See Annual Percentage Rate.

See Adjustable Rate Mortgage.

Borrowers who contribute income and credit history to the qualification process of a loan and whose names appear on all closing documents. Each additional borrower is liable for the debt and condition of the property.

A mortgage whose interest rate changes over time based on an index and a margin. Rate changes are made at prescribed times and within limits (caps), as defined in the mortgage contract.

The date on which the interest rate changes for an adjustable-rate mortgage.

The period that elapses between adjustment dates for an adjustable-rate mortgage.

Person authorized to act on behalf of another in dealings with third parties.

A periodic, pre-determined sum awarded to a spouse or former spouse following a separation or divorce. Alimony is an obligation to make payments for support or maintenance. An alimony payment is the actual sum paid to fulfill the obligation.

Payment of debt in regular, periodic installments of principal and interest until the debt has been repaid in full.

A schedule of payments for retiring a debt. An amortization schedule breaks down the payments into principal and interest, which is helpful because these amounts vary with each payment of an amortizing loan. (See Amortization.)

The loan amount minus the prepaid finance charge. The Amount Financed is the amount on which the APR is based. For example, if the borrower requests $100,000 and the Prepaid Finance Charge totals $4,000, the Amount Financed would be $96,000.

APR is a measurement of the full cost of a loan, including interest and loan fees, expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, the APR provides consumers with a good basis for comparing the cost of loans.

The process of estimating and supporting an estimate of value.

An opinion or estimate of property value provided by a certified property appraiser. The estimate of value, generally, is obtained by comparing the subject property to the sales price of similar or comparable properties located within the same local area or neighborhood.

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

The value placed on a property by local officials for taxation purposes (may or may not equal appraised value).

(1) A local tax levied against a property. (2) The estimating of the value of a property for property tax purposes.

Real or personal property that hold value and is available for the payment of debts (including, for example, bank accounts, land, stocks and mutual funds).

A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

The transfer of the seller's existing mortgage to the buyer. Note: The lender must typically approve the new debtor in order to release the existing debtor from liability.

The amount of liquid assets (i.e. checking, savings, mutual funds, etc.) immediately available to pay closing costs and down payment.

A type of loan that does not fully amortize over its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan.

A mortgage loan that has a principal balance (or balloon) due at maturity, because the loan does not amortize fully over the loan term. A typical balloon mortgage might amortize over 30 years while having a 5-7 year term. A balloon mortgage carries an interest rate that is lower than a 30 year fixed rate mortgage. A balloon mortgage should be selected only by those who are prepared to make the balloon payment at maturity, or those who have the wherewithal to sell or refinance their property before maturity.

An oversized payment due at the end of a mortgage, commercial loan, or other amortized loan. The entire loan amount is not amortized over the life of the loan. Therefore, the remaining balance is due as a final repayment to the lender.

A judicial proceeding to restructure or forgive a debtor’s debts when the debtor does not have sufficient cash or assets to meet his/her financial obligations. The goal of bankruptcy is the equitable distribution of a debtor’s assets among his/her creditors.

A mortgage in which payments are made twice a month (15th and 30th). This allows for a more rapid repayment of principal, and decreases the amount of interest paid over the life of the loan.

A mortgage in which payments are made every two weeks instead of monthly, thus making the equivalent of 13 monthly payments a year (there are 26 two week periods) instead of 12. This allows for a more rapid repayment of principal and decreases the amount of interest paid over the life of the loan.

With respect to insurance, a binder is an agreement confirming temporary coverage pending issuance of a formal policy. In the context of a real estate transaction, a binder, generally, is issued to the homeowner and lender for homeowners and title insurance.

The recipient of a loan. (See Mortgagor).

One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for their part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange (the fee or commission is usually paid by the seller).

One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for their part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange (the fee or commission is usually paid by the seller).

A person who acts on behalf of the buyer in a real estate sales transaction. (See also Agent.)

See Closing Disclosure Form.

The ratio of all loans secured by a property to the property’s total value. For example, if an individual purchases a property for $200,000, and takes out two loans for the property, one for $100,000 and another for $50,000, then the combined loan-to-value would be 75% (($100,000 + $50,000) / $200,000).

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.

