A adjustable-rate mortgage (ARM)
A mortgage loan with an interest rate that is allowed to vary during the life of the loan.
A gradual paying off of a debt by periodic installments.
  amortization term
The time reuired to retire a debt through periodic payments.
  annual percentage rate (APR)
The cost of a mortgage shown in consumer loan documents as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
An opinion or estimate of the value of a property. The borrower will pay the appraisal fee.
  appraiser (return to top)
A person qualified to estimate the value of real property.
An increase in the value of a property.
Anything of monetary value that is owned by a person.
The method or manner by which a right or contract is transferred from one person to another.
  assumption of mortgage
The purchase of mortgaged property whereby the buyer accepts liability for the debt that continues to exist. The seller remains liable to the lender unless the lender agrees to release him/her.
B balance sheet (return to top)
A financial statement that shows assets, liabilities, and net worth as of a specific date.
  balloon mortgage
A mortgage can be interest only with the whole principal due at the end of the term or it may be calculated to amortize over a longer period, say 30 years, but with the outstanding principal balance payable at the end of, say, 10 years.
  balloon payment
The final lump sum payment that is made at the maturity date of a balloon mortgage.
The person designated to receive the income from a trust, estate, or a deed of trust.
  blanket mortgage
A blanket mortgage covers more than one parcel of real estate. Release provisions are usually included to allow individual parcels to be released from the mortgage upon payment of part of the mortgage principal.
  bridge loan
A bridge loan is a loan that is used for a short duration of time until permanent financing is put in place.
  buydown mortgage (return to top)
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.
C call option (return to top)
A provision in a home loan that gives the mortgagee the right to call the mortgage due and payable at the end of a specified time period for any reason.
A limit on the amount by which the interest rate on an adjustable rate mortgage may be changed.
  capital improvement
Any component constructed as a permanent improvement to real property that increases its value and adds to its useful life.
  cash-out refinance
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
  Certificate of Eligibility
A document issued by the Department of Veterans Affairs (VA) certifying a veteran's eligibility for a VA mortgage.
  certificate of title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
  chain of title
A history of conveyances and encumbrances affecting a title from the time the original patent was granted, or as far back as records are available.
  clear title
A title that is free of liens or legal questions as to ownership of the property.
The act of transferring ownership of a property from seller to buyer in accordance with a sales contract.
  closing cost item (return to top)
A single fee that a home buyer must pay at closing. Closing costs are made up of individual closing cost items such as origination fees, escrow fees, underwriting fees and processing fees. Most closing cost items are included as numbered items on the HUD-1 Settlement Statement
  closing statement
Also referred to as the HUD-1. The final statement of costs incurred to close on a loan or to purchase a home.
  cloud on title
An outstanding claim or encumbrance that, if valid, will affect or impair the owner's title.
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
The process of bringing a delinquent debt current and the filing of the necessary notices to proceed with repossession or foreclosure when necessary
A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
  Community Home Improvement Mortgage Loan
An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.
  conforming loan
A loan that conforms to the guidelines established by Fannie Mae or Freddie Mac with loan limit that may change annually.
  construction loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Conditions which must be satisfied before the buyer can close the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller.
An agreement between competent parties to do or not to do certain things for a consideration.
  conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.
  convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.
  convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
  cooperative (co-op)
A type of property ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment.
  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.
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
  credit repository (return to top)
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.
D debt (return to top)
An amount owed to another.
A written document, properly signed and delivered, that conveys title to real property.
A deed that conveys a defaulting borrower's realty to a lender, thus avoiding foreclosure proceedings.
  deed of trust
A conveyance of real estate to a third person to be held for the benefit of another.
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Failure to make mortgage payments when mortgage payments are due.
A decline in the value of property; the opposite of appreciation.
  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 (return to top)
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 loan.
E earnest money deposit (return to top)
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
A right of way giving persons other than the owner 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.
  effective gross income
Normal annual income including overtime that is regular or guaranteed. The 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.
Anything that affects or limits the fee simple title to a property or its value. Encumbrances may include mortgages, leases, easements, or restrictions.
