Value

The price a knowledgeable and willing buyer would pay, and a willing seller would accept, under normal market conditions — with neither party under compulsion to act.

Fannie Mae (FNMA)

The Federal National Mortgage Association — a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds, purchasing loans from lenders to replenish their capital for new lending.

Federal Housing Administration (FHA)

An agency within HUD that insures residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money directly.

Fee Simple

The most complete form of property ownership — unconditional, unlimited, and inheritable. The owner has full rights to use, sell, lease, or transfer the property.

Fee Simple Estate

An unconditional, unlimited estate of inheritance representing the greatest and most extensive interest in land. In a condominium, the unit owner holds fee simple to the air space within the unit and shared ownership in common areas.

FHA Mortgage

A mortgage insured by the Federal Housing Administration. Also called a government loan, FHA mortgages typically require lower down payments and have more flexible qualification requirements.

Firm Commitment

A lender's formal agreement to make a loan to a specific borrower on a specific property.

First Mortgage

The mortgage that holds the senior lien position against a property — typically the first recorded. It has priority over any second mortgages or other liens in the event of default.

Fixed-Rate Mortgage

A mortgage in which the interest rate remains unchanged for the entire term of the loan, providing predictable monthly payments.

Fixture

Personal property that has been permanently attached to real property and is therefore legally considered part of the real estate — such as built-in appliances, ceiling fans, or light fixtures.

Flood Insurance

Insurance that covers physical damage from flooding. Required by lenders for properties located in federally designated flood zones.

Foreclosure

The legal process by which a lender takes possession of a mortgaged property when the borrower defaults. This typically involves a forced sale, with proceeds applied to the outstanding mortgage debt.

401(k) / 403(b)

Employer-sponsored retirement savings plans that allow pre-tax contributions. 401(k) plans are offered by private employers; 403(b) plans are for employees of non-profit organizations.

401(k) / 403(b) Loan

A loan against funds accumulated in a 401(k) or 403(b) plan. These loans are generally an acceptable source of down payment funds for most mortgage types.

Government Loan

A mortgage insured by the FHA or guaranteed by the VA or the Rural Housing Service (RHS). These differ from conventional loans in their qualification requirements and insurance structures.

Government National Mortgage Association (Ginnie Mae)

A government-owned corporation within HUD that provides funds to lenders for making government-backed loans (FHA and VA). Unlike Fannie Mae and Freddie Mac, Ginnie Mae is a fully government-owned entity.

Grantee

The person to whom an interest in real property is being transferred or conveyed.

Grantor

The person who is conveying or transferring an interest in real property to another.

Hazard Insurance

Insurance coverage that protects a property owner against physical damage from fire, wind, vandalism, and other covered hazards. Typically required by lenders and often bundled within a homeowner's insurance policy.

Home Equity

The portion of the home's value that belongs to the owner after subtracting any outstanding mortgage balances. Equity increases as the mortgage is paid down or the home appreciates in value.

Home Equity Conversion Mortgage (HECM)

Commonly called a reverse mortgage, this loan allows older homeowners to convert their home equity into cash — typically as monthly payments. Unlike traditional loans, repayment is not required until the borrower no longer occupies the property.

Home Equity Line of Credit (HELOC)

A revolving credit line secured by the equity in a home, typically in a second lien position, allowing the borrower to draw funds up to a set limit as needed.

Homeowners' Association (HOA)

A nonprofit organization that manages the common areas and enforces the rules of a planned unit development or condominium project. Membership and fee payment are typically mandatory for all unit owners.

Homeowner's Insurance

An insurance policy combining personal liability coverage and hazard insurance for a home and its contents. Required by virtually all mortgage lenders.

Homeowner's Warranty

Insurance purchased to cover repair or replacement of certain home systems and appliances — such as HVAC or plumbing — for a set coverage period. Often negotiated as part of a purchase transaction.

Homestead Exemption

A property tax benefit available in many states for qualifying primary residences that reduces the assessed value used to calculate taxes. Eligibility and amounts vary by state and county.

HUD Median Income

The median family income for a particular county or metropolitan statistical area (MSA) as estimated by the Department of Housing and Urban Development. Used to determine eligibility for certain assistance programs.

HUD-1 Settlement Statement

A document providing an itemized listing of all funds paid at closing — including commissions, lender fees, points, and escrow amounts. It defines the seller's net proceeds and the buyer's total payment at closing.

