Morgage Glossary of Common Loan Terms   S Sales Agreement or Sales Contract See Agreement of Sale. Savings & Loan Depository institutions that specialize in originating, servicing and holding mortgage loans primarily on owner occupied residential property. Second Home Also known as a vacation home. This home is different from an investment property as it is not rented, but used occasionally by the owners. Second Mortgage A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages generally carry a higher rate than a first mortgage since they represent a higher risk for an investor. Secondary Mortgage Market The market where banks, savings & loans and mortgage bankers can sell mortgages to investors like Fannie Mae or Freddie Mac. Section 1031 The section of the IRS that deals with tax free exchanges of certain property. General rules for tax free exchanges are The properties must be : Exchanged Similar Used for business or as an investment Section 8 Housing Privately owned rental units participating in the low-income rental assistance program. Landlords receive subsidies on behalf of qualified low-income tenants, allowing the tenants to pay a limited proportion of their incomes toward the rent. Security Property that serves as collateral for a debt. Servicer An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market. Servicing The act of billing, collecting payment, filing reports, managing impound accounts and handling defaults on a mortgage. Settlement Cost (HUD guide) See Buying Your Home: Settlement Costs and Information (HUD guide) Settlement Statement See HUD 1 Shared Appreciation Mortgage A residential loan with a fixed, below-market interest rate in which the lender is entitled to a specified share of property appreciation during an agreed upon time period. Sheriff's Deed A deed given at the sheriff's sale in the foreclosure of a mortgage. Simple Interest Interest which is computed only on the principal balance. Single Family Home (SFR) A type of residential structure designed to include one dwelling. E.g., town home, detached unit. Example : Town houses, detached units. Soft Market A market where houses aren't selling much or quickly, so the sales price is likely to be significantly lower than the asking (listing) price. It's a good time for buyers to buy, but not the best time for prospective sellers to sell. Spec House A single family dwelling constructed by a builder in anticipation of finding a buyer. Special Assessment A special tax imposed on property, individual lots or all property in the neighborhood to pay for improvements - street lights, sidewalks, etc. Special Warranty Deed The grantor does not warrant against title defects arising from conditions that existed before he/she owned the property. The seller warrants that he/she has done nothing to impair title. Specific Performance A legal action in which the court requires a party to a contract to perform their obligations under the terms of the agreement. Stock Cooperative A common interest development in which a corporation holds title. Stock and exclusive right to occupancy are given to individual members (stock holders) of the stock cooperative. Standard Uniform Loan Application (Form 1003) A standard loan application widely used in the mortgage industry. Subdivision A tract of land divided into lots suitable for home building purposes. Subject To Clause A clause stating that the grantee takes title "subject to" an existing mortgage or trust deed. The original mortgagor remains responsible for any deficiency in the event of foreclosure. See Assumable Mortgage. Subordinate Financing Any mortgage or other lien that has a priority that is lower than that of the first mortgage. Subordination A loan in a lower priority, for example a second mortgage is subordinate to a first. Subsidized Second Mortgage An alternative financing option known as the Community Seconds® mortgage for low- and moderate-income households. An investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate). Part of the debt may be forgiven incrementally for each year the buyer remains in the home. Survey Map made by a licensed surveyor who measures land and charts its boundaries, improvements and relationship to the property surrounding it. Sweat Equity Value added to a property due to improvements made personally by the owner. T Takeout Financing A commitment to provide permanent financing upon completion of construction. The take out loan normally pays off the construction loan. Tax Lien Lien for nonpayment of taxes. Tax Sale Public sale of a property at an auction by a government authority as a result of non-payment of taxes. Teaser Rate A low initial interest rate on a mortgage. Tenancy at Sufferance Tenancy established when a person who had been a lawful tenant wrongfully remains in possession of property after expiration of a lease. Tenancy at Will A license to use or occupy land and buildings at the will of the owner. The tenant may decide to leave the property at any time or must leave at the landlords will. Tenancy by the Entirety A form of ownership by husband and wife whereby each owns the entire property. In event of the death of one, the survivor owns the property without probate. Tenancy for Years Created by a lease for a fixed term, such as 6 months, 2 years, etc. Tenancy in Common Ownership of a property by 2 or more persons, each of whom has an undivided interest, without the right of survivorship. Upon the death of one of the owners, the ownership share of the deceased is inherited by the beneficiary designated on the owner's will. Tenancy in Severalty Ownership of property by one person. Time Share A form of property ownership under which a property is held by a number of people, each with the right of possession for a specified time interval. Time sharing is used mostly for vacation properties. Time is of the Essence Legal phrase in a contract requiring all references to specific dates and times noted in the contract be interpreted exactly. Title Evidence that the owner of the property is in lawful possession. Evidence of ownership. Title Insurance An insurance policy which protects the insured against loss arising from defects in title. Title insurance policies are typically obtained for the buyer and the lender. Title Report A document indicating the current state of title. The report includes information on the current ownership, outstanding deeds of trust or mortgages, liens, easements, covenants, restrictions, and any defects. Title Search An examination of the public records to determine the ownership and encumbrances affecting the property. Total Expense Ratio Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts. Town House Residence which normally has 2 or more floors and is attached to other similar units. Town houses are commonly found in planned unit developments (PUDs) and condominiums. Tract A parcel of land, generally held for subdividing. Trade Equity Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased. Transfer Tax Tax paid to the city, county, state or other government entity upon sale of a property. Transfer of Ownership Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership. Treasury Bill Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of three months, six months and one year. Each Treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate). The rate determines the T-bill Index rate, which is used in many variable rate loan programs. Triple-Net Lease One in which the tenant pays all operating expense of the property. The landlord receives the net rent. Trust Account A separate bank account maintained by a broker or escrow company to handle all money collected for clients. A broker may not commingle these funds with his/her own funds. Trust Deed See Deed of Trust. Trustee A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. Truth in Lending See Regulation Z. Two-Step Mortgage A mortgage in which the borrower receives a fixed rate for a specified number of years (most often 5 or 7), and then receives a new interest rate based on the terms in the note. Two- to Four-Family Property A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed. U Underwriting The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc. Undivided Interest An ownership right to use and possess a property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property. Unimproved Property Land that has received no development. Unencumbered Property Real estate with free and clear title. Unrecorded Deed A document that transfers title from the grantor to the grantee without recording (i.e. providing public notice). Usury Charging a rate of interest greater than that permitted by law. Use our detailed glossary to familiarize yourself with many of the terms that will be used through out the process of obtaining a loan. The key to being a successful 'borrower' is by making the best decision based on the information available to you. With that in mind we offer this glossary to help you become a more informed 'borrower'.

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