Glossary
A B C D E F G H I J K L M N O P Q R S T U V Z
Acceleration Clause
A commonly used clause in a deed of trust/mortgage that permits the payee to declare the entire balance immediately due and payable in the event of default.
Additional Living Expense Insurance
Coverage under a Homeowners, Condominium and Renters policy that reimburses costs of residing in a temporary location until the insured's home can be made whole again. It usually provides living expenses from 10-20% of the structural coverage on the home.
Additional Property
Address of real estate that a person owns that is not being financed.
Adjustable Rate Mortgage (ARM)
A type of mortgage loan program in which the interest rate and payments may be adjusted as frequently as every month. The principal loan balance or term of the loan may also be adjusted to reflect the rate change. The purpose of the program is to allow mortgage interest rates to fluctuate with market conditions.
Adjusted Income
Your Gross Receipts Income minus business expenses, which equals total qualifying income.
Adjustment Period
The time between interest rate or payment adjustments on an adjustable rate mortgage loan.
Affidavit
A written statement sworn to before an authorized official.
Agent
One that acts for or represents another.
Agreement of Sale
A written document in which a purchaser agrees to buy property under certain given conditions, and the seller agrees to sell under certain given conditions. Also known as a "Sales Contract."
Alimony
Monthly payments received by an ex-spouse. Payments must be received continuously for three years to be counted toward qualifying income for a loan.
Amortization
The repayment of a loan in a specified number of equal periodic payments that includes principal and accrued interest.
Amortized Loan
A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal.
Amortization Schedule
A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after each payment is made.
Amortization Term
The period of time used in an amortization schedule to determine the dollar amount of scheduled loan payments, usually expressed as a number of months. For example, a fully amortizing 30-year fixed-rate mortgage has an amortization term of 360 months (30 years 12 months) with scheduled loan payments sufficient to repay all outstanding principal by the end of the amortization term with substantially equal installment payments. When the amortization term is longer than the actual loan term, the final payment required to be made (sometimes called a "balloon" payment) is larger than the preceding installment payments. For example, a 7-year balloon mortgage may have schedule loan payments determined based on an amortization term of 180 months (15 years x 12 months) even though the final loan payment is due at the end of 7 years.
Amount Financed
The loan amount minus the prepaid finance charges.
Annual Percentage Rate (APR)
The annual cost of a loan, including interest, loan fees, and other costs.
Application
A form commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security.
Appraisal
An estimate of the market value of a piece of real estate made by a competent professional who knows local real estate prices and markets.
Appraised Value
The estimated value of a home established by a professional who has a knowledge of real estate prices and markets.
Appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.
Appreciation
The increase in value or price of a property over time.
Approval
An assessment made by a lender of a borrower's ability to pay for a home and a confirmation of the amount the borrower may obtain.
Assessed Value
The value of a property for tax purposes set by a tax assessor according to a formula.
Assessments
A charge placed by a government agency (for example, city or county) for property improvements such as lighting, sewers, and flood control.
Asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others including bank accounts, stocks, mutual funds, and so on.
Assignment
The transfer of a mortgage from one person to another.
Assignment of Lease
The transfer of all rights, title, and interest under a lease that a lessee or tenant possesses in certain real property. The document used to convey leasehold is called an Assignment of Lease, rather than a Grant Deed or Special Warranty Deed.
Assumability
The ability of a mortgage to be taken over by a new borrower.
Assumable
A loan or obligation that can be taken over by a new borrower.
Assumable Mortgage
A mortgage that can be taken over or "assumed" by the buyer when a home is sold.
Assumption
A transaction where a new applicant takes over an existing loan. The original borrower's liability may or may not be released. The lender typically must approve the new buyer who agrees to assume liability. Not all loans are assumable.
Assumption Clause
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. See Assumable Mortgage.
Assumption Fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Automobile Expense/Allowance
Payment to our borrower by their employer for using their personal vehicle for business purposes.
AutoPay
A way to set up a monthly payment to be automatically paid from a bank account.
Balance Sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.
Balloon Mortgage
A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date in the future (usually at the end of the term).
Balloon Payment
A scheduled payment on a mortgage that is larger than other periodic payments, usually the unamortized final payment.
