Glossary of Mortgage Terms
Abandonment
The voluntary surrender of property, owned or leased, without naming a successor as owner or tenant.
Absentee Owner
An owner who does not personally manage or reside at property owned.
Abstract of Title
A summary of public records concerning the title to a specific parcel of land, revealing any legal defects that could hinder property sale.
Acceleration Clause
A provision allowing the lender to increase loan payments or demand full balance repayment if the borrower defaults.
Accrued Interest:
Interest earned but not yet paid.
Adjustable-Rate Mortgage (ARM):
A mortgage with a variable interest rate, typically adjusted annually based on a financial index.
Adjustment Cap:
The maximum limit on how much an adjustable interest rate can change in a single adjustment period.
Adjustment Date:
The date on which the interest rate changes for an adjustable-rate mortgage.
Adjustment Period:
The time between adjustment dates for an adjustable-rate mortgage.
Affordability Analysis:
Evaluation of a borrower's ability to afford a home purchase, considering income, liabilities, and available funds.
Amortization:
Gradual reduction of the principal amount owed on a debt through scheduled payments.
Amortization Table or Schedule:
A breakdown of monthly payments into principal and interest over the loan term.
Amortization Term:
The time required to pay off the loan, expressed in months.
Annual Adjustment Cap:
The limit on how much the variable interest rate on a loan can change annually.
Annual Percentage Rate (APR):
The total annual cost of a loan, including interest charges and fees, expressed as a percentage.
Application:
Submission of financial and personal information when applying for a loan.
Application Fees:
Nonrefundable fees paid when applying for a loan, covering costs like credit reports and property appraisals.
Appraisal:
An estimate of a property's value conducted by a licensed professional.
Appraisal Contingency:
A condition in a sales contract requiring the property to appraise at or above the offering price.
Appraisal Fee:
Payment for an appraiser's assessment of a property's value.
Appreciation:
Increase in a property's value over time due to market forces and inflation.
Assessed Value:
Value of a property determined by a tax assessor for tax purposes.
Asset:
Any valuable holding such as real estate, stocks, or jewelry.
Assumable Loan:
A loan that can be transferred to another person while maintaining the same terms.
Assumption:
Agreement between buyer and seller allowing the buyer to take over the seller's mortgage payments and liability.
Assumption Clause:
Part of a deal when assuming a mortgage, granting the buyer the right to take over the existing mortgage.
Assumption Fee:
Fee paid to the lender when assuming the seller's existing mortgage.
Balance Sheet:
A financial statement showing assets, liabilities, and net worth.
Balloon Loan:
A loan with lower monthly payments for a set period, followed by a larger final payment.
Bank Attorney:
An attorney representing the lender with fiduciary responsibility for ensuring loan contract terms are met.
Bankruptcy
A court proceeding in which a debtor, who owes more than his assets, can relieve the debts by transferring his assets to a trustee.
Basis Point:
An amount equal to 1/100th of a percentage point, commonly used in financial calculations.
Binder:
A provisional agreement to purchase property made by paying an earnest money deposit.
Biweekly Mortgage:
Mortgage payments made every two weeks instead of monthly, equivalent to 13 monthly payments a year, reducing debt more quickly.
Blanket Mortgage:
A mortgage covering more than one property.
Bona Fide:
Acting in good faith and honesty.
Borrower (Mortgagor):
The person who borrows money and is legally obligated to repay the debt under loan terms.
Breach:
A failure or violation of a legal obligation.
Bridge Loan:
Short-term financing to allow the purchase of a new home before the sale of the current one.
Broker:
A third party matching buyers and sellers, often assisting in negotiations.
Building Line or Setback:
The distance from a property boundary where structures must remain clear.
Buy-Down:
An arrangement allowing the borrower to pay more initially in exchange for a lower interest rate.
Buyer's Market:
A market condition where sellers outnumber prospective buyers, potentially leading to lower prices.
Call option
A provision in a loan that gives the lender the right to accelerate the debt and require full payment of the loan immediately at the end of a specified period or for specified reason.
Cancellation Clause
A contract provision that gives the right to terminate obligations upon the occurrence of specified events.
Cap
A limit on how much a variable interest rate can increase. Many adjustable-rate mortgages have both annual (or semiannual) rate caps and lifetime caps. They limit the amount your payments can increase in an adjustment period and over the life of the loan.
Cash available for closing
Borrower funds that are available to cover down payment and closing costs. If lending guidelines require the borrower to have cash reserves at the time the loan closes or that the down payment come from specified sources, the borrower’s cash available for closing does not include cash reserves or money from those specified sources.
Cash to close
The amount a homebuyer needs in cash at the closing of the loan. This typically, this includes down payment and closing costs.
Cash-out refinance
A refinance transaction in which the new loan amount exceeds the total of the principal balance of the existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower in cash and can often be used for debt consolidation, home improvement or any other purpose.
Ceiling rate
The maximum interest rate that can accrue on a variable rate loan or adjustable-rate mortgage (ARM).
Certificate of eligibility
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.
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 loan, based on an approved appraisal.
Certificate of title
A statement provided by an abstract company, title company or attorney stating who holds title to real estate based on the public record.
Chain of title
The history of all of the documents affecting title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Clear title
Titles that are marketable and are free of liens or disputed legal questions as to ownership of the property.
Close
The Close step is the date you will sign and execute your new loan documents.
Depending on the location of the property or type of transaction, the three business days right of rescission period may apply before your funds are available to you.
The three business days right of rescission period states that in certain real estate secured transactions that involve the refinance of a primary residence, the Truth in Lending Act allows applicants 3 business days to cancel the transaction and prohibits lenders from disbursing proceeds until after the rescission period has lapsed.
Closed
A status of closed indicates that no further action is required on this item.
Closing
The time and place, at which all documents for your loan are signed, dated, and notarized.