Consumer safeguards that limit the amount by which the interest rate on an adjustable rate mortgage (ARM) can change at each adjustment period and over the life of the loan. (See also Interest Rate Cap, Periodic Rate Cap and Lifetime Cap.)

Consumer safeguards that limit the amount that monthly payments on an adjustable rate mortgage (ARM) may change.

The total dollar amount required for payment of closing costs and down payment.

A mortgage loan that allows a borrower to borrow sufficient funds to pay off one or more existing mortgage loans and walk away with cash for personal use. The cash portion of the loan proceeds may be used by the borrower, as desired (e.g. college tuition, debt retirement, home improvements, automobile purchases, etc.). This type of mortgage permits borrowers to convert the equity in their homes into cash.

Cash funds that remain available after closing. Some lenders may require that the buyer have enough cash left after closing to make the first two mortgage payments, including principal, interest, taxes and insurance.

Document issued when the mortgage loan is paid in full. (See also Release of Mortgage or Satisfaction of Mortgage.)

A written document, prepared by a title attorney or company, that states the owner is legally vested, or has legal ownership and the right to use a piece of property.

A title to a property that is free of liens or levy from creditors or other parties and poses no legal question concerning ownership. For example, an owner of a home with a clear title is the sole undisputed owner, and no other party can make any legal claim to its ownership.

See Settlement.

Closing agents can be the lender, escrow, title, closing service companies, etc. A closing agent actually performs the closing process, which includes, disbursement of funds, the issuing of title insurance, if applicable, and recording of the deed.

The costs associated with purchasing a new home or financing an existing home to obtain a mortgage loan. Fees are generally assessed at closing and may include: insurance, loan fees, title fees, transfer fees, taxes, settlement or closing fee, survey fee, title insurance, appraisal fees, etc.

A five-page form that provides final details about the selected mortgage loan, including the loan terms, projected monthly payments, and fees, and other costs associated with the mortgage (closing costs). Also known as a CDF.

A document that lists the financial settlement between buyer and seller, and details the fees, commissions, insurances, and other costs and payments that must be transacted between the buyer and the seller in order for a successful transfer of ownership to take place. Also known as the ALTA Settlement Statement.

An additional person seeking to obtain a loan with a primary applicant. A co-applicant allows a potential borrower to increase his/her odds of qualifying for a loan or a larger loan. A co-applicant is also desirable if the loan is for the purchase of property that will be owned equally by both borrowers, such as business partners or spouses.

Borrower(s) who contribute income and credit history to the qualification process of a loan and whose name(s) appear(s) on all closing documents. The co-borrower is also liable for the debt and condition of property.

A person who signs and assumes joint liability with another person for the repayment of a debt. (See Co-Signer.)

A form of property ownership in which a corporation owns the building, and the tenants purchase shares in the corporation that give them the right to occupy a unit in the building. (See also Cooperative.)

A person who signs and assumes joint liability with another person for the repayment of a debt. (See Co-Maker.)

Property pledged as security for a debt (e.g. mortgaged real estate).

See CLTV

A lender's formal notice to a borrower that a loan has been approved. The commitment letter also states the terms and conditions of the loan.

Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium association (or a 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, and means of ingress and egress.

Properties used as comparisons to determine the value of a specified property.

See Comparables.

A form of property ownership in which each occupant of a multi-unit building owns his or her dwelling separately, but has an undivided interest with other owners in common areas (e.g. lobbies, hallways, amenities, etc.).

Rules and regulations passed by the condominium owner's association that are used to administer the property.

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership. Physical changes, as well as paperwork, may be necessary to conform to building and adhere to safety codes.

The monthly maintenance fee paid by a condominium unit owner to his/her condominium association to defray common area expenses.

A mortgage loan that conforms to Fannie Mae and Freddie Mac purchase guidelines and is not insured or guaranteed by FHA, VA, or any other federal agency. These guidelines include the borrower’s credit score, maximum loan amount, LTV, documentation, and underwriting and property requirements.

The limit on the size of a mortgage which Fannie Mae and Freddie Mac will purchase and/or guarantee. The conforming loan limit is set annually by Fannie Mae's and Freddie Mac's federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO). The current limit is $417,000 (may be higher in high cost areas).

A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he or she progresses. A construction loan is generally followed by the long term financing called a "take out" loan from a permanent lender.