Bankruptcy
A federal court proceeding in which a debtor who owes more than his or her assets can relieve the debts by transferring the assets to a trustee. Chapter 7- Officially called Liquidation; Chapter 7 is the most common type of bankruptcy proceeding. Liquidation involves the appointment of a trustee who collects and sells the non-exempt property of the debtor and distributes the proceeds to the creditors. Also referred to as "no-asset cases." Chapter 11- Officially called Reorganization, Chapter 11 is ordinarily used by businesses that desire to continue operating and repay creditors concurrently through a court-approved plan of reorganization. Chapter 13- Officially called Adjustment of Debts of an Individual with Regular Income; Chapter 13 is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to Chapter 7 because it enables the debtor to keep a valuable asset, such as a house or land. It allows the debtor to adhere to a plan to repay creditors over time, usually three to five years.
Basis Point
A unit of measure: 1/100th of one percent. For example, the difference between a 9.0% loan and a 9.5% loan is 50 basis points.
Bill of Sale
A written document that serves as evidence of the transfer of title to personal property.
Binder
An agreement to consider the purchase of real estate. The agreement is secured and backed by a cash deposit as evidence of good faith on the part of the purchaser.
Biweekly Mortgage
A loan on which payments are due and payable every two weeks instead of standard monthly payment schedule. Twenty-six biweekly payments are the equivalent of 13 monthly payments.
Blanket Mortgage
A mortgage that covers more than one parcel of real estate owned by the same buyer.
Bridge Loan
A second mortgage that is collateralized by other property owned by the applicant and currently offered for sale. The agreement allows the proceeds to be used for closing on the new purchase before the property sold.
Broker
A person or firm who acts on behalf of another.
Cap
A limit on the increase of an adjustment rate or the mortgage payment for an adjustable-rate mortgage (ARM).
Capital
The accumulated wealth (money and/or property) of a person or business.
Capital Gain
Income from the sale of an asset rather than from the general business activity. Capital gains are generally taxed at a lower rate than ordinary income.
Capital Improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
Cash Reserves
Refer to amount in cash after purchase is complete (i.e. after down payment, closing costs, etc.).
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 outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
Caveat Emptor
Latin for, "Let the buyer beware." The buyer must examine the goods or property and buy at his or her own risk.
Certificate of Eligibility
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 written document stating that the title to a piece of property is legally vested in the present owner.
Child Support
Monthly payments that contribute to the care of a child. Payments must be received continuously for three years to be counted toward qualifying income for a loan.
Clear Title
Title not burdened by liens or legal questions.
Closing
In real estate, the delivery of a deed, the payment of the purchase price, the signing of notes, and the paying of closing costs, which completes a real estate transaction.
Closing Costs
The miscellaneous expenses involved in closing a real estate transaction that are over and above the purchase price. Some of the closing costs include title insurance, appraisal fee, and credit report.
Closing/Settlement Date
The date the mortgage loan transaction is closed.
Closing Statement
Also referred to as the "HUD-1." The final statement of costs incurred to close a loan or to purchase a home.
CMT - CONSTANT MATURITY TREASURY
The 1-year CMT is the average yield of all Treasury Securities having one year remaining until maturity. The index is calculated weekly. It is made available by the Federal Reserve in the weekly publication "Statistical Release - H15" and can be found on various wire services.
COFI - 11TH DISTRICT COST OF FUNDS INDEX
The monthly weighted average of deposits and borrowings for savings institutions in the Federal Home Loan Bank's 11th District, as made available by the Federal Home Loan Bank of San Francisco.
Collateral
Any property pledged as security for repayment of a debt.
Collection
The efforts used to bring a delinquent mortgage, or other debt current, and the filing of necessary notices to proceed with foreclosure when necessary.
Co-maker or Endorser on a Note
One who agrees to be responsible for repaying a debt obligation in addition to the principal borrower.
Combination Loan
A loan in which the borrower receives a first mortgage for 80 percent of the loan amount, and a second mortgage at the same time for the remainder of the balance. If borrower is trying to avoid PMI (mortgage insurance) it is important to consider a combination loan or the Advantage90TM loan.
Combined loan-to-value (CLTV)
The relationship between the unpaid principal balances of all the mortgages on a property (first and second usually) and the property's appraised value (or sales price, if it is lower).
Commission
An agent's fee for negotiating a real estate or loan transaction, often expressed as a percentage of the selling price.
Commitment Letter
A formal offer by a lender which states the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment." This letter will indicate the contingencies that must be cleared prior to funding the loan.
Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD), or condominium project's homeowners' association, or a cooperative project's cooperative corporation that are used by all of the unit owners who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Community Property
In some states, a form of ownership under which property acquired during a marriage is generally presumed to be owned jointly by both spouses regardless of whether it is titled in the name of one or both spouses unless specifically acquired as separate property of one spouse (for example, as the result of a spouse's inheritance).
Comparables
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.
Condominium
A structure of two or more housing units. The interior space of the units are individually owned. The balance of the property (land, building and other amenities) is owned in common by the owners of the individual units.
Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Conforming Loan
A loan that is eligible for purchase by FNMA or FHLMC. The current FNMA or FHLMC conforming loan limit is $417,000 and below for a single-family residence, $533,850 and below for a 2 unit property, $645,300 and below for a 3 unit property, and $801,950 and below for a 4 unit property. Conforming loan limits may change annually. The limit is revised each year according to the change in average sales price of conventionally financed single-family homes.
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.
Contingency
A clause in a contract stating that the buyer or seller must meet a given condition before the purchase can be completed.
Contingent Liability
A debt created by association with a dependent factor, which may be likely but not certain to occur, such as being the co-signer on a loan.
Contract
An agreement between two or more parties.
Conventional Mortgage
A mortgage that is not insured or guaranteed by the federal government.
Conveyance
The process by which title to property is officially transferred and which creates an interest in real estate.
Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
Co-op
A residential project owned by a cooperative corporation. Residents own shares in the cooperation, which in turn gives them the right to live in the project.
Credit History
The financial worthiness of a borrower. The history of whether the borrower has met financial obligations on time in the past.
Credit Report
A report on a loan applicant's willingness and ability to make payments in a timely manner in the past. This report is provided to the bank by an outside agency.
Credit Reporting Agency
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 a credit repository as well as from other sources.
Credit Repository
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.
Curtailment
Payment applied to principal only in addition to and without affecting the regular monthly payments.
Debt-to-Income Ratio
The ratio of a borrower's monthly debt payments to his or her monthly gross income. Lenders use this ratio to assist them in determining how much to lend.
Deed
The legal document conveying title to a property.
Deed of Trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.
Default
Failure to make payments on a debt/liability in accordance with the payment schedule required by the lender, and/or failure to meet other terms and conditions of the loan.
Deferred Interest
Accrued but unpaid interest, occurring with Adjustable Rate Mortgage loans when a payment remittance does not cover the full amount of interest due for a given period.
Delinquency
Failure to make mortgage payments when mortgage payments are due.
Deposit
A payment made to prove that a buyer is serious about making a given transaction. An earnest money deposit is money a buyer gives to a seller to purchase to prove that he or she is serious about buying the house. It may also be known as a "good faith deposit."
Depreciation
The decline in value of an asset over time.
Disclosure Statement
A set of documents given to the applicant that provide specific information about loan terms and conditions and a summary of estimated costs. Additional disclosure statements describe the features of each adjustable rate loan program in which the applicant has expressed an interest.
Dividend and Interest Income
Dividend income is generally a share of a corporation's profit that is distributed to shareholders and is reported on IRS form 1099-DIV. Interest income is generally income earned from bonds or from investment or savings accounts and is reported on IRS Form 1099-INT.
Donor
A person who gives a gift.
Double Escrow
A term describing two concurrent escrows on the same property having the same party as buyer and seller of the property.
Down Payment
The portion of the purchase price a buyer pays, in cash, at the time the loan funds.
Due-on-sale Provision
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.
Dwelling Coverage
Dwelling coverage protects your house and any structures attached to it, like the garage or screened porch. Any materials on your property that are being used to expand or repair the house, such as lumber being used for an addition, would also be covered.
Earnest Money
A sum of money given as evidence of one's good faith, used to bind a real estate sale. Also known as a "Binder."
Earthquake Insurance
Insurance that compensates for physical property damage resulting from earthquakes to an extent depending upon the terms of the policy.
Easement
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.
Eighty-ten-ten (80/10/10)
Also known as a "Combination Loan." A loan in which you receive a first mortgage for 80 percent of the loan amount and a second mortgage at the same time for the remainder of the balance. If the borrower is trying to avoid PMI (mortgage insurance) it is important to consider a combination loan or the Advantage 90TM loan.
Encumbrance
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. ECOA also requires lenders to provide written notification to a consumer when his or her loan application cannot be approved as requested, including the specific reasons for the decision.
