Glossary

[ A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z ]

A

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Acceleration Clause

A common provision of a mortgage or note providing the holder with the right to demand that the entire outstanding balance is immediately due and usually payable in the event of default.

Accrued Interest

Interest earned but not yet paid.

Adjustable Rate Mortgage Loans (ARM)

Loans with interest rates that are adjusted periodically based on changes in a pre-selected index. As a result, the interest rate on your loan and the monthly payment will rise and fall with increases and decreases in overall interest rates. These mortgage loans must specify how their interest rate changes, usually in terms of a relation to a national index such as (but not always) Treasury bill rates. If interest rates rise, your monthly payments will rise. An interest rate cap limits the amount by which the interest rate can change; look for this feature when you consider an ARM loan.

Adjustment Interval

On an ARM loan, the time between changes in the interest rate or monthly payment.

Alternative Documentation

A method of documenting a loan file that relies on information the borrower is likely to be able to provide instead of waiting on verification sent to third parties for confirmation of statements made in the application.

Amortization

Repayment of a loan with periodic payments of both principal and interest calculated to payoff the loan at the end of a fixed period of time.

Annual Percentage Rate (APR)

The cost of credit expressed as a yearly rate. The annual percentage rate is often not the same as the interest rate. It is a percentage that results from an equation considering the amount financed, the finance charges, and the term of the loan.

Application

An initial statement of personal and financial information required to apply for a loan.

Application Fee

Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.

Appraisal

A written estimate of a property's current market value completed by an impartial party with knowledge of real estate markets.

Appraisal Fee

A fee charged to render an opinion of market value as of a specific date.

Appreciation

The increase in property value as compared to its value at a particular earlier date.

APR

Annual Percentage Rate

ARM

Adjustable Rate Mortgage Loans

Assessment

A local tax levied against a property for a specific purpose, such as road or sidewalk construction, a sewer, or street lights.

Assignment

The transfer of ownership, rights, or interests in property by one person, the assignor, to another, the assignee.

Assumability

A feature of a loan which s it to be transferred to the new purchaser of a home. Assumable mortgages can help attract buyers since assumption of a loan requires lower fees and/or qualifying standards than a new loan.

Assumption

A method of selling real estate where the buyer of the property agrees to become responsible for the repayment of an existing loan on the property.

B

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Balloon Mortgage

Balloon mortgage loans are short-term fixed-rate loans with fixed monthly payments for a set number of years followed by one large final payment ("the balloon") for all of the remainder of the principal. Typically, the balloon payment may be due at the end of 5, 7, or 10 years. Borrowers with balloon loans may have the right to refinance the loan when the balloon payment is due, but the right to refinance is not guaranteed.

Balance

A document showing the financial situation--assets, liabilities, and net worth--of a company at a specific point in time.

Bankruptcy

A proceeding in a Federal court to relieve certain debts of a person or a business unable to pay its debts.

Bearer

The legal owner of a piece of property.

Bequest

A gift of personal property by will.

Bill of Sale

A document by which one transfers ownership of goods to another.

Bi-Weekly Mortgage

A payment plan under which one pays one half of a monthly payment every two weeks, saving substantially over the life of the loan.

Blanket Mortgage

A mortgage that covers more than one parcel of real estate.

Bona Fide

In good faith.

Bond

A document representing a right to certain payments on underlying collateral.

Borrower (Mortgagor)

An individual who applies for and receives funds in the form of a loan and is obligated to repay the loan in full under the terms of the loan.

Buy-Down Mortgage

A mortgage loan with a below-market rate for a period of time.

Buyer's Broker

An agent hired by a buyer to locate a property for purchase and to represent the buyer in negotiations with the seller's broker for the best possible deal for the buyer.

Buyer's Market

Market conditions that favor buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.

C

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Caps

Limits on changes in ARM interest rates, either in an adjustment period or over the life of the loan.

Caps (interest)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index.

Caps (payment)

Consumer safeguards which limit the amount monthly payments on an adjustable-rate mortgage may change. Since they do not limit the amount of interest the lender is earning, these consumer safeguards may cause negative amortization.

