Acceleration clause
Term in a mortgage agreement that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
Acceptance
An offeree’s consent to enter into a contract and be bound by the terms of the offer.
Additional principal payment
A payment principal before the due date in order to reduce the remaining balance on the loan. Making additional principal payments does not reduce subsequent scheduled payments
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically according to the movement in a pre-selected index.
Adjusted basis
The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken
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
A process by which the borrower to reduce debt gradually through monthly payments of 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 i.e. 360 for a 30 year loan, 180 for a 15 year loan.
Amortize
Reduce a debt by regular payments of both principal and interest.
Amortization schedule
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance.
Annual Percentage Rate (APR)
The total yearly cost of a mortgage stated as a percentage of the loan amount: includes the base interest rate, primary mortgage insurance, and other loan costs such as points, application fees, etc.
Application
A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.
Application fee
The fee charged by the lender to the borrower for applying for a loan.
Appraised value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
Appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.
Appraisal
A professional opinion of the market value of a property.
Appreciation
An increase in the value of a house due to changes in market conditions or other causes.
Assessed value
The valuation placed upon property by a public tax assessor for purposes of taxation.
Assessment
The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
Assessor
A public official who establishes the value of a property for taxation purposes.
Assignment
The transfer of a mortgage from one person to another.
Assumable loan
These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.
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.
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Balance sheet
A financial statement that shows what a borrower owns and owes. The difference between the two amounts is net worth, thus balance sheets are often called net worth statements.
Bankruptcy
A court action in which a debtor is relieved of his debts. Typically assets are sold to pay creditors a portion of the amount due.
Bill of sale
A written document that transfers title to personal property such as hot tubs, refrigerators, draperies, etc. Such property is not considered real estate and is therefore not covered by the purchase agreement, thus requiring a bill of sale.
Borrower
One who receives funds with the expressed or implied intention of repaying the loan in full.
Bridge loan
A loan that allows the proceeds to be used for closing on a new house before the present home is sold. Bridge loans are usually short term in nature and designed to be paid off when the first property sells.
Building code
Local regulations that control design, construction, and materials used in construction. Building codes may vary widely from one community to another.
Buy down
Prepayment of a lump sum of cash in exchange for a lower interest rate on a home mortgage either for the entire term or for an initial period of years. Buy downs are popular when rates are at historically high levels and not prevalent otherwise.
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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.
Capital improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
Cap
A provision of an ARM limiting how much the interest rate or mortgage payments may increase. Typically, ARMs have caps for both the life of the loan and a shorter period, such as a year.
Cash out
A loan transaction in which the borrower receives funds at the time of closing.
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 mortgages and any closing costs.
Change frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
Chattel
Another name for personal property such as refrigerators or draperies.
Clear title
A title that is free of liens or legal questions as to ownership of the property
Closing
The occasion where a sale is finalized; the buyer signs the mortgage, and closing costs are paid. Also called "settlement."
Closing costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."
Closing cost item
A fee or amount that a homebuyer must pay at closing for a single service, tax, or product.
Cloud (On Title)
An outstanding claim or encumbrance, which adversely affects the marketability of title.
Co-borrower
An additional borrower on a loan. A co-borrower's obligation on a loan are the same as all other borrowers.
Collateral
An asset (with a mortgage, your house is the collateral) that provides the lender with a level of assurance that you will repay the loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
Collection
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
Commitment letter
A formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.
Common area assessments
Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project. If your single family home as community assets such as a pool, you will probably be subject to common area assessments.
Common areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Compound interest
Interest paid on the original principal balance and on the accrued and unpaid interest.
Condominium
A form of legal ownership which includes Individual ownership of a dwelling unit and an interest in the common areas which serve the multi-unit project.
Condominium conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Construction loan
A short-term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.
Consumer credit reporting agency (or bureau)
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.
Contract
An oral or written agreement to do or not to do a certain thing.
Conventional mortgage
Any 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 time.
Convertible arm
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.
Coverage
The amount of protection, usually expressed in a percentage of the total claim amount, an insured receives under a certificate.
Corporate relocation
Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
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.
Commitment
A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.
Credit history
A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.
Credit life insurance
A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force. Typically expensive and not usually required of a borrower.
Creditor
A person to whom money is owed.
Credit report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
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Deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."
Deed of Trust (Trust Deed)
Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.
Default
Failure to make mortgage payments on a timely basis or to comply with other conditions of a mortgage.
Delinquency
A loan in which a payment is overdue but not yet in default.
Discount points
See Points.
Documentary stamps
A state tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.
Down payment
The part of the purchase price, which the buyer pays in cash and does not finance with a mortgage
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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Earnest money
The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.
Easement rights
A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.
Endorser
A person who signs ownership interest over to another party. Contrast with co-maker.
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
Equity
The difference between the market value of a property and the homeowner's outstanding mortgage balance.
