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Glossary of Terms - L

Late Charge:

A penalty imposed by the mortgage lender when a borrower fails to make a scheduled payment on time.  Late charges are normally authorized by and spelled out in the mortgage loan documents.

Lease:

An agreement by which an owner of real property (lessor) gives the right of possession to an individual (lessee) for a specified period of time (term) and for a specified consideration (rent).

Leasehold Estate:

An estate in real property held under a lease for a fixed amount of time.

Lease-Purchase Option:

An option sometimes used by sellers to rent a property to a consumer, who has the option to buy the home within a specified period of time. Typically, part of each rental payment is put aside for the purpose of accumulating funds to pay the down payment and closing costs.

Legal Description:

A description of the real property recognized by the law that is based on government surveys and spells out the exact boundaries of the entire parcel of land.  Under most state laws, it must so thoroughly identify a parcel of land that it cannot be confused with any other parcel of land.

Lender:

Any person or entity that advances funds that are intended to be repaid.  A general term encompassing all mortgagees and beneficiaries under deeds of trust.

Lender’s Policy:

A title insurance policy that insures the validity, enforceability and priority of a lender’s lien on mortgaged property.  This policy does not provide protection for the owner of the property.

Lessee:

A party to whom a lease (the right to possession of a property) has been given by the owner of the property    (lessor) in return for consideration (rent).

Lessor:

A landlord and the individual or entity that provides a leasehold interest to a lessee through a lease.

Liabilities:

A person’s debts and other financial obligations.

Liability Insurance:

Insurance coverage that protects property owners against claims of negligence, personal injury or property damage to another party.

LIBOR-Index:

An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans, based on the average interest rate at which international banks lend to or borrow funds from the London Interbank Market.

License:

Permission to upon or use the land of another that is the personal privilege of an individual and is not an interest in land.  In addition, a “license” is the formal authorization granted by the state to conduct business as a regulated professional.

Lien:

A claim or charge on a property for the payment of an outstanding debt.  With a mortgage, the mortgage lender has the right to take title to the property to extinguish the outstanding debt if mortgage payments are not made as required in the mortgage documents.

Life Estate:

A grant or reservation of the right to use, occupy and own an estate for the life of an individual.

Lifetime Cap:

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

Liquid Asset:

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

Listing:

A real estate broker’s written agreement to represent a seller in the sale of his or her property.  Real estate licensees refer to their inventory of pending listing agreements as listings.

Listing Agent:

The real estate licensee that is representing the seller in the sale of his or her property through a listing agreement.

Listing Agreement:

A written agreement between a real estate broker and a seller that establishes the terms and conditions on the broker’s listing of the seller’s property for sale on the market.

List Price:

The price of a property through a listing agreement.

Loan:

An amount of money that is lent to a borrower who agrees to repay that amount along with any interest required by the loan documents.

Loan Application:

An electronic or written document that prospective borrowers must complete in order to apply for loan financing.

Loan Commitment:

An electronic or written document notifying the borrowers that the lender has agreed to lend them a specific amount of money at a specific interest rate for a specific period of time.  The loan commitment generally includes other conditions upon which the loan commitment is based.

Loan Origination:

The process by which a loan is made, which may include taking a loan application, processing and underwriting the application, and closing the loan.

Loan Origination Fees:

Fees paid to your mortgage lender or broker for processing the mortgage application. This fee is usually in the form of points. One point equals one percent of the mortgage amount.

Loan Package:

The group of mortgage loan documents that the borrowers’ lender sends for completion during the closing or escrow process.

Loan-To-Value (LTV) Ratio:

The relationship between the loan amount and the value of the property (the lower of appraised value or sales price), expressed as a percentage of the property’s value.  For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.

Lockbox:

A tool that allows secure storage of property keys on the premises for use by real estate licensees in showing homes on the real estate market to potential buyers.

Lock-In Rate:

A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time.

Lot:

Generally, a portion or parcel of real property.  Usually refers to one piece of property in a subdivision.

Low Down Payment Feature:

A feature of some mortgages, usually fixed-rate mortgages, that helps you buy a home with a low down payment.