A contract clause or provision that specifies that certain conditions, events or actions must be fulfilled in order for the contract to be considered valid. If the party that is to fulfill the requirements of the contingency clause is unable to do so, then the other party is released from its obligations and the contract will be considered null. For example, a contract may be contingent upon the buyer successfully obtaining a mortgage loan at an interest rate of 6% or lower. If the buyer cannot obtain a loan at that interest rate, then the contract would end.

A binding agreement between two or more parties that sets forth an obligation to do or not to do something specified.

A legally binding agreement between the buyer and the seller that constitutes the terms and conditions of sale or transfer of property. In some areas it is synonymous with “Land Contract”. In other areas it is synonymous with “Purchase Agreement”.

See Conforming Loan.

An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

See Co-Op.

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. COFI represents the weighted-average cost of savings, borrowings and advances of the 11th District Members of the Federal Home Loan Bank of San Francisco.

A formal agreement contained in any written contract (e.g. promissory note, mortgage, deed, etc.) stating that certain activities will or will not be carried out. Often related to terms in a loan contract.

A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's credit worthiness.

An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository, as well as from other sources.

See Debt-to-Income Ratio.

The ratio, expressed as a percentage, compares a borrower's monthly payment obligations on debts to his or her gross monthly income. DTI is one way that lenders measure an individual’s ability to manage monthly payments and repay debts. (See Housing Expenses-to-Income Ratio.)

The legal document conveying title to a property.

A legal document used in many states instead of a mortgage to secure a borrower’s obligations under a note. Under a deed of trust, the property is transferred to a trustee by the borrower (trustor) for the benefit of the lender (beneficiary) and re-conveyed to the borrower by the trustee upon loan repayment. (See also Mortgage and Trustee.)

Failure to make a mortgage payment or satisfy other obligations on a timely basis.

A mortgage loan that allows the borrower to make a minimum monthly payment that is less than the amount required to satisfy the note rate. The unpaid interest is added to the loan balance (“deferred) to be paid off. (See Negative Amortization.)

Failure to fulfill a financial obligation on time. This term commonly refers to a late payment by a borrower.

A sum of money paid to the seller, real estate broker, or escrow agent showing the buyer’s good faith in a transaction, with an offer to purchase real estate. (See Earnest Money).

A decline in property value; opposite of appreciation.

See Loan Discount Points.

Payment made by the buyer up front, in cash as part of the purchase price of a home, but which is not included in the loan.

A provision in a mortgage or deed of trust that allows the lender to demand repayment in full if the borrower sells the property. The due-on-sale provision serves as security for the mortgage. Also known as an Alienation Clause.

A sum of money paid to the seller, real estate broker, or escrow agent showing the buyer’s good faith in a transaction, with an offer to purchase real estate. (See Deposit.)

The right of one party to use the property of another party for a specific purpose. This “right” is created by grant, reservation, agreement, prescription, or necessary implication.

The age of a structure as estimated by its condition rather than actual age. Takes into account rehabilitation and maintenance.

Any interest, right, lien, or liability attached to a parcel of land that constitutes or represents a burden on the property. Anything that affects or limits the title to a property. A claim, lien, charge or liability attached to and binding real property.

A federal law that requires lenders and other 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.

The terms “equal housing lender” and “equal opportunity lender” are synonymous and refer to all banks insured by the Federal Deposit Insurance Corporation in the United States. Such banks are prohibited from discriminating on the basis of race, color, religion, national origin, sex, handicap, or familial status.

The difference between the fair market value and current indebtedness; also referred to as the owner's interest. The value of an owner’s real estate over and above the amount owed against the property.

A home equity line of credit (often called HELOC and pronounced “Hee-lock”) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house (akin to a second mortgage).

A loan based on the borrower's equity in his or her home.

(1) The holding of documents and money (such as a deposit) by a neutral third party prior to closing. (2) Also an account held by the lender into which a homeowner pays money for taxes and insurance.

The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses. Also known as an Impound Account.

The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

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

That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, mortgage insurance, hazard insurance, lease payments, and other items as they become due. Also known as "impounds" in some states.

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

The expected price a given property will bring if widely exposed on the market, assuming buyer and seller are fully informed.

An acronym for the Federal National Mortgage Association. Fannie Mae purchases mortgage loans originated by local lenders and sets guidelines that lenders must follow to qualify prospective borrowers.

