By Owner Glossary

Adjustable Rate Mortgage - A mortgage loan with a variable interest rate that is adjusted at set intervals specified in the terms of the loan to reflect current market rates.

Agent - A representative, acting on behalf of another, for example, a real estate agent represents the interests of a client, either the buyer or seller.

Amortization - The repayment of a loan, structured into monthly payments of principal and interest, during the beginning stage of the payment process, most of the monthly amount is applied to interest and in the later stages, the principal receives the greater portion of the payment.

Appraisal Fee - The cost, usually paid by the buyer, of determining the estimated market value of a property.

Appraised Value - An estimate of the market value of a property that is to be held as security for a mortgage loan.

Asset - Any item that has monetary value, for example; real property, bank accounts, stocks.

Balance Sheet - A detailed statement showing net worth, financial liabilities and assets as of the date prepared.

Before-tax Income - The gross income, or total income before the deduction of taxes.

Bridge Loan - An interim loan meant to cover the period between the end of one mortgage, and the start of another, for example, to cover the gap created by the borrower if they purchase a home before receiving payment for the sale of their previous home.

Business Inventories and Sales - Statistics released monthly by the Bureau of Census that measure the sales and inventory of wholesalers, retailers, and manufacturers. The upward trend of these figures can signal a growing economy.

Buyer′s Market - A real estate market in which there are a greater number of properties available for sale than there are potential purchasers.

Capacity Utilization - the Capacity Utilization Rate is a measure of the industrial output, compared against industrial capacity. A rate nearing 90% is considered to be nearly full capacity and can cause inflation, while a rate close to 70% can be recessionary.

Capital Gains - The profit gained from the sale of an asset, or the difference between the selling price, and its original value or basis.

Closing Costs - The costs involved in the processing of a loan, due at the time that the transaction is completed and the loan is disbursed. Typically, in a mortgage, closing costs are for the title search, escrow fees, points, and appraisal.

Compound Interest - interest that is paid on the accrued interest, unpaid interest and principal.

Consumer Price Index (CPI) - A measure of the overall level of consumer prices, using key components as indicators including the prices of energy, housing, transportation, medical care, entertainment, and clothing. When this index rises, it can indicate a climate of inflation.

Credit Report - A comprehensive report compiled to show the debts and payment history of a person, used to assess the level of risk involved in extending a loan.

Debt-to-Income Ratio - A measure indicating the level of outstanding debt weighed against the level of income to determine how much, as a percentage, of the monthly income is obligated to debt payment.

Deed - A legal document used in the transfer of title of real property that contains a description of the property, and is signed and witnessed to be delivered to the buyer at closing.

Deposit - An amount of funds that is given to show good faith and bind an agreement of sale of a property.

Down Payment - A cash deposit given towards a purchase of an item, such as real property, or a vehicle, with the rest of the funds for the purchase provided by a loan.

Durable Goods Orders - A statistic that indicates the future manufacturing activity of the nation determined by the amount of orders placed for goods with life expectancy of at least 3 years. An increase in this statistic can indicate economy growth.

Effective Gross Income - regular annual income, usually wages and any other stable income source.

Effect of Economic Indicators on Fixed Income Investments - Economic indicators are statistics that show the general condition of the economy and the direction in which it is moving, reflecting rates of growth and inflation, which are used in the determination of interest rates. If these statistics indicate rising inflation, this usually causes higher interest rates and lower bond prices. If the indications are towards a sinking inflation rate, the opposite is the norm, with lower interest rates and higher bond prices.

Equity - The financial interest held by the owner in a property, determined by subtracting the amount of outstanding mortgage debt from the market value of the property, with the difference representing the amount of equity held.

Escrow - An account held in trust for the payment of property taxes and insurance, funded with a portion of the monthly payment of a mortgage.

Escrow Company - A neutral party that is given charge of the funds and documents pertaining to a real estate transfer until all conditions are met, and the transaction is finalized.

Factory Orders - Used as an economic indicator, this is a statistic that includes the new and unfilled orders, shipments, and inventories of the country′s factories. An increase in factory orders can indicate a growing economy, and possible inflation.

FED Is Easing - The Federal Reserve will lower interest rates to help stimulate the economy when indicators show that there is not enough economic growth.

FED Is Tightening - The Federal Reserve will attempt to curb an excess of growth in the money supply by raising the discount rate, or the federal funds rate.

FHA Loan - Mortgage loan guaranteed by the Federal Housing Administration for the purchase of homes of lower to mid range price, that is available to all qualified buyers.

Fixed-rate Mortgage - A mortgage loan that specifies in its terms an interest rate that will remain at the same level throughout the life of the loan.