Closing costs
Closing costs, also known as settlement costs, are the costs incurred when obtaining your loan. For new purchases, these costs also include ownership transfer of any collateral property from the seller to you. Costs may include and are not limited to: attorney's fees, preparation and title search fees, discount points, appraisal fees, title insurance, and credit report charges. They are typically about 1% to 3% of your loan amount, and are often paid at closing or just before your loan closes.
Funds often needed to close a loan, such as homeowners insurance, property taxes, and escrow impound account funds, aren't included in closing costs and are considered separate. You should be prepared to pay these costs before your loan closes.
Closing date
The date you will sign your new loan documents.
Closing Disclosure (CD)
A closing document which provides key information such as interest rate, monthly payments, and costs to close the loan. Consumers are required to receive this form no later than 3 business days before they close on the loan.
Closing statement
An accounting of funds given to both buyer and seller before real estate is sold.
Co-borrower
An additional person who assumes equal responsibility for repayment of a loan and is fully obligated under the terms of the loan. This person also has equal rights to the proceeds of the loan.
Coinsurance
A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.
Collateral
An asset, such as a car or a home, used for securing the repayment of a loan. The borrower risks losing the asset if the loan is not repaid.
Collection
The efforts used to bring a delinquent loan current and, if necessary, to file legal papers and notices to proceed with foreclosure.
Combined liens
The outstanding balance of all mortgages held on a property. Used to determine the total available equity when considering the appraised value of the property less total combined or outstanding liens.
Combined loan-to-value ratio (CLTV)
The ratio between the unpaid principal amount of your first mortgage, plus your credit limit if you have a home equity line of credit, and the appraised value of your home. Expressed as a percentage.
Commitment letter
Sometimes called a loan commitment, this letter is a lender's formal offer of a loan under agreed-upon terms and conditions.
Comparables (comps)
Properties similar to the property under consideration for a mortgage that have approximately the same size, location and amenities and have recently been sold. Comparables help an appraiser determine the fair market value of a property.
Compound interest
Interest paid on the principal balance and on the accrued and unpaid interest.
Conforming loan
A mortgage loan that has the standard features as defined by (and is eligible for sale to) Fannie Mae and Freddie Mac.
Construction loan
A short-term interim loan for financing the cost of home construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Contingency
A specified condition in a sales contract that must be satisfied before the home sale can occur. When buying a home, the 2 most common contingencies are that the house must pass inspection and that the borrower must be approved for a loan.
Contractual Payment: First Mortgage
For a mortgage, the contractual payment is the required monthly payment amount for your home loan as described and determined by your loan contract. The contractual payment may include principal and interest due and may include a portion of funds due to cover homeowners insurance, mortgage insurance (if applicable), and property taxes associated with your home.
Here's how it works:
Principal + interest + mortgage insurance (if applicable) + homeowners insurance and tax (if applicable) = full contractual payment.
Contractual Payment: Home Equity Line of Credit
For a home equity line of credit, the contractual payment is the amount owed each month, which may fluctuate based on usage of the line and the terms of your loan agreement. At times, your Contractual Payment may consist of interest only or interest and principal payments.
Conventional loan
A home loan that is not insured or guaranteed by the federal government. A conventional loan can be for conforming or non-conforming loan amounts.
Convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate loan at specified times during the life of the loan.
Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate loan under specified conditions.
Convey
To transfer or deliver title to property from one to another by deed or contract. When an item becomes a part of the transfer of title, it is conveyed with the property.
Co-signer
A second person who signs your loan and assumes equal responsibility for payment of the loan but receives no benefit from the loan proceeds.
Covenant
A promise in a mortgage or deed that requires or prevents certain uses of the property that, if violated, may result in loss or foreclosure of the property.
Credit bureau
An organization that gathers, records, updates and stores financial and public records of individuals who have been granted credit and provides this information to lenders and other authorized users for a fee. The 3 major credit bureaus are Equifax, Experian and TransUnion and you are legally entitled to receive 1 free report each year from each of these agencies.
Credit limit
The maximum amount you can borrow under a line of credit.
Credit monitoring service
A service that offers the benefit of early detection of unauthorized activity in order to limit the amount of financial damage that a person may suffer at the hands of an identity thief.
Credit report
A record of an individual’s debts and payment habits. It helps a lender determine whether or not a potential borrower is a good business risk. The 3 major credit bureaus that provide credit reports are Equifax, Experian and TransUnion and you are legally entitled to receive 1 free report each year from each of these agencies.
Credit risk
The likelihood that a borrower will pay their obligations as agreed. Borrowers who pay as agreed pose less credit risk to lenders.
Credit score
A number that rates the quality of an individual’s credit. The number helps predict the relative likelihood that a person will repay a credit obligation, such as a mortgage loan. In general, the higher your credit score, the more likely you are to be approved for and to pay a lower interest rate on a loan.
Creditor
A person or business from whom you borrow or to whom you owe money.
Creditworthiness
The likely ability of a borrower to repay debt.
Cumulative interest
Total interest accrued.
Curtailment
A payment that reduces the principal balance of a loan.
Debt consolidation
A single loan to pay off multiple debts, usually over a longer term. This is a common use for a home equity line of credit.
Debt-to-income ratio (DTI)
A key indicator of a prospective home buyer's ability to repay a mortgage. It shows a borrower's monthly debt payments divided by gross monthly income. A lower ratio is generally more favorable to lenders.
Deed
A formal, written instrument that transfers legal title to real property from one owner to another. The deed should be signed by the buyer and seller, contain an accurate description of the property being conveyed, and bear the signatures of witnesses in accordance with state laws. The purchaser receives the deed at the closing.
Deed-in-lieu
A deed given by the borrower to the mortgage lender to avoid foreclosure or satisfy a debt.
