Glossary Of Real Estate Terms
A B C
D E F
G H I
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Acceptance - A buyer's or seller's agreement to enter
into a contract and be bound by the terms of the offer.
Additional Principal Payment - A payment made by a
borrower of more than the scheduled principal amount due, in order to reduce the
outstanding balance on the loan, to save on interest over the life of the loan
and/or pay off the loan early.
Adjustable Rate Mortgage (ARM) - stands for
Adjustable Rate Mortgage, also referred to as a Variable Rate Mortgage. They
both mean the same thing. An ARM is a mortgage with an interest rate that
adjusts periodically to reflect changes in market conditions. Your mortgage
payments are adjusted up or down (usually on an annual basis) as the interest
rate changes. To protect you in a rising interest market, rate increases are
limited (usually 2 percentage points annually; 6 percentage points over the life
of the loan).
Amenity - A feature of real property that enhances
its attractiveness and increases the occupant's or user's satisfaction, although
the feature is not essential to the property's use. Natural amenities include a
pleasant or desirable location near water, scenic views, etc. Man-made amenities
include swimming pools, tennis courts, community buildings, and other
Amortization - The gradual repayment of a home loan
by periodic installments.
Amortization Schedule - A timetable for payment of a
home loan. An amortization schedule shows the amount of each payment applied to
interest and principal and the remaining balance after each payment is
Amortization Term (period) - The amount of time it
takes to pay off the loan. The amortization term is expressed as a number of
months. For example, for a 30 year fixed rate loan, the amortization term is 360
Amortize - To repay a loan with regular payments that
cover both principal and interest.
Annual Percentage Rate (APR) - stands for Annual
Percentage Rate. This refers to the interest rate that reflects the actual cost
of a mortgage as a yearly rate. Because APR includes points and other costs
associated with the mortgage, it's usually higher than the advertised simple
interest rate. The APR more accurately reflects what you'll be paying and allows
you to compare different mortgages based on actual costs.
(or 1003) - A form to be completed by a home loan applicant with the
lender's assistance to provide pertinent information about a prospective
borrower's employment, income, assets, debts and other financial information,
about the purpose of the home loan, and about the property securing the home
loan. Lenders also sometimes call it a 1003-the form number of Fannie Mae's
standard application form.
Application Fee - A fee usually paid at the time an
application is given to a lender for helping to complete and review an
application. Some lenders collect fees for a property appraisal and a credit
report, instead of an application fee, at the time of application.
Appraisal - An estimate of the value of a home, made
by a professional appraiser. The maximum amount of the mortgage is usually based
on the appraisal.
Appraised Value - The dollar figure for a
property's estimated fair market value, based on an appraiser's knowledge,
experience, and analysis of the property and comparable properties near
Appraiser - A person qualified by education,
training, and experience to estimate the value of real property.
Appreciation - An increase in the value of a property
due to changes in market conditions or other causes. Inflation, increased
demand, home improvement, and sweat equity are all causes of appreciation. The
opposite of depreciation.
Assessed Value - The value used to determine property
taxes, based on a public tax assessor's opinion. Contrast with appraised
Assessment - The amount of tax due to local
government. May also refer to the amount due to local government or to common
owners of a property (e.g., a homeowner's association) for a special payment to
cover expenses for improvements or maintenance, such as new sewers or
Assessment Rolls - A public record of the assessed
value of property in the taxing jurisdiction.
Assessor - A public official who establishes the
value of a property for taxation purposes.
Asset - Anything of monetary value that is owned by a
person. Assets include real property, personal property, and enforceable claims
against others (including bank accounts, stocks, mutual funds, and so
Assumable Loan - A home loan that allows a new
purchaser of the home to take over ("assume") the loan obligations of the seller
when a home is sold.
Assumption Clause - A provision in an assumable loan
that allows a buyer to assume responsibility for the home loan from the seller.
The loan does not need to be paid in full by the original borrower (seller) upon
sale or transfer of the property.
Assumption Fee - The fee paid to a lender (usually by
the buyer) for the lender's agreement to start collecting payment from the buyer
instead of the original borrower (seller).
Balance Sheet - A financial statement that shows an
individual's assets, liabilities, and net worth as of a specific
Balloon Loan - A loan that has level monthly payments
that will amortize it over a stated term (e.g., 30 years) but that requires a
lump sum payment of the entire principal balance at the end of a shorter term
(e.g., 10 years).
Balloon Payment - The final lump sum payment that is
made at the end of the shorter term for a balloon loan and pays the loan in
Bankrupt - A person, firm, or corporation that is
financially unable to pay debts when due. The debtor seeks relief through a
court proceeding to work out a payment schedule or erase debts. In some cases,
the debtor must surrender control of all assets to a court-appointed
Bankruptcy - A proceeding in a federal court in which
a debtor who is financially unable to pay debts when due seeks relief to work
out a payment schedule or erase debts.
Bill Of Sale - A written document that transfers
title to personal property from seller to buyer.
Biweekly Payment Loan - A loan that requires payments
to reduce the debt every two weeks (instead of the standard monthly payment
schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half
of the monthly payment that would be required if the loan were a standard 30
year fixed rate loan, and they are usually drafted from the borrower's bank
account. The result for the borrower is faster amortization leading to
substantial interest savings from faster principal
Bond - An interest-bearing certificate of debt with a
maturity date. A real estate bond is a written
obligation usually secured by
a mortgage or a deed of trust.
Breach - A violation of terms of any legal
Break Even Point - Point at which total income equals
Bridge Loan - A type of mortgage financing between
the termination of one loan and the start of another loan. For example, a
mortgage secured by the borrower's present home (which is usually up for sale)
in a manner that allows the proceeds to be used for closing on a new house
before the present home is sold. Also known as a "swing loan."
Broker - A person who is normally licensed by the
state and who, for a commission or a fee, assists in negotiating a real estate
transaction or negotiating the terms of a home loan. See mortgage
Budget - A detailed plan of income and expenses
expected over a certain period of time. A budget can provide guidelines for
managing future investments and expenses.
Building Code - Local regulations that specify
minimum structural requirements for design of, construction of, and materials
used in a home or office building. Building codes are based on safety and health
Buydown Account - An account in which funds are held
so that they can be applied as part of the monthly loan payment as each payment
comes due during the period that an interest rate buydown plan is in effect. For
example, if a seller agrees to help reduce a buyer's monthly payment during the
first year of a loan, the seller may put money in a buydown account which is
then paid to the lender each month to reduce the buyer's monthly payment. This
is more commonly done through a buydown paid directly to the lender at
Buydown - A temporary buydown gives a borrower a
reduced monthly payment during the first few years of a home loan and is
typically paid for in an initial lump sum made by the seller, lender, or
borrower. A permanent buydown is paid the same way but reduces the interest rate
over the entire life of a home loan.