Escrow account
The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses. Escrow analysis. The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.
Escrow payment
The portion of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
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Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Fannie Mae (FNMA)
(Federal National Mortgage Association, Fannie Mae). A government-sponsored corporation, owned solely by private investors, created to provide support to the secondary market for FHA and VA mortgages and conventional mortgages.
FDIC
(Federal Deposit Insurance Corporation). Provides insurance of accounts for institutions whose deposits were formerly covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).
Fee simple
The greatest possible interest a person can have in real estate.
FHA
(Federal Housing Administration). A division of the Department of Housing and Urban Development. The FHA's main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA neither lends money, nor plans, nor constructs housing.
FHA loan
Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
FHLMC
(Federal Home Loan Mortgage Corporation, Freddie Mac). A private corporation authorized by Congress, which became an independent, stockholder-owned government corporation with the passage of FIRREA. FHLMC promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secondary market and selling securities backed by those mortgages in the capital market.
Finance charge
The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.
Firm commitment
A lender’s agreement to make a loan to a specific borrower on a specific property.
First mortgage
The mortgage that has first claim in the event of default.
Fixed installment
The monthly payment due on a mortgage loan.
Fixed-Rate mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
Flood insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Foreclosure
The process by which a mortgage property may be sold when a mortgage is in default.
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.
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Good faith estimate
An estimate of costs a borrower is likely to incur in connection with a loan closing.
Graduated payment mortgage
(GPM) A mortgage where the payments are scheduled to increase, usually annually, for a set number of years, and then level off. GPM can be used with either a fixed or adjustable interest rate, and usually has a 30-year term.
Gross monthly income
The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.
Growing equity mortgage
(GEM) A fixed rate, graduated payment mortgage with small initial payments that increase each year so that the loan pays off in a shortened term, usually 15 years.
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Homeowner's insurance
An insurance policy that combines liability coverage and hazard insurance.
Homeowner's warranty
A type of insurance that covers repairs to specified parts of a house for a specific period of time.
Housing ratio
The ratio of the monthly housing payment to total gross monthly income. Also called Payment-to-Income Ratio or Front-End Ratio.
HUD
(Department of Housing and Urban Development). A cabinet department responsible for the implementation and administration of government housing and urban development programs.
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Income property
Real estate developed or improved to produce income.
Index
(Also called "Rate Index"). A regularly published rate, independent of the lending institution, that measures the prevailing cost of funds, and is used periodically with the margin to set AML accrual rates.
Initial borrower interest rate
The rate on hich the borrower's first payment is calculated.
Inflation
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.
Initial interest rate
The original interest rate of the mortgage at the time of closing.
Installment
The regular periodic payment that a borrower agrees to make to a lender.
Insurable title
A property title that a title insurance company agrees to insure against defects and disputes.
Insurance
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
Insurance binder
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.
Insured mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount
Interest
The fee charged for borrowing money.
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, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.
Interest rate
The percentage of an amount of money, which is paid for its use for a specified time.
Interest rate cap
A provision of an ARM limiting how much interest rates may increase per adjustment period.
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.
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Judgment
A decision 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 the decree of a court.
Judicial foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
Jumbo loans
Jumbo, or non-conforming, is a term used to describe a loan that does not conform to Fannie Mae or Freddie Mac guidelines. The typical Jumbo loan exceeds the maximum loan amounts described above.
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(empty)
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Late charge
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
Leasehold estate
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
Legal description
A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.
Lender
An institution that makes loans to borrowers on real estate.
Liability insurance
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. Often a component of homeowner's insurance and automobile insurance.
Lifetime cap
A provision of an ARM that limits the total increase in interest rates over the life of the loan.
Lifetime payment cap
A limit on the amount that payments can increase or decrease over the life of the mortgage.
Line of credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
Loan
A sum of borrowed money (principal) that is generally repaid with interest.
Loan commitment
Formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.
Loan origination
The process by which a mortgage lender brings into existence a mortgage secured by real property.
Loan servicing
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
Loan -to-value ratio
(LTV). The loan-to-value ratio (LTV) is the original loan amount divided by the lower of the sales price or the appraised value.
Lock
The period, expressed in number of days, during which a lender will guarantee a specific interest rate.
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Marketable title
A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.
Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Modification margin
(Also called "Spread"). The amount the lender adds to the index to determine the Fully Indexed Accrual Rate.
Monthly housing expense
Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.
Monthly payment mortgage
A mortgage that requires payments to reduce the debt once a month.
Mortgage
A legal document that pledges a property to the lender as security for a payment of a debt.
Mortgage banker
A company that originates mortgages exclusively for resale in the secondary market.
Mortgage broker
A company that for a fee matches borrowers with lenders.
Mortgagee
The lender in a mortgage agreement.
Mortgage commitment
A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.