Deed of trust
A document similar to a conventional deed. It involves three parties: borrower, lender, and trustee. The borrower transfers title to the property to the trustee, who holds it as security for the lender. If the borrower pays the debt, the deed of trust becomes void, and the title reverts to the borrower free and clear. If the borrower defaults, the trustee may sell the property to satisfy the debt.
Default
Failure to fulfill a financial obligation. Defaulting on a loan often means losing whatever assets were used as collateral.
Delinquency
Failure to make payments on time, as agreed in the loan agreement.
Department of Housing and Urban Development (HUD)
The federal agency charged with administering FHA, GNMA, and several other housing programs.
Department of Veterans Affairs (VA)
An agency of the federal government that provides services and guarantees residential mortgages made to eligible veterans of the military services.
Deposit
Money that a buyer gives to a seller to ensure that the seller will not offer the property to another buyer for a specified period, typically 60 days. If the sale proceeds, the deposit is counted as part of the selling price. If the sale falls through, the buyer usually forfeits the deposit, which compensates the seller for lost sales during the specified time period.
Depreciation
The decline in the value of an asset over time.
Devise
A gift of real property by will or last testament.
Disburse
To pay out on the loan.
Disclosures
Information that must be given to consumers about their financial dealings.
Discount points (or points)
Interest paid when the mortgage is signed. One point equals 1% of the total loan amount. Typically, paying more points at closing results in a lower overall interest rate on the mortgage.
Documentary stamps
A state tax paid for transferring real estate title in a sale, usually in the form of stamps affixed to the deed or mortgage.
Down payment
An initial cash payment, typically between 3.5% and 20% of a property's purchase price, that covers the difference between the price and the mortgage amount.
Draw
The process of obtaining an advance against an available line of credit.
Draw period
The period during which a borrower can obtain advances from an available line of credit. At the end of the draw period, borrowers may be able to renew the credit line or may be required to pay the outstanding balance in full or in monthly installments.
Due-on-sale clause
A standard mortgage provision stating that any remaining balance must be repaid immediately if the borrower sells the mortgaged property or transfers legal title.
Duplex
A dwelling divided into two distinct and separate living units.
Earnest money
A deposit made toward a down payment as a sign of good faith. Typically made when a purchase agreement is signed.
Easement
The legal right of a person or entity to use someone else's property for a specified purpose, such as hosting power lines or providing access.
Economic obsolescence
The decline in a property's value due to changes in the surrounding area, such as the construction of new infrastructure nearby. Also known as economic depreciation.
Effective age
An appraiser's estimate of a structure's age based on its condition rather than its actual age.
Effective rate
An estimate of the cost of a mortgage considering the prospective buyer's expected duration of homeownership. Unlike APR, which assumes the mortgage's full term, the effective rate views costs over a shorter period, providing a more realistic comparison.
Eminent domain
The government's legal right to seize private property for public use, compensating the owner at fair market value.
Encroachment
A structure, such as a fence or building, that intrudes illegally onto another's property.
Encumbrance
Any lien or liability affecting a property's title, such as unpaid taxes or mortgages.
Environmental hazard
Conditions, like asbestos or radon, posing health risks to homeowners and diminishing property value.
Equal Opportunity Act (ECOA)
The federal regulations that requires lenders to make credit equally available to all without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
Equity
The property's current market value minus debts owed.
Escrow
Funds held by a neutral third party until a sale's completion.
Escrow account
An account, often called an 'impound account,' managed by the lender to cover taxes and insurance.
Escrow agent
Responsible for ensuring purchase/sale or loan terms are executed properly.
Escrow disbursements
Use of escrow funds for property expenses like taxes and insurance.
Escrow payment
Portion of a mortgage payment held by the servicer for taxes and insurance.
Estate
Ownership interest in real property or the total property owned by an individual at death.
Eviction
Legal expulsion of an occupant from real property.
Examination of title
Report on a property's title from public records or an abstract.
Fair Credit Reporting Act
A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file.
Fannie Mae (FNMA)
Federal National Mortgage Association. A congressionally chartered, shareholder-owned company (otherwise called a “government-sponsored enterprise” or “GSE”) that is the nation’s largest supplier of home mortgage funds. Fannie Mae buys home loans from lenders. To finance these purchases, they package the loans into pools and then issue securities against them.
Federal Funds Rate
Interest rate charged by banks, with excess reserves at a Federal Reserve district bank, to banks needing overnight loans to meet reserve requirements. The federal funds rate is the most sensitive indicator of the direction of interest rates, since it is set daily by the market, unlike the prime rate and the discount rate, which are periodically changed by banks and by the Federal Reserve Board, respectively.
Fee Simple
Absolute ownership of real property; the greatest possible interest a person can have in real estate.
Fee Simple Estate
An unconditional, unlimited estate of inheritance that represents the greatest possible interest in land that can be enjoyed.
FHA
The Federal Housing Administration
FHA Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
FICO
FICO® stands for Fair Isaac Corporation, which are the creators of the FICO® score. This score is used to make up part of a credit report that lenders use to determine the borrower’s risk when extended a loan.
FICO Score
FICO® scores are the most widely used credit score in U.S. mortgage loan underwriting. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information that are on your credit report. Higher FICO® scores represent lower credit risks, which typically equate to better loan terms.
First Mortgage
The primary lien against a property.
Fixed Installment
The monthly payment due on a mortgage loan including payment of both principal and interest.
Fixed Rate Mortgage
A home loan in which the interest rate remains the same throughout the term of the loan. A Fixed Rate Mortgage will allow you to plan a budget and make consistent payments.
Float
A term that describes the interest rate for a loan that has not yet been guaranteed by a lender. If the lender has not yet guaranteed or locked the interest rate, it is floating and could change prior to closing.
Flood Certification
An inspection to determine if a property is located in an area prone to flooding also known as a flood plain. The federal government determines whether an area is in a flood plain. Lenders generally rely on the flood certification to determine if flood insurance will be required in order to obtain a mortgage. For our comparison purposes, the cost of the flood certification is considered to be a third party fee, though you may find that all lenders do not pass this fee on to the borrower.
