Glossary of Terms
A - D, E - H, I - L, M - P, Q - T, U - Z
Implied Warranty of Habitability - a legal doctrine that requires landlords to offer and maintain livable premises for their tenants. If a landlord fails to provide habitable housing, tenants in most states may legally withhold rent or take other measures, including hiring someone to fix the problem or moving out.
Impound Account - see Escrow Account.
Improvements - additions to raw land such as buildings, streets, sewers, etc. that increase the value of the property.
Incidents of Ownership - any control over property. If you give away property but keep an incident of ownership--for example, you give away an apartment building but retain the right to receive rent--then legally, no gift has been made. This distinction can be important if you\’re making large gifts to reduce your eventual estate tax.
Indemnify - to protect another person against loss or damage.
Index - The published cost of money that serves as the minimum basis for determining the interest rate for an adjustable rate mortgage. Among the commonly used indices are the Prime Rate (Prime), the London Interbank Offering Rate (LIBOR), the Cost of Funds (COF) and the 1 year Treasury Bill (1 year T). The particular index is generally, though not always, selected based on how often an interest rate is supposed to adjust. Loans which allow monthly interest rate adjustments commonly use the Prime Rate. Loans that adjust semi-annually may use LIBOR. The 1 year Treasury and the Cost of Funds are often used for loans which adjust on an annual basis. There are other Treasury instruments which are used for 3 and 5 year adjustment periods. The interest rate of the loan is determined by adding a margin to the index. The size of the margin is typically a function of the index used and the credit worthiness of the borrower. Typical margins on a Prime Rate based loan would be 0.0 to 5.0 so that if the Prime Rate were 8.25% and the margin were 2.0 (typical for an "average" borrower), the interest rate would be 10.25% (8.25 + 2.0).
Initial Note Rate - With regard to an adjustable rate mortgage, the note rate upon origination. This rate may differ from the fully indexed note rate.
Installment Contract - see Contract for Deed
Installment Sale - when a seller accepts a mortgage for all or part of the sale, tax on the gain is paid as the mortgage principal is collected.
Insurance Binder - a document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.
Insured Mortgage - a mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.
Inter Vivos - during one’s life.
Interest Accrual Rate - the percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
Interest Rate - The percentage of the loan amount charged for borrowing money; i.e., the cost of the money expressed as a percentage.
Interest Rate Buydown Plan - a temporary buydown gives a borrower a reduced monthly payment during the first few years of a home loan and is typically paid for in an initial lump sum made by the seller, lender, or borrower. A permanent buydown is paid the same way but reduces the interest rate over the entire life of a home loan.
Interim Financing - a loan, including a construction loan, used when the property owner is unable or unwilliing to arrange permanent financing.
Intestate - having made no valid will.
Joint and Several Liability - a creditor can demand full repayment from any and all of those who have borrowed, each borrower is liable for the full debt, not just the prorated share.
Joint Tenancy - ownership of realty by two or more persons, each of whom has an undivided interest.
Joint Venture - an agreement between two or more persons who invest in a single business or property.
Judgment - a decree of a court stating that one individual is indebted to another and fixing the amount of the indebtedness.
Judgment Creditor - one who has received a court decree or judgment for money due from a debtor.
Judgment Lien - the claim upon the property of a debtor resulting from recording a judgment.
Judicial Foreclosure - having a defaulted debtor’s property sold where the court ratifies the price paid.
Jumbo Loan - A loan larger than the maximum allowed by conforming loans. The threshold amount has traditionally been adjusted more or less on an annual basis and has been in the low $200,000’s. Banks and mortgage brokers can quote the current threshold. They are typically available at interest rates slightly higher than those of conforming loans and typically require the same underwriting standards as conforming loans. (see definition of "conforming loan" above).
Junior Mortgage - a mortgage whose claim against the property will be satisfied only after prior mortgages have been repaid.
Kicker - A payment required by a mortgage in addition to normal principal and interest.
Lien - A claim on a property of another as security for money owed. Examples of types of liens would include judgments, mechanic’s liens, mortgages and unpaid taxes.
Land Contract - see Contract for Deed.
Land Lease - see Ground Lease.
