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A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U |V |W | X | Y | Z
A (Back to Top) A historical summary provided by a title insurance company, of the successive conveyances affecting the title to a property. A provision in a mortgage enabling the lender to declare the entire outstanding balance of a loan immediately due and payable in the event the borrower violates any condition of the mortgage or note (such as missing payments). Adjustable-Rate Mortgage (ARM) A mortgage with an interest rate that changes periodically, according to an index that is selected when the mortgage is issued, plus a margin that remains constant. Although the initial interest rate may be lower than that of a fixed-rate mortgage, the monthly payments can go up or down when the rate is adjusted. The gradual repayment of a mortgage loan by regular installments including both interest and principal. The timetable covering this process is called an amortization schedule. The interest rate which reflects the cost of a mortgage as a yearly rate. This rate is usually higher than the stated loan rate for the mortgage, because it takes into account points and other charges. The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs. The determination of property value based on recent sales information for similar properties. An increase in the value of a property, due to changes in the market and/or improvements to the property.
B (Back to Top) Usually a short-term mortgage with regular monthly payments that are insufficient to pay off the loan at the end of the term. A lump sum payment (balloon payment) is then required at the maturity date. A type of mortgage in which payments equal to one-half of the regular monthly payment are scheduled every two weeks, rather than monthly. This arrangement results in the equivalent of 13 months of payments in a year, substantially less paid in interest, and a much quicker payoff on the loan. An interim loan, made when a borrower needs additional time before obtaining permanent financing. A bridge loan is often required between the purchase of a new home, and the sale of the borrower's current home. An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services. A temporary reduction in an interest rate made by paying a lump sum or discount points up front. C (Back to Top) A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime. A certificate obtained by a veteran from a Veteran's Administration office, which states that, the borrower is eligible for a VA insured loan. Certificate of Reasonable Value (CRV) An Appraisal of Property Required for a VA Mortgage. The portion of principal and interest due on a loan that is written off when deemed to be uncollectible. Also known as settlement. The meeting at which the sale of a property is finalized, closing costs and escrow amounts are paid, and the buyer and seller sign documents to transfer ownership of the property. A neutral third party, usually an escrow company, title company or attorney, that facilities the closing of a real estate transaction. Expenses related to obtaining a loan. These normally include an origination fee, taxes, points, escrow payments, insurance, etc. A fee paid to a broker or salesperson for facilitating a real estate transaction. Commissions are usually expressed as a percentage of the loan amount or sale amount. Also known as "comps." Properties of similar size, location, and feature that are used as comparisons to determine the value of a specified property. A lender's promise to issue a loan subject to certain conditions. The loan will not be funded until these conditions have been met. Purchase offer in which the buyer proposes to purchase property only after certain events occur, such as the sale of the current home, or obtaining financing. A mortgage loan for $275,000 or lower. A loan not guaranteed or insured by a government entity, such as the VA or FHA. An adjustable rate mortgage that may be converted to a fixed-rate mortgage, subject to certain conditions specified in the mortgage note. Borrowers are rated by lenders according to the their credit worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower. A report obtained by a lender, usually from one of three major reporting bureaus, for the purpose of determining a borrower's history of debt repayment. Borrowers may examine their own credit reports, although they may have to pay a fee unless denied for credit recently. A process that uses recorded information about individuals and their loan requests to assess, in a quantifiable, objective, and consistent manner, their future performance regarding debt repayment.
D (Back to Top) The ratio of a borrower's monthly payment obligation, divided by his or her monthly income. The ratio is expressed as a percentage and is used by lenders as a measure of eligibility for a loan. A front-end ratio compares all monthly housing expenses to the gross income. A back-end ratio also figures in other debts, such as auto loans and credit cards. The legal document conveying title to a property. A document, used in some states, given by the borrower to a third party (trustee) vesting title to the property in the trustee as security for the borrower's repayment of the mortgage loan.
The failure of a borrower to comply with the terms of a note or the provisions of a mortgage.
A mortgage loan on which a payment has not been made by the due date. A serious delinquency is a single-family mortgage that is 90 days or more past due, or a multifamily mortgage that is two months or more past due.
A type of point paid by the borrower that reduces the interest rate of the loan. The lump sum paid to the seller when the property is purchased. This is usually 10 to 20 percent of the purchase price, although some loans may allow a lower down payment.
