An offeree's consent to enter into a contract and be bound by the terms of the
A measure of land, 43560 square feet.
Additional principal payment
A payment by a borrower of more than the scheduled principal amount due in order
to reduce the remaining balance on the mortgage loan.
Adjustable-rate mortgage (ARM)
A mortgage that permits the lender to adjust its interest rate periodically on
the basis of changes in a specified financial index.
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
The period that elapses between the adjustment dates for an adjustable-rate mortgage
Agreement for deed
A contract to purchase certain real estate.
An amortization table shows the amount of each payment applied to interest and
principal and shows the remaining balance after each payment is made.
The amount required to pay off a mortgage loan at a point in time.
Annual percentage rate (APR)
The actual finance charge for a loan, including points and loan fees in addition
to the stated interest rate.
A form used to apply for a mortgage loan.
A written analysis of the estimated worth of a property on which a mortgage is
An opinion of a property's fair market value, based on an appraiser's knowledge,
experience, and analysis of the property.
A person qualified by education, training, and experience to estimate the value
of real property and personal property.
The valuation placed on property by a public tax assessor for purposes of taxation.
Value assigned to property by local government for tax purposes. This is not
used to determine the fair market value.
Anything of monetary value that is owned by an applicant. Assets include but
are not limited to bank accounts, stocks, mutual funds, real property and personal
The transfer of a mortgage from one party to another.
A mortgage that can be taken over by the buyer when a home is sold.
The transfer of the sellers existing mortgage to the buyer.
A provision in an assumable mortgage that allows a buyer to assume responsibility
for the mortgage from the seller. The loan does not need to be paid in full by
the original borrower upon sale or transfer of the property. Usually, the lender
reserves the right to approve the buyer
The fee paid to a lender (usually by the purchaser of real property) resulting
from the assumption of an existing mortgage.
One who holds a power of attorney from another to execute documents on behalf
of the grantor of the power.
A financial statement that shows assets, liabilities, and net worth as of a specific
A mortgage that has periodic payments that will amortize it over a stated term
but that provides for a lump sum payment to be due at the end of an earlier specified
A principal payment due all at once at the end of a specified period.
A person, firm, or corporation that, through a court proceeding is relieved from
the payment of all debts after the surrender of all assets to a court-appointed
A proceeding in a federal court in which a debtor who owes more than his or her
assets can relieve the debts by transferring his or her assets to a trustee.
The person designated to receive the income from a trust, estate, or a deed of
To transfer personal property through a will.
Bill of sale
A written document that transfers title to personal property.
A preliminary agreement secured by the payment of an earnest money deposit, under
which a buyer offers to purchase real estate.
Biweekly payment mortgage
A mortgage 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 mortgage, and they are usually drafted
from the borrowers bank account. The result for the borrower is a substantial
savings in interest.
In good faith, without fraud.
An interest-bearing certificate of debt with a maturity date. An obligation of
a government or business corporation. A real estate bond is a written obligation
usually secured by a mortgage or a deed of trust.
A mortgagor whom receives funds in the form of a loan with the obligation.
A violation of any legal obligation.
A form of second trust that is collateralized by the borrower's present home
(which is usually 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 "swing
A person who, for a commission or a fee, brings parties together and assists
in negotiating contracts between them.
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.
Local regulations that control design, construction, and materials used in construction.
Building codes are based on safety and health standards.
Buy down account
An account in which funds are held so that they can be applied as part of the
monthly mortgage payment as each payment comes due during the period that an
interest rate buy down plan is in effect.
Buy down mortgage
A temporary buy down is a mortgage on which an initial lump sum payment is made
by any party to reduce a borrowers monthly payments during the first few years
of a mortgage. A permanent buy down reduces the interest rate over the entire
life of a mortgage.
Limit on how much the interest rate or mortgage payment may change on an ARM
Any structure or component erected as a permanent improvement to real property
that adds to its value and useful life.
A refinance transaction in which the borrower receives cash in excess of existing
mortgages and certain financing costs.
Certificate of Eligibility
A document issued by the federal government certifying a veterans eligibility
for a Department of Veterans Affairs (VA) mortgage.
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 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
The history of all of the documents that transfer title to a parcel of real property,
starting with the earliest existing document and ending with the most recent.
A title that is free of liens or legal questions as to ownership of the property.
The final procedure in which documents are executed and/or recorded.
