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Seller's Form Descriptions & Rea Estate Term Definitions


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A deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition.

One-year adjustable

Mortgage whose annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.


Lender's guarantee that the mortgage rate quoted will be good for a specific number of days from day of application.


A floating index lenders use to calculate the rate on a one-year adjustable-rate mortgage. The most common indexes are the one-year treasury Constant Maturity Yield and the FHLB 11th District Cost of Funds.


The maximum amount the mortgage rate can change annually or over the life of the loan on a one-year adjustable.For example, if the caps are 2% annual and 6% life of loan, a mortgage whose first-year rate is 10% could rise to no more than12% the second year and 16% over the entire loan term.


The number of percentage points added to the index on a one-year adjustable. For example, if the index rate is 9%and the margin is 3%, then the fully-indexed rate is 12%.


A percentage of the loan amount, paid at closing.Each point is one-hundredth of the loan amount.

Indexed rate

The sum of the published index plus the margin. For example if the index were 9% and the margin 2.75%,the indexed rate would be 11.75%. Often, lenders charge less thanthe indexed rate the first year of an adjustable-rate mortgage.

Annual Percentage Rate (APR)

Interest rate reflecting the first-year rate including certain points and credit costs.


Adjustable-rate mortgage with rate that adjustsbased on a cost-of-funds index, often the 11th District Cost ofFunds.


Mortgage in which the rate is offset by paying more points up front.

7/23 and 5/25 Mortgages

Mortgages with a onetime rate adjustment after seven years and five years respectively.

3/1, 5/1, 7/1 and 10/1 ARMs

Adjustable-rate mortgagesin which rate is fixed for three-year, five-year, seven-year and10-year periods, respectively, but may adjust annually after that.


Loan in which little, if any, of your monthly payments go toward paying off the outstanding balance. Rather, one large, lump-sum payment is due at maturity.

Jumbo Mortgages

Mortgages that go over the $207,000 Fannie Mae and Freddie Mac limit.

Loan-to-Value Ratio

Proportion of a home's value upon which an institution will issue a loan.

Negative Amortization

When interest rates increase faster than monthly payments, on an adjustable-rate mortgage, your balance may grow despite efforts to pay it down.

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