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

ACCELERATION The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause. This latter is, of course, the opposite of the Santa Claus.

ADDITIONAL PRINCIPAL APYMENT A payment made by a borrower of more than the scheduled principal amount due. You
might do this if you want to more quickly reduce the remaining balance owed.

ADJUSTABLE RATE MORTGAGE (ARM) A mortgage in which the interest rate is adjusted periodically based on a preselected index. Also sometimes known as the renegotiable rate mortgage, the variable rate mortgage or the rollover mortgage.

ADJUSTED BASIS The original cost of a property, plus the value of any capital expenditures for improvements, minus any depreciation.

ADJUSTMENT DATE The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

ADJUSTMENT INTERVAL On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment -- typically one, three or five years, depending on the index.

AFFORDABILITY ANALYSIS A detailed analysis of your ability to buy a home. This includes your income, holdings, and debts. It may also include the type of mortgage you plan to use, the location of the home, and your closing costs.

AMORITIZATION The period of time during which you will owe interest and principal to your lender.

AMORITIZATION SCHEDULE A schedule that provides a breakdown of the principal and interest payments, and the amount outstanding at any given point during the amortization period.

AMORTIZE To repay a mortgage with regular payments, both the principal due and the interest.

ANNUAL PERCENTAGE RATE (APR) An interest rate reflecting the cost of a mortgage as a yearly rate.

This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

APPLICATION A form used to apply for a loan, on which you'll put relevant information about yourself. Also refers to the whole process of applying for a loan. Or, for that matter, of applying to college (but that's a different story entirely).

APPRAISAL An estimate of the value of the property, made by a qualified professional called an "appraiser". An appraisal is required by your bank to determine how much money it will lend you.

APPRAISAL VALUE An opinion of a property's fair market value, given by an appraiser, whose job it is to evaluate such things.

APPRECIATION An increase in the value of a property due to changes in market conditions, or for other reasons. The opposite of depreciation.

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

ASSESSOR A public official who establishes the value of a property for purposes of taxation.

ASSIGNMENT The transfer of a mortgage from one individual to another. This isn't always allowed.

ASSUMABLE MORTGAGE A mortgage (on a home) that can be taken over by the buyer of the home.

ASSUMPTION The agreement between buyer and seller in which the buyer takes over the payments on an existing mortgage from the seller.

ASSUMPTION FEE Fee usually paid by the buyer to a lender if the buyer assumes, or takes on, an existing mortgage.

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BACK-END RATIO The amount you pay in monthly debt (credit cards, student loans, etc.) divided by your gross monthly income.

BALOON MORTGAGE Usually a short-term fixed-rate loan which involves small payments for a certain period of time, and one large payment for the remaining amount of the principal at a time specified in the contract.

BILL OF SALE A written document that transfers title to the property.

BINDER A preliminary agreement, secured by an earnest money deposit, through which the buyer offers to purchase the home.

BIWEEKLY MORTGAGE PAYMENT A mortgage that requires payments to be made every two weeks (instead of monthly).

BLANKET MORTGAGE A mortgage covering at least two pieces of real estate as security for the same mortgage.

BONA FIDE In good faith, real, not fraudulent. We think this is a Latin phrase, but it may also have something to do with a dog.

BREACH A violation of any legal obligation. Not to be confused with Henry V -- "Once more unto the breach, dear friends!"

BUILDING CODE Local regulations having to do with design and construction of a building. This means, of course, that it's not OK to build a house made of oatmeal, no matter what that builder may tell you.

BUY DOWN The lender and/or the home builder subsidize the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

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CAPITAL EXPENDITURE The cost of an improvement made either to lengthen the useful life of a property or to add value to it. It's a fancy term for the money you pony up for improvements. See also capital improvement.

CAPITAL IMOROVEMENT Any structure which is a permanent improvement to the property.

CAPS (INTEREST) Consumer safeguards which limit the amount that the interest rate on an adjustable rate mortgage may change per year and/or during the life of the loan.

CASH FLOW The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income-producing property (including mortgage payment, maintenance, utilities, etc.)

CERTIFICATE OF TITLE A statement which confirms that the title to the house is legally held by the current owner. This is important, because you don't want to buy something from someone who doesn't really own it, now do you?

CHAIN OF TITLE The history of all of the documents that transfer title to a a piece of real estate. Think of it as being a genealogy for the home since it was built.

CHANGE FREQUENCY The frequency of payment and/or interest rate changes in an adjustable-rate mortgage (ARM). Generally expressed in months.

CLEAR TITLE A title that is free of liens. You've probably heard of 'you own it free and clear.' Meet 'clear.' See also cloud on title.

CLOSING the meeting between the buyer, seller and lender or their agents at which the property and funds legally change hands. Also called 'settlement.' See also Closing Costs.

CLOSING COSTS Expenses incurred by buyers and sellers in transferring ownership of a property. These may include an origination fee, taxes, the costs of obtaining title insurance, transfer fees, etc. They can often total several, or many, thousands of dollars.