Closing cost item
A fee or amount that a home buyer must pay at closing for a service, such as
origination fees, title fees, loan fees etc.
Expenses (over and above the price of the property) incurred by buyers and sellers
in transferring ownership of a property. Closing costs normally include an origination
fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining
title insurance and a survey.
Cloud on title
Any conditions revealed by a title search that adversely affect the title to
real estate. Usually clouds on title cannot be removed except by a quitclaim
deed, release, or court action.
An asset that secures the repayment of a loan.
The efforts used to bring a delinquent mortgage current and to file the necessary
notices to proceed with 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 jointly responsible for the repayment.
The fee charged by a broker or agent for negotiating a real estate or loan transaction.
A formal offer by a lender stating the terms under which it agrees to lend money
to a borrower.
Common area assessments
Levies against 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.
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
An unwritten body of law based on general custom and usage which is recognized
and enforced by the courts.
In some western and southwestern states, a form of ownership under which property
acquired during a marriage is presumed to be owned jointly unless acquired as
separate property of either spouse.
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 property.
Interest paid on the original principal balance and on the accrued and unpaid
The determination that a building is not fit for use or is dangerous and must
be destroyed; the taking of private property for a public purpose through an
exercise of the right of eminent domain.
A real estate project in which each unit owner has title to a unit in a building,
an undivided interest in the common areas of the project, and sometimes the
exclusive use of certain limited common areas.
Changing the ownership of an existing building (usually a rental project) to
the condominium form of ownership.
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.
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 inspector.
An oral or written agreement to do or not to do a certain thing.
A mortgage that is not insured or guaranteed by the federal government.
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower
to change the ARM to a fixed-rate mortgage at specified time frames after loan
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage
under specified conditions.
A type of multiple ownership in which the residents of a multiunit housing complex
own shares in the cooperative corporation that owns the property, giving each
resident the right to occupy a specific apartment or unit.
A business trust entity that holds title to a cooperative project and grants
occupancy rights to particular apartments or units to shareholders through proprietary
leases or similar arrangements.
Mortgages related to a cooperative project. This usually refers to the multifamily
mortgage covering the entire project but occasionally describes the share loans
on the individual units.
A residential or mixed-use building wherein a corporation or trust holds title
to the property and sells shares of stock representing the value of a single
apartment unit to individuals who, in turn, receive a proprietary lease as evidence
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.
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
A clause in a mortgage that obligates or restricts the borrower and that, if
violated, can result in foreclosure.
An agreement in which a borrower receives something of value in exchange for
a promise to repay the lender at a later date.
Credit reporting agency (or bureau)
An organization that prepares reports that are used by lenders to determine a
potential borrower's credit history. The agency obtains data for these reports
from credit repositories (EFX, Experian, TU), as well as from other sources.
A record of an individual's open and fully repaid debts. A credit history helps
a lender to determine whether a potential borrower has a history of repaying
debts in a timely manner.
Credit life insurance
A type of insurance often bought by mortgagors because it will pay off the mortgage
debt if the mortgagor dies while the policy is in force.
A person to whom money is owed.
A report of an individual's credit history prepared by a credit bureau and used
by a lender in determining a loan applicant's creditworthiness. See merged credit
An organization that gathers, records, updates, and stores financial and public
records information about the payment records of individuals who are being considered
You may contact the credit repositories to obtain a copy of your credit file
to review and/or correct reporting mistakes.
Equifax (EFX); telephone number 800-685-1111; web address
Trans Union Corporation (TU); telephone number 800-888-4213; web address www.tuc.com.
Experian (TRW), formally Trw, telephone number 800-831-5614; web address www.experian.com.
The legal document conveying title to a property from the seller to the buyer.
A deed given by a mortgagor to the mortgagee to satisfy a debt
and avoid foreclosure. Also called a "voluntary conveyance."
Deed of trust
The document used in some states instead of a mortgage; title is conveyed to
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 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.
The rights of a widow in the property of her husband at his death.
The part of the purchase price of a property that the buyer pays in cash and
may not borrowed.
A provision in a mortgage that allows the lender to demand repayment in full
if the borrower sells the property that serves as security for the mortgage.
Earnest money deposit
A good faith deposit to show seriousness of purchase.
A right of way giving persons other than the owner access to or over a property.
The right of a government to take private property for public use upon payment
of its fair market value. Eminent domain is the basis for condemnation proceedings.
