Abstract Of Title
A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.
Acceleration Clause
Condition in a mortgage that may require the balance of the loan to become due immediately. This may occur if regular mortgage payments are not made or for breach of other conditions of the mortgage.
Adjustment Interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically six months, one, three, or five years, depending on the mortgage terms.
Adjustable Rate Mortgage (ARM)
A variable or flexible rate mortgage with an interest rate that adjusts periodically according to the financial index it is based upon plus a margin. To limit the borrower¹s risk, the ARM may have a payment or rate cap.
Annual Percentage Rate (APR)
The cost of credit expressed as an annual rate. It must be calculated by using a formula set by Federal law and disclosed to the borrower to aid in comparing different credit plans.
Percentage Rate (APR)
The cost of credit expressed as an annual rate. It must be calculated by using a formula set by federal law and disclosed to the borrower to aid in comparing different credit plans.
Application
A printed form used by a Mortgage lender to record necessary information concerning a prospective mortgage.
Application Fee
A sum of money paid towards estimated initial Mortgage processing expenses such as appraisal and credit report.
Appraisal
An expert judgment or estimate of the quality or value of real estate as of a given date.
Appreciation
A property’s increase in value due to inflation or economic factors.
As Separate Property
Ownership in real property which is to be specifically excluded from community property.
Assessed Valuation
The value that a taxing authority places on real or personal property for the purpose of taxation.
Assessment
Charges levied against a property for tax purposes or to pay for municipality or association improvements such as curbs, sewers, or grounds maintenance.
Assignment
A means of transferring a contract right or other asset to another person or entity.
Balloon Mortgage
A mortgage that has level monthly payments which are insufficient to amortize the loan so that a balloon, or lump sum payment is due at the end of the term. Frequently, balloon mortgages contain an opportunity to refinance when the balloon payment is due.
Bankruptcy
A proceeding in a federal court in which a debtor (who owes more than his/her assets or cash flow) is relieved from the payment of debts. This can affect the borrower’s personal liability or the mortgage debt but not the lien of a mortgage.
Basis Points
Used to describe mortgage yield, one basis point equals one 100th of 1% or 0.01%. A mortgage yield increase from 9.50 to 9.75% is an increase of 25 basis points.
Binder or “Offer to Purchase”
A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase Real Estate. A binder secures the right to purchase Real Estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.
Blanket Mortgage
A mortgage covering at least two pieces of Real Estate as security for the same mortgage.
Borrower (Mortgagor)
A mortgage covering at least two pieces of Real Estate as security for the same mortgage.
Assumption of Mortgage
An obligation undertaken by the purchaser of property to be personally liable for payment of an existing Mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee’s consent is usually required. The original mortgagor should always obtain a written release from further liability if he/she desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the Mortgage fails to make the monthly payments. An “Assumption of Mortgage” is often confused with “purchasing subject to a Mortgage .” When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee’s consent is not required to a sale subject to a mortgage. Both “Assumption of Mortgage” and “Purchasing Subject to a Mortgage” are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.
Building Line of Setback
Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.
Buy-Down
Where the buyer pays additional discount points in return for a below market interest rate; or the buyer or seller deposits sufficient funds with the lender to reduce the rate during the first one to three years of the loan; or pays closing costs such as the origination fee. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.
Cap
A limit on how much an adjustable rate mortgages monthly payment or annual interest rate can increase. A cap is meant to protect the borrower from large increases and may be a payment cap, an interest cap, a life-of- loan cap or periodic cap. A payment cap is a limit on the monthly payment. An interest cap is a limit on the amount of the interest rate. A life-a-loan cap restricts the amount the interest rate can increase over entire term of the loan. A periodic cap limits the amount the interest rate can change each interest rate adjustment date.
Cash to Close
Liquid assets that are readily available to be used to pay the closing costs involved in a closing of a Mortgage transaction.
Certificate of Occupancy (CO)
Written authorization given by a local municipality that allows a newly completed or substantially completed structure to be inhabited – not to be confused with “Notice of Completion.”
Certificate of Reasonable Value (CRV)
A Veteran’s Administration appraisal that establishes the maximum VA Mortgage loan amount for a specified property.
Certificate of Title
Document rendering an opinion on the status of a property’s title based on public records.
Closed End Mortgage
A mortgage principal amount that is fixed and can not be increased during the life of the loan.
Closing
A transaction in which the formalities of a Real Estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.
Cloud On Title
An outstanding claim or encumbrance which adversely affects the marketability of title.
Co-Borrower
One who is individually and jointly obligated to repay a mortgage loan and may or may not share ownership of the property with one or more of the borrowers.