Flood Insurance
Insurance that protects a homeowner from the cost of damages to a property due to flooding or high water. It is required by law that properties located in areas prone to flooding have flood insurance. The federal government determines whether an area is prone to flooding and considered to be in a flood plain.
Foreclosure
The legal process in which a borrower's ownership of a property is dissolved due to default. Typically, the property is sold at a public auction and the proceeds are used to pay the loan in full.
Forfeiture
The loss of money, or anything else of value, due to a breach of legal obligation or contract.
Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A government-sponsored enterprise (GSE) that buys home loans from lenders. To finance these purchases, they package the loans into pools and then issue securities against them.
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.
Gap Loan
Short-term financing, usually to cover a gap in time between a person’s purchase of a home and that person’s later receipt of funds, usually from the sale of their previous home. Sometimes called a bridge loan or swing loan.
Ginnie Mae (GNMA)
A wholly owned government corporation, Ginnie Mae offers government-insured loans like FHA, VA, PIH, and RD. Ginnie Mae is not a Government Sponsored Enterprise (GSE). To understand the difference, please visit
Good Faith Estimate (GFE)
A written estimate of the closing costs the borrower will 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 mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA) or, is insured by the Federal Housing Administration (FHA). Compare with conventional mortgage.
Grant
A technical term used in deeds of conveyance of property to indicate a transfer.
Grantee
The person to whom an interest in real property is conveyed.
Grantor
The person conveying an interest in real property.
Guarantee Mortgage
A mortgage that is guaranteed by a third party.
Habendum Clause
The “to have and to hold” clause that defines the amount of the estate granted in the deed.
Hazard Insurance
Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as homeowner's insurance
Home Equity
The difference between the appraised value of your home and the remaining balance of your mortgage loan. Also called Equity.
Home Equity Conversion Mortgage (HECM)
A special type of mortgage that enables seniors to convert the equity in their homes.
Home Equity Line of Credit (HELOC)
A loan secured by real property, usually in a subordinate position, that allows the borrower to receive the loan proceeds in the form of multiple advances up to a limit that represents a maximum percentage of the borrower's equity in a property.
Home Equity Loan
A loan secured by a subordinate mortgage on one's principal residence, generally to be used for some non-housing expenditure. A traditional home equity loan provides lump-sum proceeds at the time the loan is closed.
Home Inspection
A complete and detailed inspection that examines and evaluates the mechanical and structural condition of a property. A complete and satisfactory home inspection is often required by the homebuyer.
Homeowner's Insurance
Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as hazard insurance.
Homeowners Association
A nonprofit association that manages the common areas of a condominium project or planned unit development (PUD). In a condominium development, the association has no ownership interest in the common elements. In a PUD, it holds title to the common elements of the project.
Homeowners Association Dues
Payments made to an association responsible for the maintenance of the common areas in a condominium or subdivision development.
Homeowner’s Warranty
A type of insurance policy that covers repairs to certain parts of a home for an agreed upon period of time. It is typically provided by the contractor or seller as a condition of the sale.
Housing Ratio
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type and amount. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance) by the borrower’s monthly gross income. Also referred to as a front-end ratio or a top ratio.
Housing Starts
Economic indicator that measures the number of residential units on which construction is begun each month. Monthly percent changes reflect the rate of change of such activity. The level of housing starts is widely followed as an indicator of residential construction activity. Frequency: monthly. Source: Commerce Department.
Housing Expense Ratio
The percentage of gross monthly income budgeted to pay housing expenses.
HUD
The U.S. Department of Housing and Urban Development
HUD-1 statement
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing.
Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)
A combination fixed rate and adjustable rate loan – also called 3/1,5/1,7/1 – can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a “5/1 loan” has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable rate loan, based on then-current rates for the remaining 25 years. It’s a good choice for people who expect to move or refinance, before or shortly after, the adjustment occurs.
Illiquidity
Having inadequate cash to meet current obligations. Real property is considered an illiquid investment because of the time and effort required to convert it to cash.
Implied Agency
Form of agency that occurs when the words and actions of the parties indicate that there is an agency relationship.
Implied Contract
A contract created by actions, but not necessarily written or spoken.
Impound Account
A fund set aside for future needs, such as an escrow or reserve account.
Impounds
An impound refers to the funds a mortgagor pays to the lender along with their monthly principal and interest payments for the payment of real estates taxes and hazard insurance. This is also referred to as an escrow account. The money is held by the lender to make payments when they are due.
In-file Credit Report
A computer-generated report containing credit and legal information obtained from one of the main credit bureaus.
Income Property
Real estate developed and improved to produce steady income.
Index
The index is the measure of interest rate changes a lender uses to decide the amount an interest rate on an ARM will change over time. The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. Some index rates tend to be higher than others and some more volatile.
Initial Interest Rate
This refers to the original interest rate of the mortgage at the time of closing that runs through an agreed upon number of months known as the initial rate period. This rate changes for an adjustable rate mortgage (ARM). It’s also known as “start rate” or “teaser.”
Installment
The regular periodic payment that a borrower agrees to make to a lender.
Installment Loan
Borrowed money that is repaid in equal periodic payments. Cars and furniture are often paid for with installment loans.
Insurable Title
A property title that a title insurance company agrees to insure against defects and claims.
Insurance
A form of contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy. The periodic payments are known as insurance premiums.
Insurance Binder
A document stating that insurance is only temporarily in effect. Because the coverage will expire by a certain date, a permanent policy must be obtained prior to the expiration date.
Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
Interest
The fee charged for borrowing money.
Interest Rate
The rate a lender charges you each period for the loan. See Fixed Rate Mortgage and Adjustable Rate Mortgage.
Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
Interest Rate Buydown Plan
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage.