Land Trust - A revocable, living trust primarily used to hold title to real estate for privacy and anonymity. Also known as an Illinois Land Trust or Nominee Trust. The land trustee is a nominal title holder, with the beneficiaries having the exclusive right to direct and control the actions of the trustee.
Landlocked - condition of a lot that has no access to public thoroughfare except through an adjacent lot.
Lease - a contract in which, for a rent payment, the one entitled to the possession of the real property (lessor) transfers those rights to another (lessee) for a specified period of time.
Lease Option - a lease combined with an option agreement that gives the lessee (tenant) the right to purchase the property under specified conditions.
Lease Purchase - a lease combined with a purchase agreement that obligates the lessee (tenant) to purchase the property under specified conditions.
Leasehold - the interest or estate on which a lessee (tenant) of real estate has a lease.
Leasehold Estate - A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
Legal Blemish - Blemishes on a piece of property, such as a zoning violation or fraudulent title claim.
Legal Description - legally acceptable identification of real estate by government survey, metes and bounds, or recorded plat.
Lessee - a person to whom property is rented under a lease.
Lessor - one who rents property to another under a lease.
Let - to rent a property to a tenant.
Letter of Intent - written expression of desire to enter into a contract without actually doing so.
Liabilities - a person\’s debts or financial obligations. Liabilities include long-term and short-term debt, as well as potential losses from legal claims.
Liability Insurance - insurance coverage that offers protection against claims alleging that a property owner\’s negligence or inappropriate action resulted in bodily injury or property damage to another party. See also homeowners insurance.
Lien Theory State - Texas is a Lien Theory State, where legal title of mortgaged property resides with the mortgagor (borrower), with the mortgage as a lien against the property. Contrast with title theory state.
Life Estate - an interest in property that terminates upon the death of a specified person.
Life Tenant - one who is allowed to use property for life or the lifetime of another designated person.
Lifetime Cap - The highest amount over the initial interest rate that an adjustable mortgage can be raised. Lifetime caps are typically in the range of 5.0% - 7.0%. If the initial interest rate is 5.25% and the lifetime cap is 6.0%, the highest interest rate a borrower could pay during the course of the loan would be 11.25% (5.25% + 6.0%).
Like-Kind Property - property having the same nature.
Limited Partnership - one in which there is at least one partner who is passive and limits liability to the amount invested and at least one partner whose liability extends beyond monetary investment.
Line Of Credit - an agreement by a lender to extend credit up to a certain amount for a certain time without the need for the borrower to file another application.
Liquidated Damages - an amount agreed upon in a contract that one party will pay the other in the event of a breach of contract.
Liquidity - ease of converting assets to cash.
Lis Pendens - Latin for "suit pending", recorded notice of the filing of a lawsuit, the outcome of which may affect title to real property.
Listing - written agreement between a principal and an agent authorizing the agent to perform services for the principal involving the principal’s property.
Loan Application (1003) - A loan application that is required for conforming loans. It has become the standard application for most residential loans, even non-conforming loans.
Loan Origination Fee - Most lenders charge borrowers an origination fee--or points--for processing a loan. A point is 1 percent of the total loan amount.
Loan Package - The organized group of documents that contains all of the information required to obtain an underwriting decision of loan approval or loan denial. Depending on the type of loan and the particular lender, a package may contain some or all of the following as well as other documents: loan application, statement of use of funds, statement of net worth, P & L statements, tax returns, pay stubs, statements from various types of banking and investment accounts, property appraisal, letters of explanation, credit report, verification of employment, verification of housing payments, purchase agreement, etc. (See definition of "underwriting" below.)
Loan-to-Value (LTV) - The ratio of the size of the loan to the value of the property. If the loan is $80,000 and the value of the property is $100,000 the LTV is 80% ($80,000 / $100,000).
Lot and Block - method of identifying legal description of property, see Legal Description.
Lot Line - a line bounding a lot as described in a property survey.
Low-Documentation Loan - A mortgage that requires only minimal verification of income and assets
Low-Down-Payment loan - A home loan that requires the borrower to make only a small down payment before obtaining the financing needed to purchase a house.
Glossary of Terms
A - D, E - H, I - L, M - P, Q - T, U - Z
