Acknowledgement: A formal declaration made before an authorized official (usually a notary public) by the person who has executed (signed) a document, that such execution is his/her own act and deed. In most instances, documents must be acknowledged (notarized) before they can be accepted for recording.

Adjustable Rate Mortgage: A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).

Adjustment Period: The length of time between interest rate changes on an ARM.

Affidavit: A sworn statement in writing, made before an authorized official.

A.L.T.A.: Acronym for the American Land Title Association.

Amortization: Repayment of a loan in equal installments of principal and interest, rather than interest-only payments.

Annual Percentage Rate: The total finance charges (interest, loan fees, points) expressed as a percentage of the loan amount.

Assessments: Specific and special taxes (in addition to normal taxes) imposed on real property to pay for public improvements within a specific geographic area.

Assumption of Mortgage: A buyer's agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

Attorney-In-Fact: An agent authorized to act for another under Power of Attorney.

Baloon Payment: A lump sum principal payment due at the end of some mortgages or other long-term loans.

Beneficiary: As used in a trust deed, the Lender is designated as the Beneficiary, i.e. obtains the benefit of the security.

Cap: The limit on how much the interest rate can be adjusted over the life of the mortgage.

CC&Rs: Covenants, Conditions and Restictions. A document which controls the use, requirements, and restrictions of a property.

Certificate of Reasonable Value: A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.

Conventional Loan: A mortgage loan which is not insured or guaranteed by a governmental agency.

Closing Statement: The financial disclosure statement that accounts for all of the funds received and disbursed at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.

Condominium: A form of real estate ownership. The owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors, and ceilings) serve as its boundaries.

Contingency: A conditio nthat must be satisfied before a contract can be completed. For instance, a sales agreement may be contingent upon the buyer obtaining financing.

Conversion to Clause: A provision in some ARMs that enables you to change an ARM 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.

CRB: Certified Residential Broker. To be certified, a broker must be a member of the National Association of Realtors, have five years' experience as a licensed broker, and have completed five required Residential Division courses.

Deed: Written instrument by which the ownership of land is transferred from one person to another.

Deed of Trust: Written instrument by which title to land is transferred to a trustee as security for a debt or other obligation. Also called Trust Deed. Used in place of mortgages in many states.

Deposit Receipt: Used when accepting "Earnest Money" to bind an offer for property by a prospective purchaser; also includes terms of a contract.

Due-On-Sale Clause: An acceleration clause which requires full payment of a mortgage or deed of trust when the secured property changes ownership.

Earnest Money: The portion of the down payment delivered to the seller or escrow agent by the purchaser with written offer as evidence of good faith. It is deposited into escrow upon opening of escrow.

Easement: A right to use the property of another for a specified purpose.

Escrow: A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties' instructions and assuming responsibility for handling all of the paperwork and distribution of funds.

FHA: The Federal Housing Administration, an agency created by the National Housing Act of 1934 for the purpose of expanding and strengthening home ownership by making private mortgage financing possible on a long-term, low down payment basis. FHA includes a mortgage insurance program, with premiums paid by the homeowner, to protect lenders against loss on these higher-risk loans. Since 1965, FHA has been part of the newly created Department of Housing and Urban Development (HUD).

Federal National Mortgage Association: Popularly known as Fannie Mae (FNMA) A privately owned corporation created by Congress t osupport the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

Fee Simple: An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

Grant: A transfer of real property.

Grantee: The person to whom a grant is made.

Grantor: The person who makes a grant.

GRI: Graduate Realtors Institute. A professional designation granted to a member of the National Association of Realtors who has successfully completed three courses covering Law, Finance, and Principles of Real Estate.

Home Inspection Report: A qualified inspector's report on a property's overall condition. The report usually includes an evaluation of both the structral and mechanical systems.

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Index: A source of interest rates, used to determine changes in an ARM's interest rate over the term of the loan.

Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.

Lien: A legal hold or claim on property as security for a debt or charge.

Loan Commitment: A written promise to make a loan for a specified amount on specified items.

Loan-To-Value Ratio: The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

Margin: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Mortgage Banker: A cmopany or individual engaged in the business of originating mortgage loans with its own funds. Frequently those loans are sold to long-term investors, with the mortgage banker servicing the loans for the investor until they are paid in full.

Mortgage Life Insurance: A type of term life insurance often bought by borrowers. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the debt is automatically covered by insurance proceeds.

Negative Amortization: This occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments which aren't high enough to cover the interest.

Origination Fee: A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent for FHA and VA loans.

Personal Property: Movable property; all property which is not real property; e.g. furniture, car, clothing.

PITI: Principal, interest, taxes, and insurance.

Planned Unit Development: Also called PUD, a zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open common areas. Uses may be residential, commercial or industrial.

Point: An amount equal to 1 percent of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

Prepayment Penalty: A fee charged to a mortgagor who pays a loan before it is due. Not allowed for FHA or VA loans.

Private Mortgage Insurance: Also called PMI, this is insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.

Purchase Agreement: A written document in which the purchaser agrees to buy certain real estate and seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

Real Property: Land and buildings as opposed to personal property or chattels.

Realtor: A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors.

Recordation: Filing for record in the office of the county recorder.

Regulation Z: The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.

Tenancy in Common: A type of joint ownership of property by two or more persons with no right of survivorship.

Title: Evidence of a person's right or the extent of his interest in property.

Title Insurance Policy: A policy that protects the purchaser, mortgagee or other party against losses.

VA Loan: A loan that is partially guaranteed by the Veterans Administration and made by a private lender.

Veterans Administration: An independent agency of the federal government created by the Service Men's Readjustment Act of 1944 to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the Home Loan Guaranty Program designed to encourage mortgage lenders to offer long-term low down payment financing to eligible veterans by guaranteeing the lender against loss on these higher-risk loans.

Home Warranty Plan: Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems, and installed appliances.

Impound Account: Funds retained by a lender to cover such items as taxes and hazard insurance premiums.