What does that mean??

    • Abstract of Title – Written history of all the recorded documents and proceedings related to a specific property summarized. (A title company or attorney, researches all recorded records related to a property and prepares a written history)
    • Acceleration Clause – Also known as an acceleration covenant is a condition in a mortgage that allows the lender to demand immediate repayment of the loan balance in the event that regular payments are not made or for other breaches of the mortgage conditions.
    • Accrued Interest – Interest earned but not yet paid
    • Adjustable Rate – An interest rate that changes periodically tied to a specific index
    • Adjustable Rate Mortgage – Also known as an ARM, is a home loan with an interest rate that can change periodically based on a pre-selected index. This allows the interest rate and payment to rise and fall with the “market’ The initial interest rate is generally lower than with a fixed rate.
    • Adjustment Date – Date that the interest rate on an adjustable rate mortgage is changed.
    • Adjustment Interval – Also known as the Adjustment Period is the amount of time between the interest rate changes on an adjustable rate mortgage. After the initial fixed rate period, the interest rate adjusts up or down once per interval until the loan is paid in full
    • Alternative Documentation – Documentation given to or required by the lender from the borrower as a way to “bypass’ the third party verification of statements made in an a loan application.
    • Amortization – An accounting term that refers to the process of allocating principal and interest payments over time
    • Amortizaiton Schedule – The monthly repayment schedule that shows how the principal and interest payments are allocated.
    • Annual Percentage Rate (APR) – The annual cost of a mortgage expressed as a yearly rate according to a government formula intended to reflect the true annual cost of borrowing. This takes into account not only the note rate, but the points, origination fees, and mortgage insurance. The APR is always higher than the actual note rate.
    • Application – The form used by mortgage lenders to obtain the initial statement of a borrowers income, savings, assets, debts and more.
    • Application Fee – The fee charged by the mortgage lender to cover the initial costs of loan processing. Often this includes the charges for the appraisal and credit report.
    • Appraisal – A written estimate of a property’s current market value based on an analysis of sales of comparable properties nearby, the condition of the property and the neighborhood.
    • Appraisal Fee – The fee that a licensed and certified appraiser charges to render an opinion of market value as of a specific date.
    • Appreciation – The increase in the value of a property. Can be due to many causes, scarcity, inflation, general market conditions.
    • Assessed Value – The value that is placed on a property by the public tax assessor.
    • Assessment – This actually has two different specific definitions 1. Placing a value on a property for the purposes of taxation. 2. A local tax or fee levied against a property for a specific purpose, road or sidewalk construction, sewer and water issues and street lights are the most common. This can be done by a local taxing authority or a Home Owners Association.
    • Asset – Any item of monetary value owned by an individual. Generally divided into liquid assets, those assets that can be quickly converted to cash, i.e. bank accounts, stocks, bonds, mutual funds, etc. and non-liquid assets; real and personal property, and debts receivable.
    • Assignment – The transfer of property rights from one person or entity to another. In a mortgage when the ownership of the mortgage is transferred or sold to another mortgage company it is called an assignment.
    • Assumable Mortgage – A mortgage with a feature that allows the current mortgage to be assumed by a new buyer of the home. The new buyer generally must  “qualify” in order to assume the loan.
    • Assumption – The agreement between a buyer and a seller that the buyer will take over ( assume) the payments on the existing mortgage.

     

    • Balloon Mortgage – A short term mortgage generally fixed rate mortgage that requires the remaining principal balance to be paid at the termination of the loan. Example, a loan could be amortized over a 30 year but requires that at the end of the tenth year the entire remaining balance is due and payable.
    • Balloon Payment – The final payment that is due at the termination of a balloon mortgage.
    • Bankruptcy – Proclamation by a court that an individual (or organization) is insolvent or unable to pay their debts The petition is brought by the individual or the creditors to relieve or restructure their debts. There are various types of bankruptcies. The most common for individuals is the “Chapter 7 No Asset” bankruptcy in which the borrower is relieved of most types of debts. Bankruptcy severely limits the individuals ability to borrow.
    • Bequest – The gift of personal property through a will.
    • Bill of Sale – The written document that transfers ownership/title to personal property from one individual to another.
    • Biweekly Mortgage – A mortgage payment plan that allows the mortgage payments to be divided into 1/2 of the monthly mortgage payment every two weeks effectively causing the borrower to make 13 mortgage payments per year, thus reducing the time that it would normally take to pay of a mortgage.
    • Blanket Mortgage – A mortgage in which the collateral includes additional real estate as collateral for a loan.
    • Bona Fide – In good faith.
    • Bond Market – The market in which US Treasury bonds are traded. This market is followed closely by lenders as the interest rate on these securities is tied to the various mortgage products, i.e. if the yields on the US Treasury bonds goes up or down, interest rates on mortgages follows.
    • Borrower – The individual or individuals that apply for and receive a mortgage loan.
    • Bridge Loan – A loan that is typically used for a short term to “bridge” the purchase of a home while the current home is sold. As a general rule the current home is already for sale.
    • Broker – This term has several different meanings depending on the situation. A real estate broker is the individual that is “in charge” of the agents. Most realtors are agents, but many are both and either work for themselves or “under” another broker. In the mortgage industry a broker is an individual or company that arranges the financing to larger lenders or investors, not funding the loans themselves.
    • Buy-down – Refers to the situation in a fixed rate mortgage where the borrower has the opportunity to “buy down” the interest rate. For example, the current rate on a 15 year fixed rate mortgage is 4.5% but for an additional fee of .625 of the loan amount the lender will reduce the note rate to 3.75%.
    • Buyers Agent – The agent that is retained by the buyers to assist them with locating a property for purchase and to represent the buyers in negotiations with the Sellers agent.
    • Buyers Market – Market condition when there are more sellers than buyers. This generally gives the buyers a greater selection of potential properties and can drive prices down.

