Real Estate Terminologies:

1. 100% Mortgage
It is a mortgage loan in which the borrower receives a loan amount equivalent to the total value of the property to be purchased. In this situation, the borrower does not need to make a down payment to secure the loan.

2. 2-1 Buydown
When a borrower gives up-front cash payments to decrease its monthly installments on a mortgage loan its called a buy down. A 2-1 Buydown is the kind of mortgage with a set of two initial provisional-start interest rates that increase in forward turn until a fixed interest rate is reached. The beginning interest rate reductions are either paid for by the borrower so as to help them become eligible for a mortgage, or could be paid for by a builder as incentive to buy a home. Example of 2-1 Buydown: It is assumed that the loan balance is $350,000 and the interest rate is fixed at 6.75% for 30. Following are the calculations of 2-1 buydown: 1. 1st year interest rate is 4.75% and payable $1,826 per month. 2. 2nd year interest rate is 5.75% and payable $2,043 per month. 3. 3rd year through year 30, interest rate is 6.75% and payable $2,270 per month. 4. 1st year savings according to the 2-1 buydown (as comparative to $2,270 per month) is $444 per month or $6,332 per year. 5. 2nd year savings according to the 2-1 buydown (as comparative to $2,270 per month) is $228 per month or $2,731 per year. Now add the annual savings so the cumulative total is: $6,332 + $2,731 = $8,063. So it costs $8,063.

3. 3-2-1 Buydown
A type of mortgage with a series of three initial temporary-start interest rates that increase in a stair-step fashion until a permanent interest rate is reached. Lenders will charge for the temporary interest rate reductions. A 3-2-1 buydown is sometimes used as a method to help a borrower with excess cash (but a relatively low income) to qualify for a mortgage. Or, a 3-2-1 buydown mortgage might be offered by a builder as incentive to purchase a home.

4. 2/28 Adjustable-rate Mortgage (ARM)

A type of adjustable-rate mortgage that has a two-year fixed interest rate period after which the interest rate on the mortgage begins to float based on an index plus a margin. The index plus the margin is known as the fully indexed interest rate. In many cases, 2/28-mortgage borrowers fail to recognize the risks associated with such a mortgage. They often don't recognize how much their monthly payments will increase when the interest rate starts to adjust at a higher rate. It is important to note that there is usually a high probability that the fully indexed interest rate will be substantially higher than the initial two-year fixed interest rate. Once this number adjusts, the borrower's payments are likely to increase as well.

5. 48-Hour Rule
A requirement that all pooled information regarding to-be-announced transactions on forward mortgage-backed securities (MBS) is communicated to the buyer from the seller before 3 p.m. EST 48 hours prior to the settlement date of the trade. Assume that the agreed upon settlement date between the buyer and the seller is July 14. The 48-hour rule requires that on July 12 by 3 p.m. EST the seller will have informed the buyer of the exact details of the MBS pooled that will be delivered on July 14.

6. Absolute Auction
It is a type of auction where the sale is awarded to the highest bidder. Absolute auctions do not have a reserve price which sets a minimum required bid for the item to be sold. One type of absolute auction relates to foreclosed properties, where the winning bid acquires the foreclosed property. This is opposed to a lender confirmation auction, where the lender must approve the bid in order to complete the transaction.

7. Absolute Title
It is a title to a property that is free of any encumbrances or deficiencies. Absolute title gives unequivocal right of ownership to the owner, and cannot be disputed or challenged by anyone else. This is opposed to titles with liens, attachments or judgments against them. It is also known as a perfect title.

8. Absorption Rate
It is the rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the total number of available homes by the average number of sales per month. The figure shows how many months it will take to exhaust the supply of homes on the market. A high absorption rate may indicate that the supply of available homes will shrink rapidly, increasing the odds that a homeowner will sell a piece of property in a shorter period of time.

9. Abstract of Title
It is a brief history of the titles for a piece of land. The abstract of title lists all of the legal actions that have been performed or used in conjunction with a piece of property. This is used to determine whether or not there is any kind of claim against a property.

10. ABX Index

A financial benchmark that measures the overall value of mortgages made to borrowers with subprime or weak credit. The ABX index uses credit default swap contracts to come up with an overall value and is made up of 20 bonds that is comprised of groups of subprime mortgages. Using this index, financial institutions are able to determine if the market for these securities are improving or worsening. It is also referred to as Asset-Backed Securities Index. A decline in the ABX index indicates that the market associates more risks with subprime mortgages.