Interest Rate Ceiling
For an adjustable rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
Interest Rate Floor
For an adjustable rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
Interest-Only Mortgage
A mortgage that gives the borrower the option of paying only the interest portion of a payment without paying on the principal balance.
Investment Property
A property held as an investment or rented out.
Jeopardy
An element of risk or danger.
Joint Account
A credit account held by two or more people so that all can use the account and all assume legal responsibility to repay.
Joint and Several Liability
A situation whereby a creditor can demand full repayment from any and all borrowers. Each borrower is liable for the full debt, not just the prorated share.
Joint Tenancy
A form of co-ownership that gives each tenant equal undivided interest and equal rights in the property, including the right of survivorship.
Joint Venture
An agreement between two or more parties who invest in a property or business.
Judgment
A decree made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.
Judgment Lien
A lien on the property of a debtor resulting from a judgment.
Judgment Search Fee
A fee charged by a title company to search the public record for judgments filed against a property owner or borrower that could ultimately encumber the title of the property. For our comparison purposes, a judgment search fee is considered to be a third party fee. Some lenders will include this fee in the title insurance cost.
Judicial Foreclosure
Type of foreclosure proceeding used in some mortgage states that is handled like a civil lawsuit and conducted entirely under the direction of a court.
Jumbo Mortgage
A loan that exceeds the maximum loan amount allowed by the most common mortgage investors. The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage. Also known as a non-conforming loan.
Keogh Plan
A tax-deferred pension account designated for employees of unincorporated businesses or for persons who are self-employed.
Kicker
A payment sometimes required by a mortgage loan in addition to normal principal and interest.
Land Banking
The business of buying land that is not currently needed for use.
Land Contract
A property installment selling agreement whereby the purchaser may occupy and use the land, but no deed is given by the seller until a specified part of the sales price has been paid.
Late Charge
The penalty a borrower must pay when a payment is made after the stated due date.
Late Payment
A payment made later than agreed upon in a credit contract and on which additional charges may be imposed.
Lease
A written contract between a property owner and a tenant that expresses the conditions under which the tenant may possess the real estate for a specified period of time and rent.
Lease-purchase Mortgage Loan
A creative financing option that allows homebuyers to lease a home with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance, plus an extra amount that is deposited into a savings account created for a down payment.
Leasehold Estate
A way of holding title to a property wherein the mortgagor does not actually own the property, but instead has a long-term recorded lease on it.
Legal Description
A legal property description that is sufficient to locate and identify the property without verbal testimony.
Lender
The bank, mortgage broker, or financial institution providing the loan funds to a borrower.
Lender Fees
Fees that are kept by the lender to cover some of their expenses and to meet their profitability goals. Typically fees such as origination fees, processing/administration fees, underwriting fees and document preparation fees are lender fees. This is the area of fees that you should compare very closely from lender to lender before making a decision.
Lessee
A person or company that signs a lease to get temporary use of property.
Lessor
A person or company that provides temporary use of property usually in return for periodic payment.
Liabilities
A person's financial obligations including both long-term and short-term debt, as well as any other amounts that are owed to others.
Liability Insurance
An insurance policy that offers protection against claims that a property owner's negligence resulted in bodily injury or property damage to another party.
Liability on an Account
Legal responsibility to repay debt.
LIBOR
See London Inter-bank Offered Rate.
Lien
A loan secured by real estate. An encumbrance against a property for money due. The lien can be voluntary such as a mortgage or involuntary such as a judgment.
Lien Certificate
A certificate to verify there are no claims by one person on the property of another as security for money owed.
Lifetime Interest Rate Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the term of the loan.
Lifetime Payment Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the term of the loan.
Liquid Asset
An asset that is easily converted into cash.
Loan
Borrowed money that is usually repaid with interest.
Loan Commitment
A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. Also called a commitment letter.
Loan Origination
The process by which a mortgage lender creates a mortgage secured by real property.
Loan Term
The number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.
Loan to Value Ratio (LTV)
A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home. To determine the loan to value ratio, divide the loan amount by the home's value. The LTV ratio is used to determine what loan types the borrower qualifies for as well as the cost and fees associated with obtaining the loan.
Lock
Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time.
Lock Period
The number of days that the lender will guarantee the interest rate offered for a loan. In order to hold the guaranteed interest rate for a loan, the loan closing must occur during the lock period.
Lock-in
Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time.
London Inter-Bank Offered Rates (LIBOR)
An index used to establish the interest rate of some adjustable rate mortgages (ARM). LIBOR is the London Inter-Bank Offered Rates. This is the interest rate at which the highest rated banks offer to lend to one another in Eurodollars. LIBOR offers various maturities, including 1-month, 3-month, 6-month and 1-year, however, the 6-month index is most common for mortgages. LIBOR is quoted daily in the Wall Street Journal's Money Rates.
Maintenance
Activities required to compensate for wear and tear on a property.
Management fee
The fee charged for professional property management. Usually set at a fixed percentage of total rental income generated by the managed property.
Margin
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.
Master Association
A homeowners' association sometimes formed in a large condominium project or planned unit development (PUD) that is made up of representatives from associations covering specific areas within the project.
Maturity
The date on which the principal balance of a financial instrument becomes due and payable.
Merged Credit Report
A credit report that contains information from at least three credit repositories. Any duplicate entries are combined to provide a concise summary of a your credit.
Military Classification
Military Classification refers to whether the veteran served and qualifies for VA home loan benefits as Active Duty, Reserve Service or National Guard Member.
Mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Also refers to the loan used to purchase property that is paid back over time. Many different types of mortgages are available depending on a borrower’s needs and financial status.
Mortgage Banker
A company that originates mortgages exclusively for resale in the secondary mortgage market.
Mortgage Broker
An individual or company that brings borrowers and lenders together for the purpose of loan origination.
Mortgage Insurance
A contract that insures the lender against loss caused by a mortgagor’s default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency.