     

    • Call Option – This is similar to the acceleration clause, giving the lender the right to call the mortgage due and payable after a certain period for any reason.
    • Cap – Is the limit on the amount that an adjustable rate mortgage interest and or payment can change during a specific period of time i.e. six month period, one year period or over the life of the loan (a life cap or ceiling).
    • Cash-out – Also known as a cash out refinance is when a new loan is taken out on the property that is for more than the existing balance due on the current mortgage, i.e. the borrower is “pulling cash out” to use for whatever reason the borrower sees fit.
    • Cashiers Check – A check that is drawn on the Bank, rather than on the customers account directly. This is assumed to be guaranteed funds.
    • CC&R’s – Covenants Code and Restrictions – see below
    • Ceiling – The maximum that is allowed for an interest rate on an adjustable rate mortgage.
    • Certificate of Eligibility – Issued by the Veterans Administration to qualified veterans which entitles the veteran to apply for VA guaranteed loans.
    • Certificate of Reasonable Value – This applies only to VA loans. It indicates that the appraisal has been performed on a property being purchased using a VA loan and that the value has been approved.
    • Certificate of Occupancy – This document is issued by the appropriate local government agency indicating that a property meets all of the requirements of the building and health codes.
    • Certificate of Title – A statement of opinion of the status of the title, based on a thorough examination of the title by an attorney or title company.
    • Certificate of Veteran Status – Document that gives veterans or reservists who have served 90 days of continuous active duty service that enables them to obtain lower down payments on FHA insured loans. This is obtained through the local Veterans Affairs (VA) office.
    • Certified Check – Check drawn on an issuer’s account, for which the funds have been segregated by the bank, guaranteeing payment.
    • Chain of Title – The chronological sequence of historical transfers of a property from the original owner to the present owner.
    • Clear Title – Title that is free of liens, levys and disputes from creditors or other parties and thus poses no question as to legal ownership.
    • Closing – In Utah the transaction is not considered closed until the documents have been recorded at the local recorders office.
    • Closing Costs – These are fees that are incurred as a result of the real estate and or mortgage transaction. They are divided into non-recurring closing costs and pre-paid items. Non-recurring closing costs are items that are paid only once as a result of the transaction and could include loan origination fees, discount points, attorney’s fees, title insurance, appraisal fees, and surveys. Pre-paid items would include property taxes, insurance, and HOA dues.
    • Closing Statement – Disclosure statement that outlines all of the various debits and credits attributable to the buyer and seller as of closing.
    • Cloud on Title – Any condition that is revealed through the title search that adversely affects or impair the owners title or ownership of the real estate. Generally clouds on title cannot be removed other that by deed release or court actions.
    • Co-Borrower – Additional individual or individuals that are obligated on the loan and are included on the title to the property.
    • COFI – Cost of Funds Index – Below
    • Collateral – Asset or assets that back a mortgage loan. Generally with a home loan the real estate is the collateral. In the event that the loan is not repaid according to the terms of the mortgage or deed of trust the borrower risks losing the property that is put up as collateral.
    • Collection –  Refers to the action taken by a lender in the event that the borrower falls behind in their repayment of the mortgage loan. This involves a number of required steps that the lender must take in the event that the lender needs to foreclose on the property.
    • Combined Loan to Value – A ratio of all mortgage liens against a property to the lesser of sales price or appraised value. Example, owner has a 1st mortgage of $300,000 and a home equity loan of $75,000, property appraises for $500,000. The combined loan to value would be $375,000 divided by $500,000, 75% combined loan to value.
    • Commission – The money paid to a real estate brokerage by the seller. This amount is commonly split between the sellers brokerage and the buyers brokerage and then between the respective agent and broker. This total commission is usually based on the sales price of the real estate.
    • Commitment – The official/formal offer from a lender to make a loan to a borrower, generally on a specific property under certain terms and conditions.
    • Common Area Assessment – The fees paid by members of a homeowners association to maintain the common areas. This is also sometimes referred to as the common area fee.
    • Common Area – The areas within a homeowners association (HOA) or planned unit development (PUD), whether it be building, land or amenities that are owned and or managed by the HOA or PUD, that are used by all of the unit owners and share in the common expenses to operate and maintain. Examples include, recreation facilities, swimming pools, tennis courts, parking areas, common hallways, walkways, parks etc.
    • Common Law – The body of law developed from judicial decisions on general custom and precedent. As opposed to law that is created by statute from legislatures (statutory law) and laws created through a written constitution (constitutional law).
    • Comparable Sales – The most recent sales of nearby and similar properties. These are used to determine the current market value of a property. Sometimes referred to as comps.
    • Condominium – The form of property ownership where all of the owners have a common ownership of the proper, common areas and buildings together. Individually they only own the interior of the respective unit to which they hold title. This does not refer to a type of construction or development, but to the type of ownership.
    • Condominium Conversion – When the ownership of an existing building, most commonly an apartment rental project, to the condominium form of ownership.
    • Condominium Hotel – Operated as a commercial hotel, with registration desk, short term occupancy, and daily cleaning service. The units are individually owned. This property type is most likely found in resort areas like Park City.
    • Conforming Loan –  A loan that is below the maximum loan amount that FNMA and FHLMC are allowed to purchase. As of 2018 that amount is $453,100, but is higher in areas like Park City, Utah where it is $679,650 for a single unit property.
    • Construction Loan – Short term loan that is used to fund the construction of homes and other buildings. Generally the loan proceeds are advanced to the builder/general contractor as the work progresses. Once the property is completed a long term or permanent loan is used to pay of the construction loan.
    • Contingency – Any condition that must be satisfied prior to a contract will be legally binding and before a sale can be closed. Common contingencies include, property inspection, and financing.
    • Contract of Sale – Agreement between a buyer and seller which defines the terms of the purchase/sale, including the purchase price, and terms and conditions of the purchase/sale.
    • Conventional Mortgage – Home loans that are not guaranteed by the Federal Housing Administration(FHA) or the Veterans Administration (VA).
    • Conversion Clause – A clause or provision in an adjustable rate mortgage(ARM) that allows the borrower to switch to a fixed rate mortgage. The fixed rate wold be set at the current rates. Many lenders will charge for this conversion.
    • Convertible ARM –  An adjustable rate mortgage with a conversion option. See above.
    • Cooperative (co-op) – Ownership where the residents of a multi-family housing property own shares in the “cooperative corporation” that owns the property, and gives each resident the right to occupy a specific apartment.
    • Cost of Funds Index (COFI) – An index that is used to determine interest rate changes for some adjustable rate mortgages. This represents the monthly weighted average of savings and checking accounts offered by institutions  within the 11th District of the Federal Home Loan Bank.
    • Credit History –  The record of an individual’s repayment of debt.
    • Credit Report –  Report that details the credit history of a potential borrower. Reviewed by the mortgage lender underwriters to determine credit risk and worthiness.