11. Accelerated Amortization

Extra payments made towards paying down a mortgage principal. With accelerated amortization, the loan borrower is allowed to add additional payments to their mortgage bill in order to pay off a mortgage before the loan settlement date. The benefit of doing so is reduced overall interest payments.

For example, take a mortgage originated for $200,000 at 7% interest for 30 years. The monthly principal and interest payment is $1330.60. Increasing the payment by $100 per month will result in a loan payoff period of 24 years instead of the original 30 years, saving the borrower six years of interest. Paying a mortgage in an accelerated manner decreases the loan premium faster and diminishes the amount of additional interest the borrower is required to pay on the loan.

12. Acceleration Clause

It is 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. It is also known as acceleration covenant. It is a clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender. For example, a borrower who fails to make a payment or who breaks a covenant (agreement) may be required to pay the lender the balance on a loan. In this case, the borrower is considered in breach of contract.

13. Acquisition Fee

A fee charged by a lessor (landlord) to cover the expenses incurred in arranging a lease (a contract by which one party conveys land, property, services, etc., to another for a specified time, usually in return for a periodic). Acquisition fees may also refer to charges and commissions paid for the acquisition or purchase of property, such as closing costs, real estate commission, and development/construction fees. Acquisition fees may be paid up front by the buyer or lessee or added to the loan amount and paid over the term of the loan. The acquisition fee should also be preferably paid up front, rather than including it in the loan or lease amount, since this would result in significantly higher interest expenses over the term of the loan.

14. Acquittance
It is a document that shows that a debtor has been released from a debt obligation. An acquittance are often given as an indication from the lender to a debtor that the owed amount has been completely repaid and that the lender cannot request further repayment on that specific debt. Banks and other mortgage lenders often issue some form of an acquittance once a mortgagor makes a final payment toward his or her mortgage. This provides the borrower with an official statement that the loan has been repaid in full.

15. Add-On Factor

It is the number of usable square feet divided by the number of rentable square feet in a commercial real estate lease. The result of this calculation will be 1 if the two numbers are identical, but it is usually slightly lower than 1 because some square footage in a building will be partly or totally non-unusable. Non-usable square footage includes space shared with other tenants (such as lobbies, hallways, stairwells, elevators and restrooms) or occupied by structural components (such as support poles and interior walls). In a poorly designed building, the usable area may be considerably less than the rentable area.

16. Adjustable Rate Mortgage (ARM)

A type of mortgage in which the interest rate paid on the outstanding balance varies according to a specific benchmark. The initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month. The interest rate paid by the borrower will be based on a benchmark plus an additional spread, called an ARM margin. An adjustable rate mortgage is also known as a "variable-rate mortgage" or a "floating-rate mortgage".

17. Adjustment Date

Adjustment date also refers to the date on which the interest rate changes in an adjustable rate mortgage (ARM).

18. Adjustment Frequency

It is the frequency at which interest rate changes or resets on an adjustable-rate mortgage occur. Different adjustable-rate mortgages have different adjustment frequencies.

19. Adjustment Index

A modification made to a piece of numerical data, or a set of numerical data, by a product of some type of a mathematical formula. In consumer finance, an adjustment index is commonly used to adopt adjustable rate mortgages to changes in the economy by combining a number of market interest rates to form a benchmark.

20. Adjustment Interval

The amount of time between interest rate changes to an adjustable rate mortgage (ARM). Most ARMs have two adjustment intervals. The first interval is typically longer (usually 3, 5, 7 or 10 years) during which there is a fixed rate of interest and payment. This initial interval is followed by periodic adjustments to the interest rate (usually every 6 months or year) throughout the remainder of the loan.

21. Adverse Possession

A principle of real estate law that allows a person who possesses someone else's land for an extended period of time to claim legal title to that land. Land claimed under adverse possession does not require the claimant to pay for that land, but does require that the claimant prove that the land possession is actual, open and notorious, exclusive, hostile or adverse and continuous.

22. Affidavit of Title

A document provided by the seller of a piece of property that explicitly states the status of potential legal issues involving the property or the seller. The affidavit is a sworn statement of fact. For example, someone looking to sell a piece of real estate would have to provide an affidavit of title indicating that the property is truly owned by the seller, that the property is not being sold to another party, that there are no liens against the property and that the seller is not in bankruptcy proceedings.

23. After-Acquired Collateral

The requirement for after-acquired collateral is generally explained in the loan agreement. The need may arise if the lending institution requires more collateral than the borrower can put up, in order to have a greater degree of security for the loan. In this case, the borrower agrees to pledge all future property up to a certain amount, as additional collateral (security) for the loan.