A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
ABANDONMENT
Is the failure to occupy and use property, which may result in a loss of rights.
ACCELERATION CLAUSE
A clause in your mortgage, which allows the lender to demand payment of the outstanding loan balance immediately if the borrower breaches one or more provisions of the loan agreement.
ADJUSTABLE-RATE MORTGAGE (ARM)
A loan in which the interest rates change periodically to reflect changes according to prevailing financial market conditions.
ADJUSTMENT DATE
The interval at which the interest rate changes on an adjustable-rate mortgage (ARM).
AGENT
A person who represents a seller or buyer in the purchase or sale of real estate.
AMENITY
A feature of the home or property that serves as a benefit to the buyer but that is not necessary.
AMORTIZATION
The loan payment consists of a portion, which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
AMORTIZATION, NEGATIVE
When unpaid interest on a loan is added to the principal balance, increasing the amount owed.
AMORTIZATION SCHEDULE
A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan.
ANNUAL MEMBERSHIP
A fee that may be charged annually for having a line of credit available, this is often charged regardless of whether or not you use the line. This is also referred to as a participation fee.
ANNUAL PERCENTAGE RATE (APR)
A value created according to a government formula intended to reflect the true annual cost of borrowing. This includes up front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. This does not include title insurance, appraisal, and credit report.
APPLICATION
The form used to apply for a mortgage loan, containing personal and financial information about a borrower’s income, savings, assets, debts, and more.
APPLICATION FEE
Fees that are charged upon application, fees may include charges for property appraisal ($200-$400) and a credit report ($30-$50).
APPRAISAL
A document that gives an estimate of a property’s fair market value, this is generally required by a lender before loan approval.
APPRAISER
An individual qualified by education, training, and experience to estimate the value of property.
APPRECIATION
The increase in the value of a property due to changes in market conditions, inflation, or other causes; the opposite of depreciation.
ASSESSMENT
The valuation placed on property by a public tax assessor for purposes of taxation.
ASSESSOR
A public official who is responsible for establishing the value of a property for taxation purposes.
ASSET
Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets."
ASSIGNMENT
When ownership of your mortgage is transferred from one company or individual to another.
ASSUMABLE MORTGAGE
A mortgage that can be transferred from a seller to a buyer, once the loan is assumed by the buyer, the seller is no longer responsible for repaying it.
ASSUMPTION
When a buyer takes on personal liability for paying off the seller’s existing mortgage or deed of trust.
BALLOON MORTGAGE
A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a 30-year period, but requires that at the end of the tenth year the entire remaining balance must be paid.
BALLOON PAYMENT
A payment on a loan, usually the final payment, that is significantly larger than the regular installment payments
BANKRUPTCY
A federal law whereby a person’s assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay
BILL OF SALE
A written document that transfers title to personal property from one person to another.
BIWEEKLY MORTGAGE
A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen.
BOND MARKET
Refers to the daily buying and selling of thirty year treasury bonds, lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. This is why rates change daily
BORROWER
A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms
BRIDGE LOAN
Bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment.
BROKER
A broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
BUDGET
An itemized summary of estimated or intended expenditures for a given period along with proposals for financing them
BUILDING CODE
Is a regulation that determines the design, construction, and materials used in building a structure.
BUYDOWN
When discount points are paid to a lender to reduce the interest rate seller pays discount points to help the buyer/ borrower quality for financing.
BUYER’S AGENT
A Real Estate Agent that has made an agreement to represent the buyer exclusively in a real estate deal.
CALL OPTION
Similar to the acceleration clause.
CAP
A limit that is placed on an adjustable rate mortgage that regulates how much a monthly payment or interest rate can increase or decrease.
CASH-OUT REFINANCE
When a borrower refinances his mortgage with the intention of pulling out money for personal use, it is referred to as “cash out refinance.”
CASH RESERVES
A cash amount required to be held in reserve in addition to the down payment and closing costs, the amount is determined by the lender.
CEILING
The maximum allowable interest rate over the life of the loan of an adjustable rate.
CERTIFICATE OF DEPOSIT
A timed deposit held in a bank which pays a certain amount of interest to the depositor.
CERTIFICATE OF DEPOSIT INDEX
One of the indexes used for determining interest rate changes on some adjustable rate mortgages.
CERTIFICATE OF ELIGIBILITY
A document issued by the Veterans Administration that certifies a veteran’s eligibility for
a VA guaranteed loan.
