A B C
D E F G
H I J L
M N O P
Q R S T
U V W Z
Abut: Connect or join. If
two pieces of property touch each other, they abut each other.
Acceleration clause. A provision in a mortgage
that gives the lender the right to demand payment of the entire
outstanding balance if a monthly payment is missed.
Accrued interest: Interest earned but not
paid since the last due date.
Add-on interest: Interest added to the amount
of the loan on the front end, or beginning of the loan repayment
period. The balance is then paid by installments. This form
of interest is much more expensive than simple interest paid
on the entire amount for the entire term of the loan.
Adjustable living expenses: Expenses you
can change, such as costs of groceries, utilities, telephone.
Adjustable mortgage ( ARM ) A mortgage
that permits the lender to adjust its interest rate periodically
on the basis of changes in a specified index.
Affordable Housing Program (AHP): A program
of the Federal Home Loan Bank system which allows the Regional
Banks of the System to make subsidized funds available through
member institutions for the production of affordable housing
to serve families below 80 % of their area median income (AMI).
Amenity: A natural or man-made feature that
increases the value of property. Examples would be a view
of a golf course or the ocean, or a beautifully landscaped
Amortization The gradual repayment of a
mortgage by installments, calculated to pay off the obligation
at the end of a fixed period of time.
Amortization schedule. A timetable for payment
of a mortgage showing the amount of each payment applied to
interest and principal and the balance remaining.
Annual percentage rate (APR). The total cost
of a mortgage stated as a yearly rate; includes such items
as the base interest rate, loan origination fee (points),
commitment fees, prepaid interest and other credit costs which
may be paid by the borrower.
Appraisal. A professional opinion or estimate
of the marker value of a property.
Appreciation. An increase in the value of
a property due to changes in market conditions or other causes.
Appurtenance: An item attributable to the land, such as improvements
or an easement. Something that comes from outside the property
but is considered part of the property and transfers with
the property upon sale or other transfer. A utility easement
is an example of an appurtenance
Arrears: At the end of a period. You pay interest on home
mortgages in arrears. You pay rent in advance. For example,
a mortgage payment due May 1 is for the interest for April;
rent due May 1 is for the month of May. The term can pertain
to delinquent mortgage payments. A mortgage loan that is three
months delinquent can be said to be three months in arrears.
Assessed value. The valuation placed upon property by a public
tax assessor that is used to compute property taxes.
As is: Property sold in its present condition
with no warranties made about the plumbing, heating, electrical
system or infestation of termites is said to be sold "as
Assumable mortgage. A mortgage that can
be taken over by the buyer when a home is sold.
Assumption The transfer of the seller’s
existing mortgage to the buyer.
Balloon mortgage: A mortgage
loan with periodic payments of principal and interest that
do not completely amortize the loan. The balance of this type
of mortgage loan is due and payable in a lump sum at a specified
time in the future. The borrower pays interest regularly,
but may or may not make small principal repayments during
the loan period. The unpaid balance is due at a specific time
in the future as stated in the mortgage or deed of trust.
For example, if you borrow $30,000 for 5 years, or 60 months,
and the interest rate is 15%, your monthly payments will be
only $375. But the payments cover interest only, with the
entire principal due at maturity in five years. Thus, the
borrower must make 59 equal monthly payments of $375 and a
final balloon payment of $30,375 (the principal plus the last
interest payment). If the borrower cannot make the final payment,
the borrower must refinance (if refinancing is available)
or sell the property. Some lenders guarantee refinancing when
the balloon payment is due, although they do not commit to
a specified interest rate. The rate at refinancing could be
much higher than the borrower's current rate. Other lenders
do not offer automatic refinancing. Without such a guarantee,
the borrower could be forced to start the whole business of
shopping for mortgage funds again, besides paying closing
costs and front-end charges a second time. A balloon mortgage
can be a senior or junior mortgage; i.e., a first or second
Balloon note: A Promissory Note which requires
only partial or no amortization (principal reduction.) Balloon
Notes result in an eventual Balloon Payment. A Balloon Note
may be coupled with an Extendible Rider which allows for the
extension of the loan term as long as certain conditions are
met. (Such as on 5/25 and 7/23 loans.)