E (Back to Top) A cash deposit paid by the buyer during negotiations to demonstrate serious interest in purchasing the property. The difference between the fair market value of the property and the homeowner's mortgage debt. Equity increases as a mortgage is paid and/or the property appreciates.
Usually refers to an account set up by the lender in which money is held to pay taxes and insurance. The portion of the homeowner's monthly payment held in trust by the lender to pay for taxes and insurance. Also known as "impounds" in some states. F (Back to Top) Nickname for the Federal National Mortgage Association (FNMA). FNMA is the largest of the secondary market investors that purchase loans from mortgage companies. The company is a private corporation and is listed on the New York Stock Exchange. Federal Housing Administration (FHA) An agency of the U.S. Department of Housing and Urban Development (HUD) that insures first mortgages and can enable lenders to lend a very high percentage of the purchase price. The FHA does not actually lend money. The regulatory agency that sets monetary policy for the country and provides liquidity for supervised financial institutions. A government-backed mortgage loan supported by the US FHA and the Department of Housing and Urban Development (HUD). An entity, such as a real estate broker or mortgage broker, designated to act in the best interest of a client. The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation. A mortgage where the interest rate does not change for the life of the loan. A mortgage that is the primary lien against a property. Not necessarily the first mortgage obtained chronologically. Between the time of application and closing, a borrower may choose to bet on interest rates decreasing by electing to float. Floating is essentially choosing not to lock the interest rate. Since it is the borrower's responsibility to lock his or her rate before (or at) closing, choosing to float is considered risky and may result in a higher interest rate. Request information from your lender regarding lock procedures. The lender's postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date A legal process in which a homeowner in default on a mortgage is deprived of interest in the property, so that it may be sold to satisfy the debt. Nickname for the Federal Home Loan Mortgage Corporation (FHLMC). Another major secondary market purchaser of loans. FHLMC is a government-sponsored agency that is also publicly traded on the NYSE.
G (Back to Top) Nickname for the Government National Mortgage Association (GNMA). An agency that acts as a secondary market conduit for FHA and VA loans, guaranteeing payment to investors. A written disclosure of costs provided by a lender to a prospective borrower. H (Back to Top) Insurance on a property against fire and other natural disasters. Areas prone to flood, hurricanes, or earthquakes may require special policies. Homeowner's Fees (Association Fees) Payments made by the owners of a condominium or a unit in a PUD to the homeowners' association for administrative expenses, and cost incurred in upkeep of the common areas. A policy that combines personal liability insurance and hazard insurance for a home and its contents. Such a policy is generally required to obtain a loan. Housing and Urban Development (HUD) The federal government agency that oversees the FHA. The ratio of monthly housing payment to total gross monthly income. Also called Payment-to-Income Ratio or Front-End Ratio. A closing document required by HUD that outlines the settlement cost of a loan. It contains an itemized list of closing costs and is signed by the buyer and the seller. I (Back to Top) An account held by a lender for payment of taxes, insurance or other related expenses.
A published interest rate not controlled by the lender to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. The index and the interest rate linked to it may increase or decrease. A mortgage insured against loss to the mortgagee in the event of default. The percentage added to a loan that covers the lenders' costs for supplying money. This amount is part of an APR. J (Back to Top) An interest in property taken by two or more joint tenants. A loan amount above $322,700. These limits are set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
K (Back to Top) L (Back to Top) A penalty assessed for failure to make a payment on time. The bank, mortgage company, or mortgage broker offering the loan. Many institutions only "originate" loans and then resell the obligation to third parties. A legal claim by one party on the property of another party. In a mortgage, it is used as security for repayment of the loan. The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial loan rate. For example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime cap will never adjust above a rate of 13.25% (7.25+6.0). An agreement between a property owner and a real estate broker, authorizing the broker to find a buyer for the property. If the sale is consummated, the listing broker will be paid a fee. A qualified individual who helps borrowers through the selection, processing and closing of mortgage loan. The loan officer may be an employee of a mortgage broker, mortgage banker or other lending institution. The tasks a lender performs to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.