Equity
The value of a property minus outstanding mortgage debt and other liens. Equity is the portion of your property that you have already paid for plus the appreciation, less the decline if any, in the value of the property since you acquired it.
Escrow
The legal relationship between a buyer, seller, and a third party holding money or papers until all conditions of a sales agreement and loan is fulfilled.
Escrow Account
An account held by the lender/servicer, into which a borrower makes monthly installment payments for property taxes, insurance and special assessments. The lender/servicer disburses these sums as they become due. This type of account is sometimes known as an "Impound Account."
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 Disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
Escrow Fee
Fee charged by the escrow company for handling escrow activities including paying off liens and clearing title and other debts.
Escrow Holdback
Also known as Holdback. Money held at closing to pay for specific upgrades or repairs that are completed after closing.
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. Also known as "impounds" or "reserves" in some states.
Estate
The ownership interest of an individual in real property. The total sum of all the real property and personal property owned by an individual at time of death.
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
See Federal National Mortgage Association (FNMA).
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 Home Loan Mortgage Corporation (FHLMC)
Commonly known as "Freddie Mac." A major secondary market investor, government sponsored, but privately owned corporation, which is a major purchaser of mortgages.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development (HUD). FHA insures loans made by approved lenders in accordance with their HUD regulations. Washington Mutual is an approved lender.
Federal National Mortgage Association (FNMA)
Commonly known as "Fannie Mae." A government sponsored but privately owned corporation whose primary function is to buy and sell conventional FHA and VA mortgages in the secondary market. Fannie Mae is the nation's largest supplier of home mortgage funds.
Fee Simple
The greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one's heirs.
FHA Mortgage
A loan insured by the Department of Housing and Urban Development of the Federal Housing Administration (FHA).
Finance Charge
The charges that include all of the interest expected to be earned over the life of a loan, in addition to the service charges, mortgage insurance premiums and certain other charges related to a loan.
First Adjustment
When you can expect the first rate adjustment in your adjustable-rate mortgage (ARM) loan.
First Mortgage
A mortgage that is the primary lien against a property.
Fixed Amortization
The payment of a debt in regular, periodic installments of principal and interest. Fixed amortization occurs when the interest rate and payment never change. The same payment is made over the life of the loan. Each month, as the principal is paid down and, since interest is charged against the remaining amount of principal, the amount charged for interest decreases.
Fixed Rate Mortgage (FRM)
A mortgage loan with a constant interest rate and payment throughout the life of the loan. The interest rate and payment amount are established at the time of funding.
Float Down
A float-down option allows the consumer to lock in the interest rate and points on a loan, yet retain the right to lower that locked-in interest rate prior to closing if interest rates offered by the lender for similar loans decreases. Details of the float-down option (if applicable) are in the Loan Terms Agreement that you will receive if you submit a loan application.
Floater
Insurance protecting against the loss of movable property, jewelry or furs for example, regardless of its location. The coverage "floats" with the property. Also known as Valuable Article insurance.
Floating Interest Rate
Interest rate and points that are subject to change before the loan closes or before the borrower decides to lock in the interest rate and points. The interest rate and points may change if the lender's interest rate and points for similar loans change. If the interest rate increases before the loan closes or before the borrower decides to lock in the interest rate and points, the principal amount the lender is willing to lend may decrease.
Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
FNMA
See Federal National Mortgage Association
Foreclosure
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.
Foster Care Income
Income for providing foster parent services to foster children, that is paid by a government agency.
Freddie Mac
See Federal Home Loan Mortgage Corporation.
Full-time Salary
Regular income earned by being a permanent, full time employee of a company, generally working at least 35 hours every week.
Fully Indexed Interest Rate
This interest rate is the sum of the current index rate on an adjustable-rate mortgage (ARM) plus the margin.
General Partnership
An entity composed of and owned by general partners. All partners are personally liable for the partnership obligations and share in the profits and losses of the partnership business.
Gift from a Family Member
A gift of cash, to a mortgage applicant from a relative by blood or marriage, which the applicant is not required to repay. In some instances it is necessary to provide a written statement so that repayment is not required.
Good Faith Estimate
A disclosure that must be given to all mortgage loan applicants within three business days of an application. It is an estimate of all settlement charges likely to be incurred at closing.
Government National Mortgage Association (GNMA)
Also known as "Ginnie Mae." A government corporation that provides special assistance for the purchase of certain FHA and VA mortgages and guarantees securitized pools of mortgage loans.