Call Option - A provision in a loan that gives the
lender the right to accelerate the debt, and require for full payment of the
loan immediately, at the end of a specified period or for specified
Cap - A provision of an adjustable-rate mortgage
(ARM) that limits how much the interest rate or loan payments may increase or
decrease. In upward rate markets, it protects the borrower from large increases
in the interest rate or monthly payment. See lifetime payment cap, lifetime rate
cap, periodic payment cap, and periodic rate cap.
Capital - (1) Money used to create income, either as
an investment in a business or an income property. (2) The money or property
comprising the wealth owned or used by a person or business enterprise. (3) The
accumulated wealth of a person or business. (4) The net worth of a business
represented by the amount by which its assets exceed liabilities.
Capital Expenditure - The cost of an improvement made
to extend the useful life of a property or to add to its value, such as adding a
room. The cost of repairing a property is not a capital expenditure. Capital
expenditures are appreciated over their useful life; repairs are subtracted from
income for the current year.
Capital Improvement - Any structure or component
erected as a permanent improvement to real property that adds to its value and
useful life. See Capital Expenditure.
Cash Available For Closing - Borrower funds available
to cover down payment and closing costs. If lending guidelines require the
borrower to have cash reserves at the time the loan closes or that the down
payment come from certain sources, borrower's cash available for closing does
not include cash reserves or money from other sources.
Cash Flow Basis - This calculation shows when your
monthly payment savings exceed your estimated closing costs and discount points.
It does not consider the tax impact or differences in principal balance
reduction between your current loan and the refinance suggestions. You can use
the Amortization Schedule Calculator to compare principal reduction.
Cash For Transaction - Enter the amount your want to
use toward closing costs (discount points and fees) and/or to reduce your loan
balance. In situations where your loan balance is above the conforming amount,
reducing the principal may allow you to get a lower rate. Enter zero if you want
a no-point loan and/or to finance the closing fees.
Cash-Out Refinance - A refinance transaction in which
the new loan amount exceeds the total of the principal balance of the existing
first mortgage and any secondary mortgages or liens, together with closing costs
and points for the new loan. This excess is usually given to the borrower in
cash and can often be used for debt consolidation, home improvement, or any
other purpose. The borrower effectively borrows against the home
Ceiling - The maximum interest rate that can accrue
on a variable rate loan or adjustable rate mortgage (ARM). See lifetime rate
Certificate Of Eligibility - A document issued by the
federal government certifying a veteran's eligibility for a Department of
Veterans Affairs (VA) loan.
Certificate Of Reasonable Value (CRV) - A document
issued by the Department of Veterans Affairs (VA) that establishes the maximum
value and loan amount for a VA loan, based on an approved appraisal.
Certificate Of Title - A statement provided by an
abstract company, title company, or attorney stating who holds title to real
estate based on the public record.
Chain Of Title - The history of all of the documents
affecting title to a parcel of real property, starting with the earliest
existing document and ending with the most recent.
Clear Title - A title that is marketable and is free
of liens or disputed legal questions as to ownership of the property.
Closing - The conclusion or consummation of a
transaction. In real estate, closing includes the delivery of a deed, the
signing of notes and security instruments, and the disbursement of funds
necessary to the sale or loan transaction. Also referred to as
Closing Cost Item - A fee or amount that a home buyer
must pay at closing for a particular service, tax, or product. Closing costs are
made up of individual closing cost items such as origination fees and attorney's
fees. Many closing cost items are included as numbered items on the HUD-1
Closing Costs - Various expenses (over and above the
price of the property) incurred by buyers and sellers in transferring ownership
of a property. Closing costs normally include items such as broker's
commissions, discount points, origination fees, attorney's fees, taxes, title
insurance premiums, escrow agent fees, and charges for obtaining appraisals,
inspections and surveys. Closing costs will vary according to the area of the
country. Lenders or real estate professionals often provide estimates of closing
costs to prospective home buyers even before the HUD-1 settlement statement is
Closing Statement - An accounting of funds given to
both buyer and seller before real estate is sold. See HUD-1 settlement
Cloud On Title - An outstanding claim or lien,
revealed by a title search, that adversely affects the owner's title to real
estate. Usually, clouds on title cannot be removed except by a quit claim deed,
release, or court action.
Coinsurance - A sharing of insurance risk between the
insurer and the insured. Coinsurance depends on the relationship between the
amount of the policy and a specified percentage of the actual value of the
property insured at the time of the loss.
Coinsurance Clause - A provision in a hazard
insurance policy stating the minimum amount of coverage that must be maintained
- as a percentage of the total value of the property - in order for the insured
to collect the full amount of a loss.
Combined Loan To Value (CLTV) - The ratio of the
total amount borrowed on all mortgages against a property compared to the
appraised value of the property. For example, if you have an $80,000 1st
mortgage and a $10,000 2nd mortgage on a home with an appraised value of
$100,000, the CLTV is 90% ($80,000+$10,000 = $90,000 / $100,000 =
Commission - The fee charged by a broker or agent for
negotiating a real estate or loan transaction. A commission is generally a
percentage of the price of the property or loan (such as 3%, 5%, or
Commitment Letter - A formal notification from a
lender stating that the borrower's loan has been conditionally approved and
specifying the terms under which lender agrees make the loan. Also known as a
Common Area Assessments - Payments required of
individual unit owners in a condominium or planned unit development (PUD)
project for additional capital to defray homeowners' association costs and
expenses and to repair, replace, maintain, improve, or operate the common areas
of the project.
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 areas include
swimming pools, tennis courts, and other recreational facilities, as well as
common corridors of buildings, parking areas, means of ingress and egress,
Community Property - In some Western and Southwestern
states, the law specifies that property acquired during a marriage is presumed
to be owned jointly by the husband and wife unless acquired as separate property
of one spouse or the other.
Community Seconds? - An alternative financing option
for low- and moderate-income households under which an investor purchases a
first mortgage that has a subsidized second mortgage behind it. The second
mortgage may be issued by a state, county, or local housing agency, foundation,
or nonprofit organization. Payment on the second mortgage is often deferred and
carries a very low interest rate (or no interest rate at all). Part or all of
the second mortgage debt may be forgiven depending on how long the buyer remains
in the home.