Collateral
Something of value pledged as security for a loan. In mortgage lending, the property itself serves as collateral for a mortgage loan.
Commission
Money paid to a Real Estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price–6 to 7 percent on houses, 10 percent on land.
Commitment
A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgage from a lender with specific terms or conditions.
Closing Costs
The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of Real Estate. These costs are in addition to price of the property and are items prepaid at the closing day. This is a typical list: Buyer’s Expenses – Documentary Stamps on Notes – Recording Deed and Mortgage – Escrow Fees – Attorney’s Fee – Title Insurance – Appraisal and Inspection – Survey Charge Seller’s Expenses – Cost of Abstract – Documentary Stamps on Deed – Real Estate Commission – Recording Mortgage – Survey Charge – Escrow Fees – Attorney’s Fee The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs.
Commitment Fee
A fee charged when an agreement is reached between a lender and a borrower for a loan on specific terms and conditions. Rate and points may be locked-in or may be “floating”.
Commitment Letter
A formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.
Common Elements / Areas / Ground
Those portions of a building, land, and amenities of a PUD, condo or co-op that are used by all the unit owners, who share in the common expense of their operation and maintenance. Common areas usually include swimming pools, tennis courts, or other recreational facilities, as well as common corridors of buildings, parking lots, etc.
Condemnation
The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government’s power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.
Condominium
Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.
Conforming Loan
Construction Loan
Contract Sale or Deed
Contractor
Conventional Mortgage
Cooperative Housing
Consumer Handbook on Adjustable Rate Mortgages
Conventional Loan
Convertible Mortgage
Co-Signer
Covenants
Credit Bureau Repositories
Credit Report
Debt-To-Income Ratio
Deed
Deed of Trust
DeMinimus PUD
Deferred Interest
Deferred Interest
Delinquency
Deposit
Depreciation
Department of Housing and Urban Development
Discount
Discounted Loan
Documentary Stamps
Due-On-Sale
Down Payment
Earnest Money
Easement Rights
Economic Obsolescence
Encroachment
Encumbrance
Environmental Hazard
Equal Credit Opportunity Act
Equity
Escrow Funds
Escrow Closing
Fair Credit Reporting Act (FCRA)
Fair Market Value
Fannie Mae
Farmers Home Administration (FmHA)
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
Federal Housing Administration (FHA)
Federal National Mortgage Association (FNMA or Fannie Mae)
Fee Simple
FHLMC
First Mortgage
Fixed Rate Mortgage
FNMA
Foreclosure
A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage , or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.
Freddie Mac
Nickname for Federal Home Loan Mortgage Corporation.
General Warranty Deed
A deed which conveys not only all the grantor’s interests in and title to the property to the grantee, but also warrants that if the title is defective or has a “cloud” on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic’s liens against it) the grantee may hold the grantor liable.
Gift Funds
Funds donated to the borrower from certain eligible sources to assist the borrower in meeting closing costs. Generally, eligible sources are: a relative, church, municipality, or nonprofit organization.
Gift Letter
A written explanation signed by the individual giving the gift stating, “This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time.”
Ginnie Mae
Nickname for Government National Mortgage Association (GNMA).
Government National Mortgage Association
A government organization that participates in the secondary market, buying, selling and guaranteeing FHA and VA loans.
Graduated Payment Mortgage (GPM)
A Mortgage that has initial monthly payments set at an amount lower than that required for full amortization of the debt. The payments are then increased by a specified percentage each year during the graduated payment period. At the end of the period, payments are in an amount that will fully amortize the Mortgage.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
That party in the deed who is the seller or giver.
Gross Monthly Income
Total monthly income earned before tax and other deductions.
Guaranty
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.
Hazard Insurance
Protects against damages caused to property by fire, windstorms, and other common hazards.
High-Ratio Loan
Mortgage loans in excess of 80 percent of the loan amount divided by the lower of the sales price or appraised value.
Home Equity Line Of Credit (HELOC)
A Real Estate loan, usually in a subordinate position, that allows a borrower to borrow against equity in Real Estate owned with specific limitations. This is an open-end loan that permits the borrower to repay and re-borrow the funds available.
Home Equity Loan
A mortgage on the borrower’s principal residence, usually for the purpose of making home improvements or debt consolidation. This is closed-end loan repayable in accordance with a fixed schedule.
Homeowner’s Association (HOA)
A non-profit association, whose directors and officers are elected by the unit owners of a condominium or PUD project; primary responsibilities are to manage the common areas, expenses and services of the project.
Homeowners’ Association Dues
The fees imposed by a condominium or homeowners’ association for maintenance of common areas.
Housing and Urban Development (HUD)
The U.S. government agency that administers FHA, GNMA and other housing programs.
