The Reading-Berks Association of REALTORS® provides the following definitions of terms associated with the real estate industry as a service to you.

grantee
The person conveying an interest in real property.

grantor
The person conveying an interest in real property.

hazard insurance
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

home inspection
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.

homeowner’s insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a swelling and its contents.

homeowner’s warranty (HOW)
A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

HUD-1 statement
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the “closing statement” or “settlement sheet”.

joint tenancy
A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.

lease
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.

legal description
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

lien
A legal claim against a property that must be paid off when the property is sold.

loan
A sum of borrowed money (principal) that is generally repaid with interest.

loan origination
The process by which a mortgage lender brings into existence a mortgage secured by real property.

mortgage
A legal document that pledges a property to the lender as security for payment of a debt.

mortgage broker
An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.

mortgagee
The lender in a mortgage agreement.

mortgage insurance
A contract that insures the lender against loss caused by a mortgagor’s default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan.

note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

origination fee
A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.

owner financing
A property purchase transaction in which the property seller provides all or part of the financing.

personal property
Any property that is not real property.

PITI
See principal, interest, taxes and insurance (PITI) below.

pre-qualification
The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

prime rate
The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.

principal, interest, taxes, and insurance (PITI)
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

private Mortgage insurance

If your down payment on a home is less than 20 percent of the appraised value or sale price, you must obtain mortgage insurance.

Mortgage insurance sometimes is referred to as private mortgage insurance, or PMI, to distinguish it from FHA and VA insurance, which are run by government programs. The cost of mortgage insurance varies depending on the size of the down payment and the loan, but it typically amounts to about one-half of 1 percent of the loan.

PUD (Planned Unit Development)
A project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.

purchase and sale agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.