Comparables (comps) - An abbreviation for "comparable
properties"; used for comparative purposes in the appraisal process. Comparables
are properties like the property under consideration; they have reasonably the
same size, location, and amenities and have recently been sold. Comparables help
the appraiser determine the approximate fair market value of the subject
Compound Interest - Interest paid on the principal
balance and on the accrued and unpaid interest.
Condemnation - (1) Declaration that a building is
unfit for use or is dangerous and must be destroyed; (2) taking of private
property for a public use (such as a park, street or school) through an exercise
of the right of eminent domain.
Condominium - A real estate project in which each
unit owner has title to a unit in a multi-unit building, an undivided interest
in the common areas of the project, and sometimes the exclusive use of certain
limited common areas.
Condominium Conversion - Changing the ownership of an
existing building (usually a rental project) to the condominium form of
Condominium Hotel (condotel) - 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.
Conforming Loan - A home loan with a maximum loan
amount of $252,700 that is eligible for purchase by FNMA and FHLMC.
Construction loan - A short-term, interim loan for
financing the cost of home construction. The lender makes payments to the
builder at periodic intervals as the work progresses.
Consumer Reporting Agency (or bureau) - An
organization that prepares reports that lenders use to determine a potential
borrower's credit history. The agency obtains data for these reports from a
credit repository as well as from creditors such as mortgage lenders, credit
card companies, department stores, etc.
Contingency - A condition that must be met before a
contract is legally binding. For example, home purchasers often include a
contingency that specifies that the contract is not binding until the purchaser
obtains a satisfactory home inspection report from a qualified home
Contract - An oral or written agreement to do or not
Conventional Loan - A home loan that is not insured
or guaranteed by the federal government. Contrast with government loan. Can be
for conforming or non-conforming loan amounts.
Convertibility Clause - A provision in some
adjustable rate mortgages (ARMs) that allows the borrower to change the ARM to a
fixed rate loan at specified times during the life of the loan.
Convertible ARM - An adjustable rate mortgage (ARM)
that can be converted to a fixed rate loan under specified
Cooperative (co-op) - A type of multiple ownership in
which the residents of a multi-unit housing complex own shares in the
cooperative corporation that owns the property, giving each resident the right
to occupy a specific apartment or unit.
Corporate Relocation - Arrangements under which an
employer moves an employee to another area as part of the employer's normal
course of business or under which it transfers a substantial part or all of its
operations and employees to another area because it is relocating its
headquarters or expanding its office capacity.
Co-Signer - A person who signs a promissory note
along with the borrower. A co-maker's signature helps to assure that the loan
will be repaid. The borrower and the co-maker are jointly responsible
repayment of the loan.
Cost Of Funds Index (COFI) - An index that is used to
determine interest rate changes for certain adjustable-rate mortgage (ARM)
plans. It represents the weighted-average cost of savings, borrowings, and
advances of the 11th District members of the Federal Home Loan Bank of San
Francisco. See adjustable-rate mortgage (ARM).
Covenant - A promise in a mortgage or deed that
requires or prevents certain uses of the property that, if violated, may result
in loss or foreclosure of the property.
Credit - An agreement in which a borrower receives
money or something of value in exchange for a promise to repay the lender on
specified terms at a later time.
Credit History - An evaluation of an individual's
capacity and history of debt repayment. A credit history helps a lender to
determine whether a potential borrower is likely to repay a loan in a timely
Credit Life Insurance - A type of insurance that pays
off a loan if one of the borrowers dies while the policy is in force.
Credit Limit - The maximum amount that can be
borrowed under the home equity line of credit.
Creditor - A person to whom money is owed.
Credit Rating - An expression of creditworthiness
based upon present financial condition and past credit history.
Credit Report - A detailed account of the credit,
employment and residence history of an individual used by a prospective lender
to help determine creditworthiness. Credit reports also list any judgments, tax
liens, bankruptcies or similar matters of public record entered against the
Credit Repository (credit bureau) - An organization
that gathers, records, updates, and stores financial and public records
information about the payment records of individuals who are being considered
Credit Scoring - Credit scores are numerical values
that rank individuals according to their credit history at a given point in
time. Your score is based on your past payment history, the amount of credit you
have outstanding, the amount of credit you have available, and other factors.
According to Fannie Mae--one of the major investors in home loans, credit scores
have proven to be very good predictors of whether a borrower will repay his or
Cumulative Interest - Total interest
Current PITI - This is an abbreviation for a monthly
payment that includes principal, interest, taxes and insurance. In mortgage
lending it is common for the monthly mortgage payment to include not only the
principal and interest payment on the loan, but an escrow amount for real estate
taxes and hazard insurance as well.
Curtailment - A payment that reduces the principal
balance of a loan.
Debt - An amount owed to another. See installment
loan and revolving liability.
Deed - The legal document conveying title to a
Deed-In-Lieu - A deed given by a borrower to the
lender to satisfy a debt and avoid foreclosure. Also called a "voluntary
Deed Of Trust - The document used in some states
instead of a mortgage; title is vested in a trustee to secure repayment of the
Default - Failure to make loan payments on a timely
basis or to comply with other requirements of a mortgage.
Delinquency - Failure to make mortgage payments when
Deposit - A sum of money given to bind the sale of
real estate, or a sum of money given to ensure payment or an advance of funds in
the processing of a loan. See earnest money deposit.
Depreciation - A decline in the value of property
because of physical or economic changes such as wear and tear; the opposite of
Discount Points - Amounts paid to the lender at
origination to lower the rate on the face of the note. See point.
Document Preparation - This fee covers the expenses
associated with this process of preparing some of the legal documents that you
will be signing at the time of closing, such as the mortgage, note, and
Down Payment - The part of the purchase price of a
property that the buyer pays in cash and does not finance with a home
Draw Period - The time period in which the borrower
may access and use a line of credit.
Due-On-Sale Provision - A provision in a mortgage
home loan that allows the lender to demand repayment in full if the borrower
sells the property that serves as security for the loan.
Due-On-Transfer Provision - This terminology is
usually used for second mortgages. See due-on-sale provision.
Earnest Money Deposit (Earnest Money) - A deposit
made by the potential home buyer to show that he or she is serious about buying
Easement A right of way giving to persons other than
the owner to access to or over a property.
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 fair compensation to the owner.
Eminent domain is the basis for condemnation proceedings.
Employer-Assisted Housing A special Fannie Mae
housing initiative that offers several different ways for employers to work with
local lenders to develop plans to assist their employees in purchasing
Encroachment - An improvement that physically
intrudes or trespasses on another's property.