Housing Debt-To-Income Ratio (DTI)
The sum of all monthly housing Mortgage expenses such as principal, interest, taxes and insurance (PITI), Homeowners dues, private mortgage insurance and any special assessments as a percentage of gross qualifying income.
Impound
That portion of a borrower’s monthly payment held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as Reserves.
Index
A published interest rate complied from other indicators such as U.S. Treasury bills or the monthly average interest rate on loans closed by savings and loan organizations. Mortgage lenders use the index figure to establish rates on adjustable rate mortgages (ARM’s).
Installment Debt
Borrowed money that is repaid in successive payments, usually at regular intervals.
Insured Loans
A loan insured by HUD-FHA or a private mortgage insurance company.
Interest
A charge paid for borrowing money.
Interest Rate
The simple interest rate, stated as a percentage, charged b a lender on the principal amount of borrowed money.
Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
Investor
A money source for a lender.
Jumbo Loan
Keogh
A retirement plan for self-employed individuals. Similar to an IRA, contributions may be deductible and the tax liability is deferred until the funds are withdrawn.
Lien
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor.
Liquidity
Cash or cash equivalents that a borrower has accumulated or the ability to readily convert other assets or investments into cash; a.k.a. cash reserves.
Loan-To-Value Ratio (LTV)
The relationship, expressed as a percentage, between the amount of the proposed loan and a property’s appraised value or purchase price. For example, a $75,000 loan on a property appraised at $100,000 is a 75% loan-to-value.
Lock-In Rate
The guarantee of a specific interest rate and/or points for a specific period of time. Some lenders will charge a fee for locking in an interest rate.
Margin
The amount a lender adds to the index of an adjustable rate mortgage to establish an interest rate. For example, a margin of 1.50 added to a 7 percent index establishes an interest rate of 8.50 percent. The margin remains the same throughout the loan.
Marketable Title
A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.
Market Value
The most probable price which a ready, willing and able buyer would pay and a willing seller will accept, both being fully informed under no pressure to act. The market value may be different from the price a property can actually be sold for at a given time (market price).
Maturity
The termination or due date on which final payment on a loan must be paid in full.
Mortgage Insurance Premium (MIP)
MIP is one-half percent borrowers pay each month on FHA insured Mortgage loans. It is insurance from FHA to the lender against incurring a less due to the borrower’s default. On September 1, 1983 the MIP was changed to a one-time charge to borrowers.
Monthly Payment
Usually, the amount of PITI (principal, interest, taxes, and insurance) paid each month on a mortgage loan.
Mortgage
A legal instrument in which a lien on real property is granted as security for the repayment of a loan. In some states, a deed of trust is used rather than a mortgage.
Mortgage (Open-End)
A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure.
Mortgagee
The lender in a mortgage agreement.
Mortgagor
The borrower in a mortgage agreement.
Mortgage Broker
An intermediary between a borrower and a lender. A broker’s expertise is to help borrowers find financing that they might not otherwise find themselves.
Mortgage Commitment
Written notice from the bank or other lending institution saying it will advance Mortgage funds in a specified amount to enable a buyer to purchase a house.
Mortgage Insurance Premium (MIP / MI)
The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.
Mortgage Note
A written agreement to repay a loan. The agreement is secured by a mortgag , serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.
Negative Amortization
A situation in which a borrower is paying less interest than what is actually being charged for a mortgage loan. The unpaid interest is added to the loan’s principal. The borrower may end up owing more than the original amount of the mortgage.
Net Effective Income
The borrower’s gross income minus federal tax.
Net Rental Income
The remaining income generated by an investment property after deducting all mortgage related expenses, including HOA fees (if applicable) and operating expenses from the gross rental income.
Net Worth
The amount by which an individual’s assets (or assets of a business) exceed total liabilities.
Non-Assumption Clause
In a mortgage contract, a statement that disallows a new buyer to assume a Mortgage payment without the approval of the lender.
Non-Conforming Loan
Non-Permanent Resident Alien
Non-Resident Alien
Occupancy
Origination Fee
Payment To Income Ratio (P/I)
Permanent Buydown
PITI (Principal, Interest, Taxes, and Insurance)
Planned Unit Development (PUD)
Plat
Points
Power Of Attorney
Preliminary Title Report
Prepaid Items
Prepayment
Pre-Payment Penalty
Pre-Qualification
Primary Mortgage Market
Primary Residence
Prime Rate
Principal
Private Mortgage Insurance
Processing
Planned Unit Development (PUD)
Purchase Contract (Agreement/Offer)
Qualification
Qualifying Ratios
Quitclaim Deed
Rate Lock Option
Real Assets
Real Estate Broker
Real Property
Refinance