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| Glossary of Lending Terms |
| Your inquiry into the Focus Publications Glossary of Lending Terms produced the following results: |
back up offer An offer to buy a property that is accepted in secondary position, subject to the collapse of the primary offer. |
balance sheet A financial statement that shows assets, liabilities, and net worth as of a specific date. |
balloon clause A clause in a mortgage or deed of trust that requires the entire remaining principal balance of the loan (the balloon payment) to be paid on or before a certain date. The balloon payment is due before the loan would be completely amortized. |
bankrupt See bankruptcy. |
bankruptcy A relief obtained through court action that may work out or erase debts when the debtor is financially unable to pay debts when due. A bankruptcy remains on an individual's credit report for 10 years. |
bankruptcy (Chapter 11) Shelters a business while it reorganizes and develops a court-approved plan for paying off its creditors. |
bankruptcy (Chapter 12) Bankruptcies of family farms, rarely used except in times of depressed crop prices. |
bankruptcy (Chapter 13) Establishes a payment plan to pay off debts. For individuals or small businesses with less than $100,000 in unsecured debt or less than $350,000 in debt secured by assets. |
bankruptcy (Chapter 7) Wipes out all debts. Allows filer to keep some property. Nonexempt assets are sold to pay bills. Individuals emerge with no debts, but businesses are closed. |
bare-walls coverage Master insurance policy for a condominium or a cooperative, covering the building's shell and common areas only. See single-entity coverage. |
basis point One 100th of 1% or 0.01%. |
basis (tax) The book value of a property. The original purchase price of a property plus allowable purchase expenses (such as legal fees and recording costs) and improvements, and less any casualty losses. The basis is the key factor in the equation used to determine the capital gain or loss on the sale of real estate. |
before-tax income Income before taxes are deducted. |
beige book A report known as the beige book because of the color of its cover. It is a compilation of anecdotal data from the 12 Federal Reserve Districts regarding regional economic conditions. The report is produced every 6 weeks or so, prior to each Federal Open Market Committee (FOMC) meeting, and is used by central bank policy makers when they consider monetary policy. |
beneficial owner See equitable owner. |
beneficiary The person who receives or is to receive the benefits resulting from certain acts. When a deed of trust is used the lender is called the beneficiary. One can also be a beneficiary of a trust or an estate. |
beneficiary statement A statement issued by the lender stipulating pertinent information about the loan such as the remaining loan balance, interest rate, and monthly payment. Requested from the lender when a buyer assumes the loan. |
bequeath To transfer personal property through a will. |
betterment An improvement that increases property value as distinguished from replacements that simply maintain value. |
biannual Occurring twice a year. Same as semiannual. |
bid A term used to describe an offer to purchase real property. |
biennial Occurring every two (2) years. |
bill of sale A written instrument that transfers title to personal property. |
binder 1. A written commitment issued by title insurance company stating the condition of title and the terms (including conditions and exclusions) under which title insurance will be issued on a property subject to the conditions and exclusions listed in the binder. 2. A preliminary agreement secured by the good-faith payment of earnest money, between a buyer and seller which is 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. 3. In insurance it is an agreement confirming temporary coverage pending the issuance of a formal policy. |
biweekly mortgage A mortgage which requires 1/2 the normal monthly payment every two (2) weeks. The effect is to speed the repayment of the loan, thereby reducing the total amount of interest paid. The borrower makes the equivalent of 13 monthly payments (26 half payments) every year thus the loan is shortened from 30 years to approximately 18 years. |
blanket insurance policy A single insurance policy that covers more than one piece of property (or more than one person). |
blanket mortgage A mortgage covering more than one parcel of real estate as security. Examples: 1. In a cooperative, the mortgage covering the building as a whole, as distinguished from the share loans that a buyer must obtain to finance the purchase of an individual unit. 2. A developer subdivides a track of land into lots and obtains a blanket mortgage on the whole track. |
blended rate An interest rate, applied to a refinanced loan, that is higher than the rate on the old loan, but lower than the rate offered on new loans. Generally offered by the lender to induce homebuyers to refinance an existing loan. |
blind pool An investment program in which monies are invested into an association without investors knowing which properties will be purchased. |
blueprint A detailed building plan used by the construction workmen. |
bona fide In good faith, without fraud. |
bond An interest-bearing certificate of debt with a maturity date. 1. A debt instrument used in the capital markets to raise capital or finance long-term debt. It is a popular instrument of the U.S. government, corporations and municipalities. Mortgages and their payments can also back bonds. The best known bond is the 30-yr Treasury bond issued by the U.S. government. 2. An insurance agreement, such as a performance bond, that guarantees that something will be done or completed as stated or the party suffering the loss will receive compensation. 3. A sum of money given to a court to guarantee against a loss. Example: If there is a lien on a property, the owner may remove the lien by posting a bond. |
borrower One who applies for and receives a loan in the form of a mortgage and is responsible for repaying the loan in full. See mortgagor. |
breach of contract Failure to perform to the terms of a contract without legal justification or a violation of any legal obligation. |
bridge financing See bridge loan. |
bridge loan An interim loan that provides temporary financing when a borrower needs additional time to obtain permanent financing between the termination of one loan and the beginning of another loan. Typically used when the buyer is unable to sell his/her house but needs money to close the transaction on the house he/she is buying. The bridge loan is made on the buyer's current residence to finance the buyer's new residence. The loan is paid off when the buyer's current residence is sold. |
budget A detailed plan of income and expenses over a specific period of time. A budget can provide guidelines for managing future investments and expenses. |
budget category An accounting category of income or expense data used in budgeting. |
building code Local regulations that control design, construction, and materials used in construction. Building codes are primarily based on safety and health standards. |
building line (setback) Distances from the ends and/or sides of the lot beyond which construction may not extend. Methods of establishing include filing a plat map of the subdivision, restrictive covenants in deeds or leases, building codes, and zoning ordinances. |
building officials and code administrators international code (boca code) The building code used nationwide in most residential construction. |
built-ins Cabinets, shelving, appliances, etc., framed into the building construction and not movable. |
buy-down A payment, usually in up-front points, made by the borrower or seller to the lender that reduces (subsidizes) the interest rate on a mortgage loan. The reduced rate may apply for all or a portion of the loan term, but is usually for a specified period of time. While the payments are initially low, they will increase when the subsidy expires. A buy-down may be used to qualify a borrower who would otherwise not qualify. |
buydown account An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect. |
buy-down loans Loans that have a lower interest rate for the first year, or first few years, because the seller has prepaid some of the interest costs. |
buyer's broker A broker supervising a real estate agent who is retained to represent the interests of the buyer in a real-estate transaction, paid by the buyer and responsible for negotiating on the buyers behalf. This differs from the typical arrangement, in which the broker acts as the agent of the seller and is paid a commission by the seller from the proceeds of the sale. |
buyers agent A real estate sales agent acting as the exclusive agent for a buyer. The use of a buyers agent must be disclosed in the agent contract. |
buyers market Market conditions favoring the buyer. In real estate, this occurs when more homes are for sale than there are willing and able buyers. A buyers market may be caused by an economic slump or overbuilding. |
buyers silence The taking of no positive action by the buyer. In some circumstances buyers silence can be deemed a waiver of a contingency. |
bylaws A set of rules and regulations by which an organization conducts its business. Example: A condominium or townhouse association prepares bylaws that provide for the administration and maintenance of the complex. |
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