Encumbrance - Anything that affects or limits the fee
simple title to a property, such as mortgages, leases, easements, deeds, or
Endorser - A person who signs a check or promissory
note over to another party. Contrast with co-signer.
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
Equity - The value of your home after the outstanding
balance of any loans are subtracted. If you make a 5 percent down payment, you
have 5 percent of the price of your home in equity. As you make payments toward
principal over time, the equity in your home grows.
Escrow - Can serve two purposes. 1)As a special
third-party account set up by the lender in which a portion of your monthly
payment funds are held to pay for taxes and insurance and other items. 2)Escrow
is most commonly known as a third party who carries out the instructions of both
the buyer and seller to handle the paperwork at the settlement of a real estate
Escrow (or Impound) Account - The account in which a
loan servicer holds the borrower's escrow payments prior to paying property
expenses, such as property taxes or homeowners insurance.
Escrow Analysis - The periodic examination of escrow
accounts to determine if current monthly deposits will provide sufficient funds
to pay taxes, insurance, and other bills when due.
Escrow Collections - Funds collected by the loan
servicer and set aside in an escrow account to pay borrower expenses such as
property taxes, mortgage insurance, and hazard homeowners insurance.
Escrow Disbursements - The use of escrow funds to pay
real estate taxes, homeowners insurance, mortgage insurance, and other property
expenses as they become due.
Escrow Payment - The portion of a borrower's monthly
payment that is held by the loan servicer to pay for taxes, hazard homeowners
insurance, mortgage insurance, lease payments, and other items as they become
due. Known as "impounds" or "reserves" in some states.
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 - A legal proceeding by a landlord to
recover possession of real property from the tenant.
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, but reserving the owner's right to sell the property alone
without the payment of a commission.
Fair Credit Reporting Act - A consumer protection law
that regulates the disclosure and use of consumer credit information,
establishes rules for credit reporting to consumer credit reporting agencies,
and establishes procedures for a consumer to view his or her credit report and
correct mistakes on it.
Fair Market Value - The price that a buyer, willing
but not compelled to buy, and a seller, willing but not compelled to sell, would
Fannie Mae (Federal National Mortgage Association FNMA) -
A New York Stock Exchange company and the largest non-bank financial
services company in the world. It operates pursuant to a federal charter and is
the nation's largest source of financing for home mortgages. It adds liquidity
to the mortgage market by investing in home loans through the
Federal Housing Administration (FHA) - An agency 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 loan underwriting but does not lend money or plan
or construct housing.
Fee Simple - 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
FHA Coinsured Home Loan - A loan (under FHA Section
244) for which the Federal Housing Administration (FHA) and the originating
lender share the risk of loss in the event of the borrower's default.
FHA Home Loan - A mortgage home loan that is insured
by the Federal Housing Administration (FHA). Also known as a government
Filing Status - Please enter here whether you file
your income taxes as single, married, separated or head-of household.
Firm Commitment - A lender's agreement to make a loan
to a specific borrower on a specific property.
First Mortgage (Home Loan) - A home loan that is the
primary lien against a property.
Fixed Installment - The monthly payment due on a
mortgage loan. The fixed installment includes payment of both principal and
Fixed Period ARM - Provides a fixed rate for 3, 5, 7
or 10 years then adjusts annually based on a financial index for the remaining
Fixed Rate Mortgage - A mortgage with an interest
rate that stays the same (fixed) over the life of the mortgage. Monthly payments
for a fixed rate mortgage are very stable and will not change.
Fixture - Personal property that becomes real
property when attached in a permanent manner to real estate (such as a lighting
fixture or an in-ground spa).
Flood Check - A survey conducted to determine whether
a property is in a flood zone.
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's
interest in mortgaged property is taken because of a default on the loan. This
usually involves a forced sale of the property at public auction with the
proceeds of the sale being applied to the mortgage debt.
Forfeiture - The loss of money, property, rights, or
privileges due to a breach of legal obligation.
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
401(k)/403(b) Loan - Some administrators of
401(k)/403(b) plans allow for loans against the monies accumulated in these
plans - monies must be repaid to avoid serious penalty charges.
Freddie Mac (Federal Home Loan Mortgage Corporation) -
A federal agency within the Department of Housing and Urban Development
(HUD), which insures residential mortgage loans made by private lenders and sets
standards for underwriting mortgage loans.
Good Faith Estimate - A document provided when you
apply for a loan. It provides estimates of all costs associated with obtaining
and closing a mortgage loan.
Government Loan - A loan that is insured by the
Federal Housing Administration (FHA) or guaranteed by the Department of Veterans
Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional
Government National Mortgage Association (GNMA or 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
assumed responsibility for the special assistance loan programs formerly
administered by Fannie Mae.
Grantee - The person to whom an interest in real
property is conveyed (e.g. the buyer).
Grantor - The person who conveys an interest in real
property (e.g. the seller).
Gross Monthly Income - Normal annual income including
overtime that is regular or guaranteed. The before taxes income may be from more
than one source. Salary is generally the principal source, but other income may
qualify if it is significant and stable.
Ground Rent - The amount of money that is paid for
the use of land when title to a property is held as a leasehold estate rather
than as a fee simple estate.
Group Home A single-family residential structure
designed or adapted for occupancy by unrelated developmentally disabled persons.
The structure provides long-term housing and support services that are
residential in nature.
Homeowner's Insurance (Hazard Insurance) - Insurance
coverage that compensates for physical damage to a property from fire, wind,
vandalism, or other hazards. The policy typically combines personal liability
insurance and property hazard insurance coverage for a dwelling and its
contents. See also homeowner's insurance.
Home Equity Line Of Credit (HELOC) - A mortgage loan,
which is usually in a subordinate position, that allows the borrower to obtain
multiple advances of the loan proceeds at his or her own discretion, up to an
amount that represents a specified percentage of the borrower's equity in a
Home Inspection - A thorough inspection that
evaluates the structural and mechanical condition of a property. A satisfactory
home inspection is often included as a contingency by the purchaser. Contrast
Homeowners' Association - A nonprofit association
that manages the common areas of a planned unit development (PUD) or condominium
project. In a condominium project, it has no ownership interest in the common
elements. In a PUD project, it holds title to the common elements. See also
Homeowner's Insurance - Insurance coverage that
compensates for physical damage to a property from fire, wind, vandalism, or
other hazards. The policy typically combines personal liability insurance and
property hazard insurance coverage for a dwelling and its contents.