See Fannie Mae.

The central bank of the United States, the Federal Reserve Bank is the most powerful financial institution in the world. The Federal Reserve Bank was founded by the US Congress in 1913 to provide the nation with a safe, flexible, and stable monetary and financial system.

In United States banking, a federal savings bank (FSB) is a savings bank that is created (or chartered) under and regulated by United States federal law administered by the United States Department of the Treasury's Office of the Comptroller of the Currency.

The cost of credit expressed in dollars, the finance charge is the total amount of interest calculated (at the approved interest rate) over the life of the loan; plus Prepaid Finance Charges and the total amount of any required mortgage insurance charged over the life of the loan.

The primary lien against your real estate, taking precedence to all other mortgages. If the property is sold or if the borrower defaults, the first mortgage is paid before any other mortgage lien on the property. Usually, the loan used to purchase the property is secured by the first mortgage.

A mortgage in which the interest rate remains the same during the entire life of the loan.

Insurance indemnifying against loss of property by flood. Required by lenders if a property is in a federally designated flood hazard area. The insurance is private but federally subsidized.

The legal process by which a mortgaged property may be sold when a mortgage is in default.

An acronym for the Federal Home Loan Mortgage Corporation. Freddie Mac purchases mortgage loans originated by local lenders and sets guidelines that lenders must follow to qualify prospective borrowers.

The interest rate on an adjustable rate mortgage that is calculated by adding the margin to the index.

Money given (and does not require repayment) to a buyer to assist in the purchase of a home. The gift usually comes from a relative, but may also come from a government agency or employer (subject to restrictions).

A government-owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA guarantees timely principal and interest payments to investors.

Period of time (usually 15 days) after a mortgage payment is due when the lender will not charge a late penalty or report the payment as late.

The starting point for determining the Federal and state income taxes of individuals, corporations, estates and trusts for residents or nonresidents. "Except as otherwise provided" by law, Gross income means "all income from whatever source," and is not limited to cash received.

When you purchase a condominium, townhouse or other type of property in a planned development such as a leased land property, a gated community, or even an ordinary subdivision, you are obligated to join that community's homeowners' association (HOA) and pay monthly or annual HOA fees.

An open-end loan, usually recorded as a second mortgage that permits borrowers to obtain cash advances based on an approved line of credit using a portion or all of the equity in their home (primary residence). (See also Home Equity Line of Credit.)

A home inspection is a non-invasive, visual examination of a residential dwelling, performed for a fee, which is designed to identify observed material defects within specific components of said dwelling.  

The Home Mortgage Disclosure Act (or HMDA, pronounced HUM-duh) is a United States federal law that requires certain financial institutions to provide mortgage data to the public. Congress enacted HMDA in 1975.

Acronym for the U.S. Department of Housing and Urban Development (HUD).

Property insurance designed to protect the homeowner and lender against physical damage to property from fire, wind, vandalism and other perils, depending upon the terms of the policy. This insurance is often referred to as Homeowners Insurance.

An open-end loan, usually recorded as a second mortgage that permits borrowers to obtain cash advances based on an approved line of credit using a portion or all of the equity in their home (primary residence). (See also HELOC.)

A type of loan that allows homeowners to acquire a loan in addition to their original mortgage/lien using a portion or all of the equity in their home (primary residence). A home equity loan is generally a second mortgage on the subject property and may be used for any personal needs (e.g. college education, debt consolidation, home improvements, etc.).

An insurance policy that combines hazard insurance and liability coverage.

The housing expense ratio, expressed as a percentage, is derived when a borrower's housing expenses are divided by his/her gross monthly income.

The portion of a borrower's monthly payment held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items. Also referred to as Escrow Payments.

Property that produces income, usually from rental. Income property may also include any property that is not entirely owner occupied.

The interest rate on an adjustable rate mortgage is tied to a bench mark interest rate known as an index.

The periodic payment that a borrower agrees to pay a lender.

One of a series of fixed, scheduled payments toward a debt or other sum payable instead of a lump sum. These payments often, but do not always, include interest to pay the seller for accepting the credit risk in the case that the buyer does not make payment in a timely manner. Installment payments make expensive goods and services available to buyers who may not otherwise be able to afford them.

