Adjustable - Rate Mortgage (ARM): A mortgage for which the interest rate and the payments change during the life of the loan.

Amortization: A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal.

Appreciation: An increase in the worth or value of a property due to economic or related causes, which may prove to be either temporary or permanent; opposite of depreciation

Capital Gains Tax: The taxable profit derived from the sale of a capital asset. The capital gain is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing costs, fixing up expenses, capital improvements, allowable depreciation, etc.

Closing statement: A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all credits made and all cash paid out in the transaction.

Cloud on title: Any document, claim, unreleased lien or encumbrance that may impair the title to real property or make the title doubtful; usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.

Contingency: A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.

Conventional Loan: A loan that is not insured or guaranteed by a government source.

Deficiency judgment: A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full.

Dower: The legal right or interest, recognized in some states, that a wife acquires in the property her husband held or acquired during their marriage. During the husband's lifetime the right is only a possibility of an interest; upon his death it can become an interest in land.

Dual agency: Representing both parties to a transaction. This is unethical unless both parties agree to it, and it is illegal in many states.

Earnest Money: An amount of money given as part of the property's purchase price to bind the agreement between buyer and seller.

Easement: A right to use land of another for a specific purpose, such as for a right-of-way or utilities.

Eminent domain: The right of a government or municipal quasi-public body to acquire property for public use through a court action called condemnation, in which the court decides that the use is a public use and determines the compensation to be paid to the owner.

Encumbrance: Anything which affects or limits the fee simple title to property, such as mortgages, easements or restrictions of any kind. liens are special encumbrances which make the property security for the payment of a debt or obligation, such as mortgages and taxes.

Encroachment: A building or some portion of it; a wall or fence for instance that extends beyond the land of the owner and illegally intrudes on some land of an adjoining owner or a street or alley.

Encumbrance: Anything; such as a mortgage, tax, or judgment lien, an easement, a restriction on the use of the land or an outstanding dower right; that may diminish the value of the property.

Equity: The interest or value which an owner has in real estate over and above the liens against it.

Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac): A quasi-governmental secondary market agency that purchases whole mortgage loans. Freddie Mac sells interest in pools of mortgage loans to obtain funds for mortgage loan purchases.

Federal Housing Administration (FHA): A government agency within the Department of Housing and Urban Development that administrators many programs involving housing loans made from private funds, including mortgage insurance for lenders and rent or interest assistance for low-income tenants and mortgagors.

Federal National Mortgage Association (Fannie Mae): A privately owned and managed corporation that purchases mortgage loans originated by other lenders. Fannie Mae issues stocks and securities to obtain funds for its purchases.

Fixed Rate Mortgage: A loan that fixes the interest rate at a prescribed rate for the duration of the loan.

Earnest Money: The deposit by a potential buyer to show he or she is serious about the property. If the sale is finalized, the money is applied to the down payment.

Escrow: The deposit of instruments and funds with instructions to a third neutral party bonded by law to carry out the provisions of an agreement or contract.

Evict: The physical removal of a person from a property.

Exchange: The trading of an equity in a piece of property for the equity in another.

Exclusive Right To Sell: A listing in which the owner may sell his property but with the payment of a commission.

Federal Housing Administration (F.H.A.): the federal government agency which administers F.H.A. insured loans.

Federal Tax Lien: An obligation to the United States government as a result of non-payment of taxes.

F.N.M.A.: Abbreviation for the Federal National Mortgage Association. It is an agency which buys big blocks of loans from banks, thus enabling the banks to loan more money. The F.N.M.A. gets its money by selling securities in the market to investors. The securities are guaranteed by the loans behind them.

Forced Sale: An involuntary sale of real property. The owner is forced, usually by law to sell a property for whatever it will bring.

Grantee: The buyer.

Grantor: The seller.

Homestead: A home upon which the owner or owners have recorded a declaration of homestead, which protects the home against judgments up to specified amounts.

Impound account: A compulsory bank account demanded of a borrower by the lender to ensure the payment of taxes and insurance of the property on which the loan was made.

Joint Tenancy: Joint ownership by two or more persons with right of survivorship; all joint tenants own equal interest and have equal rights in the property.

Junior Lien: A lien that does not have first priority makes property security for the payment of a debt or discharge of an obligation. Example: judgments, taxes, mortgages, deed of trust, etc.

Lis Pendens: Suit pending, usually recorded so as to give constructive notice of pending litigation.

Mechanic's Lien: Alien placed on property by laborers and material suppliers who have contributed to a work of improvement.

Mortgage Insurance Premium (MIP): The consideration paid by a mortgagor for mortgage insurance to FHA. It protects the lender from possible loss in the event of a default on a loan.

Note: A unilateral agreement containing a promise of the signer to give a named person or bearer a definite sum of money at a specified date or on demand. The note usually provides for interest, and it is often secured by a trust deed or a mortgage.

Notice of default: A notice filed to show that the borrower under a mortgage or deed of trust is in default (behind on the payments).

Option: A right given a person to buy or lease property within a stated period and given under certain specified terms. The person has the right to buy or sell, but is not required to do so.

Payment Cap: Limits the amount that a monthly payment on an ARM loan can increase at the time of adjustment.

Points: A charge made by a lender. One point equals one percent of the loan. Points are often used to buy down the interest.

Preliminary Title Report: A report from a title company of present condition of title made prior to the issuance of a title policy.

Principle: A person who is acting for himself in a transaction. Also, the full amount of a loan, note, or a debt, exclusive of interest.

Private Mortgage Insurance (PMI): The insurance coverage offered by a private company that protects a lender against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan-to-value ratios. The borrower pays the premiums.

Rate Cap: Interest rate cap on an ARM loan; it restricts the upward movement of the loan's interest rate at the time of adjustment.

Right of Survivorship: Right to acquire the interest of a deceased joint owner; distinguishing feature of a joint tenancy.

Subordination Clause: A clause in a trust deed or mortgage by which the lender relinquishes his priority to a subsequent trust deed, mortgage, or other lien. It benefits the borrower.

Tenancy in Common: Ownership by two or more persons who hold undivided interest, without right of survivorship; interests need not be equal.

Title: Evidence that an owner of land is in lawful possession; an instrument evidencing such ownership.

Title Insurance: Insurance written by a title company to protect property owners against loss if title is imperfect.

Trustee: One who holds property in trust for another to secure the performance of an obligation.

Trustor: One who deeds his property to a trustee to be held as security until he has performed his obligation to a lender under terms of a deed of trust.

Veterans Administration (VA): A government agency that helps veterans of the armed forces obtain housing.