Homeowner's Warranty (HOW) - A type of insurance that
covers repairs to specified parts of a house for a specific period of time. It
may be provided by the builder or property seller as a condition of the sale but
homeowners can also purchase it.
Housing Expense Ratio - The percentage of gross
monthly income that goes toward paying housing expenses.
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 are payable at closing. Items that appear
on the statement include real estate commissions, loan fees, points, and initial
escrow amounts. Each item on the statement is represented by a separate number
within a standardized numbering system. The totals at the bottom of the HUD-1
statement define the seller's net proceeds and the buyer's net payment at
closing. The blank form for the statement is published by the Department of
Housing and Urban Development (HUD). The HUD-1 statement is also known as the
"closing statement" or "settlement sheet."
Income Property - Real estate developed or improved
to produce income.
Index - A number used to compute the interest rate
for an adjustable-rate mortgage (ARM). The index is generally a published number
or percentage, such as the average interest rate or yield on Treasury bills. A
margin is added to the index to determine the interest rate that will be charged
on the ARM. Some lenders provide caps that limit how much the interest rate or
loan payments may increase or decrease.
In-File Credit Report - An objective account,
normally computer-generated, of credit and other financial information obtained
from a credit reporting agencies.
Inflation - An increase in the amount of money or
credit available in relation to the amount of goods or services available, which
causes an increase in the general price level of goods and services. Over time,
inflation reduces the purchasing power of a dollar, making it worth
Initial Draw Amount - The amount of the home equity
line of credit that the borrower is requesting at closing (up to, but never
exceeding, the credit line amount).
Initial Interest Rate - The starting interest rate
for an adjustable-rate mortgage (ARM) loan or variable-rate home equity line of
credit. At the end of the effective period for the initial rate, the interest
rate adjusts periodically during the life of the loan based on changes in a
specified financial index. Sometimes known as "start rate," "intro rate" or
Introductory Rate - The starting rate for a home
equity loan or line of credit, usually a discounted rate, for a short period of
time. See initial interest rate.
Installment Loan - Borrowed money that is repaid in
equal payments, known as installments. A furniture loan is often paid for as an
Insurable Title - A property title that a title
insurance company agrees to insure against defects and disputes.
Insurance - A contract that provides compensation for
specific losses in exchange for a periodic payment. An individual contract is
known as an insurance policy, and the periodic payment is known as an insurance
Insurance Binder - A document that states that
insurance is temporarily in effect. Because the coverage will expire by a
specified date, a permanent policy must be obtained before the expiration
Insured Mortgage - A mortgage that is protected by
the Federal Housing Administration (FHA) or by private mortgage insurance (PMI).
If the borrower defaults on the loan, the insurer must pay the lender the lesser
of the loss incurred or the insured amount.
Interest - The amount the lender charges to lend you
Interest Accrual Rate - The percentage rate at which
interest accrues on the mortgage. In most cases, it is also the rate used to
calculate the monthly payments.
Interest Payment - The portion of a monthly payment
that goes to interest based on the amortization schedule.
Interest Rate - The percentage rate of return charged
for use of a sum of money. This percentage rate is specified in the mortgage
note. See note rate.
Interest Rate Buydown Plan - A temporary buydown
gives a borrower a reduced monthly payment during the first few years of a home
loan and is typically paid for in an initial lump sum made by the seller,
lender, or borrower. A permanent buydown is paid the same way but reduces the
interest rate over the entire life of a home loan.
Investment Property - A property that is not occupied
by the owner and is generally rented to a tenant to produce income.
Joint Tenancy - A form of co-ownership that gives
each tenant equal undivided interest and rights in the property, including the
right of survivorship. Contrast with tenancy in common, tenancy by the
Judgment - A decree by a court of law that one
person, a debtor, is indebted to another, a creditor, in a specified amount. The
court may place a lien against the debtor's real property as collateral for
payment of the judgment to the creditor.
Judgment Lien - A lien on the property of a debtor
resulting from a judgment.
Judicial Foreclosure - A type of foreclosure
proceeding used in some states that is handled as a civil lawsuit where the
court confirms the sales price for the property and the distribution of the sale
Jumbo Loan - Any loan amount in excess of $252,700.
Also called a nonconforming loan.
Late Charge - The penalty a borrower must pay when a
payment is made a stated number of days (usually 10-15) after the due
Lease - A written agreement between the property
owner and a tenant that stipulates the conditions under which the tenant may use
the real estate for a specified period of time and the amount of rent to be
Leasehold Estate - A tenant's interest in or right to
hold possession of a property.
Legal Description - A property description,
recognized by law, using a government rectangular survey, metes and bounds, or a
plot map to sufficiently locate and identify a property.
Lender's Fees - Fees paid to the lender to cover
costs associated with processing, underwriting and closing of the
Lending Guidelines - Every loan program has different
guidelines. Guidelines are used to meet Federal, State and Local laws and
enforce minimum requirements by the lender. Guidelines ensure that prospective
borrowers won't purchase a home that they won't be able to afford.
Liabilities - A person's debts or financial
obligations. Liabilities include long-term and short-term debt, as well as
potential losses from legal claims.
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. See also homeowners insurance.
Lien - A legal claim against a property that must be
paid off when the property is sold. A lien is created when you borrow money to
purchase or refinance a home loan or and with obtain a home equity
Lifetime Rate 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 loan. See cap.
Line/Loan Amount - The entire HELOC or Fixed Rate
Second mortgage loan amount.
Line Of Credit - An agreement by a lender to extend
credit up to a certain amount for a certain time without the need for the
borrower to file another application. See home equity line of credit.
Liquid Asset - A cash asset or an asset that is
easily converted into cash.
Loan Amount - The amount of money you want to borrow
to purchase or refinance a home. Also called the principal and is generally
repaid over time with interest.
Loan Commitment - A lender's agreement to advance
money on specified terms after specified conditions are met. See commitment
Loan Origination - The process by which a mortgage
lender makes a home loan and records a mortgage against the borrower's real
property as security for repayment of the loan.
Loan Program - Typically a lender will have several
types of loan programs available. They are described in accordance with the
major features of the loan program. For example, a loan described as a "Fixed 30
Year" would mean that the interest rate and payment remain fixed over the thirty
year life of the loan. A program described as "Fixed/ARM 5/1" means that the
interest rate and payment remain fixed for the first five years, and then it is
subject to adjustments every year thereafter.
Loan-To-Value Ratio - The ratio of the total amount
borrowed on a mortgage against a property compared to the appraised value of the
property. For example, if you have an $80,000 1st mortgage on a home with an
appraised value of $100,000, the LTV is 80% ($80,000 / $100,000 =
Lock-In - A written agreement in which the lender
guarantees a specified loan program interest rate and points if a mortgage goes
to closing within a set period of time.