The ratio of the mortgage loan amount to the property's appraised value or selling price, whichever is less. For example, a property appraised at $100,000 with a mortgage amount of $75,000 is said to have a 75% LTV. The act of committing to a mortgage rate. This action, taken by a borrower some time between the application and the closing dates, is sometimes accompanied by a payment by the borrower to the lender. M (Back to Top) The amount a lender adds to the quoted index rate for an adjustable rate loan to determine the new interest rate. Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability. A legal document that pledges property to a lender as security for the repayment of the loan. The term also is used to refer to the loan itself. The borrower(s). A building with more than four residential rental units. N (Back to Top) A gradual increase in a mortgage debt that occurs when the monthly payment does not cover the entire principal and interest due. Can create a condition known as being "upside down" in a mortgage. Gross income less federal income tax. An asset such as a mortgage that is not currently accruing interest or on which interest is not being paid. A document that shows evidence of a debt, including the amount and terms of repayment.
O (Back to Top) The fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned. A note carried all or in part by an owner selling a property. P (Back to Top) Principal, Interest, Taxes, and Insurance. These are the four components that typically make up a homeowner's mortgage payment. Planned Unit Development (PUD) A type of real estate development that includes common areas and rules governed by an owners' association. Prepaid interest equal to one percent of a mortgage loan. Lenders generally offer loans with several combinations of interest rates and points. Generally, the more points paid, the lower the interest rate. The best choice of interest rate/points may depend on how often you refinance. Expenses such as taxes, insurance and assessments which are paid in advance of their due date and which must be paid by the buyer on a prorated basis at closing.
Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or their entire loan in advance of the regular schedule. The amount of debt owed, not including interest, on a loan. An initial evaluation of a borrower's credit and financial situation by a lender, to determine eligibility for a loan. Private Mortgage Insurance (PMI) Usually required by a lender if the down payment is less than 20% of the sale price. PMI protects the lender in the event of a default, and is usually terminated when the homeowner has built up 20% equity. Q (Back to Top) The ratio of the borrower's fixed monthly expenses to his gross monthly income. Usually ratios are expressed as two numbers like 28/36 where 28 would be the Front-End Ratio and 36 would be the Back-End Ratio.
The Front-End Ratio is the percentage of a borrower's gross monthly income (before income taxes) that would cover the cost of PITI (Mortgage Principal Payment + Mortgage Interest Payment + Property Taxes + Homeowners Insurance). In the case of a 28% Front-End Ratio a borrower could qualify if the proposed monthly PITI payments were 28% or less than the borrower's gross monthly income.
The Back-End Ratio is the percentage of a borrower's gross monthly income that would cover the cost of PITI, plus any other monthly debt payments like car or personal loans and credit card debt. R (Back to Top) Also known as real property. Land and anything permanently affixed to the land, such as a building. A licensed individual, designated to act on the behalf of either the buyer, or the property owner, in a real estate transaction. Also known as a Realtor®. The right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment. Securing a new loan that pays off the current mortgage(s), using the same property as security. Often done to obtain a lower interest rate or to gain access to equity for cash back. An instrument releasing property from the lien of the mortgage, judgment, etc. RESPA (Real Estate Settlement Procedures Act) A federal regulation that requires lenders and mortgage brokers to disclose to borrowers, in advance, the fees required to obtain a mortgage loan. A clause in a deed that restricts the use of property for some period of time. A special program for the elderly that provides income until death. Payment requirements are arranged through the increase in the principal amount of the loan. An agency of the U.S. Department of Agriculture that provides financing to farmers and other borrowers in rural areas who are otherwise unable to obtain a loan. S (Back to Top) A mortgage that is a lien against the first mortgage. The entity that collects payments and manages escrow accounts of a loan. Often designated when a loan has been purchased by a secondary market investor. Credit that is less-than-perfect. This may include late or missed payments, past bankruptcies, or judgments. A borrower whose credit is considered subprime may still be eligible for a loan, but will generally be subject to higher interest rates. T (Back to Top) Lien imposed for non-payment of taxes. An examination of city, town, or county records to determine the legal ownership of real estate. Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio. A federal law that requires lenders to disclose in writing, the complete terms and conditions of a mortgage. U (Back to Top) The person or company that actually decides whether or not to release funds for a mortgage. Underwriters make a final analysis of a borrower's credit worthiness, and may request additional information before issuing the loan. A loan guaranteed by the Department of Veterans Affairs. These mortgages have low or no down payments, less stringent requirements for qualification, and are only available to active members of the armed forces, veterans, and their spouses. W (Back to Top) A mortgage that includes the remaining balance from an old mortgage, plus a new amount.
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