All In Costs
Total costs, explicit and implicit.

Amortization
The repayment of a loan calculated so that the principal will be paid in full through monthly payments of principal and interest for a predetermined period of time.

Annual Percentage
Rate (APR)
The APR shows the cost of a loan expressed as a yearly interest rate, including the interest and other fees associated with the loan. Because the APR includes up-front costs paid to obtain the loan, it is usually a higher amount than the interest rate stipulated in the note.

Appraisal
An estimate of the market value of a piece of property by a qualified appraiser.

Arms Length
A transaction in which the parties involved act independently of each other, and in which the mechanics of the transaction are handled as they would be between strangers.

ARMs
A loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a pre-selected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan.

Assignment
The act of assigning or transferring or of allotting or awarding. Also, an assignment is the instrument in writing by which property, rights or interests are transferred.

Balance Sheet
A financial statement that contains the types and amounts of assets, liabilities and net worth of a company, institution or individual. Also called a statement of condition.

Blanket Loan
A loan made to developers or contractors to purchase one or more tracts of land with the intention of dividing the land into smaller parcels for resale or development.

Bridge Loan
Interim financing of one sort or another used to solidify a position until more permanent financing is arranged.

Broker
One that acts as an agent for others, as in negotiating contracts, purchases, or sales in return for a fee or commission.

Capitalization Rate
The ratio of net rentals from an income property to the market value of the property, expressed as a percentage.

Cash Flow
The amount of cash earned after paying all expenses and taxes. Cash flow is calculated by adding: net after-tax income plus any bookkeeping expenses that result in items being deducted but not paid out in cash. Such bookkeeping entries include amounts charged off for depreciation, depletion, amortization, and charges to reserves. Cash flow is a measure of a company's worth and its ability to pay dividends on its stock.

Closing
Also known as Settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer.

Collateral
Property pledged as security for a loan to ensure repayment of a loan.

Commitment Letter
A letter sent by a lender informing a borrower that the lender has approved a loan application for a specific amount, term and rate, and listing any conditions that must be met before the loan funds are disbursed.

Conventional Mortgage
A loan based on the credit of the borrower and on the collateral for the mortgage.

Credit Score
A statistical technique wherein several financial characteristics are combined to form a single score to represent a customer's creditworthiness.

Default
The failure to repay a loan according to the terms of the loan.

Depreciation
Decline in the value of a currency, financial asset, or capital good. When applied to a capital good, depreciation usually refers to loss of value because of obsolescence, wear, or destruction (as by fire or flood). (also known as tax depreciation) is the depreciation that the tax code allows businesses to deduct when they calculate their taxable profits. It is typically faster than , which represents the actual decline in the value of the asset. Both measures of depreciation appear as part of the national income and product accounts.

Down Payment
(1) an initial, partial payment made at the time of purchase to permit the buyer to take delivery of the purchase. (2) a partial payment made to evidence good faith that the buyer will complete the purchase transaction at the time the contract is signed.

Due Diligence
Research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities).

Equity
The money value of a property or of an interest in a property in excess of claims or liens against it.

Estoppel Certificate
A written statement setting forth facts about a piece of real estate such as the unpaid principal balance of a mortgage and the interest rate. Its purpose is to stop a future claim that the amount owed is different from the actual unpaid balance, or that the interest rate is other than the contracted rate.

Fixed Rate
A loan on which the rate paid by the borrower is fixed for the life of the loan.

Floating Rate
An interest rate that, instead of being a fixed percentage, is stated as an amount above or below another rate, such as the prime rate. The interest rate moves up or down in relation to the rate of the controlling index.

Franchise
The authorization to conduct a business using the name and operating methods of another.

Guarantor
A person who pledges collateral for the contract of another or who guarantees the performance of another.

Income Property
Real estate owned or operated to produce revenue.

Income Statement
A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time.

Letter of Intent
A document that describes the preliminary understanding between parties who intend to make a contract or join together in another action.

Liability
A financial obligation, or the cash outlay that must be made at a specific time to satisfy the contractual terms of such an obligation.

LIBOR
The London Interbank Offered Rate; the rate of interest that major international banks in London charge each other for borrowings. Many variable interest rates in the U.S. are based on spreads off of LIBOR.

Lien
A security interest in one or more assetss that is granted to lenders in connection with secured debt financing.

Loan Origination Fee
Fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.

Loan to Value (LTV)
The relationship, expressed as a percent, of the amount of money loaned to the appraised value of the real estate pledged as security for the loan.

Market Value
A price at which buyers and sellers with a reasonable knowledge of pertinent facts and not acting under any compulsion are willing to do business.

Marketable Title
Title to property that is free of defects and that will legally be accepted without objection. Also known as perfect title, clear title, and good title.

Mortgage
A conveyance of or lien against property (as for securing a loan) that becomes void upon payment or performance according to stipulated terms.

Negative Amortization
The result of a mortgage repayment plan in which the borrower makes payments that amount to less than the interest due. Unpaid interest is then added to the outstanding loan balance, causing the outstanding loan balance to increase instead of decrease.

Net Worth
The value in dollars of all assets less all liabilities.

Non-Conforming Loan
A loan with an unpaid principal balance or an unexpired term that exceeds lending limitations established by the principal purchasers and guarantors of the secondary mortgage market; the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Association.

Origination Fee
A charge imposed by a lender for the evaluation, preparation and processing of loan applications.

Prepayment Penalty
A fee assessed by a lender on a borrower who repays all or part of the principal of a loan before it is due. The prepayment penalty compensates the lender for the loss of interest that would have been earned had the loan remained in effect for its full term.

Profit & Loss (P&L)
A detailed earnings statement for the previous full year (if you are currently in business). Existing businesses are required to show a Profit and Loss Statement for the current period to the date of the Balance Sheet.

Promissory Note
Written promise to pay.

Rate Lock
An agreement between the mortgage banker and the loan applicant guaranteeing a specified interest rate for a designated period, usually 60 days.

Rate of Interest
The rate, as a proportion of the principal, at which interest is computed.

Recourse
The right to demand payment from the maker or endorser of a negotiable instrument.

Secured Debt
Debt that, in the event of default, has first claim on specified assets.

SBA
A federal government agency that makes, guarantees and purchases participations in loan to small wholesale, retail, service and manufacturing businesses.

Term Loan
A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule.

Title
(1) the ownership right to property, including the right of possession. (2) the document or instrument constituting evidence of such an ownership right.

Valuation
Estimated worth or value; appraisement.

Without Recourse
Without the lender having any right to seek payment or seize assets in the event of nonpayment from anyone other than the party (such as a special-purpose entity) specified in the debt contract.

Working Capital
Liquid assets available for conducting the daily affairs of a business.

Zoning Ordinance
A local law prescribing how and for what purpose each parcel of land in a community may be used.