Lock-In Period - The time period during which the
lender has guaranteed an interest rate to a borrower. See lock-in.
Margin - For an adjustable-rate mortgage (ARM) or
home equity line of credit, the amount that is added to the index to establish
the interest rate on each adjustment date, subject to any limitations on the
interest rate change. The margin is static and will not change during the life
of the loan.
Master Association - A homeowners' association in a
large condominium or planned unit development (PUD) project that is made up of
representatives from associations covering specific areas within the project. In
effect, it is a "second-level" association that handles matters affecting the
entire development, while the "first-level" associations handle matters
affecting their particular portions of the project.
Maturity - The date on which the principal balance of
a loan, bond, or other financial instrument becomes due and payable. At the
maturity of a 30-year loan the principal balance will be paid in
Maximum Financing - The maximum amount a lender will
lend on a specific loan program.
Maximum Rate - The maximum interest rate that can
accrue on a variable rate loan
Merged Credit Report - A credit report that contains
information from more than one credit reporting agency. When the report is
created, the information is compared for inconsistencies and duplicate entries.
Any duplicates are combined to provide a summary of a your credit.
Minimum Payment - The minimum amount that must be
paid monthly on an account. On the HELOC product, the minimum payment is
interest only during the draw period. On the Fixed Rate Second products, the
minimum payment is principal and interest.
Modification - The act of changing any of the terms
of the mortgage.
Money Market Account - A savings account that
provides bank depositors with many of the advantages of a money market fund.
Certain regulatory restrictions apply to the withdrawal of funds from a money
Money Market Fund - A mutual fund that allows
individuals to participate in managed investments in short-term debt securities,
such as certificates of deposit and Treasury bills.
Monthly Debt - A borrower's monthly expenses
including credit cards, installment loans, student loan payments, alimony and
child support and housing payment expense.
Monthly Mortgage Insurance (MI) Payment - Portion of
monthly payment that covers the cost of Private Mortgage Insurance.
Monthly Principal & Interest (P&I) Payment -
Portion of monthly payment that covers the principal and interest due on the
Monthly Taxes & Insurance (T&I) Payment -
Portion of monthly payment that funds the escrow or impound account for
taxes and insurance.
Monthly Payment (P&I) - This is the monthly
mortgage payment on a home loan, this includes principal and interest, but
excludes any amounts that are applied to taxes and insurance.
Mortgage - A legal document that pledges a property
to the lender as security for payment of a debt.
Mortgage Banker - A company that originates, sells
and services mortgages exclusively for resale in the secondary mortgage
Mortgage Broker - An individual or company that
brings borrowers and lenders together for the purpose of loan origination.
Mortgage brokers typically require a fee or a commission for their
Mortgagee - The lender in a mortgage
Mortgage Insurance - A contract that insures the
lender against loss caused by a borrower's default on a government mortgage or
conventional mortgage. Mortgage insurance can be issued by a private company or
by a government agency such as the Federal Housing Administration (FHA).
Depending on the type of mortgage insurance, the insurance may cover a
percentage of or virtually all of the mortgage loan. See private mortgage
Mortgage Insurance Premium (MIP) - The amount paid by
a borrower for mortgage insurance, either to a government agency such as the
Federal Housing Administration (FHA) or to a private mortgage insurance (MI)
Mortgage Life Insurance - A type of term life
insurance sometimes bought by borrowers. The amount of coverage decreases as the
loan's principal balance declines. In the event that the borrower dies while the
policy is in force, the debt is automatically satisfied by insurance proceeds.
See credit life insurance.
Mortgagor - The borrower in a mortgage
Multi-Dwelling Units - Properties that provide
separate housing units for more than one family, although they secure only a
single mortgage. Typically a 2-4 unit property.
Negative Amortization - An increase in the
outstanding balance of a mortgage that occurs when the monthly payment is not
large enough to cover the interest due. The amount of the shortfall is added to
the remaining balance to create "negative" amortization.
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.
No Closing Cost Loan - A loan in which the fees the
borrower(s) are not required to pay cash out-of-pocket at closing for the normal
closing costs. The lender typically includes the closing costs in the principal
balance or charges a higher interest rate than for a loan with closing costs to
cover the advance of closing costs.
Net Worth - The value of all of a person's assets,
including cash, minus all liabilities.
Non-Conforming Loan - See jumbo loan.
Non-Liquid Asset - An asset that cannot easily be
converted into cash.
"No Out Of Pocket Cost" Loan - A loan in which the
fees the borrower(s) are not required to pay cash out-of-pocket at closing for
the normal closing costs. The lender typically includes the closing costs in the
principal balance or charges a higher interest rate than for a loan with closing
costs to cover the advance of closing costs.
Notary - An official authorized by law to attest and
certify certain documents by his or her hand and official seal.
Note - A legal document that obligates a borrower to
repay a mortgage loan at a stated interest rate during a specified period of
Note Rate - The interest rate stated on a mortgage
Notice Of Default - A formal written notice to a
borrower that a default has occurred and that legal action may be
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, making a home loan, and recording a mortgage
against the borrower's real property as security for repayment of the loan. The
origination fee is stated in the form of points. One point is 1% of the mortgage
amount (e.g., 1,000 on a $100,000 loan).
Owner Financing - A property purchase transaction in
which the property seller provides all or part of the financing and takes back a
Partial Payment - A payment that is not sufficient to
cover the scheduled monthly principal and interest payment on a mortgage
Payment (P&I) - Your monthly mortgage payment,
including principal and interest, but excluding Tax and insurance
Payment Change Date - The date when a new monthly
payment amount takes effect on an adjustable rate mortgage (ARM). Generally, the
payment change date occurs in the month immediately after the adjustment date
and the borrower is notified 30 days prior as to the new rate.
Payoff - To pay the outstanding balance of a loan in
Periodic Payment Cap - A provision of an
adjustable-rate mortgage (ARM) that limits how much the interest rate or loan
payments may increase or decrease. In upward rate markets, it protects the
borrower from large increases in the interest rate or monthly payment at each
adjustment period. See cap.
Periodic Rate Cap - A provision of an adjustable-rate
mortgage (ARM) that limits how much the interest rate or loan payments may
increase or decrease. In upward rate markets, it protects the borrower from
large increases in the interest rate or monthly payment at each adjustment
period. See cap.
