Real Estate Terms and Definitions

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) Appraisal A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate. Condominium A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas. Debt-to-income ratio A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income. Default The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms. Deed The document that transfers ownership of a property Bankruptcy A federal law Whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay. Deed-in-lieu To avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure. PMI Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price. 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.

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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.