Spokane Real Estate Advisor

Glossary of real estate terms

L

Land Contract (Land Sales Contract)

Method of conveying title to a real property in which title does pass to the buyer until the contract for Deed is fulfilled. The contract for deed usually requires that the purchase price is paid in installments. (Cal-Vet loans are the most common occurrence of this in California)

Landlocked

Surrounded by adjacent land with no means of access.

Late Charge

The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.

Latent defect

Concealed defect not easily determined from an inspection of the property.

Lease

A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.

Lease-Purchase Mortgage Loan

An alternative Fannie Mae financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payments consists of PITI payments on the first mortgage, plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate.

Lease-purchase Option

Nonprofit organizations may use the lease-purchase option to purchase a home that they then rent to a consumer, or "leaseholder." The leaseholder has the option to buy the home after a designated period of time (usually three or five years). Part of each rent payment is put aside toward savings for the purpose of accumulating the down payment and closing costs.

Leased fee

The landlord's interest.

Leasehold

A possessory legal interest in real property acquired by a tenant (lessee) when she enters into a rental agreement with the owner of the property (landlord or lessor).

Leasehold Estate

A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Legal Description

A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

Lessee

The tenant in a lease agreement.

Lessor

The landlord in a lease agreement.

Letter of Credit

Line of credit to a grant recipient established at time of approval of application.

Leverage

The use of borrowed funds to increase the effective rate of return on an investment.

Liabilities

A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability

Assets owed for items received, services received, assets acquired, construction performed (regardless of whether invoices have been received), an amount received but not yet earned, or other Expenses incurred. (GAO) HUDCAPS Core Financial System Standard Accounting Interface, dated 9/30/97

Liability Insurance

Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.

LIBOR-based ARMs

The London Interbank Offered Rate (LIBOR) is based on the interest rate that major international banks are willing to lend and borrow funds for a specified period of time in the London interbank market. The LIBOR is similar to the prime-lending rate posted by major U.S. banks. You can select an adjustable rate mortgage (ARM) that adjusts to the LIBOR at specified periods, usually every six months. This type of ARM typically has a per-adjustment period cap of 1 percent and is offered with either a 5 percent or a 6 percent lifetime rate cap.

Lien

A legal claim against a property that must be paid off when the property is sold.

Lifetime cap

A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Lifetime Payment Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

Lifetime Rate Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan.

Line of Credit

An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower. See home equity line of credit.

Liquid Asset

A cash asset or an asset that is easily converted into cash.

Liquid assets

Cash or other assets that can be quickly converted to cash with little or no sacrifice in value.

Liquidated damages

A specified sum of money agreed upon by contracting parties that will be received by the other or others if one of the parties commits a breach of the contract.

Listing agent

A real estate agent who lists a house for sale. The listing agent represents the seller of the house.

Listings

A computerized pool of information, shared by real estate agents, that list houses for sale. Also called Multiple Listing Service or MLS.

Loan

A sum of borrowed money (principal) that is generally repaid with interest.

Loan Application

The loan application is a detailed form designed to provide information from you that your lender will need. Lenders use the application to evaluate whether or not they can give you a loan, and if so, the amount of money they can lend you. The "four Cs" of credit come into play when filling out an application -- they are capacity, credit history, capital and collateral. The loan application form requests information such as:

Bank account balances and account numbers, as well as bank branch address

Information about where you work or what sources of income you have

Outstanding debts (including loans and credit cards with names and addresses of creditors)

Information needed for the loan application may vary from lender to lender, so prior to filling out the application it's important to discuss with your lender what items your lender will need. If your an approved lender uses Desktop Underwriter, an automated underwriting system, they will not have to ask you for as much information regarding your employment, credit, or residence history. As a result, you won't need to provide as much documentation to back-up the information. Ask your lender if the lender uses this time-saving system.

Loan balance

The amount of money remaining to be paid on an amortizing loan at a given time.

Loan Commitment

The commitment letter states the dollar amount of the loan being offered, the number of years you have to repay the loan, the loan origination fee, the points, the annual percentage rate, and the monthly charges. The letter also states the time you have to accept the loan offer and to close the loan. Make sure you understand all aspects of the commitment letter because by signing it, you indicate your acceptance of its terms and conditions.

Loan Limit

Loan limit

Loan or mortgage value

That portion of the value of real property recognized by the lender when used to secure a loan.

Loan Origination

The process by which a mortgage lender brings into existence a mortgage secured by real property.

Loan Origination Fee

The loan origination fee covers the administrative costs of processing the loan. It is often expressed in points. One point is 1 percent of the mortgage amount. For example, a $100,000 mortgage with a loan origination fee of 1 point would mean you pay $1,000.

Loan point

A charge prepaid by the borrower upon the origination of a loan. One point equals one percent of the loan amount.

Loan servicing

The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Loan Terms and Conditions

With a reverse mortgage, a lender can call in your loan under certain conditions. But, if you occupy the property as your primary residence, are not absent from the property for 12 consecutive months. You may instruct the lender to pay the taxes and insurance on your behalf from your reverse mortgage funds. The lender will set aside funds from your reverse mortgage to pay for future taxes and insurance, as long as funds are available. Furthermore, as long as you comply with the terms noted above, you can't be forced to sell your home to pay off the reverse mortgage, even if the loan balance grows to exceed the value of your property.

Loan To Value Ratio (LTV)

The loan balance on a house compared to the appraised value of a house. In making a mortgage loan, a lender uses the LTV to show that a house is worth more than the loan amount. This is important because, if the ho meowner does not make pay-ments on the mortgage loan, the bank gets the house in return, as payment.

Loan-to-value ratio

The ratio of amount borrowed to the property market value, usually expressed as a percentage.

Lock-in

A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

Lock-in Period

The time period during which the lender has guaranteed an interest rate to a borrower.

Low Income

Income that does not exceed 80 percent of area median income.

Low Income Housing Tax Credits (LIHTC)

A way of obtaining financing to develop low-income housing. Government programs provide dollar-for-dollar credit toward taxes owed by the housing owner. These tax credits can be sold, or used to back up bonds that are sold, to obtain financing to develop the housing.