If the buyer intends to proceed with a particular mortgage application, they must take the next step and tell the lender that they wish to move forward with the application for that loan. The lender is required to honor the terms of the Loan Estimate for only 10 business days. If the buyer decides to move forward more than 10 business days after receiving a Loan Estimate, the lender can revise the terms and estimated costs and provide the buyer with a revised Loan Estimate.  

A fee that is charged by a lender to borrower for the right to use the borrowed funds. The interest charge typically is expressed as an annual percentage rate.

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the outstanding loan.

Consumer safeguard that limits the amount by which the interest rate on an adjustable rate mortgage (ARM) can change at each adjustment period and over the life of the loan. (See also Lifetime Cap.)

A property that is not occupied by the owner and which, in most cases, is purchased for the primary purpose of profit. The profit may be from income or from resale.

An undivided interest in property, taken by two or more joint tenants. The interests must be equal, occurring under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenant(s), rather than to the heirs of the deceased.

A decision by the court stating that one individual is legally indebted to another. A judgment often involves an award, which may be the rights to a property or a specific monetary amount, that if recorded can become a lien on the property.

A mortgage loan with a principal balance that exceeds the conforming loan limit. A jumbo mortgage is a non-conforming loan. (See Conforming Loan Limit and Non-Conforming Loan.)

See Loan Estimate.

See Loan-to-Value Ratio.

A fee payable by a borrower to a lender when a loan payment is made after its due date.

The person or institution who provides money to a borrower for a specified time period in exchange for the repayment of principal and the payment of loan costs and interest. (See Mortgagee.)

A credit from the lender to offset closing costs in exchange for a higher interest rate. When you receive lender credits, you pay less upfront, but you pay more over time with the higher interest rate.

A title insurance policy that protects the lender’s security interest in a property against loss by defects in the borrower's title. Also called a Loan Policy.

Insurance that covers the loss of an interest in a property due to legal defects. Lender’s title insurance is required if the property is under mortgage. Most title insurance is lender's title insurance, which is paid for by the borrower, but protects only the lender.

A legal claim against a specific property as security for payment of a debt. The mortgagor (borrower) still holds legal title to the property; however, a lien is pledged as collateral.

Consumer safeguard that limits the amount by which the interest rate on an adjustable rate mortgage (ARM) can change over the life of the loan. (See also Interest Rate Cap.)

A loan with a maximum credit limit that allows the borrower to disburse funds up to the amount of the credit limit, as needed. Funds may be disbursed repeatedly as the principal balance is paid down. A line of credit functions similar to a credit card, and may be accessed by writing a check or using a debit card.

Agent representing the property owner. The Listing Agent provides the MLS and other advertising associated with the sale of the property. (See also Seller’s Agent.)

A debt provided by an entity (organization or individual) to another entity at an interest rate, and evidenced by a promissory note which specifies, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and date of repayment.

The total amount borrowed. The loan amount is the basis for many loan fee calculations, such as loan origination fees.

The unpaid principal balance of a loan.

An amount paid up front by the borrower to the lender to permanently reduce the interest rate of a loan. One point is equal to one percent of the loan amount. (See also Discount Points and Points.)

A Loan Estimate is a three-page form you receive after you apply for a mortgage loan that provides important details about the loan. The Loan Estimate provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. Also known as an LE.

A one-time fee charged by some lenders to initiate a loan. The loan origination fee is usually paid at closing. EasiLoans does not charge a loan origination fee.

The amount required to repay a loan, including interest and fees.

Synonymous with loan type - Loan Products vary in loan term, amortization schedule, interest rate, down payment requirement, documentation, etc.

A note holder or other entity that performs loan servicing activities. (See Loan Servicing.)

The task of collecting loan payments from a borrower and performing related activities, such as maintaining tax and insurance escrows. Servicing is performed by the note holder or outsourced to a third party.

The period of time scheduled for the repayment of a loan.

Description of a mortgage loan, such as Conventional, FHA, or VA.

The ratio between the amount of a given mortgage loan and the lower of sales price or appraised value. To determine a loan-to-value ratio, divide the loan amount by the sales price or appraised value. Maximum percentages for banks, savings and loans, or government insured loans are set by statute.

A written agreement guaranteeing the home buyer a specified interest rate provided the loan closes with that buyer within a set period of time. (See also Rate Lock.)

