BulletMortgage

Abstract (of title)

A written summary of the title history of a particular piece of real estate.

Acceleration Clause

A provision of a mortgage or note which provides that the entire outstanding balance will become due and payable in the event of default.

Adjustment date

The date the interest rate changes on an adjustable-rate mortgage

ARM (Adjustable Rate Mortgage)

A mortgage in which the interest rate is adjusted periodically, based on the movement of a financial index.

Amortization

Repayment of loan by installment payments. As the payments are made, the debt is reduced so that at the end of fixed period or term, no money will be owed.

amortization schedule

A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.

APR (Annual Percentage Rate)

The annual percentage rate refers to the total cost of the loan, expressed as a yearly rate.

Application

The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more.

Application Fee

That part of the closing costs pre-paid to the lender at time of application to cover initial expenses.

Appraisal

A report made by a qualified person as to the value of a property as of a given date.

Appraised value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

Appraiser

An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

Appreciation

The increase in the value of a property due to changes in market conditions, inflation, or other causes.

Assessed Value

The value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.

Assessment

The placing of a value on property for the purpose of taxation.

Assessor

A public official who establishes the value of a property for taxation purposes.

Asset

Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

Assumable mortgage

A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan.

Assumption of Mortgage

The purchaser takes over mortgage payments for the balance of the loan, assuming primary liability. Unless specifically released by the lender, the seller remains secondarily liable.

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Bankruptcy

By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

Balloon Mortgage

A mortgage with periodic payments that do not fully amortize the loan. The outstanding balance of the mortgage is due in a lump sum at the end of the term.

Balloon payment

The final lump sum payment that is due at the termination of a balloon mortgage.

Bill of Sale

A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

Biweekly Mortgage

A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

Bond Market

Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.

Bridge Loan

A short-term loan secured by the equity in an as-yet-unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or the end of the loan term, whichever comes first. Interest payments may or may not be deferred until the house is sold.

Broker

The person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Buydown

Money advanced by an individual (e.g. builder, seller, buyer, lender, developer) to lower monthly mortgage payments for a few years or the whole term.

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Call Option

Similar to the acceleration clause.

Cash-out Refinance

When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."

Cap (interest rate)

The maximum interest rate increase allowable on an adjustable rate mortgage. Does not result in negative amortization. See Negative amortization.

Cap (payment rate)

The maximum payment amount increase allowable on an adjustable rate mortgage. May result in negative amortization. See Negative amortization.

Certificate of Deposit

Time deposit held in a bank which pays a certain amount of interest to the depositor.

Certificate of Deposit Index

One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.

Certificate of Eligibility

A document issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan.

Certificate of Reasonable Value (CRV)

Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

Certificate Of Title

A statement that shows ownership of property, stating that the seller has clear legal title.

Chain of Title

An analysis of the transfers of title to a piece of property over the years.

Clear Title

A title that is free of liens or legal questions as to ownership of the property.

Cloud on Title

Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.

Closing

The concluding day of the real estate transaction, when title and deed pass from seller to buyer, the buyer signs the mortgage and pays the purchase price and closing costs.

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."

Closing Statement

A financial disclosure giving an account of all funds received and expected at closing, including the escrow deposit for taxes, hazard insurance and mortgage insurance for the escrow account.

Commission

An agent's or broker's fee for bringing the principals together and helping to negotiate a real estate transaction, often a percentage of the sales price or flat fee.

CO-Borrower

An additional individual who is both obligated on the loan and is on title to the property.

Collateral

In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.

collection

When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

Commitment

An agreement, frequently in writing, between a lender and a borrower to loan money at a future date, subject to certain conditions.

Common Area Assessments

In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.

Common Areas

Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common Law

An unwritten body of law based on general custom in England and used to an extent in some states.

Community property

In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.

Comparables

Refers to similar properties used for comparison purposes in the appraisal process. These properties will be reasonably the same size and location, with similar amenities and characteristics, so that the approximate fair market value of the subject property can be determined.

Condominium

Ownership of a single unit in a multiunit building or complex of buildings. Along with this goes a share of ownership of the common areas.

Condominium Conversion

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel

A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.

Construction Loan

A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Contingency

A condition that must be met for a contract or a commitment to remain binding.

Contract

An oral or written agreement to do or not to do a certain thing.

Cooperative (co-op)

A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Conventional Mortgage

Any mortgage loan that is not insured by FHA, guaranteed by VA, of funded by a government authorized bond sale or grant.

Convertible ARM

An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.

Convey

To transfer real estate from one person to another.

Credit

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Creditor

A person to whom money is owed.

Credit History

A record of an individual's repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.

Credit Repository

Organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Credit Report

The report to a prospective lender on the credit standing of a prospective borrower.

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Debt

An amount owed to another.

Deed

A legal written document by which title to property is transferred.

Deed-in-Lieu

Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.

Deed of Trust

Some states, like California, do not record mortgages. Instead, they record a deed of trust which is essentially the same thing.

Default

Failure to fulfill the terms as agreed to in the mortgage of note.