Personal Property - Any property that is not real
property or is not permanently fixed to land. Cash, furniture, and cars are all
examples of personal property.
Piggyback - A combination of two loans. Example: A
loan is made for 90% of the home price. 80% of the purchase price is supplied by
a 1st mortgage and 10% by a 2nd mortgage. The 2nd mortgage is piggybacked on the
PITI - An abbreviation for the parts of a typical
monthly mortgage payment. PITI stands for principal-Interest-Taxes-Insurance.
See principal, interest, taxes, and insurance.
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 - See PUD.
PMI - Stands for Private Mortgage Insurance. PMI is
an insurance policy the borrower buys to protect the lender from non-payment of
the loan. PMI policies are usually required if you make a down payment that is
below 20% of the sales price of the home.
Points (Loan Discount Points) - Points are prepaid
interest on your mortgage. A one-time fee charged by the lender at the time of
closing for originating a loan. Each point is 1% of the loan amount - that is, 2
points on a $100,000 mortgage would be $2,000.
Power Of Attorney - A legal document authorizing one
person to act on another's behalf. A power of attorney can grant complete
authority or can be limited to certain acts and/or certain periods of
Pre-Approval - A lender's conditional agreement to
lend a specific amount on specific terms to a homebuyer. (subject to
satisfactory appraisal and no change in financial condition). You can shop with
assurance, because you'll know up-front how large a loan you could qualify
Preforeclosure Sale -A procedure in which the
investor allows a mortgagor to avoid foreclosure by selling the property,
typically for less than the amount that is owed to the lender.
Pre-Paid Items (Prepaids) - Items required by lender
to be paid at closing prior to the period they cover such as prorated property
taxes, homeowners insurance and pre-paid interest.
Pre-Paid Interest - Mortgage interest that is paid in
advance of when it is due.
Prepayment - Any amount paid to reduce the principal
balance of a loan before the due date. Payment 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. Generally, a prepayment penalty
is added to a loan in exchange for a discounted rate.
Pre-Qualification - A preliminary analysis of a
borrower's ability to afford the purchase of a home. An affordability analysis
takes into consideration factors such as income, liabilities, and available
funds, along with the type of home loan, the likely taxes and insurance for the
home, and the estimated closing costs.
Primary Residence - The place someone lives most of
Prime Rate - The interest rate that banks charge on
short-term loans to its most creditworthy customers. Changes in the prime rate
influence changes in other rates, including mortgage interest rates.
Principal - The amount borrowed or remaining unpaid.
The part of the monthly payment that reduces the remaining balance of a
Principal Balance - The outstanding balance on a
mortgage. The principal balance does not include interest or any other charges.
See remaining balance.
Principal, Interest, Taxes, and Insurance (PITI) -
Four potential components of a monthly mortgage payment. 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 may be paid into an escrow account each month for
property taxes and mortgage and hazard insurance.
Principal Payment - Portion of your monthly payment
that reduces the remaining balance of a home loan.
Private Mortgage Insurance (PMI) - Mortgage insurance
that is provided by a private mortgage insurance company to protect lenders
against loss if a borrower defaults. Most lenders generally require PMI for a
loan with a loan-to-value (LTV) percentage in excess of 80 %.
Processing - The preparation and documentation of a
mortgage loan application for underwriting.
Promissory Note - A written promise to repay a
specified amount over a specified period of time.
Property Value - LTV or Loan to Value Ratio refers to
the relationship between the unpaid principal balance of the mortgage and the
property's appraised value (or sales price if it is lower).
Public Auction - A meeting in an announced public
location to sell property to repay a mortgage that is in default.
PUD (Planned Unit Development) - 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
Purchase Agreement - A written contract signed by the
buyer and seller stating the terms and conditions under which a property will be
Purchase Money Transaction - A loan used in part as
payment for a purchase. A loan that is used to buy a home is called a purchase
Purchase Price - The total amount paid for a
Qualifying Ratios - Calculations that are used in
determining whether a borrower can qualify for a mortgage. They consist of two
separate calculations: a housing expense as a percent of income ratio and total
debt obligations as a percent of income ratio.
Quit Claim Deed - A deed that transfers, without
warranty of ownership, whatever interest or title a grantor may have at the time
the conveyance is made.
Rate - This is the annual interest rate applied to
the outstanding balance of the loans.
Rate Reduction Option - A fixed-rate mortgage that
includes a provision that gives the borrower an option to reduce the interest
rate (without refinancing) at a later date. It is similar to a prearranged
refinancing agreement, except that it does not require re-qualifying.
Rate Lock - A commitment issued by a lender to a
borrower guaranteeing a specified interest rate for a specified period of time.
Real Estate Agent - A person who is normally licensed
by the state and who, for a commission or a fee, assists in negotiating a real
Real Estate Settlement Procedures Act (RESPA) - A
consumer protection law that, among other things, requires advance disclosure of
settlement costs to home buyers and sellers, prohibits certain types of referral
and other fees, sets rules for escrow accounts, and requires notice to borrowers
when servicing of a home loan is transferred.
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.
Recording - Filing a document in the public records,
thereby giving constructive notice to the world of the existence of the document
and its contents.
Reduced Documentation - A method used to determine
income when qualifying a borrower(s) for a loan. Borrower(s) provide their
income, however no verification documentation is typically required.
Rescission - The act of cancellation or annulment of
a transaction or contract by the operation of a law. Borrowers usually have the
option to cancel certain credit transactions, including a refinance or home
equity transaction, within three business days after consummation (when the
consumer becomes contractually obligated by, for example, signing the loan
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 a book of public record of
the terms of a legal document affecting title to real property, such as a deed,
a mortgage note, a satisfaction of mortgage, or an extension of
Refinance Transaction - The process of paying off one
loan with the proceeds from a new loan, typically using the same property as
security for the new loan.
Rehabilitation Mortgage - A mortgage created to cover
the costs of repairing, improving, and sometimes acquiring an existing
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 With Option To Buy - See lease-purchase mortgage
Repayment Plan - An arrangement made to repay
delinquent installments or advances. Lenders' formal repayment plans are often
called "relief provisions."
Revolving Liability - A credit arrangement, such as a
credit card or HELOC, that allows a customer to borrow against a predetermined
line of credit when purchasing goods and services. The borrower makes payments
on the amount that is actually borrowed plus any interest due.
Request For Notice of Default - A recorded document
that obligates the holder of the first mortgage lien to notify subordinate lien
holders in the event of default by the borrower.
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.
