Engel Volkers Buyer & Seller Guide Bozeman - Manual / Resource - Page 76
E n g E l & Vö l k E r s | B oz E M a n
Glossary of terms
These definitions are to acquaint the home-buyer with terms commonly used in real estate transactions.
the terms are intended to be general and brief and are not complete and wholly accurate when applied to all
possible uses of the term.
Adjustable Rate Mortgage (ARM) a mortgage instrument with an interest rate that is periodically adjusted to follow a preselected published index. the interest rate is adjusted at certain intervals during the loan period.
Adjustment Period the length of time between interest rate changes on an aRm. For example, in the case of an aRm loan
with a one-year adjustment period, the interest rate may change once each year.
Agency any relationship in which one party (agent) acts for or represents another (principal) under the authority of the
principal. agency involving real property should be in writing, such as listing, trust, powers of attorney, etc.
American Land Title Association (ALTA) a national association of title insurance companies, abstractors, and agents. the
association adopts standard policy forms.
Amortization Repayment of a mortgage debt with periodic payments of both principal and interest, calculated to retire the
obligation at the end of a fi xed period of time.
Annual Percentage Rate (APR) a term defined in section 106 of the Federal truth in Lending act (15 usc 1606), which
expresses on an annualized basis the charges imposed on the borrower to obtain a loan (defined in the act as “fi nance
charges”), including interest, discounts and other costs.
Appraisal an opinion or estimate of value. also refers to the process by which a value estimate is obtained.
Assignment the transfer of ownership, rights, or interests in property, as in a mortgage, lease, or deed of trust. mortgages
and other security instruments are regularly assigned from one investor to another and commitments by HUD/FHa to insure
mortgages may be assigned by one originating lender to another before insurance.
Beneficiary the person who is entitled to receive funds or property under the terms and provisions of a will, trust, insurance
policy or security instrument. in the case of a mortgage loan, the benefi ciary is the lender.
Broker or Agent one who is licensed by the state to carry on the business of dealing in real estate. a broker/agent is
employed on a fee or commission basis to bring together buyers and sellers, landlord and tenant, or parties to an exchange,
and assist in negotiating contracts between them.
Cap the limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the
mortgage.
Certificate of Reasonable Value (CRV) a document that establishes the maximum value and loan amount for a va
guaranteed loan.
Closing Costs the costs incurred to purchase real estate. these may include loan fees, title fees, appraisal fees, etc.
Closing Statement the financial disclosure statement that accounts for all of the funds received and expected at the closing,
including deposits for taxes, hazard insurance, and mortgage insurance.
Commission an agent’s compensation for negotiating a real estate or loan transaction, often expressed as a percentage of
the selling price.
Contingency Clause a provision in some aRms to a fixed rate loan, usually after the first adjustment period. the new fixed
rate is generally set at the prevailing interest rate for fixed rate mortgages. this conversion feature may cost extra.
Deed the document by which title to real property is transferred or conveyed from one party to another.
Deed of Trust type of security instrument in which the borrower conveys title to real property to a third party (trustee) to be
held in trust as security for the lender, with the provision that the trustee shall re-convey the title upon the payment of the
debt, and, conversely, will sell the land and pay the debt in the event of a default by the borrower.
Deposit a sum of money given to (1) bind a sale of real estate, or (2) assure payment or an advance of funds in the processing
of a loan. also called earnest money.
Discount Points a negotiable fee paid to the lender to secure financing for the buyer. Discount points are up front interest
charges to reduce the interest rate on the loan over the life, or a portion, of the loan’s term. one discount point equals one
percent of the loan amount.
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