Balloon payment: The final payment in a balloon
mortgage. The balloon payment ends the mortgage; the mortgage
is paid in full. This final payment is called the balloon
Bankruptcy: When a person is declared by
a court to be unable to pay her or his debts, that person
is in bankruptcy. That person must then turn over any money
or properties to a trustee, a person whom the court appoints,
Basis points: A term used in relationship
to interest rates. One basis point is equal to 1/100 of 1
percent. Basis points are used to describe the yield of a
debt instrument, including mortgages. The difference between
9% and 9.5% is 50 basis points.
Binder. A preliminary agreement between a
buyer and seller which includes the price and terms of the
Bona fide: Genuine; sincere; in good faith.
The term can be used in a sentence such as, "this is
a bona fide offer to purchase your real estate."
Buydown: With a buydown, the seller or borrower pays
an amount to the lender so that the lender can offer a lower
rate and lower payments, during the earlier portion of the
loan term. If the seller pays, he may increase the sales price
to cover the cost of the buydown. Buydowns can occur in all
types of mortgages; fixed rate, interim fixed and adjustables.
Cap. A provision of an ARM
limiting how much the interest rate or mortgage payments may
increase or decrease.
Cash reserve. A requirement of some lenders
that buyers have sufficient cash remaining after closing equivalent
to two months mortgage payments.
Clear title. A title that is Free of liens
or legal questions as to ownership of property.
Closing A meeting at which a sale of a property
is finalized by delivery of a deed from seller to buyer and
the buyer signing the mortgage documents and paying closing
costs. Also called a settlement.
Closing costs. Expenses (over and above the
price of the property) incurred by buyers and sellers in transferring
ownership of a property. Also called settlement costs.
Collateral: Assets that are pledged to secure
the discharge of an obligation.
Commitment letter . A formal offer by a
lender stating the terms under which it agrees to lend money
to a home buyer.
Common Area Maintenance: Charges paid by
the tenant for the upkeep of areas designated for the use
(CAM) and benefit of all tenants.
Common areas and elements: Areas of property
used or available for use by multiple parties. Common Areas
in office building often include stairways, hallways, restrooms,
Condemnation: The taking of private property for
public use by a government unit, against the will of the owner,
but with payment of just compensation under the government's
power of eminent domain. Condemnation may also be a determination
by a governmental agency that a particular building is unsafe
or unfit for use.
Condominium A form of property ownership
in which the homeowner holds title to an individual dwelling
unit , an undivided interest in common areas of a multi-unit
project, and sometimes the exclusive use of certain limited
Contingency A condition that must be in met
before a contract is legally binding.
Conventional Mortgage. Any mortgage that
is not insured or guaranteed by the federal government.
Convertible ARM. An adjustable rate mortgage that
can be converted to a fixed-rate mortgage under specified
Cooperative A type of multiple ownership
in which the residents of a multi-unit housing complex own
shares in the corporation that owns the property, giving each
resident the right to occupy a specific apartment or unit.
Co-signer: A person who signs loan documents,
such as a mortgage note with another person. The co-signer
is responsible for making payments, if the borrower does not.
Covenant. A clause in a mortgage that obligates or
restricts the borrower and which, if violated, can result
Credit history: The record of a person's
payment of debt, over years' time. That record is kept by
three national credit bureaus, which send it to businesses,
lenders, and creditors-as well as to the credit-holder upon
Credit rating: A credit bureau's ranking
of the way a person has repaid his/her debts. lender uses
a loan applicant's credit rating to decide whether or not
to make the loan.
Creditor: Any person or company that lends
money (extends credit).
Creditworthy: A person with good credit,
whom a lender judges will repay a loan, is credit worthy.
Credit report. A report of an individual’s
credit history prepared by a credit bureau or consumer reporting
agency and used by a lender in determining a loan applicant’s
Credit Score. A score based statistical method
used to predict the relative likelihood that you will repay
a credit obligation, such as a mortgage loan. The most well-known
credit score In the mortgage industry has been developed by
Fair, lsaacs and Company and is often referred to as the FICO
Debt management plan: A bill
payment plan for a borrower in a credit emergency. The plan
is agreed to by the borrower and creditors.
Deed. The legal document conveying title
to a property.
