Arizona Mortgage Term L

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HOME BUYING 101

LOAN APPLICATION PROCESS

ARIZONA MORTGAGE LOAN DICTIONARY L

Laches - The doctrine that upholds loss of the right to enforce an agreement or restriction, because the delay in bringing action worked to the detriment of the other party. 

Land - Real property without any improvements attached to it.

Land Capitalization Rate - The rate of return, including interest on land only.

Land Contract - A contract where the seller keeps title while the buyer has possession.  Title passes when the property has been fully paid for.

Land Development Loan -  See Development Loan.

Land Loan -  A loan for the acquisition of land without any improvements thereon.  Usually held in anticipation of zoning and until plans are drawn and construction financing can be obtained.

Landlocked - Property that has no access because of the surrounding property and the absence of any easement. 

Land Residual Method - A means to determine land value by deducting the value of the income attributable to the improvements alone from the value of the income of the property.  

Landscape - The trees, flowers, shrubbery, lawn, etc. that surround the exterior of a structure.

Land Survey -  An instrument that specifies precise property boundaries.  It is useful in determining if boundary violations (encroachments) exist.  

Land Usage - The uses being made, or those allowable under zoning ordinances.

Late Charge -  An additional charge a borrower is required to pay as a penalty for failure to pay a regular mortgage loan installment when due;  a penalty for a delinquent payment.  

Latent Defect - A defect not apparent from a reasonable visual inspection.

Lateral Support - The support a landowner has a duty to provide to the land of adjacent property owners. 

Latitude - A unit of measure referenced by lines parallel to the equator.  Measured in terms of degrees (º), minutes ( ' ), and seconds ( " ).

Law of Decreasing Returns - The principle that states that a property reaches a point at which additional improvements no longer bring a corresponding increase in property income or value. 

Law of Increasing Returns - The principle that additional property improvements increase property income or value.

Lease -  A written agreement stating the conditions for the possession and use of real estate (and/or personal property) given by the owner (landlord) to another person (the tenant) for a specified rent and period of time. It may include an option to purchase the property after a period of time (See Lease Option).  

Leaseback - A sale arrangement where the buyer leases the property back to the seller.

Leasehold - A lease estate in realty; a non-freehold interest. 

Lease Option - A lease granting the tenant an option to purchase the property after a specified period of time.

Legal Description - A description of real property by government survey; metes and bounds; or reference to recorded lot, block and tract. 

Lender - A person, company or corporation that lends money for the purchase of real estate.

Let - To lease.

Letter of Commitment -  A document that advises the borrower that the loan has been approved, spells out the terms and conditions of the loan and confirms the closing date.  

Letter of Demand -  A prepared, formal statement showing the current status of the loan account, all sums due on a date certain to fully pay the loan balance, and the daily rate of interest.  

Letter of Intent - A formal statement, usually in letter form, from a buyer to a seller declaring that the buyer intends to purchase a specific property for a specific price on a specific date.

Leverage -  The use of borrowed money to increase one’s return on a cash investment.  For leverage to be profitable, the rate of return on the investment must be higher than the cost of the money borrowed (interest plus amortization).  Leverage has the potential to magnify losses.  

Levy - To impose or assess a tax on a person or a property; the amount of taxes to be imposed in a given district.

License - A revocable privilege to use the land of another.

Lien -  A legal encumbrance or claim of one person on the property of another as security for a debt or charge.

Lienholder -  Any person or organization who holds a legal claim over the specific property of another as security for debt.  

Lien Subordination Clause - Provides for the protection of the lienholder's value and position from any future reversion or forfeiture resulting in a breach of the restrictions attached to the agreement.

Life Estate - An estate in property for the life of a person that may not be inherited. 

Line of Credit - An agreement by a bank or other financial institution to extend credit up to a certain limit for a certain time for a specific borrower.

Link - A surveyor's measure equal to 7.92 inches. 

Liquid Assets - Assets that are readily convertible to cash.