Foreclosure - A legal repossession and sale of a property by a lender that has been held as security for a mortgage loan upon default on the part of the borrower.

FSBO - A property that is being sold directly by the owner rather than being listed with a real estate agent, with FSBO being the abbreviated form of ‘for sale by owner′.

Gross National Product (GNP) - The most wide ranging measure of the country′s production, this statistic is used as an economic indicator, and includes the market value of all goods and services newly produced nationwide.

Home Equity Loan - A loan secured by the equity in a property, which can be either fixed rate or adjustable.

Income Property - Property held as an investment, that provides income to the owner through rental or other means.

Industrial Production Index - This statistic is a measure of the level of monthly output in industries such as mining, manufacturing, and electric and gas utilities. When this production level sinks, a slowing of economic growth is indicated.

Interest Rate Cap - A limit set on the amount the interest rate can be raised during each adjustment period of an adjustable rate loan.

Leading Economic Indicators - An index that combines 11 economic statistics to predict economic activity for a period of six to nine month in advance.

Letter of Intent - A document that formally declares that a prospective buyer, developer or lessee is interested in a property.

Lien - A legal claim placed upon property, such as a home or vehicle, to insure payment of a debt.

Line of Credit - An agreement made between a lender and borrower for credit to be extended over a period of time and at a specified amount detailed in the agreement.

Liquid Asset - an asset that can readily and quickly be converted into cash, or is already held as cash.

Listing - A formal arrangement between a property owner and a real estate agent that gives the agent responsibility for the sale or rental of the property on behalf of the owner in return for a commission.

Mediation - A process that uses negotiation to settle a dispute among parties, conducted by a neutral third party trained as a mediator.

Merchandise Trade Balance - This statistic measures the import and export levels to determine the balance of trade in the nation. The difference between the two is referred to as the trade gap.

MLS - Short for multiple listing service, this is the cooperation between member agents in the sale of one another′s real estate listings.

Money Supply - The measure of the amount of money currently in circulation. The rise of this measure can indicate inflation.

Mortgage Banker - An individual or corporation that originates, services and sells mortgage loans.

Mortgage Broker - A person or corporation that originates and processes mortgage loans for a commission, but does not fund the loan, instead matching the borrower with a lender for the funding.

Net Worth - The total of all assets belonging to a person.

Non-Farm Payroll - A statistic that measures total number of civilians employed in all forms except agricultural employment.

Non Liquid Asset - Any asset held that cannot readily be converted into cash.

Owner Financing - An agreement in which the property seller finances part or all of the purchase price.

Personal Property - any property owned by a person other than real property.

Prime Rate - The interest rate that is charged by commercial banks to preferred customers for short term loans, often the basis of interest levels in the general economy.

Probate sale - the sale of a property due to the death of the owner with the proceeds divided among creditors or legal heirs of the deceased.

Producer Price Index (PPI) - This statistic is a monthly measure of the level of prices for all goods produced or imported to be sold in the nation′s primary markets. An upward trend in this statistic can be an early indication of inflation.

Property Tax - Municipal tax collected on the basis of property value.

Proration - A proportionate division of expenses, such as taxes, insurance, and interest between the buyer and seller of a property, according to time of use for each.

Retail Sales - A statistic that measures key areas of retail activity, such as building materials, automobiles, furniture, food, department store goods, gasoline, restaurants and drug store sales. When this statistic moves upward, economic growth is indicated.

Second Mortgage - A loan secured by home equity that is legally subordinate to the original mortgage.

Seller′s Market - A market in which there are a larger number of potential buyers than there are properties available for sale.

Sub-Agent - A real estate agent who represents the seller, but works with the buyer during a transaction.

Tax Lien - A claim held against a property by a municipality due to a default on property tax payments.

Title Insurance - An insurance policy guaranteeing that a property title is clear, having no defects or encumbrances.

Treasury Index - An index based on the prices or daily yield curves of Treasury bills and securities issued by the U.S. Treasury, used to determine the interest rate changes in some adjustable rate mortgages.

Unemployment Rate - This statistic is the measure of the number of civilians in the labor force that are currently unemployed. When this statistic rises, it can indicate a slowing of economic growth.

Variable Interest Rate - An interest rate that fluctuates in conjunction with a specified index, throughout the life of the loan or credit line.

Walk-Through - A final inspection done by the buyer to see that purchase conditions specified in the purchase agreement have been met.

Wraparound Mortgage - A refinancing option that creates a second mortgage which includes the balance due on an existing mortgage, as well as the amount of the new loan.