Deed of trust. The document used in some
states instead of a mortgage which gives the lender a security
interest in the property. Title is conveyed to a trustee by
the borrower (who retains equitable title). When the debt
is paid in full, title is reconveyed to the Borrower.
Deed restrictions: Restrictions or limitations
to the use of property as noted in a deed.
Default: Failure to make mortgage payments
Default. The failure to make a mortgage payment on a timely
basis or to otherwise comply with other requirements of a
Delinquency. A loan in which a payment is
overdue but not yet in default.
Deposit See Earnest money.
Depreciation A decline in the value of property;
the opposite of appreciation.
Discount points. See Points.
Down Payment. The part of the purchase price
which the buyer pays in cash and does nor finance with a mortgage.
Due-On-Sale Clause A provision in a mortgage
allowing the lender to demand repayment in full if the borrower
sells the property securing the mortgage.
Earnest money. A deposit
made by the potential home buyer to show that he or she is
serious about buying the house.
Easement A right of way giving persons other than
the owner access to or over a property.
Egress: A means of exit from a parcel of
Eminent domain: Right of a government agency
to take private property for a public purpose. Fair compensation
must be paid to the owner whose property is taken.
Encumbrance: Anything that imposes a legal burden
on title to land such as liens for security purposes, easements,
and restrictive covenants.
Equal Credit Opportunity Act (ECOA). A federal law
that prohibits lenders from discriminating on the basis of
the borrower’s race, color, religion, national origin,
age, sex, marital status, or receipt of income from public
Equity. A homeowner’s financial interest in
a property. Equity is the difference between the fair market
value of a property and the amount still owed on the mortgage.
Equity loan. A loan based on the borrower’s
equity in his or her home.
Escrow. The holding of documents and money
by a neutral third party prior to closing; also, an account
held by the lender (or servicer) into which a homeowner pays
money for taxes and insurance.
Estate sale: A sale held to sell the property
of someone who has died. Sometimes houses are sold at estate
Eviction: The physical dispossession by a landlord
of a tenant from leased premises.
Exclusive agency listing: A listing agreement between
a seller and a broker in which either has a right to sell
the property; if sold by the broker a commission will be due
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
Fair credit billing act: A federal law that gives
a borrower the right to question credit card bills from companies
other than banks. The law lays out a process for a borrower
to follow if a credit-card bill is wrong, or appears to be
Fair debt collection practices act: A federal law
that protects consumers from abuse or threats from collection
agencies trying to get overdue payments.
Fair housing act: A federal law that states
what housing and real estate practices are discriminatory.
The law also states in what ways those practices are to be
Fair market value: The amount an appraiser
decides a house is worth. The appraiser compares the house
with houses like it that have sold recently in the same area.
The physical condition of the house also affects its fair
Fannie Mae and Freddie Mac Both organizations
were chartered by Congress to increase the supply of funds
that mortgage lenders, such as commercial banks, mortgage
bankers, savings institutions and credit unions, can make
available to home buyers.
Fannie Mae and Freddie Mac buy mortgages from lenders, packaging
the mortgages into securities and selling them to investors.
As Fannie Mae and Freddie Mac will only buy loans that meet
their guidelines , they play an important role in setting
what criteria are used to evaluate a mortgage application.
FHA mortgage. A mortgage that is insured
by the Federal Housing Administration. Also referred to as
a government mortgage.
FHA (Federal Housing Administration): A division
of the U.S. Department of Housing and Urban Development that
insures mortgage loans.
FHA loan: A mortgage that is insured by the Federal
FHA 203(k) Rehabilitation Mortgages. FHA-insured
Section 203(k) rehabilitation first mortgages enable borrowers
to purchase and rehabilitate homes. With this mortgage product,
borrowers can qualify for loan amounts based on the completed
value of the property, up to the maximum FHA loan limits
FHA Title I Home Improvement Loans Title
I home improvement loans may be used to finance modest home
improvements when homeowners have little equity in their property.
Title I loans are generally based on the creditworthiness
of the borrower, rather than the equity in the home.
FICO Score. See credit Score
First Mortgage A mortgage that has First
claim to the secured property in the event of default.