Cash Out

Any cash received when you get a new loan that is larger than the remaining balance of your current mortgage, based upon the equity you have already built up in the house.

The cash out amount is calculated by subtracting the sum of the old loan and fees from the new mortgage loan.

For example, if your existing loan is $100,000, you might refinance it with a loan of $120,000. After you pay off your current loan ($100,000) and any loan-origination costs for the new loan (for example $2,000), you would be left with $18,000 cash out.

Cash-out loans may not be available for all types of property.

Cashier's Check (or Bank Check)

A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank's account instead of the customer's.

Ceiling

The maximum allowable interest rate of an adjustable rate mortgage.

Certificate of Eligibility

Document issued by the Veterans Administration to qualified veterans which verifies a veteran's eligibility for a VA guaranteed loan. Obtainable through local VA office by submitting form DD-214 (Separation Paper) and VA form 1880 (request for Certificate of Eligibility).

Certificate of Occupancy

Document issued by local government agency stating that a property meets the requirements of health and building codes.

Certificate of Reasonable Value (CRV)

A property appraisal performed by a VA approved appraiser which establishes the limit on the principal of the VA loan.

Certificate of Veteran Status

Form filled out by the VA to establish a borrower's eligibility for a VA loan. Obtainable through local VA office by submitting form DD 214 (Separation Paper) with form 26-8261a (request for certificate of veteran status).

Certified Check

A check drawn on the issuer's account for funds that have been segregated by the bank, guaranteeing payment.

Chain of Title

The chronological order of conveyance of a property from the original owner to the present owner.

Clear Title

A marketable title, free of clouds and disputes.

Closing

The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).

Closing Costs

Costs for services that must be performed before your loan can be closed. Examples include title fees, recording fees, appraisal fee, credit report fee, attorney's fees, and surveying fees.

Closing Disclosure (CD)

A standard from (October, 2015) required to be provided to borrower(s) 3 business days in advance of closing. It itemizes all of the fees associated with closing a mortgage loan.

Cloud on Title

An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title.

COFI

See Cost of Funds Index.

Collateral

Assets (such as your home) pledged as security for a debt.

Commission

Money paid to a real estate agent or broker for negotiating a real estate or loan transaction.

Commitment

A promise to lend and a statement by the lender of the terms and conditions under which a loan is made.

Condominium

A form of property ownership in which the homeowner holds title to an individual dwelling unit and a proportionate interest in common areas and facilities of a multi-unit project.

Conforming Loan

A conventional mortgage loan which meets all requirements to be eligible for purchase by Federal agencies such as FannieMac and FreddieMac. The maximum conforming loan amount is $417,000 for a one-unit property.

Construction Loan

A short-term interim loan to fund the construction of buildings or homes, which usually advances the money to the builder as work progresses. After completion, a permanent loan is used to pay off the construction loan.

Consumer Reporting Agency

A company which regularly gathers, files and sells information to creditors to facilitate their decisions to extend credit.

Consumer Finance Protection Bureau (CFPB)

Federal regulatory agency formed from Dodd-Frank regulatory reform

Contingency

A condition which must be satisfied before a contract is legally binding.

Contract of Sale

Contract signed by buyer and seller stating the terms and conditions under which a property will be sold

Conventional Loan

Loans that are not made under any government sponsored housing program; they are not subject to the restrictions of government programs. They are generally underwritten to the guidelines of Fannie Mae or Freddie Mac.

Conversion Clause

A provision in some ARMs that allows you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate will be set at current rates, and there may be a charge for the conversion feature.

Convertible ARMs

A type of ARMs loan with the option to convert to a fixed-rate loan during a given time period.

Conveyance

The document used to effect a transfer, such as a deed, or mortgage.

Cost of Funds Index (COFI)

An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.

Covenants, Conditions and Restrictions (CC&Rs)

A document that defines the use, requirements and restrictions of a property.

Credit Bureau

A credit bureau is a clearinghouse for credit history information. Credit grantors provide the bureau with factual information on how their credit customers pay their bills. The bureau regularly assembles this information, along with public record information obtained from court houses around the country, into a "file" on each consumer.