Grace Period
A specified period after the regular due date of a loan payment during which no late charge or other penalty is assessed.
Gross Bonuses
Bonus pay before taxes averaged over previous 24 months. Your bonuses must be averaged over two years to be considered monthly income.
Gross Income
Normal annual income before taxes 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.
Gross Overtime
Overtime pay before taxes averaged over previous 24 months. Your overtime must be averaged over two years to be considered monthly income. Overtime earned for less than two years will not be considered.
Hazard Insurance
Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
Home Equity Line Of Credit
A credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is interest only.
Home Equity Loan
A loan secured by a second deed of trust on a house, typically used as a home improvement loan.
Homeowners' Association
A nonprofit corporation or association that manages the common areas of a condominium or PUD project. In a condominium, the association has no ownership interest in the common areas. In a PUD, the association holds title to the common areas.
Homeowners' Association Fees
Monthly or annual fees associated with owning a condominium or living in a planned unit development (PUD). These fees can cover building and property maintenance, trash removal services, the cost of landscaping public areas, homeowner's or hazard insurance, and other fees.
Homeowner's Insurance Declaration
A document accompanying a homeowner's insurance policy whose purpose is to verify that the homeowner's property is, in fact, properly insured.
Homeowners' Policy
A hazard insurance policy that provides protection for the home. It might also cover public liability, theft and a general floater.
Housing Ratio
The ratio of the monthly housing payment in total (PITI -- Principal, Interest, Taxes and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the "top ratio" or "front-end ratio."
HUD
The U.S. Department of Housing and Urban Development.
Impound Account
Also known as an "Escrow Account." An account held by the lender/servicer, into which a borrower makes monthly installment payments for property taxes, insurance and special assessments. The lender/servicer disburses these sums as they become due.
Income Property
Real estate developed or improved to produce income. Also referred to as "non-owner occupied property" or "rental property."
Independent Contractor
A person who is employed by a company on a contract basis, for a fixed fee or at an hourly rate, without being a permanent employee of that company and without being eligible for company benefits. Independent contractors are usually responsible for paying their own federal, state, local, and FICA taxes.
Index
An economic indicator which lenders use to calculate interest rates on mortgages (ARMS).
Initial Fixed Interest Period
The period of time that the interest rate on an adjustable loan is initially fixed. Thereafter, the interest rate then becomes fully indexed (the then current index value plus factor/margin). May change in accordance with the index of the loan document.
Initial Interest Rate
The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at the first rate adjustment.
Installment
The regular periodic payment that a borrower agrees to make the lender.
Interest
Money paid for the use of borrowed funds, usually expressed as an annual percentage.
Interest Rate Cap
A limit to the interest rate increases and decreases on an adjustable rate loan; either from one adjustment period to the next or over the life of the loan.
Investment Property
Property the applicant does not intend to occupy, whether or not the property produces income.
Joint Tenancy
A form of property ownership giving each person equal shared interest in the property, typically including rights of survivorship.
Joint Venture
An association between two or more parties to own/or develop real estate or any other business. It may take a variety of legal forms, including partnership, tenancy in common or a corporation. It is formed for a specific purpose and duration.
Jumbo Mortgage
Also known as a 'non-conforming' mortgage. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium.
The current conforming loan limit is $417,000 and below for a single family residence, $533,850 and below for a 2 unit property, $645,300 and below for a 3 unit property, and $801,950 and below for a 4 unit property. Loan amounts greater than this are considered non-conforming or jumbo mortgages
Keogh Retirement Plan
A retirement plan for the self-employed.
Lease
A written document by which the rights of use and occupancy of land and/or structures are transferred by the owner (lessor, party in fee simple title) to another person (lessee, ground lessee, tenant) for specified period of time upon specified terms and conditions, such as payment of rent. The lessor retains the right to take possession of the land and/or structures in the event of default by the lessee under the terms of the lease, and at the end of the lease term.
Leasehold
A manner of holding title to property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
Lender
The bank, mortgage company, or mortgage broker offering the loan.
Lessee
The person or entity to whom real property is leased.
Lessor
The fee owner of real property who leases the property to another. The lessor may be a person or entity.
Liabilities
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Lien
A legal hold or claim of a creditor on the property of another.
Lien Search
An examination of public records to identify any claims of a creditor against real or personal property. In co-op lending lien search is used instead of a title search.
