Abstract of Title
A written history of ownership to a specific area of land. An abstract of title covers the period from the original source of title to the present time and summarizes all subsequent documents that have been recorded against that area.
ACH (Automatic Clearing House)
Electronic Drafting system that debits an authorized bank account and electronically transfers funds scheduled for remittance.
Addendum
An agreement or list that is added to a contract, agreement, or other document such as a letter of intent. FHA and VA require that an addendum be added to or incorporated in a sales contract, if it is written prior to the appraisal.
Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically according to a pre-selected index.
American Land Title Association (ALTA)
A national association of title insurance companies, abstractors, and attorneys specializing in real property law. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.
Amortization
Payment of a debt in regular, periodic installments of principal and interest as opposed to interest only payments.
AmortizationSchedule
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance.
Balloon Mortgage
A mortgage that has level monthly payments that will fully amortize it over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.
Bankruptcy
A proceeding in a federal court in which a debtor, who owes more than his or her assets, can discharge personal liability for his or her debts. This affects the borrower's personal liability for a mortgage debt but not the lien of the mortgage.
Biweekly Mortgage
A mortgage with payments due every two weeks, totaling 26 payments a year.
Borrower
A person (also known as mortgagor) who receives funds in the form of a loan with an obligation to repay principal with interest.
Bridge Loan
A form of second deed of trust or mortgage that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.
Buydown
Money advanced by an individual (builder, seller, etc.) to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years
Cash
Currency, checks and other negotiable instruments acceptable for direct deposit by a bank.
Cash to Close
Liquid assets that are readily available to be used to pay the closing costs involved in a closing of a mortgage transaction.
Cash Reserve
A requirement by some lenders that buyers have sufficient cash remaining after closing to make the first mortgage payment.
Cash Out Refinancing
When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding of the existing mortgage being refinanced, and all or a portion of the equity is converted to cash.
Closing
The consummation of a real estate transaction. The closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to complete the sale and loan transaction.
Closing Costs
Money paid by the borrower in connection with the closing of a mortgage loan. This generally involves an origination fee, discount points, appraisal, credit report, title insurance, attorney's fees, survey, and pre-paid items such as tax and insurance escrow payments.
Closing Statement
A form used at closing that gives an account of the funds received and paid at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance. Also referred to as a HUD or HUD1 Settlement Statement.
Co-Borrower
Additional borrower(s) whose income contributes to qualifying for a loan and whose name(s) appears on documents with equal legal obligations.
Collateral
Property pledged as security for a debt, such as the real estate pledged as security for a mortgage.
Commitment Letter
A formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.
Deed
The legal document conveying title to a real property.
Deed of Trust
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and reconveyed upon payment in full.
Default
The failure to perform an obligation as agreed in a contract.
Delinquency
A loan payment that is overdue but within the period allowed before actual default is declared.
Department of Housing and Urban Development (HUD)
A governmental entity responsible for the implementation and administration of housing and urban development programs. HUD was established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency.
Department of Veterans Affairs (VA)
A cabinet-level agency of the federal government. The Servicemen's Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the VA Home Loan Guaranty program, which encourages mortgage lenders to offer long-term, no down payment financing to eligible veterans by partially guaranteeing the lender against loss upon foreclosure.
Deposit
A sum of money given to bind a sale of real estate. Also known as earnest money.
Disclosure
Information relevant to specific transactions that is required by law.
Discount Point
A point paid to the lender to permanently buy down or lower an interest rate. It is usually a percentage of the loan amount.
Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount.
Earnest Money
A portion of the down payment delivered with a purchase offer by the purchaser of real estate. Delivered to the seller, or an escrow agency, by the purchaser with the purchase offer as evidence of good faith. Also known as a deposit.
Effective Interest Rate
The actual rate of return or yield to an investor. The actual rate of interest paid by a borrower.
Equal Credit OpportunityAct (ECOA)
A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs or past exercising of rights under the Consumer Credit Protection Act.