Credit Report

A report detailing the credit history of a prospective borrower. Information is collected from the three major credit reporting bureaus: Equifax, Experian and TransUnion in order to gain a complete picture of a borrower's credit worthiness.

Credit Score

A statistical method of assessing your creditworthiness. Your credit card history; amount of outstanding debt; the type of credit you use; negative information such as bankruptcies or late payments; collection accounts and judgments; too little credit history and too many credit lines with the maximum amount borrowed are all included in credit-scoring models to determine your credit score.

Credit Risk

The possibility that the borrower may default on financial obligations to the investor.

D

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Deed

Legal document by which title to real property is transferred from one owner to another. The deed contains a description of the property, and is signed, witnessed, and delivered to the buyer at closing.

Default

Failure to meet legal obligations in a contract, including failure to make payments on a loan

Deferred Interest

Interest added to the balance of a loan when monthly payments are not sufficient to cover it. (See negative amortization.)

Delinquency

Failure to make payments as agreed in the loan agreement.

Deposit

Cash paid to the seller when a formal sales contract is signed.

Depreciation

Decline in property value.

Discount Points (or Points)

Points are an up-front fee paid to the lender at the time that you get your loan. Each "point" equals one percent of your total loan amount. Points and interest rates are inherently connected: in general, the more points you pay, the lower your interest rate although the amounts vary. However, the more points you pay, the more cash you need up front since points are paid in cash at closing.

Documentary Stamps

A state tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another.

Document Review

Fee charged by lender for review of documents necessary to fund a loan.

Down Payment

The amount of your home's purchase price you need to supply up front in cash to get your loan.

For conventional loans, expect a down payment that's at least 5% of your home's value. FHA requires at least 2.25%. Lenders generally do not require private mortgage insurance with a down payment of at least 20% or greater of your home's purchase price. (Note, however, that FHA and VA loans have different policies regarding mortgage insurance.)

Due-on-Sale Clause

Provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance upon sale of the property.

E

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Earnest Money

Deposit made by a buyer to the seller towards the down payment in evidence of good faith, usually made when the purchase agreement is signed.

ECOA

See Equal Credit Opportunity Act

Encumbrance

A legal right or interest in a property that affects title and lessens the property value. Encumbrances can take the form of claims, liens, unpaid taxes, etc. These will usually have to be taken care of before a buyer will want to purchase the property.

Equifax

One of the three largest credit bureaus in the United States.

Equal Credit Opportunity Act (ECOA)

Federal law requiring creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity

The difference between the current market value of a property and the total debt obligations against the property. On a new mortgage loan, the down payment represents the equity in the property.

Escrow Account

An account held by the lender to which the borrower pays monthly installments, collected as part of the monthly mortgage payment, for annual expenses such as taxes and insurance. The lender disburses escrow account funds on behalf of the borrower when they become due. Also known as Impound Account.

Escrow Account Waiver

It is considered an escrow account waiver when the taxes and insurance are not part of the borrowers monthly payment to the lender.

Experian

One of the three largest credit bureaus in the United States.

F

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Fair Isaac and Co.

The company that invented the credit scoring system most commonly used worldwide, the FICO score.

Fannie Mae

A common nickname for the Federal National Mortgage Association, a government agency that purchases eligible loans from lenders.

Farmer's Home Administration (FmHA)

An agency, within the U.S. Department of Agriculture, that provides financing for purchasers of homes and farms in small towns and rural areas.

Federal Deposit Insurance Corporation (FDIC)

Independent deposit insurance agency created by Congress to maintain stability and public confidence in the nation's banking system.

Federal Home Loan Bank Board (FHLBB)

Former name for the regulatory and supervisory agency for federally chartered savings institutions, now called the Office of Thrift Supervision.

Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac)

See Freddie Mac

Federal Housing Administration (FHA)

A federal agency within the Department of Housing and Urban Development (HUD), which insures residential mortgage loans made by lenders and sets standards for underwriting mortgage loans.

