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Mortgage and Real Estate Glossary ~ S

Sale-leaseback

An agreement where a home buyer allows the seller to stay in the property in exchange for rent. In a sale-leaseback, the homeowner gives up ownership of a home and becomes a renter. People commonly use a sale-leaseback in these situations:
(1) when the seller is buying or building another home and is not ready to move out on the sale date or
(2) when parents sell their home to a son or daughter and remain in the house, keeping the property in the family.

Sales comparable

A recent sale of a property that is used to estimate the value of a similar property. Generally referred to as comps. Comps come in handy when you are trying to set the best sale price on your home, they provide a good reference point, so you accurately price your home's value. Appraisers, certified professionals who estimate the fair market value on homes, also use comps to help them evaluate properties.

When attempting to set a price, you should use comps that were sold in the last six months and are similar to your home in age, style, size, condition and location. Real estate agents also have easy access to comps via an online network. Keep in mind that other factors, such as market conditions also affect a home's selling price.
See: Appraisal

Seasonal income

Any income that you receive on a cyclical basis. Here are a few examples of seasonal income:
(1) youre not a full-time accountant, but you make money preparing income taxes during tax season, from February to April
(2) you work on a farm only during the spring as astrawberry picker. If you can prove that you have received a seasonal income for two years in a row and it is likely to continue, you can cite it as a source of income when applying for a loan to buy a home.

Second mortgage

A loan that in the event of foreclosure is paid off after the first mortgage. You can have one or more mortgages on your property. Buyers often use second mortgages when they can not get enough financing from a lender to pay for a home. For example, you can ask the seller to reduce a home's selling price by $15,000 and offer to pay back this amount along with interest in monthly installments. This $15,000 is secured with a second mortgage.

The seller, though, is taking a risk - if you default on the first mortgage and the lender forecloses on the home, there might not be enough money from the sale to cover both the first mortgage and the seller's loan. Second mortgages usually have a higher interest to offset this risk. In some states, a second mortgage is called a junior trust deed.
See: Home equity loan, Piggy back loan

Secondary market

Companies that buy groups of loans from lenders and then sell them to other lenders and investors. The secondary market allows lenders to get more money in order to offer more loans. Three federally-charted agencies are important in keeping a steady flow of cash available for loans: Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and Government National Mortgage Association (Ginnie Mae). In general, Fannie Mae and Freddie Mac buy and sell loans, and Ginnie Mae issues mortgage-backed securities, which lenders sell to investors.

Security

Something of value that borrowers promise to a lender in event they can't repay a loan.
See: Collateral

Servicing a loan

The company that collects monthly mortgage payments. A lender often contracts a service bureau to collect monthly mortgage payments in exchange for a small percentage of the loan. The service bureau also makes sure the borrower pays property taxes, forecloses if the borrower defaults, and provides general customer service. Mortgage bankers can also take on the job of servicing loans.
See: Mortgage banker

Settlement

When a property's sale or purchase is completed. Depending upon where you live, settlement can either be in escrow, or a sit-down meeting between the buyer and seller. The rules for settlement vary from state to state, as well as from county to county, but typically here is what takes place:
(1) The buyer pays for the home and closing costs in one lump-sum
(2) The buyer and seller sign the closing documents
(3) The deed is recorded and
(4) The mortgage officially begins. If settlement is a meeting, the buyer and seller are often joined by mortgage brokers, attorneys, a lender representative or title officer. Settlement is also called closing.
See: Escrow, Closing costs

Settlement statement

A document that gives a breakdown of the costs that the buyer and seller are responsible for on the closing date. The settlement statement, unlike the Good Faith Estimate, shows the final paid closing costs. You can receive the settlement statement either before or on the closing date. If your property closes in escrow, you will receive the settlement statement in the mail within 24 hours after the deed of trust is recorded. The settlement statement is also called HUD-1 or closing statement.
See: Closing costs

Super jumbo loan

Any mortgage for $1 million or more. Though not very common, lenders do provide loans for $1 million or more. A millionaire, for example, might take out a mortgage solely to benefit from the tax write-offs.
See: Jumbo loan

Sweat equity

A program that gives a buyer part or all of the money for a down payment in exchange for hours of labor helping to build the home.

Sweat equity allows you strike a deal with a homebuilder to exchange hours of hard labor for 5% to 10% of your down payment. Depending on your skill set, you can do a range of construction jobs such as sand and paint walls, nail down floorboards and fit bathroom tiles. Lenders find sweat equity programs risky because buyers often don't follow through on the amount of work required.

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