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

A

acceleration
This is the right of the lender to demand immediate repayment of the mortgage upon default.

APR (annual percentage rate)
Designed to meansure the "true cost of a loan," it can be a very confusing number because the rules for computing the APR are not clearly defined.

ARM (adjustable-rate mortgage)
A mortgage that changes interest rate periodically based upon the changes in a specified index.

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

adjustment period
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

amortization
The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.

amortization term
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

annual percentage rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

application
A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security.

appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser.

appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.

appreciation
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

assignment
The transfer of a mortgage from one person to another.

assumable mortgage
A mortgage that can be taken over, or "assumed," by the buyer when a home is sold.

assumption
The transfer of the seller's existing mortgage to the buyer.

assumption clause
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

assumption fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

B
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balance sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.

balloon mortgage
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.

balloon payment
The final lump sum payment that is made at the maturity date of a balloon mortgage

bankrupt
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

bankruptcy
A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

basis point
1/100th of 1% interest. 100 basis points =1%.

before-tax income
Income before taxes are deducted

binder
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

biweekly mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

blanket mortgage
The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project

bond
An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust

bridge loan
A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."

broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

buydown mortgage
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

C
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call option
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

cap
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.

capital improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

cash-out refinance
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. This is a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Certificate of Eligibility
A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.

Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.

certificate of title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner

chain of title
The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

clear title
A title that is free of liens or legal questions as to ownership of the property.

closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs.

closing costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country.

closing statement
The final statement of costs incurred to close on a loan or to purchase a home.

cloud on title
Any conditions revealed by a title search that adversely affects the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

commitment
A promise by a lender to issue a mortgage based upon certain conditions being met.

Community Home Improvement Mortgage Loan
An alternative financing option that allows low- and moderate-income homebuyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.

community property
In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

comparables
An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

conforming (mortgage loan)
The current conforming loan limit is $240,000 and below.

construction loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

consumer reporting agency
An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.

convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.

convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

cost of funds index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.

covenant
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

D
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debt ratio
Money owed divided by Income. Used to determine affordability.

deed
The legal document conveying title to a property.

deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.

deed of trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.

default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

delinquency
Failure to make mortgage payments when mortgage payments are due.

depreciation
A decline in the value of property; the opposite of appreciation. down payment The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

discount buydown
Or permanent buydown. The process of paying points in order to obtain a lower rate.

due-on-sale provision
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

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