Federal National Mortgage Association (FNMA, or Fannie Mae)

This agency buys loans that are underwritten to its specific guidelines. These guidelines are an industry standard for residential conventional lending.

Federal Reserve

Central bank of the United States and major regulatory agency for many commercial banks.

Fee Simple

Absolute ownership of real property.

FHA

See Federal Housing Administration

FHA Loans

Fixed- or adjustable-rate loans insured by the U.S. Department of Housing and Urban Development (HUD). FHA loans are designed to make housing more affordable, particularly for first-time homebuyers. FHA loans typically permit borrowers to buy a home with a lower down payment than conventional loans. With FHA insurance, eligible buyers can purchase a home with a down payment as little as 3% of the appraised value or the purchase price, whichever is lower. The current FHA loan limits vary depending on home type and home location.

FHLMC

See Freddie Mac

FICO

The most common credit-scoring model used by lenders, it is also known as a Fair Isaac score. Your FICO can range from 200 - 900. According to this model, the higher your score, the less likely you are to default on your financial obligations.

First Mortgage

A mortgage which is in first lien position, taking priority over all other liens. In the case of a foreclosure, the first mortgage will be repaid before any other mortgages.

Fixed Rate

An interest rate which is fixed for the term of the loan

Fixed-Rate Loans

Fixed-rate loans have interest rates that do not change over the life of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan. Fixed-rate loans typically have 15-year or 30-year terms. With a fixed-rate loan, you will have predictable monthly mortgage payments for as long as you have the loan.

Flood Insurance

Insurance that compensates for physical damage to a property by flood. Typically not covered under standard homeowner's/Hazard insurance.

Floor

The minimum rate of interest payable on an adjustable-rate mortgage.

FmHA

See Farmer's Home Administration

FNMA

See Fannie Mae

Forbearance

The act by the lender of refraining from taking legal action on a mortgage loan that is delinquent.

Foreclosure (or Repossession)

Legal process by which a mortgaged property may be sold by the lender to pay off a mortgage loan that is in default.

Freddie Mac

A common nickname for the Federal Home Loan Mortgage Corporation, a government agency that purchases eligible loans from lenders. This agency buys loans underwritten to its specific guidelines.

G

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Ginnie Mae / GNMA

See Government National Mortgage Association.

Good Faith Estimate

This form was replaced by the Loan Estimate in October, 2015. It was a written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

Government National Mortgage Association (GNMA, or Ginnie Mae)

Government agency that provides funds for VA and FHA loans.

Graduated Payment Mortgage (GPM)

Mortgage in which initial low payments (with potential negative amortization) increase regularly for several years and then level off.

Grace Period

Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note.

Gross Income

Total income before taxes or expenses are deducted.

Gross Monthly Income

The total amount of gross income earned by the borrower each month

Guarantee

To assume liability for another's debts in the event of default.

Guaranty

A promise by one party to pay a debt or perform an obligation contracted by another in case of that person's default.

H

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Hazard Insurance

Protects the insured against loss due to fire or other natural disaster in exchange for a premium paid to the insurer. Also known as Homeowner's Insurance.

Home Equity Loan

A loan secured by the equity in your home. These are sought for a variety of purposes, including home improvements, major purchases or expenses, and debt consolidation. Interest paid is usually tax -deductible.

Housing and Urban Development

See HUD

Housing Code

Local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings.

HUD

The Department of Housing and Urban Development. A U.S. government agency established to implement Federal housing and community development programs; oversees the Federal Housing Administration.

HUD-1 Uniform Settlement Statement

This form was replaced by the Closing Disclosure (CD) in October, 2015. It is a standard from provided at closing which itemizes all of the actual costs associated with purchasing/selling or refinancing a home.

I

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Index

Most lenders generally tie adjustable rate mortgage loan (ARM) interest rate changes to an "index." An index is a widely published rate such as LIBOR, T-Bill, or 11th District Cost of Funds (COFI). Lenders use these indices to establish the interest rates charged on mortgage loans. For ARMs, a pre-determined margin is added to the index to compute the interest rate adjustment.