     

    • Debt-to-Income Ratio – The ratio, as a percentage of an individuals total monthly payment obligations on long term debts divided by their gross monthly income.
    • Deed – The legal document that transfers title from one owner to another. The deed contains has a description of the property being transferred and is signed, witnessed and delivered to the buyer at closing.
    • Deed-in-lieu – Document that conveys title from the borrower to the lender when the borrower is in default and wants to avoid forclosure. This is used to prevent having the documents prepared and a foreclosure being recorded as a matter of public record. It is important to note that the lender may or may not cease the foreclosure process and that the avoidance and non-repayment of debt will show on a credit history.
    • Deed of Trust – Agreement to pledge a property as the security for a loan, similar to a mortgage. The borrower transfers legal title to a trustee who then holds the property in trust as a security for the repayment of debt. If the debt is repaid, the deed of trust becomes void. Allows the trustee to sell the property in the event that the borrower defaults on the loan.
    • Default – Failure to meet the legal obligations in a contract, i.e. make the mortgage payment within a specified period of time. A mortgage is considered in default when the payment due is 30 days past due.
    • Deferred Interest – Also known as negative amortization. This occurs when the contractual terms of the loan allow for a scheduled payment that is less than the interest due. The interest is then added to the loan balance.
    • Delinquency – The failure to make mortgage payments on time. Payment are generally due on the 1st of the month, and are considered late after the 15th. Once the payment is 30 days or more late the delinquency is reported to the credit bureaus.
    • Deposit – A sum of money paid to a seller in advance of a large amount being expected in the future. In real estate often referred to as the Earnest Money Deposit, amount deposited with the buyers brokerage once the contract is accepted.
    • Depreciation – The decline it the value of property. Also an accounting term that accounts for the declining monetary value of an asset creating an expense that is used to offset income.
    • Discount Points – Also referred to as points. This is money that is paid to the lender in order to get a lower interest rate. Each point is equal to 1% of the loan amount. This money is paid to the lender at closing.
    • Document Review – The process of the lender reviewing all documents necessary to fund the loan. There is often a fee attached to this review.
    • Down Payment – The amount of the purchase that is paid from borrowers own funds, not from a loan.
    • Due on Sale Clause or Provision – This provision or clause in a mortgage or deed of trust that allows the lender to demand repayment in full of the loan amount immediately upon the sale of the property.