Fixed rate mortgage A mortgage in which the
interest rate does not change during the entire term of the
Fixed expenses or fixed payments: Expenses or payments
that usually stay the same from month to month, such as rent,
a car loan, a student loan, insurance, child support.
Fixed expenses: Costs that do not change with a building's
occupancy rate. They include property taxes, insurance, and
some forms of building maintenance.
Flood Insurance. Insurance that compensates
For physical property damages resulting from flooding. It
is required for properties located in federally designated
Forbearance The lenders postponement of foreclosure
to give the borrower time to catch up on overdue payments.
Foreclosure. The legal process by which a
mortgaged property may be sold when a mortgage is in default
Good faith estimate: A lender is
required to give this estimate of a borrower's closing costs
to the borrower within three business days of the loan application.
Graduated payment mortgage. A mortgage that starts
with low monthly payments that increase at a predetermined
rate for a specified time. The initial monthly payments are
set at an amount lower than that required for full amortization
of the debt.
Gross income: The total amount of money
that a person receives, before taxes and other deductions.
This income may include funds from a job or jobs; interest
or dividends; alimony; disability payments; or public assistance.
Hazard insurance. Insurance
coverage that compensates for physical damage to a property
from fire, wind, vandalism, or other hazards.
Home inspector: A licensed professional who
looks at all parts of a house and evaluates its condition.
Homestead: Primary residence as declared
by the head of a household and filed with the county clerk
in order to exempt the homestead from claims of creditors.
Housing expense ratio: The percentage of
a person's gross monthly income that it takes to pay a mortgage
loan payment plus interest, property taxes, and insurance.
Lenders use this ratio to decide whether or not to make mortgage
HUD: U.S. Department of Housing and Urban
Development. Office of Housing/Federal Housing Administration
within HUD insures home mortgage loans made by lenders and
sets minimum standards for such homes.
Homeowner's Insurance An insurance policy that combines personal
liability coverage and hazard insurance coverage for a dwelling
and its contents.
Homeowners Warranty 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.
HUD-1. See Settlement sheet.
Improvement: Anything done
to a house that increases its value, such as adding a sun
porch or modernizing the kitchen.
Interest. The fee charged for borrowing
Interest rate cap. A provision of an ARM
limiting how much interest rates may increase per adjustment
period or over the life of a mortgage. See also Lifetime cap.
Inspection: When a house is remodeled or
rehabbed it must be inspected by an inspector from the local
government to be sure all work is done properly.
Installment debt: Debts or accounts
that are paid off in monthly payments, or install-ments, such
as credit-card accounts.
Interest escalation clause: Provides for variable
rate of interest according to a standard index.
Interest rate: The lender's rate of return on borrowed
Interest-only loan: A method of loan amortization
in which interest is paid periodically over the term of the
loan and the entire original loan amount is paid at maturity.
Joint tenancy. A form of
co-ownership giving each tenant equal interest and equal rights
in the property, including the right of survivorship.
Judgment: A decision given by a judge or
court that says a person has to pay another person a certain
amount of money.
Late charge. The penalty
a borrower must pay when a payment is made after the due date.
Lease-Purchase Mortgage Loan. A mortgage product
that allows low- and moderate Income home buyers to lease
a home from a nonprofit organization with an option to buy.
Each month’s rent payment consists of PITI payments
on the first mortgage, plus an extra amount that is earmarked
for deposit to a savings account in which money for a down
payment will accumulate.
Lien A legal claim against a property that
must be paid off when the property is sold.
Lease: A contract between landlords and tenants
for a possession of space for a specified amount of rent.
Leases are used for all types of properties.
Lessee: The person renting or leasing a property.
Also referred to as a tenant.
Lessor: A person who rents or leases a property to
another. Also referred to as a Landlord.
Liability insurance: Insurance a contractor buys
to protect herself and the person who hires her in case someone
is hurt or damage is caused during the work she performs on
Lifetime cap. A provision of an ARM that limits the
total increase in interest rates over the life of the loan.
Loan commitment See Commitment letter.
Loan or mortgage value: That portion of the value
of real property recognized by the lender when used to secure
Loan origination: The process whereby a lender initiates
a loan with a borrower.
Loan point: A charge prepaid by the borrower upon
the origination of a loan. One point equals one percent of
the loan amount.