Inspection

A professional evaluation of a home's condition that identifies potential maintenance or repair issues. A satisfactory home inspection is commonly included as a contingency in purchase offers.

Joint Tenancy

A form of property ownership in which two or more people own the property equally, with the right of survivorship — meaning if one owner dies, the surviving owner(s) automatically inherit the deceased's share. Should be reviewed carefully during divorce proceedings.

Judgment

A court decision. Judgments requiring debt repayment may result in a lien being placed against the debtor's real property as collateral.

Judicial Foreclosure

A type of foreclosure conducted through the court system as a civil lawsuit. Some states use judicial foreclosure; others use non-judicial (trustee's sale) processes.

Jumbo Loan

A loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. Also called a non-conforming loan. Jumbo loans typically carry slightly higher rates and stricter qualification requirements.

Late Charge

A penalty assessed when a mortgage payment is made after the grace period, typically 15 days from the due date on a first mortgage.

Lease

A written agreement between a property owner and a tenant specifying the terms, conditions, and duration of the tenancy, including rent amount and payment schedule.

Leasehold Estate

A form of title in which the occupant holds a long-term recorded lease on a property rather than owning it outright.

Lease Option

A financing and occupancy arrangement allowing a renter to lease a home with an option to purchase it at a predetermined price. A portion of each rent payment may be credited toward the eventual down payment.

Legal Description

A property description recognized by law that is specific enough to identify and locate the property without oral testimony — typically a metes-and-bounds description, lot number, or government survey reference.

Lender

An institution or individual that provides funds for a mortgage. Loan officers are often informally referred to as lenders.

Liabilities

A person's financial obligations — including long-term debt, short-term debt, and any other amounts owed to others.

Liability Insurance

Insurance that protects a property owner against claims that their negligence caused bodily injury or property damage to another person. Typically included in a homeowner's insurance policy.

Lien

A legal claim against a property that must be paid off when the property is sold. Mortgages, tax debts, and court judgments can all create liens. Liens typically must be resolved before a clean title can be conveyed.

Life Cap

For an adjustable-rate mortgage, the maximum amount the interest rate can increase or decrease over the entire life of the loan.

Line of Credit

An agreement by a bank or financial institution to extend credit up to a specified maximum for a set period, allowing the borrower to draw funds as needed.

Liquid Asset

Cash, or an asset that can be quickly and easily converted into cash — such as savings accounts, money market funds, or publicly traded stocks.

Listing Agreement

A contract between a homeowner and a licensed real estate broker authorizing the broker to market and sell the property on the owner's behalf.

Loan

A sum of money borrowed from a lender, to be repaid — typically with interest — according to an agreed-upon schedule.

Loan Assumption

A process allowing a buyer to take over a seller's existing mortgage. Not all loans are assumable, and lender approval is generally required. Qualification standards typically apply.

Loan Officer

A representative of a lending institution who solicits and processes mortgage loan applications. Also referred to as a loan representative, account executive, or loan rep.

Loan Origination

The process by which a lender creates or acquires a new mortgage loan — from the initial application through funding.

Loan Servicing

The ongoing administration of a mortgage loan after funding — including collecting payments, managing escrow accounts, providing statements, and handling payoffs and assumptions.

Loan-to-Value (LTV)

The ratio of the loan amount to the appraised value or purchase price of the property — whichever is lower. Expressed as a percentage. A higher LTV typically results in higher interest rates or the requirement for mortgage insurance.

Lock-In

A lender's guarantee of a specific interest rate to a borrower for a defined period at a set cost, protecting the borrower from rate increases before closing.

Lock-In Period

The period of time during which a lender has committed to hold a guaranteed interest rate for a borrower.

Margin

On an adjustable-rate mortgage, the fixed amount added to the index to determine the interest rate at each adjustment. The margin remains constant over the life of the loan; only the index fluctuates.

Marital Property

Assets acquired during the marriage that may be subject to division in a divorce. State laws determine what qualifies as marital property and how it is divided.

Market Value

The price a property would likely sell for in the current real estate market under normal conditions.

Maturity

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable in full.

Merged Credit Report

A credit report that combines raw data from two or more of the major credit bureaus. Used by lenders for a more complete picture of a borrower's credit history.

Modification

A change to the terms of an existing mortgage agreed upon by the lender and borrower, without requiring a full refinance.

Mortgage

A legal document pledging real property as collateral for a loan. The borrower retains possession of the property but the lender has a security interest. Some states use a Deed of Trust rather than a mortgage.