     

    • Earnest Money Deposit – The deposit made by the buyers of a property to show good faith once the purchase agreement is signed by both parties. This amount is generally held in trust by either a title company or the buyers brokerage.
    • Easement – A right of way that gives someone other than the owner of property the right of access to or voer the property.
    • Effective Age – The estimate by the appraiser of the physical condition of a building. The effective age can be either longer or shorter than the actual age, based on maintenance, updates, etc.
    • Effective Interest Rate – The total cost of a mortgage expressed as a yearly interest rate. Usually higher than the rate on the mortgage. This figure includes all upfront costs of obtaining the mortgage loan.
    • Eminent Domain – The governments right to take private property for public use. Only upon payment of fair market value.
    • Enchroachment – Any improvement or portion thereof that intrudes illegally onto another’s property.
    • Encumbrance – Anything that limits or affects the fee simple ownership of a property. These can take the form of unpaid taxes, claims to the property, liens and easements. These usually need to be taken care of before a buyer will purchase or a lender will lend on a property.
    • Equal Credit Opportunity Act – The Federal law that requires lenders/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.
    • Equity – The amount of property value that the owners holds. This is the difference between the current market value and the amount of any and all liens and mortgages on the property.
    • Equity Loan –  A loan that is based on the borrowers equity in a property.
    • Escrow – Any item of money, value or documents that are deposited with a third party, and to be delivered upon the satisfaction or fulfillment of a condition.
    • Escrow Account – The account that is held by the lender that contains portions of the mortgage payment that are collected for payments on annual expenses, such as property insurance and taxes, thus guaranteeing that these expenses are paid and do not become liens.
    • Escrow Analysis – The annual analysis by the lender of the escrow account to verify that the lender is collecting an adequate amount to pay the annual expenses paid by the escrow account.
    • Escrow Disbursement –  The disbursement of funds from the escrow account to pay the annual expenses from the escrow account, i.e. real estate taxes, property insurance etc.
    • Escrow Waiver – When a borrower elects to not have an escrow account. Generally when the loan amount is less than 80% of the value of the real estate. The borrower is then responsible to pay the items such as property insurance and real estate taxes themselves.
    • Estate – The total of all assets owned by an individual at the time of death. This includes all real property, personal property and paper assets.
    • Eviction – Expelling an occupant from a property through lawful means.
    • Examination of Title – A report on the title of a property obtained through a search of public records and or abstract of title.
    • Exclusive Agency – A contractual agreement between either a buyer or seller giving a licensed real estate agent the exclusive right to represent said buyer or seller and to collect a commission.
    • Exclusive Listing – The contractual agreement between the seller and a licensed real estate agent that gives that agent the exclusive right to market and sell the specific property for a specific amount of time and determines the amount of commission to be paid by the seller.
    • Executor – The individual named in a will to administer an estate. In the event that no one is named or there is no will, a court will appoint an executor.

     

    • Fair Credit Reporting Act – The consumer protection law that was enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer credit reporting agencies, and establishes the procedures for correcting mistakes on an individuals credit report.
    • Fair Market Value – The maximum price that a willing buyer would pay and that a willing seller would accept for a specific property.
    • Fannie Mae – See Federal National Mortgage Association, also known as FNMA
    • Farmers Home Administration – FmHA was the agency within the US Department of Agriculture that provided  financing for homes and farms in rural areas. The FmHA operated until 2006 and was replaced by USDA Rural Development.
    • Federal Deposit Insurance Corporation – The independent agency created by the U.S. Congress in 1933 to maintain stability and confidence in the banking system.
    • Federal Home Loan Bank Board – Formerly the regulatory and supervisory agency for federally chartered savings institutions. Now called the Office of Thrift Supervision.
    • Federal Home Loan Mortgage Corporation – Also known as Freddie Mac or FHLMC. A shareholder owned governement sponsored enterprise chartered by the U.S. Congress in 1970. Freddie Mac purchases, guarantees and securitizes mortgages from insured depository institutions and HUD-approved mortgage bankers.
    • Federal Housing Administration – FHA is a government agency within the U.S. Department of Housing and Urban Development (HUD). The agency insures residential mortgage loans made by private lenders. It also sets standards for construction and underwriting loans. The FHA does not lend money.
    • Federal National Mortgage Association – FNMA or Fannie Mae is a government sponsored enterprise that is a publicly traded corporation that buys, sells and packages residential mortgages into publicly traded securities.
    • Federal Reserve – The central bank of the United States, created by the U.S. Congress to provide a safer, more flexible and stable monetary and financial system. The Federal Reserve is also a major regulatory agency for many commercial banks.
    • Fee Simple – The absolute ownership of real property. The greatest possible ownership interest that one can have in real estate.
    • FHA – see Federal Housing Administration above
    • FHA Loan – A loan or mortgage that is insured by the Federal Housing Administration. FHA loans are designed for low to moderate income borrowers that are unable to make a large down payment.
    • FHLBB – See Federal Home Loan Bank Board above.
    • FHLMC – See Federal Home Loan Mortgage Corporation above.
    • First Mortgage – The mortgage or loan that takes priority over all other loans recorded against the property. Also referred to as first lien position. In the event of a foreclosure the first mortgage is paid before any other loans against the property.
    • Fixed Rate – An interest rate that is fixed for the entire term of a loan.
    • Fixed Rate Mortgage –  A mortgage that has an interest rate that does not change for the entire term of the loan, the mortgage interest and principal payments are also fixed for the term of the loan.
    • Fixture – Any personal property that becomes real property due to the fact that it has been permanently affixed to real property.
    • Flood Insurance – Insurance that is required when the real estate is located within a federally designated flood area, that would compensate for damage to the property resulting from flooding.
    • Floor – The minimum interest rate on an adjustable rate mortgage.
    • FmHA – See Farmer’s Home Administration above.
    • FNMA – See Federal National Mortgage Association above.
    • Forebearance – When a lender delays foreclosure, giving the borrower time to catch up on overdue payments within a certain time period or date.
    • Foreclosure – The legal process when a lender attempts to recover the balance of a mortgage loan, due to the borrower not having made the required payments. Involves the forced sale of the real estate used as collateral for the loan.
    • Freddie Mac – See Federal Home Loan Mortgage Corporation above.