Initial Cap

Consumer safeguard which limits the amount the interest rate on an adjustable rate mortgage can change during the first adjustment period. See Caps.

Initial Rate

The rate charged during the first interval of an ARM loan.

Insolvency

Condition of a person who is unable to pay his debts as they are due.

Interest

Charge paid for borrowing money, calculated as a percentage of the remaining balance of the amount borrowed.

Interest Rate

The annual rate of interest on the loan, expressed as a percentage of 100.

Interest Rate Cap

Consumer safeguards which limit the amount the interest rate on an ARM loan can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index

J

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Joint Liability

Liability shared among two or more people, each of whom is individually liable for the full debt.

Joint Tenancy

A form of ownership of property giving each person equal interest in the property, including rights of survivorship.

Jumbo Loan

A mortgage larger than the $417,000 limit set by Fannie Mae and Freddie Mac.

Junior Mortgage / Junior Lien

A mortgage subordinate to the first lien or mortgage. In the case of a foreclosure, a senior mortgage or lien will be paid first. Home equity or home improvement loans would be examples of junior loans.

K

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No K terms

L

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Late Charge

Penalty paid by a borrower when a payment is made after the due date.

Lender

The bank or mortgage company offering the loan. Mortgage Brokers are not lenders in New York State.

LIBOR (London Interbank Offered Rate)

The interest rate charged among banks in the foreign market for short-term loans to one another. A common index for ARM loans.

Lien

A legal claim by one person on the property of another for security for payment of a debt.

Loan Administration (or Loan Servicing)

The collection of mortgage payments from borrowers and related responsibilities (such as handling escrows for property tax and insurance, foreclosing on defaulted loans and remitting payments to investors).

Lifetime (or Overall) Cap

Consumer safeguard which limits the amount the interest rate on an adjustable rate mortgage loan (ARM ) can change over the life of the loan. See Caps.

Loan Application

An initial statement of personal and financial information required to apply for a loan.

Loan Application Fee

Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.

Loan Origination Fee

Fee charged by a lender to cover administrative costs of processing a loan.

Loan Servicing (or Loan Administration)

The collection of mortgage payments from borrowers and related responsibilities (such as handling escrows for property tax and insurance, foreclosing on defaulted loans and remitting payments to investors).

Loan-to-Value Ratio (LTV)

The percentage of the loan amount to the appraised value of the property (or the sales price, whichever is less).

Lock or Lock-In

A lender's guarantee of an interest rate for a set period of time. The time period is usually that between loan application approval and loan closing. The lock-in protects you against rate increases during that time.

M

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Margin

The percentage difference between the index for a particular loan and the interest rate charged. This is a number predetermined by the lender.

MIP

Mortgage Insurance Premium; Mortgage insurance required on a FHA loan.

Monthly Housing Expense

Total monthly payments of principal, interest, taxes, and insurance (PITI).

Mortgage

A legal document by which real property is pledged as security for the repayment of a loan.

Mortgage Banker

An individual or company that originates and/or services mortgage loans. In New York State, a Mortgage Banker must be licensed by the Department of Financial Services.

Mortgage Broker

An individual or company that arranges financing for borrowers.

Mortgage Insurance

Insurance to protect the lender in event a borrower defaults on the loan. With Conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's appraised value. (With less than 20% down payment, the mortgage insurance is referred to as PMI (Private Mortgage Insurance). However, FHA and VA loans have different insurance guidelines.)

Mortgage Loan

A loan for which real estate serves as collateral to provide for repayment in case of default.

Mortgage Note

Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.

Mortgagee

The lender in a mortgage loan transaction.

Mortgagor

The borrower in a mortgage loan transaction.

N

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Negative Amortization

A loan payment schedule in which the outstanding principal balance of a loan goes up rather than down because the payments do not cover the full amount of interest due. The monthly shortfall in payment is added to the unpaid principal balance of the loan.

Net

After taxes, fees and other deductions have been subtracted.

Net Effective Income

Gross income minus Federal income tax.

Note

Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.

Notice of Default

Written notice to a borrower that a default has occurred and that legal action may be taken.