Mortgage inpurance Premium
The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.
Mortgage life insurance
A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.
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 a high-rise apartment complex.
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Negative amortization
(Also called "Deferred Interest"). If the payments are too small to cover the interest due on a loan, the remaining interest owed is added to the outstanding loan balance, causing negative amortization. This often occurs with creative, adjustable rate financing plans and may result in a loss of equity during a period of rising interest rates.
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 (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.
Net worth
The value of all assets, including cash, less total liabilities.
No cash-out refinance
A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).
Non-liquid asset
An asset that cannot easily be converted into cash.
Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. The mortgage on a home is not the note, rather, it is a document that secures the note.
Notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
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Original principal balance
The total amount of principal owed on a mortgage before any payments are made.
Origination fee
A fee paid to a lender for processing a loan Application.
Owner financing
A property purchase transaction in which the property seller provides all or part of the financing.
Owner occupied
The owner of the property resides on the property.
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Payment adjustment period
The length of time between changes to the AML borrower's P&I payment.
Payment buy down
Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.
Payment discount
A reduction in the first year's interest rate to make the mortgagor more attractive to borrowers.
Periodic payment cap
A limit on the amount that payments can increase or decrease during any one-adjustment period.
Periodic rate cap
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
PITI
Principal, Interest, Taxes and Insurance are the four primary components of a mortgage payment. In some cases, taxes and insurance may be paid directly by the borrower and not rolled into the mortgage payment.
Points
A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.
Power of attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Prepayment
Payment of mortgage loan, or part of it, before due date.
Pre-qualification
The process of determining how much money a prospective homebuyer will be eligible to borrow before application.
Prime rate
The interest rates that banks charge to their preferred customers.
Principal
The amount borrowed or remaining unpaid, also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
Private Mortgage Insurance (PMI)
Insurance provided by nongovernmental insurers that protect lenders against loss if a borrower defaults. Typically required for all transactions when less than 20% of the value of the property is put down.
Purchase agreement
Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
Purchase money transaction
The acquisition of property through the payment of money or its equivalent.
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Qualifying ratios
Guidelines applied by lenders to determine how large a loan to grant a homebuyer.
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Rate caps
A limit on the interest rate charged to the borrower. Caps may be for the term of the loan or some other period, such as a year.
Rate lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.
Real estate broker
A middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.
Real estate owned
(REO). A term frequently used by lending institution as applied to ownership of real property acquired for investment or as a result of foreclosure.
RESPA
(Real Estate Settlement Procedures Act). A Federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.
Recorder
The public official who keeps records of transactions that affects real property in the area.
Recording
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
Refinancing
The process of the same mortgagor paying off one loan with the proceeds from another loan.
Rehabilitation mortgage
A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.
Remaining balance
The amount of principal that has not yet been repaid.
Remaining term
The original amortization term minus the number of payments that have been applied.
Repayment plan
An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."
Restrictive covenants
Private restrictions limiting the use of real property, such as condominium declarations, restrictions imposed by a committee of architecture, etc.
Right of ingress or egress
The right to enter or leave designated premises.
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Second mortgage
A mortgage that has rights that are subordinate to the rights of the first mortgage holders. Home equity loans are the most common form of second mortgages.
Secondary mortgage market
The buying and selling of existing mortgages by investors. The secondary mortgage market has led to the proliferation of loan products that has made home ownership possible for many people who would otherwise be forced to rent.
Seller-provided funds
(Also called "Seller Contributions"). Seller-provided funds include all transaction cost paid by the seller except the real estate agent's (or brokers) fee.
Servicer
The party who has entered into an agreement with the insured to service a loan.
Special assessments
A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, streetlights, etc.
Survey
A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.
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Tax lien
A claim against real estate for the amount of its unpaid taxes.
Teaser rate
Similar to a Payment Discount, but implies either an unusually large initial rate discount or an attempt by the lender to lure an otherwise unqualified borrower into the mortgage.
Third-party origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
Title
As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.
Title company
A company that specializes in examining and insuring titles to real estate.
Title insurance
Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.
Title search
A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.
Total debt ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.
Total expense ratio
Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.
Trade equity
Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.
Transfer tax
State or local tax payable when title passes from one owner to another.
Treasury index
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans.
Trustee
A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.
Truth-in-lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.
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Underwriting
The process of determining the risk involved in a specific loan application. Underwriting includes an analysis of the borrower's creditworthiness, income level, other debt and to some degree the quality of the property itself.
Unsecured loan
A loan that is not backed by collateral. Examples include credit card balances. Mortgages by definition are secured.
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Veterans Affairs, Department of (VA)
The agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to initiate mortgages to veterans.
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Wraparound mortgage
A form of secondary mortgage financing that incorporates the remaining balance on an existing first mortgage into a new loan 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
Laws established by local governments that determine acceptable uses for land and property.
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