Certificate of Eligibility

Certificate of Eligibility – To get a VA loan, the veteran must first obtain one of these documents from the Veterans Administration that proves the veteran is eligible fr a VA loan.

  • Example: If you are a veteran and want to purchase a home using a VA loan, the first step should be to get a certificate of eligibility which will show that you are qualified to purchase a home using a VA loan.

Errors and Omissions Insurance (E&O Insurance)

Errors and Omissions Insurance (E&O Insurance) – Insurance that protects a real estate broker or salesperson from mistakes, errors or omissions that may occur during a transaction.

Example: If a real estate broker mistakenly fails to disclose that a roof is leaking and the buyer brings a suit against the broker, the broker will be

Voluntary Lien

Voluntary Lien – A monetary encumbrance that a homeowner willingly places on their property.

  • Example: A mortgage or deed of trust is a voluntary lien.

Real Estate Investment Trust (REIT)

Real Estate Investment Trust (REIT) – A corporate entity that exists for the sole purpose of investing in real estate.

  • Example: REIT’s or Real Estate Investment Trusts can be privately or publicly held companies and they must distribute 90% of their taxable income to their investors. Therefore they are popular investment vehicles for investors who want to invest in real estate.

Commission

Commission – A fee earned by a broker, agent, facilitator or salesperson for facilitating a transaction.

  • Example: Real estate brokers are paid by commissions they earn when transactions close.

Convertible ARM

Convertible ARM – A mortgage that starts out as an adjustable rate mortgage but allows the borrower to convert it to a fixed rate loan for a specified period of time.

  • Example: A borrower who wants to take advantage of lower initial payments but still have the long term protection of a fixed rate loan can use a convertible ARM.

Chain of Title

Chain of Title – An analysis of the transfers of title to a piece of property over the years.

  • Example: When purchasing a property, a buyer should always check the chain of title to make sure the seller is who they say they are and that there are no unidentified liens against the property.

Assumption

Assumption – When a new borrower takes over a loan from a previous borrower. This must be allowed by the lender in the loan documents.

  • Example: When a different borrower takes over a loan from the original borrower the process is called assumption.

Construction Loan

Construction Loan – A short-term type of loan used to finance construction. These loans are typically repaid using the proceeds from the sale of homes that were constructed. In these loans, the lender makes the payments to the contractor and the developer starts making interest payments to the lender.

  • Example: When developers build large developments they typically finance them with construction loans that are quickly repaid using sale proceeds from the home sales.

Executor

Executor – The person who is responsible for administering the terms of a deceased’s will. The feminine of the word is Executrix.

  • Example: After the death of a person, the executor of the deceased’s will facilitates the distribution of the estate.