CLOUD ON TITLE anything found by the title search which indicates that the property is not owned free and clear by the purported owner.

COLLATERAL An asset (such as a car or a home) that can be used to guarantee the repayment of a loan. You, the borrower, risk losing that asset if the loan is not repaid in a timely fashion.

COLLECTION The process of forcing a borrower to pay what he owes on a loan and,if it comes to that, to proceed with foreclosure. Commitment A promise by a lender to make a loan, on specific terms or conditions, to a borrower or builder. It can also be a promise by an investor to purchase mortgages from a lender with specific terms or conditions.
It can also be the agreement (or, in its absence, the refusal) to engage in a long-term relationship with someone with whom you may or may not be in love. There are no easy answers here. However (OK, we'll continue this digression) you might consider the old 80/20 rule: if it's really good 80% of the time, it's probably love, and you might as well commit.

COMPS Short for "comparable properties" -- properties which have recently sold that are about the same size, in the same area, with similar amenities. These help both you and the appraiser figure out what your home ought to be worth.

CONDOMINIUM A building or group of buildings in which each unit owner has title to a specific unit. They may also have the exclusive use of certain common areas. See Also co-op.

CONSTRUCTION LOAN A loan to provide the funds necessary to pay for the construction of buildings or homes. The lender advances funds to the builder at periodic intervals as the work progresses.

CONTINGENCY A specified condition that must be met before a contract is legally binding. The two most common contingencies in home purchasing are that 1) the house must pass the home inspection, and 2) the borrower must get the loan.

CONTRACT SALE A contract between a buyer and a seller which conveys title after certain conditions have been met. It is a form of installment sale.

CONVENTIONAL LOAN A mortgage not insured by the FHA or guaranteed by the VA.

COOPERATIVE The residents of this type of housing complex own shares in the cooperative corporation that owns the property, and each has the right to occupy a specific dwelling. They don't actually own the dwelling; they own shares in the corporation.

CREDIT LIMIT The maximum amount that you can borrow.

CREDIT REPORT A report documenting the credit history and current status of a borrower's credit standing.

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DEBT-TO-INCOME RATIO The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See housing expenses-to-income ratio.

DEED OF TRUST In many states, this document is used in place of a mortgage to secure the payment of a note.

DEFAULT Failure to meet legal obligations in a contract; specifically, failure to make the monthly payments on a mortgage. If this happens, you can end up losing the house.

DEFERRED INTEREST When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See also negative amortization.

DELINQUINCY Failure to make payments on time. This can lead to foreclosure.

DEPRECIATION A decline in the value of property over time.

DOWNPAYMENT Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on conventional loans.

DUE ON SALE CLAUSE A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

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EARNEST MONEY Money given by a buyer to a seller as part of the purchase price, in order to bind a transaction or to assure payment.

EASEMENT A right of way giving people other than the owner access to a property. If there is one of these on the house you're considering, make sure you understand what it is, or you may have troops of 1953 alien-landing devotees plodding through your back yard on the way to that sacred corn field just next door.

ENTITLEMENT The VA home loan benefit is known as entitlement. It is also known as eligibility.

EQUITY The value an owner has in real estate over and above the obligation against the property. In other words, that portion of the property which the owner actually owns, having already paid for it. (It's also referred to as the owner's interest.)

ESCROW Funds that are set aside and held in trust, usually for payment of taxes and insurance on real property.

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FEDERAL HOUSING ADMIN. (FHA) A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

FANNIE MAE A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

FHA LOAN A loan insured by the Federal Housing Administration, open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderately priced homes almost anywhere in the country.

FIRM COMMITMENT The agreement by a lender to make a loan to a specific borrower for a specific property.

FIRST MORTGAGE The mortgage which is the primary lien against a property.

FIXED RATE MORTGAGE A mortgage on which the interest rate is set for the term of the loan, regardless of future interest rate fluctuations. This makes payments precisely predictable, but it is not always the cheapest alternative.

FORECLOSURE A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

FRONT END RATIO Your prospective monthly mortgage payments divided by your gross monthly income. This comes out to a percentage, and a lender uses this percentage to get an idea of how much of your income will be going to pay your loan. If they like the number (say, below 29%) then they will be more inclined to sell you the loan.

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GOVERNMENT MORTGAGE A mortgage insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS).

GINNIE MAE Provides sources of funds for residential mortgage, insured or guaranteed by FHA or VA.

GUARANTEE MORTGAGE A mortgage that is guaranteed by a third party.

GUARANTEE A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

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HAZARD INSURANCE A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

HOMEEQUITY LINE OF CREDIT A loan against the amount of equity you may have in a property.

HOME INSPECTION A complete and thorough inspection of the physical condition of a property, including all major systems and structural elements. It's conducted by someone who knows what to look for, and who will inform you of what he finds. If he turns up something you don't like and which the seller refuses to repair, you don't proceed with the purchase of the home.