     

    • Government National Mortgage Association – Also know as GNMA and Ginne Mae, is a U.S. Government Corporation, within the U.S. Department of Housing and Urban Development. GNMA guarantees the tmely payment of interest and principal from approved issuers of mortgages such as FHA and VA as well as banks and saving and loans and mortgage bankers.
    • Graduated Payment Mortgage –  A mortgage where the payment increases gradually from an initially low payment to a higher final level. There is a potential for negative amortization.
    • Grace Period – The period of time that a loan payment can be made after the due date without incurring a penalty. For example mortgage payments are typically due on the 1st of the month and late on the 15th thus the days between would be the grace period.
    • Grantee – A person to whom an interest in real property is given or conveyed
    • Grantor – A person who gives or conveys and interest in real property.
    • Gross Income – Total income amount before any expenses or taxes have been deducted.
    • Gross Monthly Income – Same as above but for a month.
    • Growing Equity Mortgage – A fixed rate mortgage with a set interest rate, but with a payment that increases over time based on a set schedule. As the payment increases, the additional amount above a fully amortized payment is credited towards the remaining principal balance, thus causing the loan to be paid of sooner.
    • Guarantee  or Guaranty- A formal pledge to assume another persons debt in the case of a default.

     

    • Hazard Insurance – Insurance that protects against a loss due to fire, wind, vandalism or other natural disasters or hazards in exchange for a premium that is paid to the insurer.
    • Home Equity Loan –  Also known as a home equity line of credit (HELOC) where in the borrower secures a loan based on the equity in the home. They are used for a variety of reasons, from home improvements to debt consolidation. Often the interest paid is tax deductible.
    • Home Inspection – A thorough inspection of a home performed by a professional home inspector, evaluating the structural condition and the mechanical systems of a home. Many home inspections also include mold, radon and meth testing. These are very often required as a part of a buyers due diligence.
    • Homeowner’s Association – HOA  is a nonprofit association formed to manage the common areas of a condominium project or planned unit development
    • Homeowner’s Warranty – Specific insurance that covers specific aspects of a home primarily mechanical systems and appliances for a designated period of time.
    • Housing and Urban Development – HUD is a U.S. government agency that oversees the Federal Housing Adminstration and implements federal housing and community development programs.

     

    • Impound – Also referred to as reserves are that portion of a monthly mortgage payment that is held by the lender to pay for property taxes, insurance and other items that were included as they come due.
    • Impound Account – An account sometimes interest bearing where the monthly impound amounts are held until the payments for the various impounds are due.
    • Index – The published interest rate used by lenders to calculate the interest rate adjustments or Adjustable Rate Mortgages (ARM). Common indexes include the Cost of Funds Index (COFI), 1 year U.S. Treasury bills and the 6 month London Interbank Offered Rate (LIBOR).
    • Insolvency – When an individual is unable to pay his/her debts as they come due.
    • Interest Rate Cap – The maximum that the interest rate could ever be on a particular Adjustable Rate Mortgage (ARM). Used as a safeguard against drastic movement in interest rates.