Mortgage Banker

A lender that originates and funds mortgage loans using its own capital, then sells them on the secondary market to investors such as Fannie Mae, Freddie Mac, or Ginnie Mae.

Mortgage Broker

A company or individual that originates loans and then places them with a variety of lenders or investors, rather than funding the loans directly.

Mortgage Insurance (MI)

Insurance that protects the lender against losses from borrower default. Generally required when the loan-to-value ratio exceeds 80%. Premiums may be paid by the borrower or built into the loan's interest rate.

Mortgage Insurance Premium (MIP)

The amount paid by a borrower for mortgage insurance — either to a government agency such as the FHA or to a private mortgage insurance company.

Mortgage Life and Disability Insurance

A type of term life insurance in which the coverage amount decreases as the mortgage balance declines. In the event of the borrower's death, the policy pays off the remaining balance. Disability coverage makes mortgage payments during a qualifying disability.

Mortgage Release

Removing one person from responsibility for an existing mortgage. This typically requires a full refinance into the remaining borrower's name and lender approval. A divorce decree alone does not remove a person from mortgage liability.

Mortgagee

The lender in a mortgage agreement — the party to whom the property is pledged as collateral.

Mortgagor

The borrower in a mortgage agreement — the property owner who pledges the property as collateral.

Multi-Dwelling Units

Properties containing separate living units for more than one family — such as duplexes or fourplexes — that are secured by a single mortgage.

Negative Amortization

A situation in which the minimum required payment on an adjustable-rate mortgage is less than the interest accruing on the loan, causing the unpaid interest to be added to the principal — increasing the balance instead of reducing it.

Net Proceeds

The amount a seller receives after paying off the mortgage, real estate commissions, closing costs, prorated taxes, and any other expenses associated with the sale.

No Cash-Out Refinance

A refinance where the new loan amount covers only the existing mortgage balance and associated costs — with no cash returned to the borrower. Also called a rate-and-term refinance.

No-Cost Loan

A loan in which certain lender fees are waived. Because no fees are charged upfront, the trade-off is typically a higher interest rate over the life of the loan.

Note

A legal document obligating a borrower to repay a mortgage loan at a stated interest rate over a specified period.

Note Rate

The interest rate stated on the mortgage note — as opposed to the APR, which reflects the true cost of borrowing including fees.

Notice of Default

A formal written notice to a borrower that they have defaulted on their loan and that legal action — including foreclosure — may be taken.

Original Principal Balance

The total loan amount before any payments are made.

Origination Fee

A fee charged by the lender for processing and funding a loan. On government loans, this is typically one percent of the loan amount; conventional loan origination fees refer to the total points charged.

Owner Financing

A transaction in which the property seller provides all or part of the financing to the buyer, rather than the buyer obtaining a traditional bank mortgage.

Partial Payment

A payment that is less than the scheduled monthly mortgage payment. Lenders generally do not accept partial payments, though exceptions may be made in cases of documented hardship.

Payment Change Date

The date when a new monthly payment amount takes effect on an adjustable-rate or graduated-payment mortgage.

Periodic Payment Cap

For adjustable-rate mortgages with independently fluctuating rates and payments, a limit on how much the payment amount can change during any single adjustment period.

Periodic Rate Cap

For an adjustable-rate mortgage, the maximum amount the interest rate can change during any single adjustment period.

Personal Property

Any property that is not real property — such as furniture, vehicles, jewelry, and other movable assets.

PITI

An acronym for Principal, Interest, Taxes, and Insurance — the four components of a fully impounded monthly mortgage payment.

PITI Reserves

The cash a borrower must have on hand after making the down payment and paying closing costs, equal to a specified number of months of PITI payments.

Planned Unit Development (PUD)

A type of ownership where individuals own their units and the land beneath them, while common areas are jointly owned and maintained by a homeowners' association.

Point

One percent of the loan amount. Points may be paid to reduce the interest rate (discount points) or as part of the origination fee.

Power of Attorney

A legal document authorizing one person to act on behalf of another. Can be broad or limited to specific actions and time periods. Often used in real estate transactions when a party cannot be physically present at closing.

Pre-Approval

A lender's preliminary review of a borrower's financial information indicating the loan amount they may qualify for. More rigorous than pre-qualification, but not a final commitment.

