A  B  C  D  E  F  G  H  I  J   L  M  N  O  P  R  S  T  U  V 

A

Acceleration -The right of a lender to demand the outstanding balance of the mortgage when a monthly payment is missed.

Adjustable Rate Mortgage (ARM) -A mortgage in which the lender is permitted to adjust the interest rate periodically, based on changes in a specific index.

Amortization-The repayment of a mortgage in equal periodic installments. This calculation pays off the obligation at the end of a fixed period of time, and includes the accrued interest.

Annual Percentage Rate (APR)-The total cost of a mortgage, stated as a yearly rate. This rate includes points and other credit costs paid by the borrower. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

Appraisal-An estimate of the market value of a property, done by an expert.

Appreciation-An increase in the value of a property.

Assumable mortgage-An existing mortgage that is taken over by the new owner of the home when the house is sold. Assuming a loan can usually save the buyer some money since a new mortgage will  have closing costs and  a different, perhaps higher, market rate.



B

Balloon Payment -A type of mortgage that allows for small payments for a certain period of time and then a large payment of the remaining principal at a predetermined time.

Borrower-An individual who applies and receives a loan with the intention of repaying the full amount.

Broker-An individual who assists the funding and negotiating contracts for a client. Brokers usually charge a fee or receive a commission for their services.

Buy-down-The temporary reduction of the note rate and the monthly payments of the mortgage. The payments are initially low, but later they will increase when the subsidy expires.



C

Caps-A safeguard used on adjustable rate mortgages (ARM) to limit the amount of increase and decrease of the interest rate and/or the payment.

Closing-A meeting that finalizes the sale of a property. The mortgage documents are signed, and the funds are transferred to the appropriate parties.

Commitment-A written promise by the lender to make or insure a loan on specific conditions and for a specified time.

Comparables-Properties used to determine the value of a specified property.

Construction  Loan-A short term loan  for real estate construction. These are usually designed to provide periodic disbursements to the builder as he progresses. It is generally followed by long term financing, called a "take out" loan which is issued upon completion of construction.

Contract Of Sale-A purchase transaction in which the buyer receives possession of the property, while the seller retains title.

Conventional Loan-A mortgage that is not guaranteed or insured by the federal government. FHA and VA loans aren't conventional loans.

Credit Report-A document of an individual's credit history and current status of a borrower's credit standing.

Credit Score-A rating given by the credit  reporting agencies, based on an individual's credit history.



D

Debt-To-Income Ratio-A borrower's monthly payment obligation  of long term debts divided by his or her gross monthly income. It is usually expressed as a percentage.

Deed-Written document that transfers title to real estate.

Deed of Trust-A document used instead of a mortgage that gives the lender a security interest in the property. Title is conveyed to a trustee by the borrower. When the debt is paid in full, title is reconveyed to the borrower.

Default-Failure to make a mortgage payment on a timely basis, or to comply with other requirements of a mortgage.

Delinquency-A situation in which a payment on a loan is overdue but not yet in default. This can lead to foreclosure.

Department of Veteran Affairs (VA)-An independent agency of the federal government which guarantees long-term, low or no down payment mortgages to eligible veterans.

Discount-A loan funded below par. Lenders will fund loans at a discount to increase the overall yield.

Disbursements-Payments made during  the course of  an escrow or at closing.

Down Payment-Part of the purchase price that the buyer pays in cash at closing. This money is the difference between the purchase price and the mortgage amount.

Due On Sale Clause-A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property securing the mortgage.



E

Earnest Money-A deposit made by the potential home buyer at closing.

Equity-The difference between the fair market value of a property and the remaining debt on the mortgage.

Escrow-An account held by the lender into which a homeowner pays money for taxes and insurance.

Estimated Closing Cost Statements-A statement that lists the financial settlement between the buyer and seller.



F

Fannie Mae-See Federal National Mortgage Association.

Federal Home Loan Mortgage Corporation  or Freddie Mac (FHLMC)-A government sponsored agency that purchases conventional mortgage loans from mortgage bankers and financial institutions.

Federal Housing Administration (FHA)-A division of the Department of Housing and Urban Development (HUD). It insures residential mortgage loans made by private lenders enabling them to loan a very high percentage of the sale price. They also set up the standards for underwriting mortgages.

Federal National Mortgage Association or Fannie Mae (FNMA)-A private corporation that purchases and sells conventional residential mortgages from mortgage companies and other depository institutions.  This institution makes mortgage money more available and more affordable.

FHA Loan-A mortgage insured by the Federal Housing Administration. Also referred to as a "government" mortgage.

Fixed Rate Mortgage-A mortgage in which the interest rate does not change during the life of the loan.

Foreclosure-The legal process by which a mortgaged property may be sold when a mortgage is in default. It is also known as a repossession of property.

Freddie Mac-See Federal Home Loan Mortgage Corporation.



G

Good Faith Estimate -See Real Estate Settlement Procedures Act (RESPA.)

Ginnie Mae-See Government National Mortgage Association.

Government National Mortgage Association (GNMA) -A government owned agency that serves as a secondary market intermediary for FHA and VA loans. GNMA guarantees the timely principal and interest payments to investors.

Graduated Payment Mortgage (GPM) -A mortgage that starts with low monthly payments that increase at a predetermined rate for a specified time.