Equity
The ownership interest; i.e. portion of a property's value over and above the liens against it.
Equity Loan
A loan based on the borrower's equity in his or her home.
Escrow
An item of value, money or documents, deposited with a third party, to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. In some parts of the country, escrows of taxes and insurance premiums are called impounds or reserves.
Escrow Account
The segregated trust account in which escrow funds are held.
Escrow Agent
The person or organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Also called escrow company or escrow depository.
Escrow Payment
That portion of a mortgagor's monthly payments held by a lender or servicer to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also called impounds or reserves in some states.
Fair Credit Reporting Act (FCRA)
This law requires consumer reporting agencies to exercise fairness, confidentiality and accuracy in preparing and disclosing credit information.
Federal Home Loan Mortgage Corporation - FHLMC (FREDDIE MAC)
A quasi-governmental agency that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association bonds to raise funds to finance the purchase of mortgages. Popularly know as Freddie Mac.
Federal National Mortgage Association - FNMA (FANNIE MAE)
A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.
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.
First Mortgage
A real estate loan that has priority over any subsequently recorded mortgages.
Fixed Interest Rate
An interest rate which does not change during the loan term.
Fixed-rate Mortgage (FRM)
A mortgage in which the interest rate and payments remain the same for the life of the loan.
Foreclosure
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.
Gift Letter
A written explanation signed by the individual giving the gift stating, "This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time."
Good Faith Estimate (GFE)
A document which tells borrowers the approximate costs they will pay at or before settlement, based on common practice in the locality. Under requirements of the Real Estate Settlement Procedures Act (RESPA), the mortgage banker or mortgage broker, if any, must deliver or mail the GFE to the applicant.
Hazard Insurance
A contract whereby an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards (i.e. fire).
Home Equity Line of Credit (HELOC)
A form of revolving credit in which your home serves as collateral.
Home Equity Loan
A revolving line of credit or loan based on the equity in the mortgagor's house. The property is the security for the loan, which is usable for any purpose.
Home Mortgage Disclosure Act (HMDA)
Federal legislation which requires certain types of lenders to compile and disclose data on where their mortgage and home improvement loans are being made.
Homeowner's Insurance
An insurance policy that combines liability coverage and hazard insurance.
Homeowner's Policy
A multiple peril insurance policy available to owners of private dwellings which covers the dwelling and its contents, as well as personal liability.
Housing Expense Ratio
The relationship of a borrower's monthly payment obligation on housing (PITI and other applicable housing expenses) divided by gross monthly income, expressed as a percentage. Also called the top ratio.
Income/Expense Ratio
A qualifying ratio used in underwriting a residential mortgage loan which computes the percentage of monthly income required.
In File Credit Report
Unverified credit report which may contain unchecked, duplicated, or overlapping data. It is often used for a quick look at a prospective borrower's credit history.
Installment
The periodic payment that a borrower agrees to pay a mortgage lender.
Insured Loans
A loan insured by HUD-FHA or a private mortgage insurance company.
Interest
Consideration in the form of money paid for the use of money. Also a right, share or title in property.
Interest Rate
The percentage of an amount of money which is paid for its use for a specified time.
Interest Rate Cap
A provision of an ARM limiting how much interest rates may increase per adjustment period. See also Lifetime cap.
Interest Rate Floor
On a floating rate instrument, the lowest the interest rate may go.
Investment Property
Real estate owned with the intent of supplementing income and not intended for owner occupancy.
Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
Judgment
Final determination by a court of the rights and claims of the parties to an action.
Late Charge
The penalty a borrower must pay when a payment is made after the due date.
Lender Paid Mortgage Insurance (LPMI)
Insurance in which the cost of the mortgage insurance is included in the interest rate. Although the interest rate is slightly higher with LPMI, this option usually results in a lower monthly payment and a larger tax deduction.
Lien
A legal claim or attachment against property as security for payment of an obligation.
Lifetime Cap
A provision of an ARM that limits the total increase in interest rates over the life of the loan.