Loan servicing: Collecting loan payments, keeping
records, following up on delinquencies, and taking foreclosure
actions relating to a mortgage loan.
Loan servicing. The collection of mortgage
payments from borrowers and related responsibilities of a
Loan-to-value percentage (LTV). The relationship
between the unpaid principal balance of the mortgage and the
appraised value (or sales price if it is lower) of the property.
Lock-in. A written agreement guaranteeing
the home buyer a specified interest rate provided the loan
is closed within a set period of time. The lock-in also usually
specifies the number of points to be paid at closing.
Market value: The price that
property would be expected to bring in the open market under
Mechanic's lien: A lien that can be filed by mechanics
or material suppliers; it is against real property created
by statute for the purpose of securing payments for services
performed or materials furnished in the construction or repair
of buildings or making other improvements to land.
Monthly housing costs: The total of a homeowner's
mortgage loan payment and expenses for utilities, general
home repair, and upkeep.
Mortgage agreement: A document signed by a borrower
and a lender giving the lender the right to take the borrower's
house if the borrower does not repay the loan
Mortgage. A legal document that pledges a property
to the lender as security for payment of a debt.
Mortgage banker A company that originates
mortgages exclusively for resale in the secondary market.
Mortgage broker An individual or company
that for a fee acts as intermediary between borrowers and
Mortgage insurance. See Private mortgage
Mortgage insurance premium (MIP). The fee
paid by a borrower to FHA or a private insurer For mortgage
Mortgage margin. the set percentage the lender
adds to the index value to determine the interest rare of
Mortgage note. A legal document obligating
a borrower to repay a loan at a stated interest rate during
a specified period of time; the mortgage note is secured by
Mortgage interest rate. The rate of interest in effect
for the monthly payment due.
Mortgagee. The lender in a mortgage agreement.
Mortgagor. The borrower in a mortgage agreement
Negative amortization. A
gradual increase in the mortgage debt that occurs when the
monthly payment is not large enough to cover the entire amount
of principal and interest due . The amount of the shortfall
is added to the unpaid principal balance which results in
Nontraditional credit history: A record of
credit performance shown with receipts and bill and check
stubs from payments to landlords, utility companies, child-care
providers, and others. A method for loan applicants who do
not have a credit history from, for example, car-loan or credit
Note: A document on which a borrower promises
to repay a loan. Also called promissory note.
Notice of default: A formal written notice
to a borrower that a default has occurred and that legal action
may be taken.
Offer: A purchase proposal
to the seller of a house, telling the amount a certain buyer
would pay for the house and other conditions that would have
to be met before the proposed house sale.
Origination fee. A fee paid to a lender
for processing a loan application; it is stated as a
percentage of the mortgage amount
Owner financing. A property purchase transaction
in which the property seller provides all or part of the financing.
Payment cap. A provision
of some ARMs limiting the amount by which a borrower's
payments may increase regardless of any interest rate increase;
may result in negative amortization. See Adjustable rate mortgage.
PITI. Stands for principal, interest, taxes,
and insurance the components of a monthly mortgage payment.
Planned unit developments (PUDs). A planned
unit development is a project or subdivision that consists
of common property that is owned and maintained by an owners
association for the benefit and use of the individual PUD
Points. A one-time charge by the lender to
increase the yield of the loan; a point is 1 percent of the
amount of the mortgage.
Prepaids. Fees collected at closing to cover
items such as setting up escrow accounts for property taxes,
homeownerâ€™s insurance, and private mortgage
Prepayment penalty. A fee that may be charged to
a borrower who pays off a loan before it is due.
Prequalification. The process of determining
how much money a prospective home buyer will be eligible to
borrow before a loan is applied for.
Principal. The amount borrowed or remaining
unpaid; also, that part of the monthly payment that reduces
the outstanding balance of a mortgage.
Private mortgage insurance (PMI). Insurance
provided by nongovernment insurers that protects lenders against
loss if a borrower defaults. Fannie Mae generally requires
private mortgage insurance for loans with loan-to-value (LTV)
percentages greater than 80 percent.
Promissory note: A written promise of a person
(maker) to pay a specified sum of money to another person
(payee) in accordance with terms and conditions agreed upon
by the parties.
