Foreclosure Glossary


Annual Percentage Rate (APR) – the interest rate applied to the balance of the loan for the year.

Appraisal – an estimate of the property’s value, determined by a professional after an inspection.

As-is condition – when a property is sold and the buyer agrees to accept it in its current condition, without modification.

Asking price – the seller’s initial price.

Auction – the selling of a property to the highest bidder.


Bankruptcy – a legal status designated by a court when a person or business can’t fulfill their financial obligations

Back-up offer – when the seller has accepted one offer, often on contingency but considers another offer in the event the first one falls through.

Base loan amount – the amount on which loan payments are based.

Broker – a person licensed to sell real estate.

Buyer’s agent – a real estate agent who represents the buyer of a property in real estate transactions.


Capital Gains Tax – a tax accrued when the property is sold and the investor makes a profit.

Caveat Emptor – meaning “buyer beware”, this means that they purchaser must ensure that they property is in good condition.

Comparables – properties that are similar or have been recently sold that used to help determine the fair market value for a property.

Credit rating – a score that relates to your credit report and designates your “credit worthiness.”

Contract – an agreement for the exchange or purchase of real estate between two parties.


Deed – a document that indicates the legal transfer of title of property from one owner to the next.

Default – failure to pay loan payments on time.

Department of Housing and Urban development – HUD is a federal agency that oversees a variety of housing and community programs.

Department of Veterans Affairs – the VA guarantees mortgages for veterans, protecting lenders from loss and encouraging lower down payments for veterans.

Distressed property – a property that has fallen into disrepair or needs updating due to a variety of situations: divorce, death in the family, job relocation, financial strain, condition of the property, partnership disputes or foreclosed/bank owned properties.

Down payment – the amount of money the buyer pays to the seller out of their own funds, this amount is not included in the loan.

Duplex – a multi-family property with two units.


Equity – the value of a property over the amount of the loan.

Escrow – funds held to pay taxes or insurance on a mortgaged property.

Estate – a person’s total assets, including their property, at time of death.

Eviction – the legal process of removing a tenant who has failed to pay rent.

Executed contract – a document that is signed and fulfilled by all parties.


Fannie Mae – The Federal National Mortgage Association, a government chartered, shareholder-owned company that buys mortgages from mortgage companies and resells them on the secondary mortgage market.

Freddie Mac – The Federal Home Loan Mortgage Corporation, a government chartered, public enterprise that buys mortgages from mortgage companies and resells them as mortgage backed securities on the open market.

FHA – The Federal Housing Administration, a government agency that aims to improve housing standards, provide home financing and stabilize the mortgage market.

Foreclosure – a specific legal process that takes place when a borrower defaults on their mortgage, the lender can goes through this legal process to recover the balance of the loan

First mortgage – a loan with priority over any other mortgages or liens.


Ginnie Mae – The Government National Mortgage Association was established to help promote home ownership. Part of HUD, this agency purchases loans from lenders and pools them to sell to investors.

Good faith estimate – an estimate from the lender that shows the costs the borrower will incur including fees.

Grace period – time allowed between when a payment is due and when a penalty is incurred for late payment.

Graduated payment mortgage (GPM) – a mortgage that has monthly payments that start very low and gradually rise.

Gross income – total income before taxes.


Hazard insurance – insurance coverage for things like fire or wind damage.

Home equity line of credit – a loan that allows homeowners to borrow funds against the equity in their home.

Home inspection – an examination of the home by a professional prior to purchase.

Home owners association – HOA, an organization that manages the common areas of a community.


Income property – a property purchased or developed to produce revenue.

Insurance – policies that protect a property owner by guaranteeing payments for specific losses or damage.

Interest rate – a fee charged by the lender, based on a percentage of the loan.

Investment property – a property purchased with the intent of earning money by renting, opening a business, or flipping the property.

Involuntary Lien – a lien imposed without the consent of the owner .


Judgment – decision made by a judge in a court of law.

Junior mortgage – also called a second mortgage, a loan placed on a property that is secondary to the main mortgage.


Kit home – modular or prefabricated homes built in a factory and assembled on site.


Lease – an agreement between the property owner and tenant.

Lender – bank or other institution that loans money.

Lien – a claim to a property as security for money owed.


Manufactured housing – prefabricated homes that are built in a factory. Sometimes called mobile homes. Check our manufactured foreclosures page to learn more.

Modification – a change to the terms of a loan.

Mortgage – a legal document that states the amount needed to purchase a home, using the property as collateral.

Multi-dwelling property – a property that has several units but one mortgage.


Negative equity – when outstanding loans on a property exceed the property’s worth.

Net cash flow – income from a rental property after expenses are accounted for.

Net worth – the total value of a person’s assets.

Notice of default – the lender’s action in court when a borrower has defaulted on their mortgage payments.


Open house – when a real estate agent allows the public to view a home with no appointment needed.

Owner financing – when the seller agrees to finance all or part of the purchase.

Owner occupied – when the owner of a property also lives in the property.


Parcel – a piece of land.

Pre-approval letter – a letter from the lender that states the amount of money a potential buyer can obtain.

Prepaid interest – interest paid before it is due.

Prequalification – when a lender reviews a buyer’s ability to pay for a property prior to taking out a loan.


Qualifying Ratio – the comparison of debt and income used to determine if a buyer qualifies for a mortgage.


Real estate agent/broker – a person licensed to sell, list and advertise real estate on behalf of the property owner or buyer.

Real Estate Owned – a property that is owned by the lender due to borrower default and foreclosure.

Real property – land and the permanent fixtures on it (such as a home).

Refinance – the process of changing the terms of a mortgage for a lower interest rate or better terms.

Repossession – when a lender takes back a property due to default by the buyer.


Second mortgage – a loan placed on a property that is secondary to the main mortgage.

Servicer – a company that administers the loan by collecting loan payments and managing escrow accounts.

Short sale – when a lender accepts less than the full balance due on a home, usually to avoid foreclosure.

Survey – the measurements, boundaries and area of land as established by blueprints.


Tax sale – property sold by the government at a public sale due to nonpayment of taxes.

Title – legal document that proves ownership of a property.

Title search – the process of examining records to determine property ownership and any liens on the property.

Townhouse – a multi-family attached home that is often two stories. (Go to our Foreclosed Townhomes page to learn more).

Trust account – accounts used by a broker or escrow agent to protect the buyer or seller during the sale of a property.


Underwriting – the process of reviewing and evaluating a borrower to set conditions for a loan.

Unsecured loan – a loan that is not secured with collateral.

Upside down home – a house that is worth less than what is owed on the mortgage.


Variable interest rate – a loan rate that fluctuates based on the rate paid on bank certificates of deposit or treasury bills.

VA mortgage – a loan guaranteed by the Department of Veterans Affairs.

Voluntary lien – a lien created by contract, such as a mortgage to buy real estate. The lien is attached to the property, not the person.


Walk through – a buyer’s final inspection of the home to ensure that all conditions of the contract have been met.

Warranty – a legally binding guaranty that lasts for a set time period.


Zoning – regulations that control how land is used.

Zoning variance – a one-time modification of existing zoning regulations.

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