Payment of a debt in regular, periodic installments of principal
and interest as opposed to interest only payments.
Annual Percentage Rate (APR)
A term used in the Truth-in-Lending Act to represent the percentage
relationship of the total finance charge to the amount of the loan.
The APR reflects the cost of your mortgage loan as a yearly rate.
It will be higher than the interest rate stated on the note because
it includes, in addition to the interest rate, loan discount points,
fees and mortgage insurance.
A printed form used by a mortgage lender to record necessary information
concerning a prospective mortgage.
A sum of money paid towards estimated initial mortgage processing
expenses such as appraisal and credit report.
A report made by a qualified person setting forth an opinion or
estimate of property value. The term also refers to the process
by which this estimate is obtained.
As Separate Property
Ownership in real property which is to be specifically excluded
from community property.
The value that a taxing authority places on real or personal property
for the purpose of taxation.
A charge against a property for purpose of taxation. This may take
the form of a levy for a special purpose or a tax in which the property
owner pays a share of the cost of community improvements according
to the valuation of his or her
A person (also known as mortgagor) who receives funds in the form
of a loan with an obligation to repay principal with interest.
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 to Close
Liquid assets that are readily available to be used to pay the closing
costs involved in a closing of a mortgage transaction.
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
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 prepaid items such as tax and insurance escrow payments.
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.
Additional borrower(s) whose income contributes to qualifying for
a loan and whose name(s) appears on documents with equal legal obligations.
Property pledged as security for a debt, such as the real estate
pledged as security for a mortgage.
A binding pledge made by the lender to the borrower to make a loan,
usually at a stated interest rate within a given period of time
for a given purpose, subject to the compliance of the borrower to
Commitment Fee (Loan)
Any fee paid by a potential borrower to a lender for the lender's
promise to lend money at a specified rate and within a given time
A formal offer by a lender stating the terms under which it agrees
to loan money to a home buyer.
Conventional home mortgages eligible for sale and delivery to either
the Federal National Mortgage Association (FNMA) or the Federal
Home Loan Mortgage Corporation (FHLMC). These agencies generally
purchase first mortgages up to loan amounts mandated by Congressional
A mortgage not obtained under a government insured program (such
as FHA or VA).
A report detailing an individual's credit history.
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.
The failure to perform an obligation as agreed in a contract.
A loan payment that is overdue but within the period allowed before
actual default is declared.
A PUD in which the common property has less than a 2% influence
upon the value of the premises. The 2% rule of thumb is calculated
by dividing the dollar amount of amenities by the total number of
units. Also see PUD.
A sum of money given to bind a sale of real estate. Also known as
A loss of value in real property brought about by age, physical
deterioration, functional or economic obsolescence.
Amount payable to the lender institution by the borrower or seller
to increase the lender's effective yield. One point is equal to
one percent on the loan amount.
When the note rate on a loan is less than the market rate, the lender
requires additional points to raise the yield on the loan to the
A portion of the down payment delivered with a purchase offer by
the purchaser of real estate to the seller or an escrow agency by
the purchaser of real estate with a purchase offer as evidence of
good faith. Also known as a deposit.
Equal Credit Opportunity Act (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.
The ownership interest; i.e. portion of a property's value over
and above the liens against it.
A procedure whereby a disinterested third party handles legal documents
and funds on behalf of a seller and buyer.
Fair Credit Reporting Act (FCRA)
A federal law which requires a lender who is rejecting a loan request
because of adverse credit information to inform the borrower of
the source of such information. This law also requires consumer
reporting agencies to exercise
fairness, confidentiality and accuracy in preparing and disclosing
Federal Home Loan Mortgage Corporation - FHLMC
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.
A real estate loan that has priority over any subsequently recorded
Fixed Interest Rate
An interest rate which does not change during the loan term.
A legal procedure in which property mortgaged as security for a
loan is sold to pay the defaulting borrower's debt.
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."
Gross Monthly Income
Total monthly income earned before tax and other deductions.
A contract whereby an insurer, for a premium, undertakes to compensate
the insured for loss on a specific property due to certain hazards
Mortgage loans in excess of 80 percent of the loan amount divided
by the lower of the sales price or appraised value.
Homeowners' Association Dues
The fees imposed by a condominium or homeowners' association for
maintenance of common areas.
A loan insured by HUD-FHA or a private mortgage insurance company.
Consideration in the form of money paid for the use of money. Also
a right, share or title in property.
The percentage of an amount of money which is paid for its use for
a specified time. Investment Property Real estate owned with the
intent of supplementing income and not intended for owner occupancy.
A legal claim or attachment against property as security for payment
of an obligation.
The ratio between the amount of a given mortgage loan and the lower
of sales price of appraised 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
The termination or due date on which final payment on a loan must
be paid in full.
Usually, the amount of PITI (principal, interest, taxes, and insurance)
paid each month on a mortgage loan.
The conveyance of an interest in real property given as security
for the payment of a loan.
The lender on a mortgage transaction.
Mortgage Insurance Premium (MIP)
The consideration paid by a mortgagor (borrower) for mortgage insurance
- either to the FHA or to a private mortgage
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.
The borrower in a mortgage transaction who pledges property as security
for a debt.
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.
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
The amount charged for services performed by the company handling
the initial application and processing of the loan.
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.
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.
A residence which the borrower intends to occupy as the principal
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.
The preparation of a mortgage loan application and supporting documentation
for consideration by a lender or insurer.
PUD (Planned Unit Development)
A planned combination of diverse land uses, such as housing, recreation,
and shopping in one contained development or subdivision. A major
feature of a PUD includes areas of common land for use by the housing
unit owners; the association of unit owners generally owns, pays
fees, and maintains the common areas. Also see DiMinimus PUD.
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.
Rate Lock Option
An agreement guaranteeing an individual a specified interest rate
on a loan provided the loan is closed within a set period of time.
Real estate or real property owned by an individual of 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.
Land and that which is affixed to it.
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.
In lending, the collateral given, deposited, or pledged to secure
the payment of a debt.
Services provided by the lender at the closing of a loan.
The measurement and description of land by a registered surveyor.
The time limit within which a loan must be repaid.
The legal evidence of ownership rights to real property.
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.
An examination of public records to disclose the past and current
facts regarding the ownership of a given piece of real estate.
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.
Analysis of risk and setting of an appropriate rate and terms for
a mortgage on a given property for given borrowers.
Zero Point Option
An option which allows the borrower to opt to pay a slightly higher
loan interest rate in lieu of paying the loan origination points
generally charged for the particular loan product