Mortgage Insurance Premium (MIP)
The amount paid by a mortgagor for mortgage insurance.
Mortgage Life Insurance
A type of term life insurance In the event that the borrower dies while the policy is in force, the debt is automatically paid by insurance proceeds.
Mortgagee
The person or company who provides the loan funds to the borrower.
Mortgagor
The borrower in a mortgage agreement.
Multifamily Mortgage
A residential mortgage on a dwelling that is designed to house more than four families, such as an apartment complex.
National Association of Realtors® (NAR)
An organization of Realtors®, devoted to encouraging professionalism in real estate activities.
Negative Amortization
A gradual increase in mortgage debt that occurs when the periodic monthly payment is not sufficient to cover the monthly principal and interest due. The amount of the deficit is added to the remaining principal balance to create negative amortization.
Net Cash Flow
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance.
Net Closing Costs
For our comparison purposes, the net closing costs are the total closing costs quoted by a lender, less any credit or rebate that is offered.
Net Worth
The total value of all of a person's or company's assets, minus all liabilities.
New Home Sales
Reports the number of new single-family homes sold, expressed on an annual basis. Can be combined with Existing Home Sales to determine the total volume of home sales, a strong predictor of future national mortgage origination volume.
No Cash Out Refinance
A refinance loan is an amount that pays off the existing mortgage balance on the property and does not provide the borrower with any cash at closing.
Non-Conforming Loan
A mortgage that exceeds the maximum loan amount for the most common mortgage investors. The cost of obtaining a non-conforming mortgage is generally higher than the cost of obtaining a conforming mortgage. Also known as a jumbo loan.
Non-liquid Assets
Any assets that cannot easily be converted into cash.
Note
The written agreement signed by the borrower at closing that contains the promise to repay the loan. The note also contains the terms of the loan, such as interest rate, payment, and term.
Note Rate
The interest rate stated on a mortgage note. Also called nominal rate or face interest rate.
Notice of Default
Formal written notice to a borrower that a default on a loan has occurred and that legal action may be taken.
Occupancy Rate
Percentage of currently rented units in a building, neighborhood, complex, or city.
Offer
A buyer's expression of willingness to purchase a property at the seller's specified price.
Offer to Purchase
An agreement between a buyer and seller to purchase real estate. An offer to purchase, also known as a binder or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
Open-end Lease
A lease which may involve a balloon payment based on the value of the property when it is returned.
Original Principal Balance
Total amount of principal owed on a loan before any payments are made.
Origination Fee
A fee charged by a lender as a way to cover processing expenses or to increase their profitability for originating a mortgage loan. Most commonly, the origination fee is expressed as a percent of the loan amount. For our comparison purposes, the origination fee is considered to be a lender fee.
Owner Financing
A real property purchase transaction in which the seller provides the financing
P&I
The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.
Partial Payment
A loan payment that is not great enough to cover the scheduled monthly payment on a mortgage.
Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM). The payment change date usually occurs in the month immediately after the adjustment date.
Periodic Payment Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase during a single adjustment period.
Periodic Rate Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase during a single adjustment period.
Personal Income
Economic indicator that measures the total income of all Americans from all sources, and is reported both before and after taxes. Also reports personal spending and personal savings. The level of spending can be used as an indicator of consumer optimism.
Personal Property
Any and all property that is not real property.
PITI
(P)rincipal, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term as well as monthly escrow payments for taxes and insurance.
Planned Unit Development (PUD)
A housing project that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual unit owners.
Points
Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1% of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up front cost of the points to the monthly savings that result from obtaining the lower rate.
Power of Attorney
A written legal instrument that authorizes another person to act on one's behalf. A power of attorney can grant either complete or limited authority.
Pre-Approval
A written commitment from a lender to extend a mortgage to you up to a specific amount for a specific time. It involves an analysis of your financial status and credit history.
Pre-foreclosure Sale
A process in which the lender allows a borrower to avoid foreclosure by selling the property for less than the amount that may be owed to the lender.
Pre-qualification
Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.
Prepaids
Expenses of property ownership or expenses incurred while obtaining a mortgage that must be paid in advance. Prepaids typically include real estate taxes and hazard insurance.
Prepayment
Any amount that is paid to reduce the principal balance, not interest, of a loan before the due date.
Prepayment Penalty
A monetary penalty charged by a lender if all or part of a loan is paid off before it is due.
Prime Rate
The interest rate that banks charge to their best customers for short-term loans. Changes in the prime rate can influence changes in other interest rates.
Principal
The actual balance, excluding interest, of a mortgage loan. Also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.
Principal & Interest
The payment required to repay a mortgage in accordance with its terms. Sometimes referred to as "P&I".
Principal Balance
The outstanding balance of principal on a loan. Principal does not include interest or fees.
Private Mortgage Insurance
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as mortgage insurance.
Promissory Note
A written promise to pay a specified sum to specified person over a specified period of time.
Property Taxes
Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.
Public Auction
A gathering at a pre-announced public location to sell property to satisfy a mortgage that is in default.
Public Record
A collection of legal documents that are filed with the local government registry so that the public will know what liens, encumbrances or judgments may affect any piece of real estate.
Purchase Agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Qualified Veteran
To officially determine if you are a qualified veteran, must request a Certificate of Eligibility (COE) from the VA. This certificate indicates that the VA has determined you are eligible for a VA home loan and shows the amount of available entitlement or guaranty. To obtain a certificate of eligibility, complete the “Request for a Certificate of Eligibility for VA Home Loan Benefits Form” (VA Form 26-1880) and submit it to the VA. This form, as well as additional information about VA home loan eligibility requirements, are available on the VA website (www.benefits.va.gov/HOMELOANS/).
Qualifying Ratios
Calculations performed by lenders to determine your ability to repay a loan. The first qualifying ratio is calculated by dividing the monthly PITI by the gross monthly income. The second ratio is calculated by dividing the monthly PITI and all other monthly debts by the gross monthly income.