Rural Housing Service (RHS) - An agency within the
Department of Agriculture. This agency provides financing to farmers and other
qualified borrowers buying property in rural areas who are unable to obtain
loans elsewhere. Funds are borrowed from the U.S. Treasury.
Sale-Lease Back - 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 Home - A property occupied part-time by a
person in addition to his or her primary residence.
Second Mortgage - A mortgage that has a lien position
subordinate to the first mortgage.
Secondary Mortgage Market - An informal market where
lenders and investors buy and sell existing mortgages. Government-sponsored
entities and private investors buy mortgages from lenders who use the proceeds
to make additional loans.
Secured Loan - A loan that is backed by collateral.
If the borrower defaults, the lender can sell the collateral to satisfy the
Security - The property that will be pledged as
collateral for a loan. If the borrower defaults, the lender can sell the
collateral to satisfy the debt.
Security Interest - An interest a lender takes in the
borrower's property to assure repayment of a debt. If the borrower defaults, the
lender can sell the collateral to satisfy the debt.
Seller Take-Back - An agreement in which the owner of
a property provides financing, often in combination with an assumable mortgage.
See owner financing.
Servicer - An organization that collects principal
and interest payments from borrowers and manages borrowers' tax and insurance
escrow accounts. A mortgage banker is often paid a fee to service mortgages that
have been purchased by an investor in the secondary mortgage market.
Servicing - The collection of principal and interest
payments from borrowers and management of borrowers' tax and insurance escrow
Settlement - See closing.
Settlement Sheet - See HUD-1 settlement
Short Sale - A sale of a house in which the proceeds
fall short of what the owner still owes on the mortgage. Many lenders will agree
to accept the proceeds of a short sale and forgive the rest of what is owed on
the mortgage when the owner cannot make the mortgage payments.
Single Family Residence - A residential structure
designed to include one dwelling.
Special Deposit Account - An account that is
established for rehabilitation mortgages to hold the funds needed for the
rehabilitation work so they can be disbursed from time to time as particular
portions of the work are completed.
Stand Alone - A Home Equity loan originated without
obtaining a Countrywide first mortgage at the same time.
Start Date - The date you want to use as the start
date for the amortization, usually the date you closed on your loan or today's
Start Month - The date you will begin adding an extra
dollar amount to your regular monthly payments. Enter the payment number from 1
to 360 (e.g., if you will start paying extra principal at the start of year 5 of
a 30 year loan, enter "49".
Start Rate - See initial interest rate.
Subdivision - A housing development that is created
by dividing a tract of land into individual lots for sale or lease.
Sub-Escrow - Are fees charged by the escrow company
for allowing the borrower to be able to sign all the loan documents in the
Escrow office instead of having to go to the lenders office.
Subordinate Financing - Any mortgage or other lien
that has a priority that is lower than that of the first mortgage. The
subordinate loan has a claim to payment in a foreclosure only after the first
mortgage is paid.
Subprime - Subprime Lending is also called B&C
lending. It refers to a category of loan programs that offer more lenient
underwriting provisions and expanded credit guidelines. These provisions allow
more flexibility in approving loans for borrowers who have less-than-perfect
credit. Subprime loans are available at various interest rates and terms. They
also offer capabilities for debt consolidation allowing borrowers to get a
mortgage with enough extra cash to consolidate loans.
Subsidized Second Mortgage - An alternative financing
option known as the Community Seconds? mortgage for low- and moderate-income
households. An investor purchases a first mortgage that has a subsidized second
mortgage behind it. The second mortgage may be issued by a state, county, or
local housing agency, foundation, or nonprofit corporation. Payment on the
second mortgage is often deferred and carries a very low interest rate (or no
interest rate). Part or all of the second mortgage debt may be forgiven
depending on how long the buyer remains in the home.
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 performed
personally by the owner.
Tax Bracket - Please select the tax bracket you fall
under. If you are unsure what tax bracket you are in, you may want to speak with
an accountant find out.
Tax Savings - This is the amount of money you save in
income taxes. You save this money because in most cases the interest you pay on
your home loan is tax deductible!
Tax Service - A fee collected to set up a third-party
to monitor the borrower's property tax payments to ensure that the payments are
made on time, and to prevent tax liens from occurring.
Tenancy By The Entirety - A type of joint tenancy of
property that provides right of survivorship and is available only to a husband
and wife. One spouse dies the property goes to the other spouse. Contrast with
tenancy in common and joint tenancy.
Tenancy In Common - A type of joint tenancy in a
property without right of survivorship. Contrast with tenancy by the entirety
and with joint tenancy.
Term - The term of a home loan is the number of years
the home loan is amortized for. Home loans are generally amortized over 15, 20
or 30 years.
Termite Report - A report that results from an
inspection by a professional to determine if the property has
Third Party Fees - Fees collected by lender for
services provided by other companies, such as an appraiser.
Third Party Origination - A process by which a lender
uses another party to completely or partially originate, process, underwrite,
close, fund, or package the home loan. See mortgage broker.
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 Insurance Endorsements - This is an endorsement
of insurance against losses that may result from claims of previously unknown
ownership in insured 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.
Total Expense Ratio - Total obligations as a
percentage of gross monthly income. The total expense ratio includes monthly
housing expenses plus other monthly debts. Used to help qualify a potential
borrower for a home loan.
Total Monthly Payment - See Monthly PITI
Transaction Fee - A fee charged each time the
borrower draws on the credit line.
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
to a property 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. See adjustable-rate mortgage
Truth-in-Lending - A federal law that requires
lenders to fully disclose, in writing, the terms and conditions of credit, such
as a mortgage, including the annual percentage rate (APR) and other
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. See multi-unit housing.
Trustee - A fiduciary who holds or controls property
for the benefit of another.
Underwriting - The analysis of risk, the
determination of the appropriate loan amount, and the setting of loan terms and
conditions, based on the borrower's creditworthiness and the value of the real
property that will secure the loan.
Unsecured Loan - A loan that is not backed by
VA Mortgage - A mortgage that is guaranteed by the
Department of Veterans Affairs (VA). Also known as a government
Variable Rate - An interest rate that changes
periodically in relation to an index. Payments may increase or decrease per the
terms of the loan agreement or note.
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
Veterans Affairs, Department of (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.
Warehouse - A closing-cost fee representing the
lender's cost of holding a borrower's loan temporarily prior to being sold on
the secondary mortgage market.
Year Acquired - The date you acquired your existing
mortgage, used to determine your remaining balance.
Year-End Statement - A report sent to the borrower
each year. The report shows how much was paid in taxes and interest during the
year, as well as the remaining mortgage loan balance at the end of the