O

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Office of Comptroller Currency

The oldest Federal financial regulatory body, which oversees the nation's Federally chartered banks.

Office of Thrift Supervision

Regulatory and supervisory agency for Federally chartered savings institutions.

Origination Fee

Fee charged by a lender to cover administrative costs of processing a loan.

Owner Financing

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

P

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Payment Cap

Consumer safeguards which limit the amount monthly payments on an adjustable-rate mortgage may change. Do not limit the amount of interest the lender is earning, they may cause negative amortization.

Per Diem Interest

Interest calculated per day. (Depending on the day of the month on which closing takes place, you will have to pay interest from the date of closing to the end of the month. Your first mortgage payment will likely be due the first day of the following month.)

Periodic Cap

Consumer safeguard which limits the amount the interest rate on an adjustable rate mortgage (ARM) can change in an adjustment interval. See Caps.

PITI

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

Points (or Discount Points)

See Discount Points

Power of Attorney

Legal document authorizing one person to act on behalf of another.

Pre-approval

The process of determining how much money a prospective homebuyer or refinancer will be eligible to borrow prior to application for a loan. A pre-approval includes a review of a borrower's credit history, as well as verification of actual assets and monthly debt obligations. Information submitted during pre-approval is subject to verification at application.

Prepaid Expenses

Taxes, insurance and assessments paid in advance of their due dates. These expenses are included at closing.

Prepaid Interest

Interest that is paid in advance of when it is due. Typically charged to a borrower at closing to cover interest on the loan between the closing date and the first payment date.

Prepayment

Full or partial repayment of the principal before the contractual due date.

Prepayment Penalty

Fee charged by a lender for a loan paid off in advance of the contractual due date.

Pre-qualification

The process of determining how much money a prospective homebuyer will be eligible to borrow prior to application for a loan. A pre-qualification may include a review of credit as well as consideration of borrower's verbal statements regarding income, assets and monthly debt obligations. Information submitted during pre-qualification is subject to verification at application.

Primary Mortgage Market

Includes banks, savings and loans, credit unions, and mortgage bankers who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to investors like Fannie Mae or Freddie Mac in the secondary mortgage market.

Prime Rate

Lowest commercial interest rate charged by a bank on short term loans to its most creditworthy customers.

Principal

The remaining balance not counting interest, left on a loan.

Private Mortgage Insurance (PMI)

Insurance to protect the lender in case you default on your loan. With conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's purchase price. With conventional loans, mortgage insurance is generally required when there is less than a 20% down payment of the home's purchase price. FHA and VA loans have different insurance guidelines.

Profit and Loss Statement

Financial statement showing sales, expenses and profits over a period of time.

Purchase Agreement

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

Q

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No Q terms

R

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Real Property

Land and any improvements permanently affixed to it, such as buildings.

Reconveyance

The transfer of property back to the owner when a mortgage loan is fully repaid.

Recording

Money paid typically to a municipality for entering the sales of a property into the public records.

Recording Fee

Money paid to an agent for entering the sale of a property into the public records.

Refinancing

The process of paying off one loan with the proceeds from a new loan secured by the same property.

Rent With Option To Buy

He/she rents a home from its owner and lives in the home as a tenant until he/she exercises the option to purchase the home and become the owner.

RESPA

Real Estate Settlement Procedures Act. RESPA is a federal law that gives consumers the right to review information about loan settlement costs. The law gives you the right to review this information after you apply for a loan within 3 days of loan application, and again 3 days prior to closing. The law only obliges lenders to provide these settlement costs after application.

Right to Rescission

Under the provisions of the Truth-in-Lending Act, the borrower's right, on certain kinds of loans, to cancel the loan within three days of signing a mortgage.

S

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Sales Agreement

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

Satisfaction

The complete payment of a debt, eliminating an obligation.

Secondary Mortgage Market

The market into which primary mortgage lenders sell the mortgages they make to obtain funds to originate more new loans; includes investors like Fannie Mae and Freddie Mac.

Second Mortgage

An additional mortgage placed on a property that has rights that are subordinate to the first mortgage.