The set percentage the lender adds to the index rate to determine the current rate of an ARM.

See Fair Market Value.

The final payment date of a loan or other financial instrument, at which point the principal amount (and all remaining interest) becomes due to be paid to the lender and interest payments stop. The term “fixed maturity” is applicable to any form of financial instrument under which the loan is due to be repaid on a fixed date.

A lien or security interest in the title to property (created by statute) for the purpose of securing payment to persons who furnish labor or materials in connection with the construction of buildings and improvements on real estate.

A legal document that pledges real property to a lender as collateral security for the repayment of a loan. (See also Deed of Trust.)

A company providing mortgage financing directly with its own funds rather than bringing together lender and borrower, as does a Mortgage Broker. Although the Mortgage Banker uses its own funds, these funds are generally borrowed and the financing is either short term or, if long term, the mortgages are sold to investors within a short time.

A company or individual that, for a fee, matches borrowers with lenders.

A written commitment, approved by the lender, where the buyer agrees to make a mortgage loan. This letter contains the specific property, the loan amount, length of time, and conditions.

See Private Mortgage Insurance.

A loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender (usually a bank) wherein the borrower receives cash upfront then makes payments over a set time until the borrower pays back the lender in full.

A legal document that evidences a borrower’s obligation to repay a mortgage loan. The mortgage note also documents the loan terms.

The note holder in a mortgage loan transaction. (See Lender.)

The borrower in a mortgage loan transaction. (See Borrower).

A classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex.

Occurs when monthly payment amounts are not large enough to pay all interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer will eventually owe more than the original amount of the loan.

The borrower's gross income minus federal income tax.

The amount remaining after total operating expenses (excluding interest payments) are deducted from effective gross income.

A provision in a mortgage contract or deed that prohibits the seller of a home to pass payment of the existing mortgage to a new buyer of the home.

A mortgage loan that is ineligible for purchase by Fannie Mae and Freddie Mac because it does not meet their purchase guidelines. (See Fannie Mae, Freddie Mac and Conforming Loan.)

A borrower that does not occupy the property but is legally responsible for the loan.

A borrower who owns, but does not occupy his/her property. In many cases, a non-occupant owner receives rental income from his/her property.

See Promissory Note.

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

A formal document in which a buyer proposes to purchase a property for a specified amount and under certain conditions. Acceptance by the seller creates a contract binding on both parties, subject to any contingencies. Also known as a Purchase Agreement.

A mortgage where the annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.

An up-front fee charged by a lender for processing a new loan application. Origination costs are used as compensation for putting the loan in place, are quoted as a percentage of the total loan, and generally total between 0.5% and 1% on mortgage loans in the United States.

See Loan Origination Fee.

A purchase where the seller provides all or part of the financing for the buyer.

The residence that the owner physically occupies and uses as his or her home.

A title insurance policy insuring an owner of real estate against loss caused by defects or unmarketability of the owner's title.

Title insurance is primarily a product that is developed and sold in the United States as a result of an alleged comparative deficiency of land records. Title insurance is intended to protect an owner's or a lender's financial interest in real property against loss due to title defects, liens, or other matters.

Stands for Principal, Interest, Taxes and Insurance - the components of a monthly mortgage payment.

See Private Mortgage Insurance.

See Power of Attorney.

See Planned Unit Development.

The period of time between rate adjustments on an Adjustable Rate Mortgage (ARM). For example, the first payment adjustment period for a 5/1 ARM occurs after five years, and subsequent payment adjustments are made annually.

A maximum payment amount under an Adjustable Rate Mortgage, regardless of increase in the interest rate. If the payment is less than the interest alone, negative amortization is created.

A scenario in which monthly mortgage payments on an adjustable rate mortgage (ARM) rise so high that the borrower may not be able to afford them. Consumer protection guidelines regarding extremely low initial "teaser" rates, lifetime ceilings, and annual caps are designed to prevent Payment Shock.

The unpaid principal balance, accrued interest, outstanding late charges, legal fees, and all other amounts required to pay off the lender in full.

A test to determine whether a property is suitable for a septic tank. This test is also used to check the stability of the land for construction.

A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease over a specific period.

A loan that replaces a construction loan after construction has been completed. (See Take-Out Loan.)