     

    • Joint Liability – When the liability is shared among more than one person each of whom is liable for the full amount of the debt.
    • Joint Tenancy – Ownership or taking title to a property by more than one person where each person owns the entire property. That ownership is not separate. When one of the party dies the survivor owns the property in its entirety.
    • Judgement – When a court of law makes a decision. When judgement’s require the repayment of a debt, a lien may be placed on the debtor’s property as collateral for the creditor.
    • Judicial Foreclosure – When foreclosure is handled as a civil lawsuit and conducted by the court.
    • Jumbo Loan – A loan that is greater than the FNMA or FHLMC limits. These are also referred  to as nonconforming loans.
    • Junior Mortgage – A mortgage that is in second or subordinate position. In the event of a foreclosure this mortgage is paid only after the first or senior mortgage is paid in full.

     

    • Late Charge – The penalty paid when a payment is made after its due date. On mortgages it is typically after fifteen days.
    • Lease – The written agreement between a tenant and landloard (property owner) that lays out the payment and other terms and conditions under which a tenant may occupy or posses a property for a specific period of time.
    • Lease Purchase Mortgage – A form of financing that allows someone to lease a home from a nonprofit organization with an option to purchase. The monthly payments  are designed to cover the mortgage payment with an additional amount to be saved by the nonprofit organization to be used towards a down payment. These are typically used by low and moderate income buyers.
    • LIBOR – London Interbank Offered Rate is the interest rate that is charged between banks for short term Eurodollar loans. This is a common index for adjustable rate mortgages.
    • Lien – A claim on the property of another for payment of debt.
    • Loan Application Fee – The fee paid by a borrower to a lender to initiate the application process.
    • Loan Origination Fee – The processing fee charged by a lender to pay for the work involved in evaluating and processing the loan. This is usually expressed as a percentage of the loan amount (points)
    • Loan Servicing – The processing of payments, sending statements, managing the escrow/impound accounts, ensure that the insurance and property taxes are paid. Deal with any assumptions, pay-offs. Handle collections efforts on delinquent loans and various other services.
    • Lock – Also know as rate lock and lock-in. Guarantee of interest rate from a lender for set period of time generally between loan application and closing. Done to protect against rising interest rates. Can be a fee associated.

     

    • Margin – Percentage points added to an index used to calculate the interest rate on an ARM for each adjustment period.
    • Marketable Title –  Title that is clear of any clouds, liens or any other defects that would prevent the sale of a property.
    • Market Rate – The current average rate that lenders are charging for fixed rate, conventional loans.
    • Market Value – The highest price that a willing buyer would pay and the lowest price a willing seller would agree to accept.
    • Merged Credit Report – A credit report that pulls the raw data from multiple credit bureaus.
    • Modification – When on the rare occasion the lender agrees to modify the terms of a mortgage without requiring the borrower to refinance.
    • Monthly Housing Expense – The total monthly amount of the mortgage principal, interest, taxes and insurance.
    • Mortgage – The legal document that creates the lien on a property being used as security for a loan or payment of debt.
    • Mortgage Banker – A true mortgage banker is one who originates and funds loans with their own funds and subsequently sell them on the secondary market.
    • Mortgage Broker – Arranges financing for borrowers. Originates the loan and then places the loan with any variety of lending institutions, with which they generally have a pre-established relationship, also know as a correspondent relationship.
    • Mortgage Insurance – Insurance that is purchase by a buyer to cover the lender against some of the losses that could be incurred as the result of a default on a home loan/mortgage. This insurance is usually required when the buyers/borrowers are putting less than 20% cash down. Mortgage insurance is also required for FHA loans and some first time buyer programs, regardless of the percentage of the down payment.
    • Mortgage Insurance Premium – Often referred to as MIP, this is the amount paid by the borrower for the mortgage insurance.

     

    • Negative Amortization – An increase in the principal balance of some adjustable rate mortgages. This is caused when the interest rate is allowed to fluctuate without regards to a required minimum payment. In other words in a borrower is making required minimum payments based on a lower interest rate, and the interest rate rises the difference between the two would be considered deferred interest and is added to the principal balance, thus causing the principal balance to increase rather than decrease with the payments.
    • No Cash Out Refinance – Often referred to as a rate and term refinance. The new loan is calculated to pay only the existing principal balance and costs directly associated with the refinance, no money is going into the hands of the borrower.
    • Non-Assumption Clause – The clause in a mortgage that expressly forbids the assumption of the mortgage by another without the express prior approval of the lender.
    • Non-Conforming Loan – Loans that have an initial balance above the conforming loan limits set by FHA and that does not comply with FHLMC or FNMA guidelines.
    • Nondischargeable Debt – Debts that cannot be forgiven in a bankruptcy. Examples of nondischargeable debts are taxes, student loans, child support and alimony.
    • Note – The legal document that states the terms of a  mortgage/debt and obligates the borrower to repay a mortgage.
    • Note Rate –  Is the interest rate that is stated on the mortgage note.
    • Notice of Default – The formal written notice to a borrower informing them that a default has occurred and the legal action may be taken.

     

    • Original Principal Balance – The total principal balance owed on a mortgage before any of the payments are made.
    • Origination Fee – The fee charged by a lender or broker for processing a the mortgage. This is almost always expressed as a percentage of the loan amount, also known as points where one point equals one percent of the loan amount.
    • Owner Financing – A transaction where the owner of the property provides some or all of the financing for the buyer of a property that the seller owns.