Limited Partnership
A form of business ownership that consists of one or more general partners who are fully liable, and one or more limited partners who are liable only for the amount of their investment.
Line of Credit
An agreement by a commercial bank or other financial institution to extend an open-ended line of credit up to a certain amount for a certain time to a specific borrower. (See also home equity line of credit.)
Liquidity
The ability to readily convert assets or investments to cash.
Loan-To-Value Ratio
The ratio between the amount of a given mortgage loan and the lower of sales price of appraised value.
Lock-in Period
A specified number of days before loan closing during which the range of rates available to a borrower is protected from financial market fluctuations in interest rates. Locking does not guarantee what specific rate will apply at closing, as that depends on specific transaction characteristics and the borrower's credit profile.
Loss Payable Clause
An insurance policy provision for payment of a claim to someone other than the insured, who holds an insurable interest in the insured property.
Manufactured Home
Factory-built or prefabricated housing, including mobile homes.
Margin
The set percentage the lender adds to the index rate to determine the interest rate of an ARM.
Market Value
The most probable price which a ready, willing and able buyer would pay and a willing seller will accept, both being fully informed under no pressure to act. The market value may be different from the price a property can actually be sold for at a given time (market price).
Maturity
The termination or due date, on which final payment on a loan must be paid in full.
Mobile Home
A factory-assembled residence consisting of one or more modules, in which a chassis and wheels are an integral part of the structure, and can be readied for occupancy without removing the chassis and/or wheels.
Modular House
A factory-assembled residence built in units or sections, transported to a permanent site and erected on a foundation. Excludes mobile homes.
Monthly Payment
Usually, the amount of PITI (principal, interest, taxes, and insurance) paid each month on a mortgage loan.
Mortgage
The conveyance of an interest in real property given as security for the payment of a loan.
Mortgage Broker
A company that for a fee matches borrowers with lenders.
Mortgage Commitment
An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term and amount.
Mortgagee
The lender on a mortgage transaction.
Mortgage Insurance
See private mortgage insurance.
Mortgage Insurance Premium (MIP)
The consideration paid by a mortgagor (borrower) for mortgage insurance -either to the FHA or to a private mortgage insurer.
Mortgage Note
A written promise to pay a sum of money at a stated interest rate during a specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.
Mortgagor
The borrower in a mortgage transaction who pledges property as security for a debt.
Negative Amortization
A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal.
Non-Conforming Loan
Conventional home mortgages not eligible for sale and delivery to either FNMA or FHLMC because of various reasons, including loan amount, loan characteristics or underwriting guidelines.
Note
A general term for any kind of paper or document signed by a borrower that is an acknowledgment of the debt, and is, by inference, a promise to pay. When the note is secured by a mortgage, it is called a mortgage note and the mortgagee is named as the payee.
Occupancy
The use of a property as a full-time residence, either by the title holder (owner-occupancy) or by another party through a formal agreement (rental).
Origination
Securing a completed mortgage application from a commercial or residential borrower.
Origination Fee
The amount charged for services performed by the company handling the initial application and processing of the loan.
Payoff Figures
The unpaid principal balance and escrow amounts to be used for payment in full of the mortgage or for closing sale of the property.
Percentage Point
One percent of the loan or a measure of the interest rate.
PITI (Principal, Interest, Taxes, and Insurance)
The most common components of a monthly mortgage payment.
Planned Unit Developoment (PUD)
A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. Also, a subdivision having lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots. See also DeMinimus PUD.
Plans And Specifications
Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.
Points
A one-time charge by the lender to increase the yield of the loan; a point is 1% of the amount of the mortgage.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Preliminary Title Report
The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.
Prepaids
Closing costs related to the mortgage loan which are collected at loan closing - including per diem pre-paid interest and initial deposits of monthly escrows of taxes and insurance.
Prepayment Penalty
A fee 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 may be eligible to borrow before a loan is applied for.
Primary Residence
A residence which the borrower intends to occupy as the principal residence.
Principal
The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
Principal Balance
The remaining balance due on a debt, exclusive of accrued interest.