Servicing (or Loan Administration)

See Loan Servicing

Settlement (or Closing)

See Closing

Settlement Costs

See Closing Cost

Settlement Cost (HUD guide)

HUD - published booklet that provides an overview of the lending process that was given to consumers after completing loan application. This was replaced by Your Home Loan Toolkit in October, 2015.

Shared Appreciation Mortgage (SAM)

Loan in which the borrower is given a below-market interest rate and the lender receives a portion of the future appreciation of the property value.

Subsidized Second Mortgage

Alternative financing option for low- and moderate-income households that also includes a down payment and a first mortgage, with funds for the second mortgage provided by city, county, or state housing agencies, foundations, or nonprofit corporations. Payment on the second mortgage is often deferred and carries low interest rates (if any). Part of the debt may be forgiven for each year the family remains in the home.

Survey

A measurement of land, prepared by a licensed surveyor, showing a property's boundaries, elevations, improvements, and relationship to surrounding tracts.

Sweat Equity

Value added to a property in the form of labor or services of the owner rather than cash.

T

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Tax Impound

See Escrow Account

Tax Lien

Claim against a property for unpaid taxes.

Tax Sale

Public sale of property by a government authority as a result of non-payment of taxes.

Term

The period of time between the beginning loan date on the legal documents and the date the entire balance of the loan is due.

TIP

The total amount of interest you will pay over the loan term as a percentage of your loan amount.

Title

Document which gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property.

Title Company

A company that insures title to property.

Title Insurance

Insurance which protects the lender (lender's policy) or the buyer (owner's policy) against title defects, judgements, liens, and/or other burdens that may surface after closing.

Title Search

Examination of municipal records to ensure that the seller is the legal owner of a property and that there are no liens or other claims against the property.

Toolkit

Replaces former HUD Settlement cost booklet. It was designed by CFPB to assist buyers in understanding the home purchase and mortgage process.

Trade Lines

Name for each individual credit accounts listed on your credit report.

TransUnion

One of the three largest credit bureaus in the United States.

Transfer Tax

Tax paid when title passes from one owner to another.

TRID: TILA RESPA Integrated Disclosure

Federal Disclosure rule that combined former Truth in Lending statement and Good Faith Estimate form, as well as Final Truth in Lending Statement & HUD1 into Closing Disclosure. Also known as the "Know Before you Owe Rule."

Truth-in-Lending Act

Federal law requiring written disclosure of the terms of a mortgage (including the APR and other charges) by a lender to a borrower within 3 days of loan application. Also requires the right to rescission period.

Two-Step Mortgage

Mortgage with a low fixed interest rate for 5, 7, or 10 years, which is then adjusted to a new rate for the rest of the loan.

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Underwriting

In mortgage lending, the process of reviewing loan application and supporting documentation to determine the risks.

Usury

Interest charged in excess of the legal rate established by law.

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VA Loans

Fixed-rate loans guaranteed by the U.S. Department of Veterans Affairs. They are designed to make housing affordable for eligible U.S. veterans. VA loans are available to veterans, reservists, active-duty personnel, and surviving spouses of veterans with 100% entitlement. Eligible veterans may be able to purchase a home with no down payment, no cash reserve, no application fee, and lower closing costs than other financing options. The maximum VA loan amount is currently $417,000.

Variable Rate Mortgage

See Adjustable Rate Mortgage

Variable Rate

See Adjustable Rate Mortgage

Verification of Deposit (VOD)

Document signed by the borrower's bank or other financial institution verifying the borrower's account balance and history.

Verification of Employment (VOE)

Document signed by the borrower's employer verifying the borrower's position and salary.

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Waiver

Voluntary relinquishment or surrender of some right or privilege.

Walk-through

A final inspection of a home to check for problems that may need to be corrected before closing.

Warehousing

A loan is said to be in a lender's warehouse before it is sold to investors in the secondary mortgage market.

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No X terms

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No Y terms

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Zoning Ordinances (or Zoning Regulations)

Local law establishing building codes and usage regulations for properties in a specified area.

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