Proration: A division of taxes, interest, and insurance so
that the seller and the buyer pay the portion covering his
period of ownership.
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.
Qualifying ratios: Guidelines
applied by lenders to determine how large a loan to grant
Quiet enjoyment: Right of property owner to use his
property without adverse claims of another to title or interest.
Quitclaim deed: A deed which transfers whatever interest
the maker of the deed may have in the particular parcel of
land. A quitclaim deed is often given to clear the title when
the grantor's interest in a property is questionable. By accepting
such a deed the buyer assumes all the risks. Such a deed makes
no warranties as to the title, but simply transfers to the
buyer whatever interest the grantor has. (see Deed.)
Radon. An invisible, odorless
gas found in some homes that in sufficient concentrations
may cause health problems.
Rate lock. See Lock-in.
Real estate sales professional. A person
licensed to negotiate and transact the sale of real estate
on behalf of the property owner.
Real Estate Settlement Procedures Act. A
consumer protection law that requires lenders to give borrowers
advance notice of closing costs.
Refinancing. The process of paying off one
loan with the proceeds from a new loan using the same property
Rent with option to buy. See Lease-Purchase
Rent: Consideration paid for the use of
Repossess: To take back a property, such as a car,
when the borrower or owner does not make payments due on the
property. Done by a lender or seller.
Right-of-way: The right to cross over or under another
person's property for ingress, egress, utility lines, or sewers.
Rural Development (RD): Formerly the Farmers
Home Administration, RD is part of the U. S. Department of
Agriculture. It administers grant and loan programs to promote
and support housing and essential community facilities development
in rural communities.
Sale price: The total amount
paid to the seller at time of sale.
Second mortgage. A mortgage that has a lien
position subordinate to the first mortgage.
Secondary mortgage market. The buying and
selling of existing mortgages. See Fannie Mae and Freddie
Section 8 program: Program of rent supplements
developed by HUD and allocated to local governments.
Septic tank: An underground tank used for
sewage treatment where city sewerage is not available.
Seller-take-back. An agreement in which
the owner of a property provides financing, often in combination
with an assumed mortgage.
Settlement. See Closing.
Settlement sheet. The computation of costs
payable at closing which determines the seller’s net
proceeds and the buyer’s net payment (referred to as
Survey. A drawing or map showing the precise legal
boundaries of a property, the location of improvements, easements,
rights of way, encroachments, and other physical features.
Tenancy by entirety. A type of joint
ownership of property that provides rights of survivorship
and is available only to a husband and wife.
Tenancy in common. A type of joint ownership in a
property without rights of survivorship.
Tenant improvements: A lease provision that
obligates the owner to incur a prespecified dollar. Allowance
amount to prepare the space for the tenant's occupancy.
Term: The length of time in which a loan
is to be repaid. A 30-year mortgage loan has a 30 year term.
Title company: A company that specializes
in insuring title to property.
Title. A legal document evidencing a person’s
right to or ownership of a property. Title company. A company
that specializes in examining and insuring titles to real
Title insurance. Insurance to protect the lender
(lender’s policy) or the buyer (owner s policy) against
loss arising from disputes over ownership of property.
Title search. An examination of the public records
to ensure that the seller is the legal owner of the property
and that there are no liens or other claims outstanding.
Transfer tax. State or local tax payable
when title passes from one owner to another.
Truth in lending act: A federal law that
requires lenders to provide complete and correct information,
in writing, about how much a borrower owes when payments are
due and how much they are, and what interest rates and other
Underwriting. The process
of evaluating a loan application to determine the risk involved
for the lender. It involves an analysis of the borrower’s
creditworthiness and the quality of the property itself.
Unsecured credit: Any credit that is not
secured by property (such as a house). A credit card is unsecured
credit, a mortgage loan is secured.
Vacancy: Loss Rent that is
not collected due to turnover or sustained vacancy of a commercial
Warranty: A guarantee by
a seller or manufacturer that a product is what it is claimed
to be, that it is in working order, and, in some cases, that
the seller or maker will repair the product.
Will: Document executed during a person's lifetime
that conveys the person's property at death.
Zoning: A county or city
law stating the types of use to which properties can be put
in specific areas.