An improvement that intrudes illegally on anothers property.
Anything that affects or limits the fee simple title to a property, such as mortgages,
leases, easements, or restrictions.
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.
The value of your home after any mortgage loans are subtracted.
An item of value, money, or documents deposited with a third party to be delivered
upon the fulfillment of a condition.
The account in which a mortgage servicer holds the borrowers escrow payments
prior to paying property expenses.
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.
Funds collected by the servicer and set aside in an escrow account to pay the
borrowers property taxes, mortgage insurance, and hazard insurance.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage
insurance, and other property expenses as they become due.
The portion of a mortgagors 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
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.
The lawful expulsion of an occupant from real property.
Examination of title
The report on the title of a property from the public records or an abstract
of the title.
A written contract that gives a licensed real estate agent the exclusive right
to sell a property for a specified time, but reserving the owners right to sell
the property alone without the payment of a commission.
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports
by consumer/credit reporting agencies and establishes procedures for correcting
mistakes on one's credit record.
Fair market value
The highest price that a buyer, willing but not compelled to buy, would pay,
and the lowest a seller, willing but not compelled to sell, would accept.
Fannie Mae (FNMA)
A congressionally chartered, shareholder-owned company that is the nation's largest
supplier of home mortgage funds.
Federal Home Loan Mortgage Corporation (FHLMC)
A corporation established to purchase primarily conventional mortgage loans in
the secondary market. Also known as Freddie Mac.
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 underwriting but does not lend money
or plan or construct housing.
The greatest possible interest a person can have in real estate.
Fee simple estate
An unconditional, unlimited estate of inheritance that represents the greatest
estate and most extensive interest in land that can be enjoyed. It is of perpetual
duration. When the real estate is in a condominium project, the unit owner is
the exclusive owner only of the air space within his or her portion of the building
(the unit) and is an owner in common with respect to the land and other common
portions of the property.
FHA co-insured mortgage
A mortgage (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 mortgagor's
A mortgage that is insured by the Federal Housing Administration (FHA). Also
known as a government mortgage.
A fee or commission paid to a mortgage broker for finding a mortgage loan for
a prospective borrower.
A lenders agreement to make a loan to a specific borrower on a specific property.
A mortgage that is the primary lien against a property.
The monthly payment due on a mortgage loan. The fixed installment includes payment
of both principal and interest.
Fixed-rate mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term
of the loan.
Personal property that becomes real property when attached in a permanent manner
to real estate.
Insurance that compensates for physical property damage resulting from flooding.
It is required for properties located in federally designated flood areas.
The legal process by which a borrower in default under a mortgage is deprived
of his or her interest in the mortgaged property. This usually involves a forced
sale of the property at public auction with the proceeds of the sale being applied
to the mortgage debt.
The loss of money, property, rights, or privileges due to a breach of legal obligation.
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.
Some administrators of 401(k) plans allow for loans against the monies you have
accumulated in these plans -- monies must be repaid to avoid serious penalty
Government National Mortgage Association
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 program formerly administered by Fannie Mae.
Popularly known as Ginnie Mae.
The person to whom an interest in real property is conveyed.
The person conveying an interest in real property.
Gross income multiplier
A figure used as a multiplier of an income producing property's gross annual
income to estimate its value.
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.
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.
Growing-equity mortgage (GEM)
A fixed-rate mortgage that provides scheduled payment increases over an established
period of time, with the increased amount of the monthly payment applied directly
toward reducing the remaining balance of the mortgage.
Insurance coverage that compensates for physical damage to a property from fire,
wind, vandalism, or other hazards.
Home equity line of credit
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 property.
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.
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.
An insurance policy that combines personal liability insurance and 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 is provided by the builder or property seller as a condition
of the sale.
Housing expense ratio
The percentage of gross monthly income that goes toward paying housing expenses.
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.
Real estate developed or improved to produce income.
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. This interest rate is subject
to any caps that are associated with the mortgage.
In-file credit report
An objective account, normally computer-generated, of credit and legal information
obtained from a credit repository.
Initial interest rate (Start Rate)
The original interest rate of the mortgage at the time of closing. This rate
changes for an adjustable-rate mortgage (ARM).
The regular periodic payment that a borrower agrees to make to a lender.
Borrowed money that is repaid in equal payments, known as installments. A furniture
loan is often paid for as an installment loan.
A property title that a title insurance company agrees to insure against defects
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 premium.