Liquidity -  The amount an individual or entity holds in cash, checking and savings accounts and other assets quickly convertible to cash without any significant loss.  

Lis Pendens - A recorded notice of a pending lawsuit concerning a property.  Though not a lien, lis pendens provides constructive notice that an action is pending against the property. 

Listing - An agency agreement between owner and broker wherein the owner authorizes the broker to attempt to find a buyer and to pay an agreed commission should the broker succeed. 

Littoral Property - Property located on the shore of a lake or ocean. 

Littoral Rights - Right of a property owner to reasonable use of a lake, pond or ocean water bordering the property. 

Livable Floor Space - Space measured by the interior of each room, excluding interior walls and closets.

Load Bearing Walls - See Bearing Walls.

Loan -  The letting out or renting of money by a lender to a borrower, to be repaid with or without interest.

Loan Balance -  The amount of principal that a borrower owes.

Loan Balance Cap -  Only applicable to adjustable rate mortgages (ARMs) with deferred interest or negative amortization (see Deferred Interest).  Because the loan balance may increase with ARMs, many lenders place limits on how much deferred interest may be added to the original loan balance.  If, during the life of the loan, the unpaid principal owed exceeds this limit, the borrower can no longer defer interest.  The monthly payment must be increased (perhaps significantly, resulting in “payment shock”) to pay all monthly interest due and enough of the monthly principal to fully pay off the loan within its remaining life.

Loan Closing -  A meeting between borrower and lender in which transfer of ownership is accomplished, funds and deed are exchanged, and all loan documents, including the promissory note and mortgage, are signed.  

Loan Constant - The yearly percentage of interest, which remains the same over the life of an amortized loan based on the monthly payment in relation to the principal originally loaned.

Loan Information Sheet -  In secondary market transactions, a listing of loans being offered for sale by principal balance, term, loan-to-value and other items.

Loan Modification -  Any change in the terms of the loan, any change in the property or any change in borrower’s liability for the loan.

Loan Portfolio -  The total of all the loans that a financial institution or other lender holds at a given time.  A list, distribution or grouping of mortgage loans.

Loan Servicing Department -  The division of a mortgage lending institution that is responsible for servicing the terms and conditions of the loan agreement.  The duties of a loan servicing department include the collection of payments, interest, principal, trust items such as hazard insurance and taxes, and conducting foreclosures.  Servicing duties also consist of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up and loan analysis.  A fee is charged to the borrower for these services.  

Loan Submission - The process of submitting a loan to an underwriter for review.

Loan to Value -  Mathematical computation that compares the loan amount to the value of the property.

Loan-to-Value Ratio -  The ratio, expressed as a percentage, of the amount of a loan (numerator) to the value or selling price of real property (denominator).  Usually, the higher the percentage, the greater the interest charged.  Maximum percentages for banks, savings and loans, or government-insured loans are set by statute.  

Lockbox - A device attached to the front door of a seller's home that contains a key.  Generally real estate agents have the code or access keys to the lockbox in order to gain entry into the home to show it to prospective buyers.

Lock-in Clause - A provision that allows prepayment provided full interest is paid as if the loan had gone to maturity; the borrower is locked-in as to interest. 

Loft - An attic-like space below the roof of a house or barn; any of the upper stories of a warehouse or factory.

Longitude - Unit of measure in terms of north-south meridians.  Measured in terms of degrees (º), minutes ( ' ), and seconds ( " ). 

Loss Payable Clause - An endorsement to a hazard insurance policy identifying additional parties (i.e. lenders) entitle to participate in claims proceeds in the even of loss.

Lot and Block System - A method of legal description of an individual parcel of land by reference to tract, block and lot numbers and other information by which the parcel is identified in a recorded subdivision map.

Lot, Block and Tract System - See Lot and Block System.  

Lot Equity -  If a borrower owns the land and is seeking a mortgage for a home under construction, the value of the land may be recognized as a down payment equivalent to cash.  

Lot Split - The legal division or splitting of a parcel of land into more than one legal parcel of land.