Adjustable-Rate Mortgage (arm)
A mortgage whose interest rate changes periodically based on the changes in a specified index.
The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Annual Percentage Rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
A written analysis of the estimated value of a property prepared by a qualified appraiser.
A person qualified by education, training, and experience to estimate the value of real property and personal property.
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
A financial statement that shows assets, liabilities, and net worth as of a specific date.
A form of second trust that is collateralized by the borrower’s present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as “swing loan.”
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage lien
Certificate Of Eligibility
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.
Certificate Of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
Certificate Of Title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
Chain Of Title
The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
A title that is free of liens or legal questions as to ownership of the property.
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called “settlement.”
Closing Cost Item
A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney’s fees. Many closing cost items are included as numbered items on
Also referred to as the HUD-1. The final statement of costs incurred to close on a loan or to purchase a home.
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
With this type of loan, you receive a first mortgage for 80 percent of the loan amount, and a second mortgage at the same time for the remainder of the balance. If avoiding PMI (mortgage insurance) is important to you, consider combination loans–known as
Combined Loan-To-Value (CLTV)
The relationship between the unpaid principal balances of all the mortgages on a property (first and second usually) and the property’s appraised value (or sales price, if it is lower.)
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.
An amount owed to another.
The legal document conveying title to a property.
Deed Of Trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Failure to make mortgage payments when mortgage payments are due.
A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
A decline in the value of property; the opposite of appreciation.
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
Earnest Money Deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposi
The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.
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.
Funds collected by the servicer and set aside in an escrow account to pay the borrower’s property taxes, mortgage insurance, and hazard insurance.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
The portion of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as “impounds” or “reserves” in some states.
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
The lawful expulsion of an occupant from real property.
Examination Of Title
The report on the title of a property from the public records or an abstract of the title.
Fair Market Value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
A congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds.
Fannie Mae’s Community Home Buyer’s Program
An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family’s buying power and to decrease the total amount of cash needed to purchase a home. Bo
Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or c
The greatest possible interest a person can have in real estate.
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
When you can expect the first rate adjustment in your ARM loan.
A mortgage that is the primary lien against a property.
Fixed Second Mortgage
See home equity loan.
Fixed-Rate Mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan.
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortga
Fully Amortized Arm
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
Good Faith Estimate
An estimate of charges which a borrower is likely to incur in connection with a settlement.
Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
Home Equity Line Of Credit
a credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is interest o
Home Equity Loan
a loan secured by a second deed of trust on a house, typically used as a home improvement loan.
The ratio of the monthly housing payment in total (PITI – Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.
The U.S. Department of Housing and Urban Development.
A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used indices include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).
The current loan limit for a conforming loan is $252,700. Loans for amounts above $252,700 are considered non-conforming or jumbo mortgages.
The bank, mortgage company, or mortgage broker offering the loan.
An encumbrance against property for money due, either voluntary or involuntary.
A provision of an ARM that limits the highest rate that can occur over the life of the loan.
Loan To Value Ratio (LTV)
The ratio of the amount of your loan to the appraised value. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders.
The amount of time that a lender will guarantee a loan’s interest rate. Once you’ve locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days.
A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period. A representative margin would be 2.75%.
A legal document that pledges a property to the lender as security for payment of a debt
Mortgage Disability Insurance
A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.
Mortgage Insurance (MI)
Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default. Usually required for loans with an LTV of 80.01% or higher.
The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.
The mortgage borrower who gives the mortgage as a pledge to repay.
No Income Verification
See “stated income”.
Also called a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming
A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand.
A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a percentage of the amount loaned, such as one percent.
A property purchase transaction in which the property seller provides all or part of the financing.
The maximum rate increase for a specific period for a specific loan (ARM) only.
Principal, interest, taxes and insurance–the components of a monthly mortgage payment.
Planned Unit Developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.
Charges levied by the mortgage lender and usually payable at closing. One point represents 1% of the face value of the mortgage loan.
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.
A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.
Amount of debt, not including interest. The face value of a note or mortgage.
Private Mortgage Insurance (PMI)
Insurance provided by nongovernment insurers that protects lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80%.
The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payment
The annual rate of interest on a loan, expressed as a percentage of 100.
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.
Compensation received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower. Loans with rebates often carry higher interest rates than loans with “points” (see above).
The process of paying off one loan with the proceeds from a new loan using the same property as security.
Residential Mortgage Credit Report (RMCR)
A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.
Seller Carry Back
An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.
Some loan products require only that applicants “state” the source of their income without providing supporting documentation such as tax returns.
A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography.
An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.
The period of time which covers the life of the loan. For example, a 30 year fixed loan has a term of 30 years.
The evidence one has of right to possession of land.
Insurance against loss resulting from defects of title to a specifically described parcel of real property.
An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.
Total Debt Ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.
A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.
Veterans Administration (VA)
A government agency guaranteeing mortgage loans with no down payment to qualified veterans.