HOMEOWNER'S INSURANCE An insurance policy, required when you take ownership, that combines personal liability insurance and hazard insurance for the home as well as its contents.

HOMEOWNER'S WARRANTY A warranty which will cover repairs to specified parts of a house for a specific period of time. It is provided by the seller (or, if the place is new, the builder) as a condition of the sale.

HUD-1 STATEMENT A document which sets forth an itemized listing of whatever costs must be paid at closing, such as real estate commissions, loan fees, points, and initial escrow amounts. It's also known as the "closing statement" or "settlement sheet."

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IMPOUND That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

INDEX A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments.

INTEREST The amount of money, expressed as a percentage of the principal, charged for the use of the money borrowed.

INTEREST RATE CEILING For an adjustable-rate mortgage (ARM), the maximum rate to which your loan can climb.

INTEREST RATE FLOOR For an adjustable-rate mortgage (ARM), the minimum interest rate to which your loan can sink.

INVESTOR A money source for a lender.

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JUMBO LOAN A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

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LATE CHARGE The penalty that must be paid by the borrower when a payment is late. This must be spelled out; make sure you know when you would incur such a charge.

LEASE-PURCHASE A financing option for low- and moderate-income home buyers, by which they can lease a home, with an option to buy, from a nonprofit organization. Each month's rent payment consists of principal, interest, taxes and insurance, plus an extra amount that is sent to a savings account in order to accumulate money for a down payment.

LIEN A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

LISTING PRICE The price at which the house is listed; the asking price.

LOAN-TO-VALUR RATIO The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

LOCK-IN A written agreement from the lender to offer a specified interest rate if the mortgage goes to closing within a set period of time.

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MARGIN The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

MARKET VALUE The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MATURITY The date on which the principal balance of a loan is due and payable.

MINIMUM PAYMENT The minimum amount that you must pay (usually monthly).

MORTGAGE A legal contract that is registered against the title to a property in order to guarantee that a loan will be repaid.

MORTGAGE BANKER A company or loan officer at a bank that originates mortgages for resale in the secondary mortgage market.

MORTGAGE BROKER A person or company that offers loans to borrowers from numerous sources; they're generally paid a commission for their services.

MORTGAGE INSURANCE Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.

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NEGATIVE AMORITIZATION Negotiable Rate Mortgage (RBM) A loan in which the interest rate is adjusted periodically. (See adjustable rate mortgage.)

NET EFFECTIVE INCOME The borrower's gross income minus federal income tax.

NO DOC LOAN A loan requiring very little loan documentation. The borrower generally puts down a sizable down payment, usually at least 25%. These loans tend to be more common among self-employed people (those who have enough for the down payment) whose tax returns might indicate earnings substantially less than what would otherwise be acceptable to the lender.

NON-ASSUMPTION CLAUSE A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

NOTE The signed obligation to pay a debt, as a mortgage note.

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ORIGINATION FEE The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property, usually computed as a percentage of the face value of the loan.

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PERMANENT LOAN A long-term mortgage, usually ten years or more. Also called an "end loan."

POINTS Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

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

PREPAID EXPENSES Money necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

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

PREPAYMENT PENALTY Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

PRIVATE MORTGAGE MARKET Lenders making mortgage loans directly to borrowers such as savings and loan association, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as to FNMA or GNMA, etc.

PRINCIPAL The amount of debt, not counting interest, left on a loan.

PRIVATE MORTGAGE INSURANCE (PMI) in the event that you do not have a 20 percent down payment, lenders will allow a smaller one - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on you loan's structure.

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

RECISION The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract (in some cases) once it is signed, if the transaction uses equity in the home as security. Recording Fees Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

If you're in the recording studio singing your heart out, then 'recording fees' no doubt refers to something else entirely.

REFINANCE Obtaining a new mortgage loan on a property already owned, often to replace existing loans on the property.

RESPA The Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.

REVERSE MORTGAGE A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as collateral.

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SALE PRICE The price at which the house actually sold. By noting the difference between the sale price and the listing price in houses that have recently sold, comparable to the one you're interested in, you can get an idea of how much below the asking price you might be able to offer.

SECOND MORTGAGE A mortgage made subsequent to another mortgage and subordinate to the first one.

SECONDARY MORTGAGE MARKET The market in which primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.

SIMPLE INTEREST Interest which is computed only on the principal balance.

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TERM The lifespan of the contract to repay a loan.

TITLE A document that gives evidence of an individual's ownership of property.

TITLE INSURANCE A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is us ally a function of the value of the property, and is often borne by the purchaser and/or seller.

TITLE SEARCH An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.

TRANSACTION FEE A fee charged each time you draw on your credit line.

TRUTH-IN LENDING A federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan.

TWO-STEP MORTGAGE Mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. also called "Super Seven" or "Premier" mortgage.

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UNDERWRITER The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

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VA LOAN A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA MORTGAGE FEE A premium of up to 1-7/8 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.
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WRAPAROUND 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 wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

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ZONING ORDINANCES The acts of an authorized local government establishing building codes, and setting forth

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