A person who signs ownership interest over to another party.
  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 (return to top)
Theinterest or value that the owner has in real esate over and above the lines against it.
An agreement between two or more parties providing that certain instruments or property be placed with a third party for safekeeping.
  escrow account
The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses.
  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 (return to top)
Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.
  escrow payment
The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.
The degree, quantity, nature, and extent of interest a person has in real or personal property.
A legal proceeding by a lessor (landload) to recover possession of property.
  examination of title
The report on the title of a property from the public records or an abstract of the title.
F Fair Credit Reporting Act (return to top)
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.
  Fannie Mae
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.
  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)
A U.S. government agency that insures to lenders the repayment of real estate loans.
  fee simple (return to top)
Absolute ownership of real property
  FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
  finder's fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a potential borrower.
  first mortgage
A mortgage that has priority as a lien over all other mortgages.
  fixed-rate mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan.
A legal procedure whereby property pledged as security for a debt is sold to pay a defaulted debt.
G good faith estimate (return to top)
An estimate A written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.
H hazard insurance (return to top)
Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
  home equity loan
a loan secured by a second deed of trust on a house, typically used as a home improvement loan.
  housing ratio
Also known as the front-end ratio, it is the percentage of a borrower's gross monthly income applied toward their mortgage or rent.
The U.S. Department of Housing and Urban Development.
I index (return to top)
A published measure of the cost of money to which a fixed margin is added to calculate the rate on an adjustable rate mortgage (ARM).
J jumbo mortgage (return to top)
Mortgages larger than the limits set by Fannie Mae and Freddie Mac. A jumbo mortgage will carry a higher interest rate than a conventional mortgage.
L lien (return to top)
A charge against property making it security for the payment of a debt, judgment, mortgage, or taxes.
  lifetime cap
A provision of an ARM that limits the highest rate that can occur over the life of the loan.
  loan to value ratio (LTV)
The ratio obtained by dividing the mortgage principal by the property value.
  lock period
The amount of time that a lender will guarantee a loan's interest rate. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days.
A written agreement guaranteeing An agreement to maintain a certain proce or rate for a certain period of time.
M margin (return to top)
A fixed number of percentage points added to the index on an adjustable rate mortgage (ARM).
A legal document that pledges a property to the lender as security for payment of a debt
  mortgage insurance (MI)
A policy that insures the lender against loss should the borrower default on a mortgage.
A person who holds a lien on or title to property as security for a debt.
A person who pledges his/her property as security for a loan.
N no income verification (return to top)
See "stated income".
A written document that acknowledges a debt and promises to pay.
O origination fee (return to top)
A fee paid to a lender for processing a loan application.
  owner financing
A property purchase transaction in which the property seller provides all or part of the financing.
P periodic cap (return to top)
The maximum rate increase for a specific period for a specific loan (ARM) only.
A mortgage payment which includes principal, interest, taxes and insurance.
  Planned Unit Developments (PUD)
A type of real estate project that gives each unit owner title to a residential lot and building and a nonexclusive easement allowing access to the project's common areas.
Charges levied by the mortgage lender and usually payable at closing. One point represents 1% of the face value of the mortgage loan.
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.
  prepayment penalty
A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.
Amount of debt, not including interest. The face value of a note or mortgage.
  private mortgage insurance (PMI)
Insurance that protects mortgage lenders against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure.
Q qualifying ratios (return to top)
The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.
R rate (return to top)
The annual rate of interest on a loan, expressed as a percentage of 100.
Restructuring a mortgage or mortgages on a property.
S seller carry back (return to top)
An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.
T term(return to top)
The number of years or payments required to pay a mortgage in full.
Evidence of ownership.
  title insurance
An insurance policy that protects the holder from any loss sustained by reason of defects in the title.
  title search
An examination of the public records to determine the ownership and encumbrances affecting real property.
  total debt ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.
  Truth-in-Lending Act (return to top)
A federal law that requires lenders to disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
V Veterans Administration (VA)
A government agency guaranteeing mortgage loans with no down payment to qualified veterans.
  (return to top)