     

    • Payment Cap – A safeguard for the consumer that limits the amount that a monthly payment on an adjustable rate mortgage can change.
    • Partial Payment –  Payment insufficient to cover the scheduled monthly payment on a mortgage loan, non normally accepted by lenders.
    • Per Diem Interest –  The interest calculated on a daily basis.
    • Periodic Payment Cap – The amount that a payment on an adjustable rate mortgage can increase in any one adjustment period.
    • Periodic Rate Cap –  The limit on the amount that the interest rate on an adjustable rate mortgage can increase during an adjustment period.
    • Permanent Loan – A mortgage that has a term of 10 years or more.
    • Personal Property – Any property that is not considered real property.
    • PITI – Principal, Interest, Taxes and Insurance. This is the typical mortgage payment where the lender is impounding for the payment of taxes and insurance. In the event that the borrower does not have or want an impounded account the lender still uses this number to determine total monthly housing expense for the purposes of loan underwriting.
    • Planned Unit Development – Ownership wherein the buildings or units are owned individually and the common areas are owned jointly with the other members of the development.
    • Points – Also referred to as discount points. This is an amount paid to the lender to reduce the interest rate on a mortgage. Each point is equal to 1% of the loan amount.
    • Power of Attorney – The legal document that authorizes another individual to act on behalf on a person. These are either limited to specific acts or periods of times or they can grant complete authority.
    • Pre-Approval – Simply means that a borrower has completed an application, paid an application fee and  the borrower has provided income, savings and debt information and that that information as well as a credit check has been reviewed by an underwriter. Makes no assumptions about interest rate or a property. The lender will then generally issue a letter stating the amount that a borrower is approved to borrow. See pre-qualification below to contrast.
    • Prepaid Expenses – Those expenses that are paid in advance of their due dates at the closing of a loan.
    • Prepaid Interest – The interest that is paid by the borrower at closing  to cover the interest from the date of closing to the first payment.
    • Prepayment – Any full or partial amount paid to reduce the principal amount of a loan prior to the due date of the loan.
    • Prepayment Penalty – Penalty assessed by the lender in the form a fee to a borrower who pays of a loan prior to the due date.
    • Pre-Qualification – The initial step in the mortgage process often done over the phone or via one of the various lender “apps” borrower provides income, savings and debt information, no credit is checked. Lender provides a rough idea of what the borrower could borrow.
    • Primary Mortgage Market – This is where the loans are made directly to the borrowers. Includes banks, savings and loan institutions, credit unions, and mortgage bankers.
    • Prime Rate – The lowest interest rate the commercial banks charge to their most preferred and credit worthy customers. This rate is often used as an index for both adjustable rate mortgages and home equity lines of credit. Most commonly referred to as the WSJ prime rate.
    • Principal – The amount of debt either original or remaining not including interest.
    • Private Mortgage Insurance – Insurance that is purchased by a buyer from a private mortgage insurance company to protect a lender against a loss due to a borrower default. Generally required when the loan to value is greater than 80% or the down payment is less than 20%.
    • Promissory Note – The written promise to repay a debt over a specified period of time.
    • Property Tax – The tax assessed by a government on a specific property based on the market value of said property.
    • Purchase Agreement – The written contract signed by both the buyer and the seller specifying the terms and conditions of the sale and purchase of  a property.

     

    • Qualifiying Ratios – The calculations that give ratios to determine whether or not a borrower can qualify for a mortgage. Two ratios are used, one in which the borrowers monthly housing costs – principal, interest, taxes, insurance, mortgage insurance and if any homeowners association fees – as a percentage of monthly income, is considered the top or front ratio. The second ratio includes the housing costs as well as any other monthly debt as a percentage of monthly income and is considered the bottom or back ratio.
    • Quitclaim Deed – A deed that transfers whatever interest a grantor may have without any warranty to another.

     

    • Rate Lock – A commitment issued that guarantees a specific interest rate for a specific period of time. Very often at a specific cost.
    • Real Estate Agent – A licensed individual who represents an buyer, seller or both in a real estate transaction.
    • Real Estate Broker – Generally an individual with more education than a real estate agent. Usually oversees the agents. Varies from state to state.
    • Real Estate Settlement Procedures Act – Commonly referred to as RESPA is the law that requires lenders to give borrowers advance written notice of closing costs.
    • Real Property – Land and all that is affixed to it, i.e. structures, landscaping, anything that is of a permanent nature.
    • Realtor® – Any real estate professional i.e. agent, broker or associate that is an active member of the National Association of Realtors.
    • Recision – Cancellation of a contract.
    • Reconveyance – Transferring the property back to the owner/borrower when a mortgage is paid in full.
    • Recorder – Often know as the County Clerk or Registrar of Deeds, this is the public official that is responsible for keeping the records of transactions that involve real property within a municipality.
    • Recording – Any noting or entering of documents into the public record at the public registrar’s or recorders office.
    • Refinance – Paying of one loan with the proceeds of another, secured by the same real estate.
    • Remaining Balance – The remaining amount of the original principal balance that has not yet been repaid.
    • Remaining Term – The remaining amortization, calculated as the original amortization term less the number of payments that have been made.
    • Repayment Plan – The arrangement that is made between a lender and borrower to repay any delinquent payments.
    • Repossession – Foreclosure the legal process when the lender forces the sale of a property due to the default of a borrower (the borrower has not met the terms of the mortgage).
    • Right of First Refusal – The provision in an agreement whereby the owner of a property is required to give another party the first right or opportunity to purchase a property prior to it being offered for sale or lease to others.
    • Right of Survivorship – The right of survivors to aquire the interest of a deceased owner. Only applicable in joint tenancy.