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
A mortgage that is protected by the Federal Housing Administration (FHA) or by
private mortgage insurance (MI). If the borrower defaults on the loan, the insurer
must pay the lender the lesser of the loss incurred or the insured amount.
The sum paid to a lender for money borrowed.
The rate of interest in effect for the monthly payment due.
Interest rate buydown plan
An arrangement wherein the property seller (or any other party) deposits money
to an account so that it can be released each month to reduce the mortgagor's
monthly payments during the early years of a mortgage. During the specified period,
the mortgagor's effective interest rate is "bought down" below the actual interest
Interest rate ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified
in the mortgage note.
Interest rate floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified
in the mortgage note.
A property that is not occupied by the owner.
IRA (Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred contributions
to a personal retirement fund. Individuals can place IRA funds in bank accounts
or in other forms of investment such as stocks, bonds, or mutual funds.
A form of co-ownership that gives each tenant equal interest and equal rights
in the property, including the right of survivorship.
A decision made by a court of law. In judgments that require the repayment of
a debt, the court may place a lien against the debtor's real property as collateral
for the judgment's creditor.
A lien on the property of a debtor resulting from the decree of a court.
A loan that exceeds conforming loan limits.
The ratio of the price change of an option to a 1% change in the expected price
The penalty a borrower must pay when a payment is made a stated number of days
(usually 15) after the due date.
A written agreement between the property owner and a tenant that stipulates the
conditions under which the tenant may possess the real estate for a specified
period of time and rent.
A way of holding title to a property wherein the mortgagor does not actually
own the property but rather has a recorded long-term lease on it.
A property description, recognized by law, that is sufficient to locate and identify
the property without oral testimony.
A person's financial obligations. Liabilities include long-term and short-term
debt, as well as any other amounts that are owed to others.
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.
A legal claim against a property that must be paid off when the property is sold.
Lifetime payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can
increase or decrease over the life of the mortgage.
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.
Line of credit
An agreement by a commercial bank or other financial institution to extend credit
up to a certain amount for a certain time to a specified borrower.
A cash asset or an asset that is easily converted into cash.
A sum of borrowed money (principal) that is generally repaid with interest.
The process by which a mortgage lender brings into existence a mortgage secured
by real property.
All the steps taken to maintain a secure position of the lender from the time
loan is originated until the last payment is made. The process includes recording
payments, analyzing escrow, preparing statements and handling collections.
Loan-to-value (LTV) percentage
The relationship between the principal balance of the mortgage and the appraised
value (or sales price if it is lower) of the property. For example, a $100,000
home with an $80,000 mortgage has a LTV percentage of 80 percent.
A written agreement in which the lender guarantees a specified interest rate
if a mortgage goes to closing within a set period of time. The lock-in also usually
specifies the number of points to be paid at closing.
The time period during which the lender has guaranteed an interest rate to a
For an adjustable-rate mortgage (ARM), 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 date on which the principal balance of a loan, bond, or other financial instrument
becomes due and payable.
A mortgage amount that is within 5 percent of the highest loan-to-value (LTV)
percentage allowed for a specific product. Thus, maximum financing on a fixed-rate
mortgage would be 90 percent or higher, because 95 percent is the maximum allowable
LTV percentage for that product.
Merged credit report
A credit report that contains information from three credit repositories. When
the report is created, the information is compared for duplicate entries. Any
duplicates are combined to provide a summary of a your credit.
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 market account.
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 fixed installment
That portion of the total monthly payment that is applied toward principal and
interest. When a mortgage negatively amortizes, the monthly fixed installment
does not include any amount for principal reduction.
Monthly payment mortgage
A mortgage that requires payments to reduce the debt once a month.
A legal document that pledges a property to the lender as security for payment
of a debt.
A company that originates mortgages exclusively for resale in the secondary mortgage
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 services.
The lender in a mortgage agreement.
A contract that insures the lender against loss caused by a mortgagor'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.
Mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government
agency such as the Federal Housing Administration (FHA) or to a private mortgage
insurance (MI) company.
Mortgage life insurance
A type of term life insurance often bought by mortgagors. The amount of coverage
decreases as the principal balance declines. In the event that the borrower dies
while the policy is in force, the debt is automatically satisfied by insurance
The borrower in a mortgage agreement.
Properties that provide separate housing units for more than one family, although
they secure only a single mortgage.
