Net cash flow
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

Net Effective Income
Gross income less federal income tax.

Negative amortization
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization

Net Worth
The value of all assets, including cash, less total liabilities.

No cash-out refinance
A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

Non-liquid asset
An asset that cannot easily be converted into cash.

Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note rate
The interest rate stated on a mortgage note.

Notice of Default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Original principal balance
The total amount of principal owed on a mortgage before any payments are made.

Origination Fee
A fee paid to a lender for processing a loan Application.

OTC
(The Office of Thrift Supervision). Charters federal thrifts, serves as the primary federal examiner and regulator of federal and state-chartered savings associations, and administers laws governing savings and loan holding companies.

Owner financing
A property purchase transaction in which the property seller provides all or part of the financing.

Owner Occupied
"Owner Occupied" means the property is the owner's primary residence.

Payment Adjustment Period
The length of time (typically a year) between changes to the AML borrower's P&I payment.

Payment Buy down
Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.

Payment Cap
A limit on the amount the payment can be changed at the end of each Payment Adjustment Period.

Payment Discount
In a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers.

Periodic payment cap
A limit on the amount that payments can increase or decrease during any one-adjustment period.

Periodic rate cap
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Personal property
Any property that is not real property.

PITI
Principal, Interest, Taxes and Insurance are components of a mortgage payment.

Plat
A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Points
A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.

Power of attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Prepayment
Payment of mortgage loan, or part of it, before due date.

Pre-qualification
The process of determining how much money a prospective homebuyer will be eligible to borrow before application.

Prime rate
The interest rates that banks charge to their preferred customers.

Principal
The amount borrowed or remaining unpaid, also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Private Mortgage Insurance
Insurance provided by nongovernmental insurers that protect lenders against loss if a borrower defaults.

Promissory note
A written promise to repay a specified amount over a specified period of time.

Public auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.

Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Purchase Agreement
See Agreement of Sale.

Purchase money transaction
The acquisition of property through the payment of money or its equivalent.

Qualifying Ratios
Guidelines applied by lenders to determine how large a loan to grant a homebuyer.

Quitclaim Deed
A deed, which transfers whatever interest, the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See Deed.)

Radon
A radioactive gas found in some homes that in sufficient concentrations could cause health problems.

Rate Caps
(Also called "Interest Rate Caps"). A limit on the amount of which the interest rate charged to the borrower can be changed.

Rate lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.

Real Estate Broker
A middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

Real Estate Owned
(REO). A term frequently used by lending institution as applied to ownership of real property acquired for investment or as a result of foreclosure.

RESPA
(Real Estate Settlement Procedures Act). A Federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.

Real property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

REALTOR
A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Recission
The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent.

Recorder
The public official who keeps records of transactions that affects real property in the area.

Recording
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

Refinancing
The process of the same mortgagor paying off one loan with the proceeds from another loan.

Rehabilitation mortgage
A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.

Remaining balance
The amount of principal that has not yet been repaid.

Remaining term
The original amortization term minus the number of payments that have been applied.

Repayment plan
An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."

Replacement reserve fund
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

Restrictive Covenants
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

Revolving liability
A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.

Right of first refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of ingress or egress
The right to enter or leave designated premises.

Right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

RTC
(Resolution Trust Corporation). Formed to resolve thrift failures over the next three years and dispose of their assets and liabilities.