Glossary of Terms

Following are mortgage and real estate related terms and definitions you may find helpful.

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Balance sheet: A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon Mortgage: A mortgage with monthly payments based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). The mortgage contains an option to "reset" the interest rate to the current market rate and to extend the due date if certain conditions are met.

Bankrupt: A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

Bankruptcy: Legally declared unable to pay your debts. Bankruptcy can severely impact your credit and your ability to borrow money.

Before-tax income: Income before taxes are deducted.

Beneficiary: The person designated to receive the income from a trust, estate, or a deed of trust.

Bill of sale: A written document that transfers title to personal property.

Binder or "Offer to Purchase": A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Blanket insurance policy: A single policy that covers more than one piece of property (or more than one person).

Bond: An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Borrower : One who receives funds with the expressed or implied intention of repaying the loan in full.

Bridge loan: A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.

Broker: An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Building code: Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Building Line or Setback: Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Buy down : Money advanced by an individual (seller, builder, etc.) to reduce monthly payments for a home mortgage either during the entire term or for an initial period of years.

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