Lifetime Cap
The maximum allowable interest rate over the life of the loan.
Limited Partnership
An entity composed of and owned by one or more general partners and one or more limited partners. Limited partners share in partnership only to the extent of their investment in the partnership.
Loan Origination Fee
A one-time fee that covers a portion of the lender's administrative costs in processing a loan.
Loan Processing
The steps taken by an institution lender from the time a request for a loan application is received to the time the loan is approved or denied, including taking the application, credit investigation, evaluation of the loan and other steps.
Loan Servicing
Supervising a loan after it has been made. This could involve collecting payments, keeping accounting records, computing interest and principal, etc.
Loan Term
The period granted for loan repayment.
Loan Terms
Essential conditions of a loan which specify the principal amount, interest rate, maturity, method of repayment, etc.
Loan-to-Value (LTV)
The ratio of the principal amount of the loan to the lesser of the purchase price of the property or the property's appraised value. You may see this expressed as an 80% loan, or 80% LTV.
Lock-In
The time at which an interest rate is set and the length of time the rate will be held prior to the closing of a loan.
Low-Documentation
Some loan products require only that applicants state the source of their income without providing supporting documentation such as tax returns.
Margin
In ARMs, a margin, or spread, is the difference between the interest rate charged on the loan and the index. Generally, the margin remains fixed over the life of the loan.
Market Value
Also known as "Fair Market Value." The estimated value of a property which a seller could expect to receive under normal conditions.
Maturity
The term of a loan, or the number or years for which the loan funds are advanced.
Mortgage
A lien or claim against real property given by the buyer to the lender as security for money borrowed.
Mortgage Disability Insurance
A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.
Mortgage Insurance (MI)
Often required when making a down payment less than 20%. It protects the lender against payment default by the homeowner. This insurance does not relieve the borrower of the obligation to repay the loan, nor should it be confused with various forms of life or disability insurance designed to pay off a mortgage in the event of the disability or death of the borrower.
Mortgagee
The lender in a mortgage transaction.
Mortgagor
The borrower in a mortgage transaction.
MTA - MONTHLY TREASURY AVERAGE
The 12-MTA index is based on yields published in the release entitled the "Selected Interest Rates - G13" which is published by the Federal Reserve Board.
MultiFamily
A building with more than four residential units.
Negative Amortization
Negative amortization occurs with some adjustable-rate mortgage (ARM) loans when the payment amount is insufficient to cover the interest due on the loan. Any interest not covered by payment is deferred and added to the principal balance.
Net Income
The difference between effective gross income and expenses, including taxes and insurance. The term is qualified as net income before depreciation and debt.
Non-conforming Loan
Also known as a 'Jumbo Mortgage.' Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium.
Non Owner Occupant
A borrower who will not be residing in the subject property as their principal residence; the borrower on rental/investment property.
Note
A written promise to repay a loan. It includes the loan amount, interest rate and term.
Notes Receivable
Income that is derived from a note (agreeing to repayment terms of monies borrowed) between a borrower (the person entitled to receive payments under the note) and another party (the person required to make payments under the note) which identifies the repayment amount and duration of payments.
Origination Date
The date on which the loan is funded.
Origination Fee
A fee imposed by a lender to cover the administrative costs of setting up a mortgage. This will include the preparation of documents and certain processing expenses in connection with making a real estate loan. This is usually charged as a percentage of the amount loaned, such as one point or one percent.
Owner Occupant
A residence lived in by the borrower.
Payment Adjustment Period
The time during which payments on an adjustable-rate mortgage (ARM) may go up or down.
Payment Cap
The limit that the monthly payment can change from one adjustment period to another. Also referred to as a Payment Change Cap.
Payment Shock
A situation that occurs when an adjustable-rate mortgage (ARM) monthly mortgage payments rise very sharply at an adjustment. The borrower may not be able to afford the payments the loan will require.
Payoff
The complete repayment of loan principal, interest and any other sums due; payoffs occur either over the full term of the loan through monthly amortization or through prepayments.
Per Diem Interest
Interest calculated per day and collected from the consumer to cover the period of time from disbursement of the loan proceeds until the start of the first payment period.
Periodic Rate Cap
The maximum rate increase for a specific period for a specific adjustable-rate mortgage (ARM) loan.