Delinquency

Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

Deposit

A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an "earnest money deposit."

Depreciation

A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

Discount Points

In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any "points" paid in addition to the one percent loan origination fee. A "point" is one percent of the loan amount.

Down Payment

The difference between the sale price of a property and the mortgage amount.

Due-On-Sale

A clause in a mortgage which gives the lender the right to require immediate repayment of a mortgage balance if the property changes hands.

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Earnest Money

The deposit money given to seller or his agent by the potential buyer at the time of the purchase offer. If the offer is accepted, the money will become part of the down payment.

Easement

A right to the limited use of land owned by another. An electric company, for example, could have an easement to put up electric power lines over someone's property.

Effective Age

An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Eminent Domain

The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.

Encumbrance

Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid property taxes.

Encroachment

An improvement that intrudes illegally on another’s property.

Equity

The value in which the owner has in real estate over and above the mortgages against it. When the mortgage and all other debts against the property are paid in full, the owner has 100% equity in his property.

Escrow

Funds and/or deed left in trust to a third party. Generally, a portion of the monthly mortgage payment is held in escrow by the lender to pay for taxes, hazard insurance and yearly mortgage insurance premiums.

Escrow Account

Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.

Escrow Analysis

Once each year your lender will perform an "escrow analysis" to make sure they are collecting the correct amount of money for the anticipated expenditures.

Escrow Disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Estate

The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

eviction

The lawful expulsion of an occupant from real property.

Examination of Title

The report on the title of a property from the public records or an abstract of the title.

Exclusive Listing

A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.

Executor

A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.

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Fair Credit Reporting Act

A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

fair market value

The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fee Simple

The greatest possible interest a person can have in real estate.

Fee Simple Estate

An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

Firm Commitment

A lender’s agreement to make a loan to a specific borrower on a specific property.

First Mortgage

A mortgage that has a primary lien against a property.

Fixed-Rates Mortgage

A mortgage with an interest rate and monthly payments that remain constant over the life of the loan.

Fixture

Property, such as a hot water heater or plumbing fixture, that has become permanently attached to piece of real estate and goes with the property when it is sold.

Flood Certification

An independent agency report required by the lender to determine whether a property is located in a flood hazard zone, which would then require a federally mandated flood insurance policy.

Flood Insurance

Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Foreclosure

A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.

Fixed-Rate Mortgage

A mortgage in which the interest rate does not change during the entire term of the loan.

Fixture

Personal property that becomes real property when attached in a permanent manner to real estate.

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Government Loan (mortgage)

A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as

Grantee

The person to whom an interest in real property is conveyed.

Grantor

The person conveying an interest in real property.

Graduated Payment Mortgage

A fixed rate loan with monthly payments that start low, increasing by a fixed amount for a specific number of years. After that period, the payments typically remain constant for the duration of the loan.

Gross Income

Normal income, including overtime, prior to any payroll deductions, that is regular and dependable. This income may come from more than one source.

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Hazard Insurance

Insurance protection against damage to a property from fire, windstorms, and other common hazards.

Home Equity Line of Credit

A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.

Home Inspection

A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

Homeowners' Association

A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Homeowner's Insurance

An insurance policy that covers the dwelling and its contents in case of fire or wind damage, theft, liability for property damage and personal liability.

Homeowner's Warranty

A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.

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Income Property

Real estate that is owned for investment purposes and not used as the owner's residence.

Interest

A charge paid for the use of money.

Interim Financing

See Bridge Loan.

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Land Contract

When the buyer agrees to make payments directly to the seller at pre-negotiated terms. The seller agrees to deed the property to the buyer upon completion of the agreement. The buyer becomes the owner of equity in this type of sale. (Also see Owner Financing.)

Late Charge

The penalty a borrower must pay when a payment is made a stated number of days. On a first trust deed or mortgage, this is usually fifteen days.

Lease

A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

Leasehold Estate

A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it. [Top]

Lease Option

An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.

legal description

A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

Lender

A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."

Liabilities

A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability Insurance

Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.

Lien

A legal claim on a property used as security for a debt.

Life cap

For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage.

Line of Credit

An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid Asset

A cash asset or an asset that is easily converted into cash.

Loan-To-Value Ratio

The relationship between the amount of the mortgage and property value, usually shown as a percentage.

Lock-in

An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

Lock-in Period

The time period during which the lender has guaranteed an interest rate to a borrower.

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Margin

The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.

Market Value

The price at which a property will sell, assuming a knowledgeable buyer and seller, both operating without undue pressure.

Maturity

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable

Merged Credit Report

A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.

Mortgage

A contract in which a borrower's property is pledged as security for a loan which is to be repaid on an installment basis.

Mortgage Note

A written promise to pay a debt at a stated interest rate during a specified term. The agreement is secured by a mortgage.

Mortgagee

The lender in a mortgage contract.

Mortgagor

The borrower in a mortgage contract.

Mortgage banker

For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.

Mortgage Broker

Mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.