A residential mortgage on a dwelling that is designed to house more than four
families, such as a high-rise apartment complex.
Multiple listing service
A marketing organization composed of real estate brokers who agree to share their
A gradual increase in mortgage debt that occurs when the monthly payment is not
large enough to cover the entire principal and 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.
The value of all of a person's assets, including cash, minus all liabilities.
No cash-out refinance
A refinance transaction in which the new mortgage amount is limited to the sum
of the remaining balance of the existing first mortgage, closing costs (including
prepaid items), points, the amount required to satisfy any mortgage liens that
are more than one year old (if the borrower chooses to satisfy them), and other
funds for the borrower's use (as long as the amount does not exceed 1 percent
of the principal amount of the new mortgage).
An asset that cannot easily be converted into cash.
A public officer authorized to attest the signing of documents requiring certification.
A legal document that obligates a borrower to repay a mortgage loan at a stated
interest rate during a specified period of time.
The interest rate stated on a mortgage note.
Notice of default
A formal written notice to a borrower that a default has occurred and that legal
action may be taken.
Original principal balance
The total amount of principal owed on a mortgage before any payments are made.
A fee paid to a lender for processing a loan application. The origination fee
is stated in the form of points. Usually computed as a percentage of the mortgage.
For example, a mortgage of $100,000 with a 1-point origination fee is equal to
$1,000 (1 percent of the mortgage amount).
A property purchase transaction in which the property seller provides all or
part of the financing.
A payment that is not sufficient to cover the scheduled monthly payment on a
Payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate
The complete repayment of loan principal, interest and other amounts due.
Periodic payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can
increase or decrease during any one-adjustment period.
Periodic rate cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest
rate can increase or decrease during any one-adjustment period, regardless of
how high or low the index might be.
Any property that is not real property.
A mortgage payment including principal, interest, taxes and insurance.
Planned unit development
A one-time charge by the lender for originating a loan. A point is 1 percent
of the amount of the mortgage.
Power of attorney
A legal document that authorizes another person to act on ones behalf. A power
of attorney can grant complete authority or can be limited to certain acts and/or
certain periods of time.
A fee that may be charged to a borrower who pays off a loan before it is due.
The process of determining how much money a prospective homebuyer will be eligible
to borrow before he or she applies for a loan.
The interest rate that banks charge to their preferred customers. Changes in
the prime rate influence changes in other rates, including mortgage interest
The amount borrowed or remaining unpaid. The part of the monthly payment that
reduces the remaining balance of a mortgage.
The outstanding balance of principal on a mortgage. The principal balance does
not include interest or any other charges. See remaining balance.
Principal, interest, taxes, and insurance (PITI)
The four components of a monthly mortgage payment. Principal refers to the part
of the monthly payment that reduces the remaining balance of the mortgage. Interest
is the fee charged for borrowing money. Taxes and insurance refer to the amounts
that are paid into an escrow account each month for property taxes and mortgage
and hazard insurance.
Private mortgage insurance (MI)
Mortgage insurance that is provided by a private mortgage insurance company to
protect lenders against loss if a borrower defaults. Most lenders generally require
MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
A written promise to repay a specified amount over a specified period of time.
Planned Unit Development (PUD)
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 and sale agreement
A written contract signed by the buyer and seller stating the terms and conditions
under which a property will be sold.
Purchase money transaction
The acquisition of property through the payment of money or its equivalent.
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.
A deed that relinquishes all interest, title, or claim in a property by a grantor,
but not representing that such title is valid nor containing any warranty or
covenants of title.
A radioactive gas found in some homes that in sufficient concentrations can cause
A fixed-rate mortgage that includes a provision that gives the borrower a one-time
option to reduce the interest rate (without refinancing) during the early years
of the mortgage term.
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing
a specified interest rate for a specified period of time.
Real estate agent
A person licensed to negotiate and transact the sale of real estate on behalf
of the property owner.
Real estate settlement procedures act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice
of closing costs.
Land and appurtenances, including anything of a permanent nature such as structures,
trees, minerals, and the interest, benefits, and inherent rights thereof.
The cancellation or annulment of a transaction or contract by the operation of
a law or by mutual consent. Borrowers usually have the option to cancel a refinance
transaction within three business days after it has closed.