Personal Property Coverage
A policy that covers possession loss incurred off your property (except for scheduled Valuable Articles.) For example, a homeowner's policy will only offer 10% of the total contents limit to apply to items off premises such as personal items that your child took away to college.
Personal Umbrella/Personal Liability Protection
An insurance policy that pays and renders service on behalf of an insured for loss arising out of his or her responsibility to another as imposed by law or assumed by contract.
PITI
Principal, interest, taxes and insurance--the components of a monthly mortgage payment.
Planned Unit Developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.
Points
An upfront fee that is collected in addition to the interest on a loan. Each "point" charged is equal to 1% of the loan amount. Points may also be referred to as an "origination fee" or "discount points" depending on the purpose.
Power of Attorney (POA)
A document in which a person (the principal) gives another person (the attorney in fact) the legal right to act on his or her behalf in specific transactions.
Pre-Approval
A process that mortgage lenders use to determine how much money they would lend you based on a thorough review of your financial situation. Lenders issue a pre-approval letter which strengthens your position when bidding on a home, as it shows sellers that you will be able to raise funds needed to purchase.
Pre-Qualification
An informal process in which a lender will offer an opinion on how much money you may be able to borrow. This opinion is based entirely on the financial information you provide and is neither binding nor necessarily accurate because lenders have not yet verified your financial information.
Prepaids
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.
Preliminary Title Report
A report made by a title company stating whether there are any other claims to ownership of a property. A necessary step before a mortgage loan can be approved.
Prepayment Clause
A clause that stipulates the amount of principal a borrower may prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments.
Prepayment Penalty
A fee charged to a borrower who pays a loan before it is due
Prime Rate
This typically refers to the best rate for short-term commercial paper. This is not a stable index.
Principal
The remaining amount or balance of the mortgage loan.
Principal and Interest
The total amount needed to pay on a loan each month. This includes the interest owed as well as the amount being paid towards the principal.
Private Mortgage Insurance (PMI)
Insurance coverage obtained from mortgage insurance companies to protect lenders against risk of making higher loan-to-value loans. Typically required on all first mortgages with an LTV that exceeds 80%. The borrower usually pays the PMI premiums.
Property Appraisal
A written analysis or opinion of the estimated value of a property prepared by a qualified appraiser.
Purchase Agreement
A written promise to pay a specific amount for a property at a specified time. The purchase agreement is a written statement of the offer, which both the borrower and the seller will sign if the offer is accepted.
Purchase Contract
A written promise to purchase and sell a property at a specified time.
Purchase Transaction
A loan where the proceeds are used to finance a portion of the total acquisition price of real property.
Purchase Price
The total sale price of the home.
Qualifying Rate
The rate used to underwrite a loan. This rate may or may not be equal to the initial or note rate.
Quit Claim Deed
A deed that transfers without any warranty whatever interest or title a grantor may have at the time the conveyance is made.
Rate Cap
A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
Rate Lock
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.
Rate Lock-in
A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.
Realtor
A real estate broker or an associate holding active membership in a real estate board affiliated with the National Association of Realtors.
Real Estate Settlement Procedures Act (RESPA)
A federal law administered by the U.S. Department of Housing and Urban Development (HUD), requiring lenders to provide specific information to a consumer, including settlement costs and servicing transfer disclosures. RESPA also regulates lenders' practices during the servicing of the loan.
Reconveyance
Also known as Deed of Reconveyance or Release. An instrument a trustee executes to transfer title to the borrower when the loan is paid off. Once the instrument is recorded, the lien is removed from the records.
Recording
The noting in the registrar's or other public official's office of the details of a properly executed legal document, such as a deed of trust, mortgage, satisfaction of mortgage, or modification of mortgage, thereby making it a part of the public record.
Refinancing
Taking out a new loan to pay off an existing mortgage. This is done to obtain a lower interest rate or to borrow cash on the equity in a property that has built up on a loan.
Registered Agent
The person who accepts any notices, subpoenas, etc. from the state on behalf of the entity. Many states require that an entity name a registered agent.
Rescission Period
The three business days during which certain applicants with loans secured by an owner-occupied dwelling may rescind their loan.
Reserves Account
See Escrow Deposit Amount and Impounds.
Residual Income
The amount of income available to the applicants after total monthly housing expenses are deducted from total income.