Pre-Qualification

A loan officer's preliminary assessment of a borrower's ability to qualify for a home loan, based on income, debt, and savings information — without a full underwriting review.

Prepayment

Any amount paid toward the principal balance before the scheduled due date. Can reduce the loan balance faster and shorten the overall loan term.

Prepayment Penalty

A fee that may be charged to a borrower who pays off their loan before the scheduled maturity date. Not all loans carry prepayment penalties; review your loan terms carefully.

Prime Rate

The interest rate commercial banks charge their most creditworthy customers. Used as the index for some adjustable-rate products, including home equity lines of credit.

Principal

The original loan amount, or the portion of each mortgage payment that reduces the remaining loan balance.

Principal Balance

The outstanding amount of the original loan that has not yet been repaid, excluding accrued interest.

Private Mortgage Insurance (PMI)

Mortgage insurance provided by a private insurer to protect the lender if a borrower defaults. Typically required when the loan-to-value ratio exceeds 80%.

Promissory Note

A written, legally binding promise to repay a specified amount of money over a defined period at a stated interest rate.

Property Settlement Agreement

A legal agreement outlining how marital assets and debts — including real estate — will be divided during a divorce.

Public Auction

A publicly announced sale of property at a designated location, used to satisfy a defaulted mortgage debt. The highest bidder receives the property, with proceeds applied to the outstanding debt.

PUD (Planned Unit Development)

A subdivision or project that includes common property owned and maintained by a homeowners' association for the benefit of individual unit owners.

Purchase Agreement

A written contract signed by both buyer and seller establishing the terms and conditions under which a property will be sold.

Purchase Money Transaction

The acquisition of property through payment of money or its equivalent — as distinguished from an assumption of an existing loan or exchange.

Qualified Domestic Relations Order (QDRO)

A court order used to divide certain retirement accounts in a divorce. Retirement assets divided by QDRO are sometimes used to offset one spouse's share of home equity.

Qualifying Ratios

Calculations used to determine whether a borrower can qualify for a mortgage. The front ratio compares housing costs to income; the back ratio includes all monthly debt obligations.

Quitclaim Deed

A deed that transfers whatever ownership interest the grantor holds — without guaranteeing that the title is clear. Commonly used in divorce to transfer one spouse's interest, but should always be executed with legal guidance and in accordance with the divorce decree.

Rate Lock

A commitment from a lender guaranteeing a specific interest rate for a specific period and cost, protecting the borrower from rate increases while the loan is being processed.

Real Estate Agent

A licensed professional authorized to negotiate and facilitate the purchase and sale of real estate on behalf of clients.

Real Estate Settlement Procedures Act (RESPA)

A federal consumer protection law requiring lenders to provide borrowers with clear, advance disclosure of closing costs and prohibiting certain practices such as kickbacks.

Real Property

Land and anything permanently attached to it — including structures, buildings, and fixtures. Distinct from personal property, which is movable.

REALTOR®

A licensed real estate agent, broker, or associate who holds active membership in a local board affiliated with the National Association of REALTORS® (NAR).

Recorder

The public official responsible for maintaining records of transactions affecting real property. Also known as the Registrar of Deeds or County Clerk.

Recording

The filing of a legal document — such as a deed, mortgage, or lien — in the public records of the county where the property is located, making it part of the official record.

Refinance

Replacing an existing mortgage with a new loan. After a divorce, refinancing is often necessary when one spouse is keeping the home and removing the other from the mortgage and title.

Remaining Balance

The amount of principal that has not yet been repaid on a loan.

Remaining Term

The number of payments left until a mortgage is fully paid off — calculated as the original loan term minus payments already made.

Rent Loss Insurance

Insurance that protects a landlord against lost rental income if the property becomes uninhabitable due to fire, casualty, or other covered events.

Repayment Plan

An agreement between a borrower and lender to repay delinquent installments over time — often structured to bring the loan current without requiring full immediate payment.

Replacement Reserve Fund

A fund established by a condominium or cooperative association to cover future replacement of common property items with a shorter useful life — such as carpeting or appliances.

Revolving Debt

A credit arrangement — such as a credit card or line of credit — with a pre-approved borrowing limit that can be repeatedly used and repaid.

Right of First Refusal

A provision giving a specific party the first opportunity to purchase or lease a property before it is offered to others.

Right of Ingress or Egress

The legal right to enter or exit a designated property — often relevant to easements and access agreements.