Private Mortgage Insurance
Insurance written by a private company protecting the mortgage lender against loss resulting from a mortgage default.
Processing
The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.
Purchase Contract (Agreement/Offer)
An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a sales contract.
Qualifying Ratios
Guidelines applied by lenders to determine how large a loan to grant a home buyer.
Quitclaim Deed
A deed relinquishing all interest, title, or claim an owner has in a property. A quitclaim deed implies no warranty.
Real Assets
Real estate or real property owned by an individual or business.
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances.
Real Property
Land and that which is affixed to it.
Refinancing
The repayment of a debt from the proceeds of a new loan using the same property as security.
Satisfaction of Mortgage
The recordable instrument issued by the lender verifying full payment of a mortgage debt.
Second Home (Vacation Home, Weekend Home)
A residence other than the borrower's primary residence which the borrower intends to occupy for a portion of each year. Must be suitable for year-round occupancy.
Secondary Mortgage Market
A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market where mortgages are originated.
Second Mortgage
A mortgage that has rights that are subordinate to the rights of the first mortgage holder.
Security
In lending, the collateral given, deposited, or pledged to secure the payment of a debt.
Security Instrument
Mortgage or deed of trust evidencing the pledge of real estate as collateral for the loan.
Security Interest
The interest of a creditor in the security collateralizing an investment.
Section 203(k) Loan Program
HUD's primary program for the rehabilitation and repair of single-family properties. A 203 (k) loan is a first mortgage that covers the costs of rehabilitation and purchase or refinance of an eligible property. The goals of the Section 203(k) loan program are community and neighborhood revitalization and expanded opportunities for homeownership for low-and moderate-income families.
Seller Contributions
Payment by the seller or any other interested party of some or all of the purchaser's usual closing costs. Investors and insurers sometimes limit the amount of seller contribution and require lenders to adjust the property's value if contributions exceed limitations. Undisclosed seller contributions (such as decorating allowances, appliances, or payment of moving expenses) are made to borrowers outside of closing and are also subject to investor and insurer restrictions.
Tax Lien
A claim against property for unpaid taxes.
Tenancy
The use of real estate under any kind of right of title.
Term
The time limit within which a loan must be repaid.
Title
The legal evidence of ownership rights to real property.
Title (Insurance) Company
A company that confirms the legal owner of a property, as well as insures a home owner and lender against a loss that could result from a title dispute.
Title Insurance
An insurance policy that protects a lender and/or homebuyer (only if homebuyer purchases a separate policy, called owner's coverage) against any loss resulting from a title error or dispute.
Title Insurance Policy
A contract in which an insurer, usually a title insurance company, agrees to pay the insured party a specific amount for any loss caused by defects of title on real estate in which the insured has an interest as purchaser, mortgagee, or otherwise.
Title Search
An examination of public records to disclose the past and current facts regarding the ownership of a given piece of real estate.
Transfer Tax
State or local tax payable when the title passes from one owner to another.
Trust Deed
The instrument given by a borrower (trustor) to a trustee vesting title to a property in the trustee to ensure the borrower's fulfillment of an obligation. A mortgage.
Truth-in-Lending Act
A Federal law requiring full disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms and financial institutions.
Underwriting
Analysis of risk and setting of an appropriate rate and terms for a mortgage on a given property for given borrowers.
URLA
Uniform residential loan application.
Wholesale Origination
A loan origination strategy by which loans are purchased from mortgage brokers, mortgage bankers, or other loan originators (banks, thrifts etc.) The loans may be purchased prior to closing, at closing or after the loans are closed depending on the arrangement between the originator and the wholesale lender. Wholesale origination enables a lender to acquire mortgage servicing rights without incurring the fixed costs associated with a retail origination strategy.
Yield to Maturity
The lender's percentage of annual return on actual funds loaned, assuming that the loan will be paid in full at maturity.
If you don't see a specific mortgage term you're looking for above, email us and we can go over the specifics with you!