CERTIFICATE OF REASONABLE VALUE (CRV)
A document issued by the Dept. of Veterans Affairs, setting forth the current market value of a property, based on a VA-approved appraisal.
CERTIFICATE OF TITLE
A document provided by a qualified source that shows the property legally belongs to the current owner.
CHAIN OF TITLE
The chain of deeds transferring title to a piece of property from one owner to the next, as disclosed in the public record.
CLEAR TITLE
A title that is free of liens or legal questions as to ownership of the property.
CLOSING
Is the final stage in a real estate transaction, when a seller receives the purchase money, the buyer receives the deed, and title is transferred. Can also be called settlement.
CLOSING COSTS
Any fees paid by the borrowers or sellers during the closing of the mortgage loan. This normally includes an origination fee, discount points, attorney’s fees, title insurance, and any items which must be prepaid, such as taxes and insurance escrow payments.
CLOSING STATEMENT
A document that presents a final, detailed accounting for a real estate transaction, listing each party’s debits and credits and the amount each will receive or required to pay at closing. Also called a closing statement.
CLOUD ON TITLE
Any conditions revealed by a title search that adversely affects the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.
CO-BORROWER
An additional individual who is both obligated on the loan and is on title to the property, Also known as co-owner.
COLLATERAL
Anything of value used as security for a debt or obligation.
COLLECTION
When a borrower falls behind, the lender contacts them in an effort to bring the loan current. If borrower is unable to bring loan current the property will be foreclosed on.
COMMISSION
Is the compensation paid to a broker for services in connection with a real estate transaction.
COMMON AREA ASSESSMENTS
In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.
COMMON AREAS
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance.
COMMON LAW
Long established rules of law based on early English law
COMMUNITY PROPERTY
Property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances.
COMPARABLE SALES
Recent sales of similar properties in nearby areas are used to help an appraiser determine the market value of a property. Sometimes called Comparable Market Analysis.
CONDOMINIUM
A type of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas
CONDOMINIUM CONVERSION
Changing the form of ownership in an existing building (usually a rental project) to the condominium form of ownership.
CONDOMINIUM HOTEL
A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.
CONFORMING LOAN
Generally, a mortgage loan under $203,150. Qualifying ratios and underwriting methods are standardized to a large degree.
CONSTRUCTION LOAN
A short-term loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
CONTINGENCY
A condition that must be met before a contract is legally binding. For example a buyer may want a successful home inspection before the contract is complete.
CONTRACT
An agreement between two or more persons to do or not do a certain thing, for consideration.
CONTRACT OF SALE
The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.
CONVENTIONAL MORTGAGE/ LOAN
An institutional loan that is not insured or guaranteed by a government.
CONVERTIBLE ARM
An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.
COOPERATIVE
A building owned by a corporation, where the residents are shareholders in the corporation.
COST OF FUNDS INDEX (COFI)
One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.
CREDIT
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
CREDIT HISTORY
A record of an individual's repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.
CREDIT LIMIT
The maximum amount that you can borrow under a home equity plan.
CREDITOR
A person to whom money is owed.
CREDIT REPORT
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
CREDIT REPOSITORY
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
CREDIT BUREAU SCORE
A number representing the possibility a borrower may default, it is based upon credit history and is used to determine ability to qualify for a mortgage loan.
DEBT
An amount owed to another.
DEBT TO INCOME RATIO
The ratio of a borrowers total of debt as a percentage of their total gross income.
DEBT SERVICE
The total amount of credit card, auto, mortgage or other debt upon which you must pay.
DEED
The document that transfers ownership of a property.
DEED-IN-LIEU
Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.
DEED IN TRUST
Used in many western states, the agreement used to pledge your home or other real estate as security for a loan.
DEFAULT
Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.
DELINQUENCY
Failure to make mortgage payments when mortgage payments are due.
DEPOSIT
A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an "earnest money deposit."
DEPRECIATION
A decline in the value of property. Depreciation is also an accounting term, which shows the declining monetary value of an asset and is used as an expense to reduce taxable income
DISCOUNT POINTS
Normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.
DOWN PAYMENT
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
DUE-ON-SALE PROVISION
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
EARNEST MONEY DEPOSIT
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
EASEMENT
A right of way giving persons other than the owner access to or over a property.
EEM
Energy Efficient Mortgage, an FHA program that helps home buyers save monet on utility bills by enabling them to finance the cost of adding energy efficient features.
EFFECTIVE AGE
An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
EMINENT DOMAIN
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
ENCROACHMENT
An improvement that intrudes illegally on another’s property.