Quantity Survey
A method used by appraisers to estimate how much it would cost to reproduce an improvement.
Quitclaim Deed
A deed that transfers, without warranty, whatever interest or rights a grantor may have at the time the transfer is made. Often used to remove a possible cloud on the title.
Rate
The annual rate of interest for a loan. Also called the interest rate.
Rate Change Cap
The maximum amount that an interest rate can change, either at an adjustment period or over the entire life of the loan. Commonly associated with an adjustable rate mortgage (ARM).
Rate Lock
An agreement by a lender to guarantee the interest rate offered for a mortgage provided that the loan closes within the specified period of time.
Rate of Interest
Same as interest rate.
Real Estate Agent
A person licensed to negotiate the purchase and sale of real estate on behalf of buyers and sellers.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires mortgage lenders and brokers to give borrowers advance notice of closing costs in the form of a Good Faith Estimate.
Real Property
Land and anything permanently affixed to the land, including structures, trees, minerals, and the interest, benefits and rights thereof.
Realtor®
A real estate broker or associate who is an active member of a local real estate board that is affiliated with the National Association of Realtors.
Recorder
The public official who keeps records of transactions that affect real property in a specific geographic area (usually a county). Often known as a County Recorder or County Clerk.
Recording
The entering in a book of public record the details of a properly executed legal instrument that affects title to real property, thereby making it a part of the public record.
Recording Fees
A fee charged by the local government to record mortgage documents into the public record so that any interested party is aware that a lender has an interest in the property.
Refinance
The process of paying off any existing mortgages on a home with a new mortgage loan.
Rehabilitation Mortgage
A loan granted to cover the costs of repairing or improving an existing property. Sometimes also used to acquire property with the intent to improve it.
Release Fee
The fee charged to release a lien to free real estate from a mortgage.
Remaining Balance
The amount of principal owed on a loan that has not yet been fully repaid.
Remaining Term
The number of payments left to be made on a loan before it is fully amortized (paid in full).
Rent Loss Insurance
An insurance policy that protects a landlord against loss of rent or value due to natural casualties that renders the premises unsuitable for use, and therefore excuses the tenant from paying rent.
Repayment Plan
An agreement between a lender and a borrower, made to help the borrower repay delinquent installments.
Replacement Reserve
An amount set aside from net operating income for replacement of short-lived common property in cooperative housing projects such as condominiums.
Rescission
The cancellation of a contract by the operation of a law or by mutual consent. In some circumstances, borrowers have the right to cancel a transaction within three business days after closing.
RESPA
See Real Estate Settlement Procedures Act.
Reverse Mortgage
See Home Equity Conversion Mortgage (HECM).
Revolving Credit
A credit agreement (typically a credit card) that allows a customer to borrow against a pre-approved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due.
RHS
See Rural Housing Service.
Right of First Refusal
A contract provision that requires a property owner to give another party the first opportunity to purchase or lease the property before it is offered to others.
Right of Ingress or Regress
The right to enter or leave specific property or premises.
Right of Survivorship
In joint tenancy, the right of surviving joint tenants to acquire the interest of a deceased joint tenant.
Rural Housing Service (RHS)
An agency within the United States Department of Agriculture that provides financing to farmers and other qualified borrowers buying property in rural areas, who are unable to obtain loans elsewhere.
Sale-leaseback
A technique in which a seller deeds property to a buyer, who simultaneously leases the property back to the seller.
Sales Contract
An agreement between a buyer and seller to purchase real estate. A sales contract, also known as an offer to purchase or a binder, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
Salesperson
A person who is licensed to make real estate transactions while under the supervision of a broker licensed by the state.
Search and Exam Fee
A fee charged by a title company or attorney in some states to perform a check of the title records that verifies the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.
Search and Survey
A fee charged by a title company in some states to perform a check of the public record to verify that the buyer is purchasing a home from the legal owner and there are no liens, overdue assessment, or other claims that would adversely affect the transfer of title. In addition, a search is performed to insure that there are no issues that a survey would show that could affect the property.
Search Fee
A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.
Second Mortgage
A loan that has a lien position subordinate to the first mortgage.
Secondary Mortgage Market
The buying and selling of existing mortgages, primarily residential first mortgages.
Secured Loan
A loan that is backed by collateral.
Security
The collateral offered to a lender in exchange for a loan. When a lender provides a mortgage, you provide your home as the security. This means that if payments are in default, the lender has the right to take title to the property.
Security Interest
The lender's right to take property that has been offered as security.
Seller take-Back (AKA Seller Carry-Back)
An arrangement in which the owner of a property provides financing.
Servicer
A company that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer may or may not be the original lender.
Settlement
A meeting of parties involved in a real estate transaction to finalize the process. In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the settlement involves the borrower and the lender. Sometimes referred to as the closing or the close of escrow.
Settlement or Closing Fee
A fee charged by a title company, closing agent or attorney to act as a representative and agent for the lender to perform the closing of a real estate transaction.
Settlement Statement
Also referred to as the HUD-1 or the closing statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
Standard Payment Calculation
The process used to determine the monthly payment required to repay the remaining principal balance of a loan in fairly equal installments, over the remaining term of the loan at the current interest rate.
State/Local Tax Fees
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.
Subdivision
A housing development that is created by dividing a large parcel of land into many individual lots for sale.
Subordinate Financing
Any mortgage or other lien that has a lower priority than that of the first mortgage.
Survey
A fee associated with obtaining a precise measurement of a piece of property by a licensed surveyor. The survey is typically a written map of the property showing locations of buildings and boundaries. In some states a survey is required by a title company to issue a title insurance policy.
Sweat Equity
Contribution to the construction of a property in the form of labor or services, instead of cash.
Takeout Financing
A firm commitment to provide permanent long-term financing after a construction project is completed.