Your Personal Assistant ("PA") and their supporting Team oversees the entire transaction to ensure all processes are simultaneously coordinated and executed. Your Personal Assistant is assigned based upon your geographic location. If you have registered an account, your PA is already identified. If you have not registered and have questions, simply call us and we will connect you to your Personal Assistant.

A housing development with common areas owned by a homeowner's association for the benefit of all homeowners. Each homeowner is obligated to pay fees to the association to defray the cost of maintaining these common areas.

A point is a fee equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent, plus a charge of 1 point, or $1,500. A lender can charge 1, 2, or more points. The two types of points include discount points and origination points.

A legal document authorizing one person to act on behalf of another.

The process of estimating a borrower’s qualifications to borrow. This estimate, generally, is performed before the borrower actually submits a loan application.

High Interest, excessive fee loans.

Funds set aside for the payment of expenses not yet due. These funds usually are escrowed with the loan servicer and may include taxes, hazard insurance, private mortgage insurance, and special assessments.

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

A clause in a mortgage contract that states if the mortgage is prepaid within a certain time period, a penalty will be assessed. The penalty is usually based on percentage of the remaining mortgage balance or a certain number of months’ worth of interest.

Charge levied by a lender in the event a borrower pays off a mortgage loan before its maturity date. Not all loans have a prepayment premium. A prepayment premium is sometimes referred to as a prepayment penalty.

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

A risk-management product that protects lenders against loss if a borrower defaults. Most lenders require private mortgage insurance (PMI) for loans with loan-to-value (LTV) percentages in excess of 80% (the buyer put down less than 20% of the home's value upon purchase.)

A legal document that evidences a borrower’s obligation to repay a loan. A promissory note also contains the loan terms.

The percentage or permille applied to a property’s assessed value to calculate property taxes. (See also Assessed Value and Property Taxes.)

Taxes collected on real property by municipal, county and state governments. The tax amount is determined by the property’s assessed value and the applicable property tax rate. (See also Assessed Value and Property Tax Rate.)

How a property is used. Possible uses include primary residence, investment property, or second home.

The amount of money paid for a specific property which is based upon a written agreement (purchase agreement) between the seller and buyer. Also known as sales price.

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

A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that you'll be able to afford your loan. A lender must make a good-faith effort to determine that you have the ability to repay your mortgage before you take it out.

Guidelines applied by lenders to determine how much a borrower may borrow. These ratios include the debt-to-income ratio and the housing expense-to-income ratio.

See Reverse Annuity Mortgage.

See Real Estate Settlement Procedures Act.

A radioactive gas found in some homes that in sufficient concentrations can cause health problems. Your lender may require a radon check on your home.

A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.

A written agreement, in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time. (See also Lock-in Rate).

A person licensed to negotiate and transact the sale of real estate on behalf of either the borrower or seller or in some cases both parties.

A federal statute requiring disclosure of certain costs in the sale of residential (one to four families) improved property which is to be financed by a federally insured lender.

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

The amount paid to the Recorder's Office in order to make a document a matter of public record.

The process of repaying a loan with the proceeds from a new loan. This is most often done to obtain a lower interest rate or convert home equity into cash.

Federal Reserve regulation issued under the Truth-in-Lending Act. (See Truth-in-Lending Act).

The document issued by the mortgagee when the mortgage loan is paid in full. (See also Satisfaction of Mortgage or Certificate of Satisfaction).

A loan in which the interest rate is renegotiated periodically. Arbitration may be provided for in the event renegotiation fails.

The cancellation of a contract. With respect to mortgage financing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

A mortgage that enables older homeowners to convert the equity in their homes into cash, usually in the form of monthly payments. Qualification for this type mortgage depends heavily on the borrower’s age and the amount of equity in the borrower’s home.

A right, usually given by an owner to a lessee, which gives the lessee a first chance to buy the property if the owner decides to sell. The owner must have a legitimate offer which the lessee can match or refuse. If the lessee refuses, the property can then be sold to the offeror.

A right of rescission is a right under federal law set forth by the Truth in Lending Act that gives a borrower the right to cancel a home equity loan or line of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee within three days of closing.

A written agreement between buyer and seller stating terms and conditions of a sale or exchange of property. (See also Sales Contract).

A written agreement between buyer and seller stating terms and conditions of a sale or exchange of property. (See also Sales Agreement).

