Buying Guide Home New,

MORTGAGE NOTE
Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.

CAPS (INTEREST)
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index.

PROMISSORY NOTE
An unconditional written promise of one person to pay a certain sum of money to another, or order, or bearer, at a future specified time.

SALE AND LEASEBACK
A transaction in which, typically, an owner sells his improved property and as part of the same transaction signs a long-term lease and remains in possession.

FINANCIAL STATEMENT
A formal statement of the financial status and net worth of a person or company, setting forth and classifying assets and liabilities as of a specified date.

NOTE
A document signed by the borrower of a loan, stating the loan amount, the interest rate, the time and method of repayment and the obligation to repay. The note is the evidence of the debt. When secured by a mortgage, it is called a mortgage note.

ESCHEAT
The reversion of property to the state when a decedent dies intestate and there are no heirs capable of inheriting, or when the property is abandoned.

NOTICE OF DEFAULT
Written notice to a borrower that a default has occurred and that legal action may be taken.

EXCLUSIVE AGENCY
A written listing agreement giving one agent the right to sell property for a specified time, but reserving to the owner the right to sell the property himself without payment of any commission.

DEVELOPER
One who attempts to put land to its most profitable use by the construction of improvements.

FLOOR AREA RATIO
The ratio of floor area to land area expressed as a percent or decimal, which is determined by dividing the total floor area on a zoning lot by the lot area.

SUBORDINATION AGREEMENT
An agreement whereby a prior mortgagee agrees to subordinate or give up their priority position to an existing or anticipated future lien.

SETTLEMENT COST (HUD GUIDE)
HUD - published booklet that provides an overview of the lending process, and that is given to consumers after completing loan application.

GOOD FAITH ESTIMATE
Written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

APPRAISAL
A written estimate of a property's current market value completed by an impartial party with knowledge of real estate markets.

FORBEARANCE
The act by the lender of refraining from taking legal action on a mortgage loan that is delinquent.

OFFER AND ACCEPTANCE
The two components of a valid contract; a "meeting of the minds."

PRE-QUALIFICATION
The process of determining how much money a prospective homebuyer will be eligible to borrow prior to application for a loan. Information submitted during pre-qualification is subject to verification at application.

LOAN COMMITMENT
A commitment by a lender of the amount he will loan to a qualified borrower on a particular piece of real estate for a specified amount of time under specific terms.

INTEREST
Charge paid for borrowing money, calculated as a percentage of the remaining balance of the amount borrowed.

PROBATE
The formal judicial proceeding to prove or confirm the validity of a will. The will is presented to the probate court, and creditors and interested parties are notified to present their claims or to show cause why the provisions of the will should not be enforced by the court.

NORMAL WEAR AND TEAR
That physical deterioration which occurs in the normal course of the use for which a property is intended, without negligence, carelessness, accident or abuse of the premises (or equipment or chattels) by the occupant, members of household, or their invitees or guests.

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