ENCUMBRANCE
A claim against a property by another party whish usually affects the ability to transfer ownership of the property.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
EQUITY
A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
ESCROW
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition.
ESCROW ACCOUNT
A separate account into which the lender puts a portion of each monthly mortgage payment, which provides the funds needed for such expenses as property taxes , homeowner’s Insurance , mortgage insurance, etc.
ESCROW ANALYSIS
Once each year your lender will perform an "escrow analysis" to make sure they are collecting the correct amount of money for the anticipated expenditures.
ESCROW DISBURSEMENT
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
ESTATE
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
EVICTION
The lawful expulsion of an occupant from real property.
EXAMINATION OF TITLE
The report on the title of a property from the public records or an abstract of the title.
EXCLUSIVE LISTING
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
EXECUTOR
A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.
FAIR HOUSING ACT
A law that prohibits discrimination in all facets of the homebuying process on the basis of race, color, national origin, religion, sex, familial status or disability.
FAIR CREDIT REPORTING ACT
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
FAIR MARKET VALUE
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
FANNIE MAE (FNMA)
The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.
FANNIE MAE’S COMMUNITY HOME BUYER’S PROGRAM
An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
FEDERAL HOUSING ADMINISTRATION (FHA)
An agency established in 1934 of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
FEE SIMPLE
The greatest possible interest a person can have in real estate.
FEE SIMPLE ESTATE
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
FHA MORTGAGE
A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.
FIRM COMMITMENT
A lender’s agreement to make a loan to a specific borrower on a specific property.
FIRST MORTGAGE
The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions.
FIXED-RATE MORTGAGE
A mortgage in which the interest rate does not change during the entire term of the loan.
FIXTURE
Personal property that becomes real property when attached in a permanent manner to real estate.
FLOOD INSURANCE
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
FORECLOSURE
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
FSBO
For Sale By Owner, Real Esate that is sold without the assistance of an Agent. FSBO can refer to both the individual selling the property or the property itself.
401(k)/403(b)
An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.
401(k)/403(b) LOAN
Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans.
FREDDIE MAC
Federal home Loan Mortgage Corporation (FHLM) a federally chartered corporation that purchases residential mortgages, securities them, and sells them to investors. This provides lenders with funds for new homebuyers.
GOOD FAITH ESTIMATE
A written estimate of closing costs which a lender must provide you within three days of submitting an application.
GOVERNMENT LOAN (MORTGAGE)
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (Ginnie Mae)
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA)
GRACE PERIOD
A period of time during which a loan payment may be paid after its due date but not incur a late penalty.
GRANTEE
The person to whom an interest in real property is conveyed.
GRANTOR
The person conveying an interest in real property.
GROSS INCOME
For qualifying purposes the income of the borrower before taxes and expenses are deducted.
HAZARD INSURANCE
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
HELP
Homebuyer Education Learning Program. An educational program from the FHA that counsels people about the home buying process.
HOME EQUITY CONVERSION MORTGAGE (HECM)
Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables homeowners to convert the equity they have in their homes into cash, usually in the form of monthly payments.
HOME EQUITY LINE OF CREDIT
A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.
HOME INSPECTION
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property, makes the buyer aware of any repairs that may be needed before they property. A satisfactory home inspection is often included as a contingency by the purchaser.
HOMEOWNER’S ASSOCIATION
A group that manages the common areas of a planned unit development (PUD) or condominium project.
HOMEOWNER’S INSURANCE
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
HOME WARRANTY
A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period.
HUD
U.S. Department of Housing and Urban Development, HUD works to create a decent home and suitable living environment for all Americans.
HUD MEDIAN INCOME
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
HUD-1 SETTLEMENT STATEMENT
A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the "closing statement" or "settlement sheet."
INDEX
A measurement used by lenders to determine changes to the interest rate charged on an adjustable rate mortgage.
INFLATION
The number of dollars in circulation exceeds the amount of goods and services avaible to purchase, inflation is a result of a decrease in the dollar’s value.
INSPECTION
A whole house inspection of a home considered for purchase which looks for defects in the property.
INTEREST
That portion of a mortgage payment that is the “charge” for using the lender’s funds.
INTEREST RATE
The amount of interest charged on a monthly loan payment, usually expressed as a percentage.
INSURANCE
Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.
JOINT TENDENCY
A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
JUDGMENT
A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.