H

Housing and Urban Development (HUD) -The government agency that oversees FHA.



I

Impound- A portion of a borrower's monthly payment held by a lender for payment of taxes, insurance, or other related expenses as they become due. Also known as reserves.

Index -A published interest rate used to calculate the difference between the current rate on an adjustable rate mortgage and that earned by other investments. This is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest Rate -A fee that is charged for borrowing money. It is stated as a percentage.



J

Joint Tenancy -Co-ownership of a property giving each tenant equal interest and equal rights in the property, including the right of survivorship.

Jumbo Loan -A loan which is larger than the limits set up by Fannie Mae and Freddie Mac. (minimum of $252,700) These loans usually carry a higher interest rate.



L

Lien-A claim against a property that must be paid off when the property is sold.

Loan to Value Ratio -The relationship between the amount of the loan and the appraised value of the property. It is expressed as a percentage.

Lock In -The guarantee from a lender that a borrower will receive a specified interest rate provided that  the loan is closed within a set period of time. It usually specifies the number of points to be paid at closing.

Loan Officer -A person that helps the borrower with the mortgage loan selection, processing, and closing.



M

Margin -The number of percentage points that the lender adds to the index rate to determine the interest rate of an ARM.

Market Value-The highest price that a buyer would pay, and the lowest price that a seller would accept on a property.

Mortgage -A legal document that pledges a property to the lender as a security for payment of a debt.

Mortgage Banker -A company that originates mortgages, and then resells them in the secondary market.

Mortgage Broker -An individual or company that acts as an intermediary between the borrowers and the lenders.

Mortgage Note -A legal document obligating the borrower to repay a loan at a standard interest rate during a specified time. It is secured by the mortgage.

Mortgage Warehousing -A funding facility that is used by mortgage companies to fund loans which are soon after sold to an investor.

Mortgagee -The lender.

Mortgagor-The borrower.  



N

Negative Amortization -A gradual increase in the mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the unpaid principal balance, resulting in a negative amortization.

Note -A written promise to repay a certain sum of money on specified terms.



O

Origination Fee -A charge by a lender to prepare, evaluate, and submit the mortgage loan. This fee is usually a percentage of the face value of the loan.



P

Per Diem Interest -Daily interest between when a loan closes, and when interest begins to accrue.

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

PMI -See Private Mortgage Insurance.

Point -A charge by the lender to increase the yield of the loan. A point is equal to 1 percent of the amount of the mortgage.

Pre-paids -Fees collected at closing to cover items such as setting up escrow accounts for property taxes, homeowner's insurance, and mortgage insurance premiums.

Pre-qualification -The process of determining how much money a prospective home buyer will be eligible to borrow before applying for a loan.

Principal -The outstanding balance on a loan. It doesn't include interest.

Private Mortgage Insurance (PMI) -Insurance provided by non-government insurers  that protect lenders against loss if a borrower defaults. Fannie Mae requires PMI for loans that have a loan to value percentage greater than 80%.



R

Rate Lock In -See Lock In.

Real Estate Investment Trusts (REIT) -A method whereby a group invests in real estate, with certain tax advantages.

Real Estate Settlement Procedures Act (RESPA) -A consumer protection law that requires lenders and mortgage brokers to give advance notice to the borrowers of closing costs.

Realtor -A real estate broker or a member of the National Association of Realtors.

Realtor Associate -Salesperson associated with a broker who is a member of the National Association of Realtors.

Recision-The annulment of a contract.

Refinancing -The repayment of one loan with the proceeds from a new loan using the same property as security.

Renegotiable Rate Mortgage -A loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.

RESPA -See Real Estate Settlement Procedures Act.

Reverse Mortgage -A special program for the elderly that provides income until death. Payment requirements are arranged by increasing the principal of the loan.

Real Estate Investment Trusts (REIT) -A method whereby a group invests in real estate, with certain tax advantages.



S

Second Mortgage -A mortgage that has a lien position subordinate to the first mortgage.

Secondary Market -The place where existing mortgages are bought and sold. It is here that the primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.

Servicing-All of the steps taken by a loan officer in order to keep a loan in good standing.

Settlement -See closing.



T

Tenancy by Entirety -A type of joint ownership of property between a husband and wife. In the event of  death of one, the other owns the property without probate.

Tenancy in Common -A type of joint ownership in a property that lacks the rights of ownership.

Title -A legal document that gives evidence of an individual's ownership of property.

Title Insurance -A policy to protect the lender and the buyer against loss arising from disputes over ownership.

Title Search -A review of the public records to ensure that the seller is the legal owner of the property and that there are no outstanding claims.

Truth in Lending -A federal law that requires lenders to fully disclose in writing the terms and conditions of the mortgage. Lenders must provide this shortly after the application has been completed.



U

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



V

Variable Rate Mortgage (VRM)- See Adjustable Rate Mortgage.

Verification of Deposit (VOD) -A  document sent by BlueLoan to your bank to verify assets.

Verification of Employment (VOE) -A document signed by the borrower's employer verifying his/her employment and income.

Verification of Rent (VOR) -A document sent to your landlord to verify your 12 month history of rent.

Verification of Mortgage (VOM)-A document sent to your existing mortgage company to verify your 12 month history. It is only sent if the mortgage company doesn't show up on your 12 month history credit report.