RESPA
The Real Estate Settlement Procedures Act (RESPA) of 1974, which was implemented through Regulation X, requires lenders to provide customers with information about the real estate settlement process and expenses involved in that process. In addition to requiring a number of disclosures relating to various aspects of a real estate transaction, RESPA also prohibits kickbacks and other abusive practices. Disclosures are required at various times in the loan application, closing and servicing processes.
Reversal (as it relates to the Transaction History)
A retraction of a monetary loan application, resulting from a payment being returned unpaid, or as part of a correction process to re-credit previously misapplied funds.
Revocable Trust
A trust established by an individual or group of individuals known as the settlor. The settlor is also known as the principal or trustor. The settlor individually or jointly owns the real property or assets to be transferred into the trust. The trust is effective during the settlor's lifetime and can be changed or cancelled by the settlor at any time, for any reason, during that person's lifetime.
Right of Rescission
When refinancing a mortgage, this is the right of a borrower to change his or her mind and cancel the transaction within three business days after closing/settlement.
Round Table Closing
A loan closed in a meeting where all documents are signed, and money and ownership changes hands.
Sales Contract
A written document in which a purchaser agrees to buy property under certain given conditions, and the seller agrees to sell under certain given conditions. Also known as an "Agreement of Sale."
Second Home
A residence owned and occupied by the applicant for some portion of the year in addition to the applicant's primary residence.
Second Mortgage
A mortgage which ranks after a first mortgage in priority. If the loan is not repaid, the first mortgage holder has first right to the property; the second mortgage holder receives anything remaining.
Secondary Mortgage Market
The market where lenders and investors buy and sell existing mortgages or mortgage-backed securities, thereby providing greater availability of funds for additional mortgage lending.
Seller Carry Back
An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.
Separate Maintenance
An order by the court to send money to an individual on a monthly basis for a specific period of time.
Servicing (or Loan Servicing)
Supervising and administering a loan after it has been made. This involves such things as collecting the payments, keeping accounting records, computing interest and principal, etc.
Settlement Statement
A statement prepared by broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale. A separate statement is prepared for the seller and buyer.
Signer
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.
Subordinate Financing
Any mortgage or other lien that has a lien position behind that of the first mortgage.
Survey
A map executed by a licensed surveyor, which sets down precisely the boundaries of a given property as well as improvements, references to known landmarks, and the property's notable features.
Tenants-in-common
An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.
Term
The period of time which covers the life of the loan. For example, a 30-year fixed loan has a term of 30 years.
Title
Evidence of a person's right to possession ownership of a property.
Title Insurance
The insurance that protects the lender and if an owner's policy is purchased, the homeowner, against loss resulting from any inconsistencies in the title of a property from liens or other title problems relating to a property.
Title Insurance Fees
Fees paid for insurance that protects a lender, and if an owner's policy is purchased, the homeowner, against loss resulting from incorrect information associated with the title. This protects the lenders and owners from liens or outstanding debts related to the property.
Title Report
A report that discloses whether there are any competing claims, liens or other problems relating to a property. This must be done before title insurance is issued. Also known as a "Preliminary Title Report" or "Prelim."
Title Search
An examination of public records, laws, and court decisions to disclose the current facts regarding ownership of and liens on real estate.
Total Debt Ratio
Monthly debt and housing payments divided by gross monthly income. Also known as "Obligations-to-Income Ratio" or "Back-End Ratio."
Transfer Tax
A real estate purchase transaction may require state or local taxes payable when title passes from one owner to another.
Truth-in-Lending Act
Also known as "Regulation Z." A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.
Unapplied Funds
Available money credited to a temporary holding (suspense) account, pending determination or instruction on the breakdown of how the money is to be allocated.
Underwriting
The analysis of risk involved in making a mortgage loan to determine whether the risk is acceptable to the lender. Underwriting involves evaluating the property as outlined in the appraisal report, and also evaluating the borrower's ability and willingness to repay the loan.
Unsecured Personal Loan
A loan that is not backed by collateral.
VA Loan
A loan that is partially guaranteed by the Department of Veterans Affairs and made by a private lender.
Valid
Sufficient in law; effective.
Valuation
The estimation of a property's value through an appraisal.
Veterans Affairs
A government agency that aids veterans of the United States armed forces in obtaining housing; its assistance takes the form of a partial guarantee of repayment to lenders in the event of borrower default.
Zero Lot Line
The positioning of a structure on a lot so that one side rests directly on the lot's boundary line. This type of construction generally is prohibited unless it is part of a special space-conserving project. See also PUD.
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