Real Estate Terms and Definitions

Balloon Mortgage A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower. Amenity A feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, Woods, water) or man-made (like a swimming pool or garden). Mortgage insurance A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. Foreclosure A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Default The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms. Annual Percentage Rate (APR): Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan. Cap A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease. Good faith estimate An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application. Amortization Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years) Alternate Dispute Resolution (ADR) A range of different forums and processes which can be utilized to resolve a dispute. We focus on two forms of ADR in this guide which might be used to negotiate a settlement: administrative settlements and mediation.

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	Did You Know?
	Three theories exist regarding who has legal title to a mortgaged property Under the title theory title to the security interest rests with the mortgagee. Most states, however, follow the lien theory under which the legal title remains with the mortgagor unless there is foreclosure. Finally, the intermediate theory applies the lien theory until there is a default on the mortgage whereupon the title theory applies.