The document issued by the mortgagee when the mortgage loan is paid in full. (See also Release of Mortgage or Certificate of Satisfaction).

A debt that places its holders second in line in the case of bankruptcy or default. Second lien debt holders receive compensation from property or other collateral after first lien debt is covered, making this type of loan a riskier investment.

An additional mortgage behind the first mortgage on a property. The rights of the second mortgage holder are subordinate to the rights of the first mortgage holder.

A market in which mortgage lenders sell their residential mortgage loans to investors. By selling their mortgage loans lenders are able to replenish their funds and continue to offer mortgage loans to the public. Fannie Mae and Freddie Mac purchase many of the mortgage loans sold on the secondary market.

An agreement in which the seller takes back a note for part of the purchase price secured by a junior mortgage, wrap-around mortgage, or contract for deed.

A person who acts on behalf of the seller in a real estate sales transaction. (See also Agent and Listing Agent).

See Loan Servicing.

The meeting at which home purchase and mortgage finance transactions are consummated. During settlement the deed, promissory note, mortgage and related documents are executed and delivered, as applicable. Settlement, generally, is attended by the borrower, seller and lender. Loan proceeds are disbursed at or soon after settlement. Settlement also is known as Closing. (See also Settlement Agent.)

The person who is responsible for facilitating a Settlement, usually an attorney or a representative of a Title Company. (See also Settlement and Title Company.)

A statement itemizing all charges incurred in connection with a real estate transaction. It is prepared by a settlement agent and provides each party with a complete list of his/her incoming and outgoing funds. The settlement sheet is sometimes referred to as a ALTA Settlement Statement, or Closing Statement.

Any service provided in connection with a real estate settlement including, but not limited to, the following: title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and mold inspections, services rendered by a real estate agent or broker, the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and the handling of the processing, and closing of settlement.

Interest which is computed only on the principal balance, as opposed to compound interest.

A report made by a licensed surveyor which measures land and charts the precise legal boundaries, the location of improvements, easements, rights of way, encroachments, other physical features and the relationship of the property to the property surrounding it.

See Truth-in-Lending Act.

A loan that replaces a construction loan after construction has been completed. (See Permanent Loan and Construction Loan.)

A form of property ownership available only to a married couple. The husband and wife each own an undivided interest in the entire property and, in the event of the death of one, the survivor owns the entire property.

An undivided interest in property taken by two or more persons. The interest need not be equal. Upon the death of one or more persons, there is no right of survivorship in the other owners.

See Loan Term.

A document certifying a property has no termites; may be required by a lender.

A legal term for an ownership interest in real or personal property.

A company that specializes in title searches and insuring title to property.

Insurance to protect the lender (lender's policy) or the owner (owner's policy) against loss resulting from defects of title to a specifically described parcel of real property.

A review of all recorded documents affecting a specific piece of property to determine the present condition of title.

The projected total cost that a reverse mortgage holder should expect to pay over the life of the loan. The total annual loan cost, or TALC, is based off of the charges associated with the reverse mortgage. These costs include principal, interest, mortgage insurance premiums, closing costs, and servicing costs.

Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.

A new disclosure required by Congress in the Dodd-Frank Act. The TIP tells you how much interest you will pay over the life of your mortgage loan, compared to the amount you borrowed.

State or local tax payable when title passes from one owner to another. Based on purchase price or money changing hands. Also called Documentary Transfer Tax.

An individual or (institution) that is responsible for holding assets and/or properties for the benefit of another person or business entity.

A federal law requiring lenders to disclose fully in writing the terms and conditions of a mortgage loan, including the annual percentage rate and other charges. (See also Regulation Z.)

Sign and accept liability under (an insurance policy), thus guaranteeing payment in case loss or damage occurs..

A loan obtained without any security or collateral. This is also called a Signature loan.

See Verification of Deposit.

See Verification of Employment.

A mortgage whose interest rate changes over time based on an index and a margin. Rate changes are made in prescribed times and within limits (caps) as defined in the mortgage contract. (See Adjustable Rate Mortgage or ARM).

A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

A document signed by the borrower's employer verifying his/her position and salary.

Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

An option which allows the borrower to not pay the points associated with the loan origination fee. This savings is offset by a slightly higher loan interest rate.