The public official who keeps records of transactions that affect
real property in the area. Sometimes known as a "Registrar of Deeds" or "County
The noting in the registrars office of the details of a properly executed legal
document, such as a deed, a mortgage note, a satisfaction of mortgage, or an
extension of mortgage, thereby making it a part of the public record.
The process of paying off one loan with the proceeds from a new loan using the
same property as security.
The discharge of property from a mortgage loan.
The amount of principal that has not yet been repaid. See principal balance.
The original amortization term minus the number of payments that have been applied.
Rent loss insurance
Insurance that protects a landlord against loss of rent or rental value due to
fire or other casualty that renders the leased premises unavailable for use and
as a result of which the tenant is excused from paying rent.
An arrangement made to repay delinquent installments or advances.
Lenders' formal repayment plans are called "relief provisions."
Replacement reserve fund
A fund set aside for replacement of common property in a condominium, PUD, or
cooperative project -- particularly that which has a short life expectancy, such
as carpeting, furniture, etc.
A credit arrangement, such as a credit card, that allows a customer to borrow
against a pre-approved line of credit when purchasing goods and services. The
borrower is billed for the amount that is actually borrowed plus any interest
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
A mathematical formula that predicts future credit performance.
For further information about risk scoring see www.fairisaac.com.
If you have questions about your risk score, please contact your lender.
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.
A mortgage that has a lien position subordinate to the first mortgage.
A market that buys and sells mortgages after origination. Mortgages may be pooled
in form of securities such as GNMA, FNMA or FHLMC that are traded on established
A loan that is backed by collateral.
The property that will be pledged as collateral for a loan.
An organization that collects principal and interest payments from borrowers
and manages borrowers escrow accounts. The servicer often services mortgages
that have been purchased by an investor in the secondary mortgage market.
The collection of mortgage payments from borrowers and related responsibilities
of a loan servicer.
A housing development that is created by dividing a tract of land into individual
lots for sale or lease.
Any mortgage or other lien that has a priority that is lower than that of the
A drawing or map showing the precise legal boundaries of a property, the location
of improvements, easements, rights of way, encroachments, and other physical
Contribution to the construction or rehabilitation of a property in the form
of labor or services rather than cash.
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.
Tenancy in common
A type of joint tenancy in a property without right of survivorship.
The obligee for a cooperative share loan, who is both a stockholder in a cooperative
corporation and a tenant of the unit under a proprietary lease or occupancy agreement.
A legal document evidencing a person's right to or ownership of a property.
A company that specializes in examining and insuring titles to real estate.
Insurance that protects the lender (lender's policy) or the buyer (owner's policy)
against loss arising from disputes over ownership of a property.
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.
Equity that results from a property purchaser giving his or her existing property
(or an asset other than real estate) as trade as all or part of the down payment
for the property that is being purchased.
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. In cases in which an inter vivos revocable
trust is the borrower, lenders also consider any transfer of a
beneficial interest in the trust to be a transfer of ownership.
State or local tax payable when title passes from one owner to another.
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.
A federal law that requires lenders to fully disclose, in writing, the terms
and conditions of a mortgage, including the annual percentage rate (APR) and
An adjustable-rate mortgage (ARM) that has one interest rate for the first five
or seven years of its mortgage term and a different interest rate for the remainder
of the amortization term.
Two- to four-family property
A property that consists of a structure that provides living space (dwelling
units) for two to four families, although ownership of the structure is evidenced
by a single deed.
A fiduciary that holds or controls property for the benefit of another
The process of evaluating a loan application to determine the risk involved for
the lender. Underwriting involves an analysis of the borrower's creditworthiness
and the quality of the property itself.
A loan that is not backed by collateral.
Taking or contracting for a rate of interest greater than permitted by law
A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also
known as a government mortgage.
Having the right to use a portion of a fund such as an individual retirement
fund. For example, individuals who are 100 percent vested can withdraw all of
the funds that are set aside for them in a retirement fund. However, taxes may
be due on any funds that are actually withdrawn.
VA Department of Veterans Affairs
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.
A measure of asset risk
Waiver of lien
The written evidence from a contractor (or supplier of material) surrendering
the right of lien to enforce collection of debt against real property.
A mortgage that includes the remaining balance on an existing first mortgage
plus an additional amount requested by the mortgagor. Full payments on both mortgages
are made to the wraparound mortgagee, who then forwards the payments on the first
mortgage to the first mortgagee
The rate of return paid on an investment
Restrictions imposed by government on the use of property