"Home Buyer's Vocabulary"

Prepared by the U.S. Department of Housing and Urban Development
Washington, D.C. 20410

March 1987
HUD-383-H(8)
(Previous Edition Current)


Preface

The potential home buyer will find this Vocabulary helpful for understanding words and terms used in real estate transactions. There are, however, some factors that may affect these definitions:

  • Terms are defined as they are commonly understood in the mortgage and real estate industry. The same terms may have different meanings in another context.
  • The definitions are intentionally general, non-technical and short. They do not encompass all possible meanings or nuances that a term may acquire in legal use.
  • State laws, as well as custom and use in various States or regions of the country, may modify or completely change the meanings of certain terms defined.

Before signing any documents or depositing any money preparatory to entering into a real estate contract, the purchaser should consult with an attorney of his choice to ensure that his rights are properly protected.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Abstract (Of Title)/div>
A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.
Acceleration Clause
Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
Amortization
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.
Appraisal
An expert judgment or estimate of the quality or value of real estate as of a given date.
Assumption of Mortgage

An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required.

The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments.

An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage.

Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.