Mortgage Insurance (MI)

Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

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Negative Amortization

A loan in which the outstanding principal balance goes up instead of down because the monthly payments are not large enough to cover the full amount of interest due. Also called deferred interest.

No Cash-out Refinance

A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."

No-Cost Loan

Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

Note

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note Rate

The interest rate stated on a mortgage note.

No-Cost Loan

Almost all lenders offer loans at "no points." You will find the interest rate on a "no points" loan is approximately a quarter percent higher than on a loan where you pay one point.

Notice of Default

A formal written notice to a borrower that a default has occurred and that legal action may be taken.

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Offer to Purchase

A written proposal to buy a piece of real estate that becomes binding when accepted by the seller. Also called a sales contract.

Original Principal Balance

The total amount of principal owed on a mortgage before any payments are made.

Origination Fee

A fee charged for the work involved in the evaluation preparation and submission of a proposed mortgage loan.

Owner Financing

A purchase in which the seller provides all or part of the financing.

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Partial Payment

A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.

Payment Change Date

The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

Periodic Payment Cap

For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.

Periodic Rate Cap

For an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Personal Property

Any property that is not real property.

PITI

An acronym for payments to lender that cover principal, interest, taxes and insurance on a property.

Plat

A map of a piece of land showing boundary lines, streets, actual measurements and easements.

Point

A fee paid to the lender on closing day to increase the effective yield of the mortgage. A point is one percent of the amount of the mortgage loan. Also called a discount point.

Prepayment

Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty

A charge paid to the lender by the borrower if a mortgage loan is repaid before its term is over.

Pre-Approval

A commitment by a lender to extend credit provided that specific conditions are met.

Pre-Qualification

A preliminary assessment of a buyer's ability to secure a loan, based on a specific set of lending guidelines and buyer representations made. This is not a guarantee or commitment by a lender to extend credit.

Pre-Qualification

This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

Prime Rate

The interest rate charged by banks to their preferred corporate customers, it tends to be an estimator for general trends in short term interest rates.

Principal

The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

PMI (Private Mortgage Insurance)

Insurance written by a private mortgage insurance company to protect the lender against losses caused by mortgage default. This is commonly required on loan transactions involving less than a 20% down payment or equity position.

Promissory Note

A Written promise to repay a specified amount over a specified period of time.

Public Auction

A meeting in an announced public location to sell property to repay a mortgage that is in default.

purchase agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Transaction

The acquisition of property through the payment of money or its equivalent.

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Qualifying Ratios

Guidelines used by lenders to determine how much of a loan a home buyer qualifies for. Often referred to as debt-to-income ratios (or DTI).

Quitclaim Deed

deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.

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Rate Lock

A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

Real Estate Settlement Statement

Final settlement statement often referred to as the HUD-1 form, used to itemize buyer, seller, broker, and lender charges and credits at closing.

Realtor

A real estate broker or sales associate affiliated with the National Association of Realtors.

Real Estate Agent

A person licensed to negotiate and transact the sale of real estate.

Real Property

Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Recording Fee

The charges made by the register of deeds to record the legal documents.

Refinance Transaction

The process of paying off one loan with the proceeds from a new loan using the same property as security.

Refinancing

Repaying a debt with the proceeds of a new loan, using the same property as collateral or security.

Remaining Balance

The amount of principal that has not yet been repaid. See principal balance.

Remaining Term

The original amortization term minus the number of payments that have been applied.

Revolving Debt

A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.

Right of First Refusal

A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of Ingress or Egress

The right to enter or leave designated premises.

Right of Survivorship

In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

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Sale-Leaseback

A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.

Second Mortgage

A loan issued on property that is already encumbered by an existing mortgage (ie: the first mortgage). The second mortgage is subordinate to the first.

Secondary Mortgage Market

The market wherein home loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a variety of other institutional investors.

Secured Loan

A loan that is backed by collateral.

Security

The property that will be pledged as collateral for a loan.

Seller Carry-Back

An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

Servicer

An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

subdivision

A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subordinate Financing

Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

Survey

A map prepared by an engineer or surveyor charting a particular piece of real estate.

Sweat Equity

Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.

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Title

Ownership of a property. A clear title is one without any outstanding liens or encumbrances. A cloud on title refers to any outstanding liens or encumbrances which could impair the title.

Title Company

A company that specializes in examining and insuring titles to real estate.

Title Insurance Policy

A policy designed to protect the buyer or lender after closing from financial losses arising from any defects in the title that may have occurred prior to purchase.

Title Search

A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.

Transfer of Ownership

Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.

Transfer Tax

In some areas city, county or state taxes imposed when property passes from one person to another.

Treasury index

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. [Top]

Truth-In-Lending

Federal law that requires lenders to disclose the terms and conditions of a mortgage, including the APR, based on certain charges incurred by the borrower. If the charges were $0, the APR would be equal to that actual interest rate on the loan.

Trustee

A fiduciary who holds or controls property for the benefit of another.

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Underwriting

The process of evaluating a loan application to determine the risk involved for the lender.

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