Tenancy by the Entirety
Type of joint tenancy that provides the right of survivorship and is available only to a husband and wife. Compare with tenancy in common.
Tenancy in Common
Type of joint tenancy without the right of survivorship. Compare with tenancy by the entirety and with joint tenancy.
Term
The period during which you can obtain advances of credit, also known as the "draw period". Generally after the draw period ends, a repayment period begins. You can not obtain advances during the repayment period. A monthly payment will be established for the repayment period that will allow you to pay the loan in full at the time the repayment period ends.
Third Party Fees
Third party fees are usually fees that the lender will collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees.
Typically, you’ll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.
Title
A legal written instrument evidencing a person's lawful possession of a property.
Title Company
A company that specializes in examining titles to real estate and issuing title insurance.
Title Insurance
An insurance policy that protects the lender (and sometimes the property owner as well) against loss due to disputes over the ownership of a property and defects in the title that were not found in the search of the public record.
Title Search
An examination of the public title records to determine the legal ownership of a property, and to ensure that there are no liens, encumbrances or other claims outstanding.
Total Closing Costs
This is the total of all non-recurring items that must be paid at closing related to your new mortgage.
Total Debt Ratio
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance plus all other monthly debt obligation) by the borrower's monthly gross income. Also referred to as a back end ratio or a bottom ratio.
Transfer of Ownership
Any legal method by which the ownership of property changes hands.
Trustee
A fiduciary who holds property in trust for another to secure performance of an obligation or act.
Truth in Lending Act
Also known as Regulation Z, this federal regulation requires a lender to provide borrowers with a disclosure estimating the costs of the loan including your total finance charge and the Annual Percentage Rate (APR) within three business days of the application for a loan. This act is designed to provide consumers with a standard method of comparing the financing costs from lender to lender.
UCC
Uniform Commercial Code.
Underlying Mortgage
Generally refers to the first mortgage when there is a wraparound mortgage.
Underwriting
Detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Underwriting usually involves an in-depth analysis of the borrower's credit history, as well as an examination of the value and quality of the subject property.
Underwriting Fee
A fee charged by some lenders to cover the cost of the lender's analysis of the risk associated with a loan. For our comparison purposes, an underwriting fee is considered to be a lender fee.
Undivided Interest
An ownership right to use and occupy property that is shared among more than one owner. No single co-owner may have exclusive rights or possession to any part of the property.
Uniform Commercial Code (UCC)
Group of laws that are applicable to commercial transactions. Only a few of the laws have relevance to real estate transactions.
Unsecured Loan
A loan that is not backed by collateral.
Upfront Mortgage Insurance Premium
FHA charges the borrower an Upfront Mortgage Insurance Premium (Upfront MIP) for most transactions to financially support the FHA program. This fee is a percentage of the principal loan amount and is due at closing. The full amount can be financed as part of the loan amount or paid in cash.
VA Funding Fee
The Department of Veteran’s Affairs (VA) charges a Funding Fee to most veterans who obtain a VA mortgage loan to help sustain the VA home loan program. Only veterans receiving VA disability are exempt from paying this fee. The VA Funding Fee is a percentage of the principal loan amount and is due at closing. The amount of the VA Funding Fee varies depending on specifics of the transaction. The full amount can usually be financed as part of the loan amount or paid in cash.
VA Loan
A mortgage for veterans and service persons. The loan is guaranteed by the Department of Veterans Affairs (VA) and requires low or no down payment.
Vacancy Rate
The percentage of all units or space that is not leased, not rented or is unoccupied.
Vacant Land
Land that is not currently being used.
Vacate
To move out of a premises.
Vacation home
A property the borrower will occupy as a second home (vacation home) while maintaining a principle residence elsewhere. Must be a reasonable distance from the borrower’s principle residence (generally 50 miles or more) and cannot be rented out.
Valid
A document or contract that has legally binding force.
Vested
Having the right or privilege to use a portion of a fund, such as an individual retirement account (IRA).
Waiver
The voluntary abandonment or surrender of some claim, right, or privilege.
Warehousing
The packaging together of many mortgages for the purpose of selling them in the secondary market, usually by a mortgage banker who has originated the loans.
Warranty
A promise contained in a contract.
Wire transfer
A transfer of money from one person’s bank to another person’s bank account, either domestically or internationally.
Wire Transfer Fee
A fee charged by some lenders to cover the cost of wiring the mortgage funds to the appropriate parties, such as the title company or attorney, so that they are available for closing. For our comparison purposes, a wire transfer fee is considered to be a third party fee. However, some lenders may not charge for this service.
Wrapround Mortgage
A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the “Wrap Around” mortgagee, who then forwards the payments on the first mortgage to the first mortgagee. These mortgages may not be allowed by the first mortgage holder, and if discovered, could be subject to a demand for full payment.
X
A notation made by an individual who doesn't know how to write or physically unable to write, to show intent to sign an instrument such as a deed or will. In regard to the conveyance of real property, such a person would be required to make such a mark or at least a thumbprint as intent to sign and have it witnessed.
Year-end statement
The report shows how much was paid in interest during the year, as well as the remaining mortgage loan balance at the end of the year. If the bank has an impound account for you, it will also show how much was paid and reserved in property taxes. If the bank does not have a property tax impound account, then tax details are not displayed on the report.
Yield
A measurement of the rate of earnings from an investment, usually expressed as a percentage.
Yield To Maturity (YTM)
The internal rate of return on an investment. Typically takes into account all investment returns and their timing.
Zone
A geographic area reserved and defined by local ordinance for specific limited use. Zones are almost always subject to certain restrictions or conditions.
Zoning
The local government's specifications for the use of property in certain areas.
Zoning map
A map of the local geographic area that defines current zoning designations and land use.
Zoning Ordinances
The acts of an authorized local government establishing building codes, and setting regulations for property usage.
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