Right of Survivorship

In joint tenancy, the automatic transfer of a deceased owner's interest to the surviving co-owner(s), bypassing probate.

Sale-Leaseback

A transaction in which a property owner sells the property and simultaneously leases it back from the buyer, allowing the seller to continue occupying the property while converting equity to cash.

Second Mortgage

A mortgage secured by a property that is subordinate to the first mortgage. In the event of foreclosure, the first mortgage lender is paid first.

Secondary Market

The market in which existing mortgages are bought and sold — typically as pools of loans purchased by entities like Fannie Mae and Freddie Mac from originating lenders.

Secured Loan

A loan backed by collateral — in a home loan, the property itself. If the borrower defaults, the lender can take the collateral.

Security

The property pledged as collateral for a mortgage loan.

Seller Carry-Back

An arrangement in which the seller provides financing to the buyer — often used in combination with an existing assumable mortgage when conventional financing is unavailable or disadvantageous.

Separate Property

Assets that generally belong to one spouse individually and may not be subject to division in a divorce — including property owned before the marriage or acquired through inheritance or personal gift. State laws govern classification.

Servicer

The organization that collects mortgage payments, manages escrow accounts, and handles day-to-day administration of a loan — often different from the original lender if the loan has been sold.

Servicing

The collection of mortgage payments and management of all related responsibilities by a loan servicer.

Settlement Agreement

The written agreement resolving all divorce issues — including property division, debts, custody, and support — before the divorce decree is finalized.

Subdivision

A housing development created by dividing a tract of land into individual lots for sale or lease.

Subordinate Financing

Any mortgage or lien with a lower priority than the first mortgage. In foreclosure, subordinate lenders are paid only after the first mortgage lender is satisfied.

Survey

A drawing or map showing a property's precise legal boundaries, the location of structures, easements, encroachments, and other physical features. Typically required by lenders and title companies.

Sweat Equity

A contribution to a property's construction or improvement in the form of labor rather than cash — recognized by some loan programs as a form of down payment.

Tenancy in Common

A form of co-ownership in which two or more individuals each hold separate, transferable ownership interests in a property — without right of survivorship. Each owner's interest can be passed through their estate.

Third-Party Origination

A process in which a lender uses another party — such as a mortgage broker — to originate, process, or underwrite loans the lender intends to fund or sell.

Title

Legal evidence of a person's right to own and possess real property.

Title Company

A company that examines property titles, issues title insurance, and facilitates the closing process in real estate transactions.

Title Insurance

Insurance protecting the lender and/or buyer against losses from title defects, unpaid liens, ownership disputes, or other issues not revealed by a title search.

Title Search

A review of public records to confirm the seller's legal right to transfer ownership and to identify any outstanding liens, easements, or other encumbrances.

Transfer of Ownership

Any means by which ownership of a property changes hands — including sale, assumption of a mortgage, exchange, or transfer through a land trust.

Transfer Tax

A state or local tax due when title to a property passes from one owner to another.

Treasury Index

An index based on U.S. Treasury bill and bond auction results, used to determine interest rate adjustments on certain adjustable-rate mortgages.

Trustee

A person or institution that holds or manages property for the benefit of another — as in a trust arrangement or, in some states, as part of a deed of trust used in place of a traditional mortgage.

Truth-in-Lending

A federal law requiring lenders to fully disclose — in writing — the terms and conditions of a mortgage, including the APR and all applicable charges.

Two-Step Mortgage

An adjustable-rate mortgage with one interest rate for the first five or seven years and a different rate for the remainder of the term.

Two-to-Four-Family Property

A residential property with two to four separate dwelling units, secured by a single mortgage.

Underwriting

The lender's detailed review of a borrower's financial qualifications — including income, assets, debts, and credit — before approving a mortgage.

VA Mortgage

A mortgage guaranteed by the Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses. Generally requires no down payment.

Veterans Administration (VA)

A federal agency that guarantees residential mortgages made to eligible veterans, protecting lenders against loss and encouraging lending to those who have served.

Vested

Having an unconditional right to a benefit or asset — such as retirement funds — that cannot be forfeited. Vesting schedules determine when employer contributions to retirement accounts become fully owned by the employee.

Warranty Deed

A deed in which the seller guarantees clear title and the legal right to transfer the property, protecting the buyer against future ownership claims.

Important: This glossary is for educational purposes only and does not constitute legal, tax, or financial advice. Every transaction is unique; decisions should be made with guidance from qualified professionals.