     

    • Sale Agreement – The contract signed by both the buyer and seller of a property which clearly states the terms and conditions that a property will be sold under.
    • Sale Leaseback – Happens when the seller leases the property back from the buyer, simultaneously with the closing of the sale/purchase.
    • Second Mortgage – A mortgage that is in second/subordinate position to the first mortgage. Home equity loans are second mortgages.
    • Secured Loan – A loan that has collateral backing.  A first mortgage is backed by the real estate.
    • Seller Carry-back – Where the owner or seller of the property agrees to provide financing to the buyer.
    • Servicer – The organization that collects the payments from borrowers and manages the escrow accounts.
    • Subordinate Financing – Any lien or mortgage that is in a lower priority to that of the first mortgage.
    • Survey – The measurement of land, showing the property’s boundaries, elevations, and improvements. These are prepared by a licensed surveyor.
    • Sweat Equity – The value added to a property by the owner through labor or services rather than cash.

     

    • Tax Impound – The money paid into an impound account held by the lender or servicer for the annual payment of property taxes.
    • Tax Lien – The lien or claim against a property for unpaid taxes.
    • Tax Sale – Also known as a sheriff’s sale, a public sale of a property caused by the non-payment of property taxes.
    • Tenancy in Common – Occurs when there are two or more individual owners on title to a piece of property, where the ownership does not pass to the other owners in the event of death.
    • Term – Number of years that it takes to pay off a loan.
    • Title – The document that provides evidence of ownership as well as rights of ownership and possession to a specific property.
    • Title Company – Company that insures the title to a property.
    • Title Insurance – Insurance that protects the lender and or buyer against a loss due a dispute over ownership of a property. Lender’s policy protects the lender and an owners policy protects the buyer/owner.
    • Title Search – The thorough examination of municipal records to ensure that the seller is the actual owner of a property and verify whether or not there are any claims or liens against the property.
    • Transfer of Ownership – Any way that a property changes owners. The following would be considered a transfer of ownership by a lender: the assumption of mortgage debt by a property purchaser, any exchange of possession by way of a land sales contract or other land trust device, and the purchase of a property “subject to” the mortgage.
    • Transfer Tax – Any tax paid to a State or local municipality required when title passes from one owner to another.
    • Trust Account – The account maintained by a trust/escrow company or real estate brokerage to handle all monies collected for clients.
    • Trustee – The individual that is given the legal responsibility to hold property in the best interests of another.
    • Truth in Lending Act – The federal legislation that requires lenders to fully disclose in writing all of the terms and conditions of a mortgage including the Annual Percentage Rate (APR) and any other charges by the lender to a borrower after application.
    • Two -Step Mortgage – Adjustable rate mortgage, where the interest rate is set for the first five or seven years of the term and then is set to a different rate for the remaining term of the loan.

     

    • Underwriting – The lenders process of verifying borrower data and the real estate for approval of a loan. The underwriter usually give the final loan approval.
    • Usury – An interest rate that is charged in excess of the legal rate established by law.

     

    • VA Mortgage – Mortgage loan available to veterans with little or no down payment guaranteed by the Department of Veterans Affairs (VA).
    • Veterans Administration – Federal cabinet level agency that oversees and provides benefits to Veterans including the guarantee of mortgage loans to eligible veterans.
    • Variable Rate Mortgage – This is the same as an adjustable rate mortgage.
    • Verification of Deposit – Often referred to as the VOD this is a document signed by a borrower’s bank or financial institution to verify the borrowers account balances and history.
    • Verification of Employment – Often referred to as the VOE is the document signed by the employer of a borrower to verify the borrowers salary.

     

    • Waiver – When a right or privilege is surrendered voluntarily.
    • Walk-through – The final inspection of a home to verify that any required repairs have been made and to make sure that the home is in the condition expected.
    • Wraparound Mortgage –  When an existing mortgage is combined with a new mortgage with the result of an interest rate between the old mortgage and the current market rate.

     

    • Zoning Ordinances – The local laws that establish regulations for usage of properties in a specific area or neighborhood. Also used to create specific districts such as commercial, residential and entertainment.