Real Estate Terms and Definitions

Earnest money Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. Homeowner's insurance An insurance policy that .combines protection against damage to a dwelling and Is contents with protection against claims of negligence or inappropriate action that result in someone's injury or property damage. Foreclosure A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. 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. Escrow account A separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc. 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) Certificate of title A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims. HUD1 Statement Also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing. 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. Default The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms.

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	Did You Know?
	Covenant condition restriction is an agreement, usually included in the deed to a property This tool acts as restricting the manner in which the property can be used. For example, a deed for a residential property may contain a covenant that the owner won’t permit “noxious uses” on the property, or any of a lengthy list of particular offenses such as stables, factories and so forth.