JUDICIAL FORECLOSURE
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
JUMBO LOAN
A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
LATE CHARGE
The penalty a borrower must pay when a payment is made a stated number of days. On a first trust deed or mortgage, this is usually fifteen days.
LEASE
A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.
LEASEHOLD ESTATE
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
LEASE OPTION
An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
LEASE PURCHASE
Assists low- to moderate- income homebuyers in purchasing a home by allowing them to lease a home with a an option to buy.
LEGAL DESCRIPTION
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
LENDER
A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."
LIABILITIES
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
LIABILITY INSURANCE
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.
LIEN
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.
LIFE CAP
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the mortgage.
LINE OF CREDIT
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
LIQUID ASSETS
A cash asset or an asset that is easily converted into cash.
LISTING
A property for sale by a Real Estate Brokerage and Agent.
LOAN
A sum of borrowed money (principal) that is generally repaid with interest.
LOAN FRAUD
Purposely giving incorrect information on a loan application in order to better qualify for a loan.
LOAN OFFICER
Also referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others. The loan officer serves several functions: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.
LOAN ORIGINATION
How a lender refers to the process of obtaining new loans.
LOAN SERVICING
After you obtain a loan, the company you make the payments to is "servicing" your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.
LOAN-TO-VALUE (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower). The higher the LTV, the less cash a borrower is required to pay as a down payment.
LOCK-IN
An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost, since interest rates can change frequently.
LOCK-IN PERIOD
The time period during which the lender has guaranteed an interest rate to a borrower.
LOSS MITIGATION
A process to avoid foreclosure, the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.
MARGIN
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index, which moves up and down.
MATURITY
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
MERGED CREDIT REPORT
A credit report that reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.
MODIFICATION
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.
MORTGAGE
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.[
MORTGAGE BANKER
For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae or Freddie Mac. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.
MORTGAGE BROKER
A mortgage company that originates loans then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
MORTGAGEE
The lender in a mortgage agreement.
MORTGAGE INSURANCE (MI)
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.
MORTGAGE INSURANCE PREMIUM (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
MORTGAGE LIFE AND DISABILITY INSURANCE
A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.
MORTGAGE MODIFICATION
A loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payment.
MORTGAGOR
The borrower in a mortgage agreement.
MULTIDWELLING UNIT
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
MLS
Multiple Listing Service, a listing of all the properties for sale by Real Estate Brokerages in a given geographical area.
NEGATIVE AMORTIZATION
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
NO CASH-OUT REFINANCE
A refinance transaction that is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."
NO-COST LOAN
Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs, which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
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.
NO-COST LOAN
Almost all lenders offer loans at "no points." You will find the interest rate on a "no points" loan is approximately a quarter percent higher than on a loan where you pay one point.
NOTICE OF DEFAULT
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
OFFER
Indication by a potential buyer of a willing to purchase a home at a specific price generally put forth in writing.
ORIGINAL PRINCIPAL BALANCE
The total amount of principal owed on a mortgage before any payments are made.
ORIGINATION
The process of preparing, submitting and evaluating a loan application, generally includes a credit check, verification of employment, and a property appraisal.
ORIGINATION FEE
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
OWNER FINANCING
A property purchase transaction in which the property seller provides all or part of the financing.
PARTIAL CLAIM
A loss mitigation option offered by the FHA that allows a borrower, with help from a lender to get an interest free loan.
PARTIAL PAYMENT
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.
PAYMENT CHANGE DATE
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.
PERIODIC PAYMENT CAP
For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.
PERIODIC RATE CAP
For an adjustable-rate mortgage, 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
This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.
PITI RESERVES
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
PLANNED UNIT DEVELOPMENT (PUD)
A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.
PMI
Private Mortgage Insurance, privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.
POINT
The amount paid either to maintain or lower the interest rate changed. 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.
PRE-APPROVAL
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification
PRE-FORECLOSURE SALE
Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.
PREMIUM
An amount paid on a regular schedule by a policyholder that maintains insurance coverage.
PRE-PAIDS
Paid for in cash at closing for such items as homeowners insurance for one year and real estate takes for several months.
PREPAYMENT
Any amount paid to reduce the principal balance of a loan before the due date. The payment is in full, on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
PREPAYMENT PENALTY
A fee that may be charged to a borrower who pays off a loan before it is due.
PRE-QUALIFICATION
This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.
PRIME RATE
The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
PRINCIPAL
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
PRINCIPAL BALANCE
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.
PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)
The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
PRIVATE MORTGAGE INSURANCE (MI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
PROMISSORY NOTE
A written promise to repay a specified amount over a specified period of time.
PROPERTY TAX
An annual or semi-annual tax paid to one or more governmental jurisdictions based on the amount of the property assessment. Generally paid as part of the mortgage payment.
PUBLIC ACTION
A meeting in an announced public location to sell property to repay a mortgage that is in default.
PURCHASE AGREEMENT
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
PURCHASE MONEY TRANSACTION
The acquisition of property through the payment of money or its equivalent.
QUALIFYING RATIO
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The "top" or "front" ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The "back" or "bottom" ratio includes housing costs as will as all other monthly debt.
QUITCLAIM DEED
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
RADON
A radioactive gas found in some homes that, if occurring in strong enough concentrations can cause health problems.
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 at a specific cost.
REAL ESTATE AGENT
A person licensed to negotiate and transact the sale of real estate.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing 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 agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
RECORDER
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
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
Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).
REFINANCE TRANSACTION
The process of paying off one loan with the proceeds from a new loan using the same property as security.
REHABILITATION MORTGAGE
A mortgage that covers the costs of rehabilitating a property.
REMAINING BALANCE
The amount of principal that has not yet been repaid. See principal balance.
REMAINING TERM
The original amortization term minus the number of payments that have been applied.
RENT LOSS INSURANCE
Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
REPAYMENT PLAN
An arrangement made to repay delinquent installments or advances.
REPLACEMENT RESERVES 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.
REAL ESTATE SETTLEMENT ACT (RESPA)
Is a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices and relationships.
REVOLVING DEBT
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.
RIGHT TO RESCISSION
The legal right to void or cancel your mortgage contracts in such a way as to treat the contract as if it never existed. Right of rescission is not applicable to mortgages made to purchase a home, but may be applicable to other mortgages, such as home equity loans.
SALE-LEASEBACK
A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
SECOND MORTGAGE
A mortgage that has a lien position subordinate to the first mortgage.
SECONDARY MARKET
The buying and selling of existing mortgages, usually as part of a "pool" of mortgages.
SECURED LOAN
A loan that is backed by collateral.
SECURITY
The property that will be pledged as collateral for a loan.
SECURITY INTEREST
An interest that a lender takes in the borrower’s property to assure repayment of a debt.
SELLER CARRY-BACK
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
SERVICER
An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
SERVICING
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
SERVICING A LOAN
The ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.
SETTLEMENT
Another name for a closing.
SETTLEMENT STATEMENT
See HUD1 Settlement Statement
SPECIAL FORBEARANCE
A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.
SUB-AGENT
A real estate agent who is working with a buyer but who represents the sellers in the transaction.
SUBDIVION
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
SUBORDINATE
To place rank of lesser importance or to make a claim secondary to another.
SUBORDINATE FINANCING
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
SURVEY
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
SWEAT EQUITY
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
TENANCY IN COMMON
As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
THIRD-PARTY ORIGINATION
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
TITLE
A legal document evidencing a person's right to or ownership of a property.
TITLE COMPANY
A company that specializes in examining and insuring titles to real estate.
TITLE INSURANCE
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
TITLE SEARCH
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
TRANSACTION FEE
A fee, which may be charged each time, you draw on a home equity credit.
TRANSFER OF OWNERSHIP
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
TRANSFER TAX
State or local tax payable when title passes from one owner to another.
TREASURY INDEX
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
TRUTH-IN-LENDING
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
TWO-STEP MORTGAGE
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
TWO- TO FOUR- FAMILY PROPERTY
A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
TRUSTEE
A fiduciary who holds or controls property for the benefit of another.
UNDERWRITING
The process of analyzing a loan application to determine the amount of risk involved in making the loan. It includes a review of the potential borrower’s credit history and a judgment of the property value.
VARIABLE RATE
An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.
VA LOAN
More appropriately termed “VA Insured Loan.” A loan for which the Veteran’s Administration insures the lender against losses the lender may incur due to your default. Available only to veterans possessing a Certificate of Eligibility.
VA MORTGAGE
A mortgage is guaranteed by the Department of Veterans Affairs (VA).
VESTED
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set-aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
VETERANS ADMINISTRATION (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
WARRANTY
Covers either most of the house in a new home, or selected items in a used home. Warranties can vary widely and are optional in used homes.
ZONING
Laws that govern specifically how a zoned area can be used. For example, an area may be zoned for single family residential, condominiums, commercial or retail, or a mix of two or more uses.
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