Mortgage Glossary

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A-Credit: A consumer with the best credit rating, deserving of the lowest prices that lenders offer. Most lenders require a FICO score above 720 (see Credit Issues). There is seldom any payoff for being above the A-credit threshold (see Does the Mortgage Market Reward Virtue?), but you pay a penalty for being below it.
ABA routing number: A series of numbers located at the bottom of an account holder's checks or deposit slips. These numbers identify a particular account at a financial institution.
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.
Absolute Auction: An auction in which the subject property is sold to the highest bidder regardless of the amount of the winning bid.
Absorption Rate: An estimate of the expected annual sales or new occupancy of a particular type of land use.
Abstract Exam
Acceleration Clause: A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
Acceptance: A party's consent to enter into a contract and be bound by the terms of the offer.
Accepted Contract
Accrued Interest: Interest that is earned but not paid, adding to the amount owed. Same as Negative amortization.
Additional Principal Payment: A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.
Adjustable Rate Mortgage
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 Interval: On an ARM, the time between changes in the interest rate or monthly payment. The rate adjustment interval is often displayed in x/y format, where "x" is the period until the first adjustment, and "y" is the adjustment period thereafter. For example, a 5/1 ARM is one on which the initial rate holds for 5 years, after which it is adjusted every year. The rate adjustment interval and the payment adjustment interval are the same on a fully amortizing ARM, but may not be on a negative amortization ARM.
Adjustment Period: The period that elapses between the adjustment dates for an adjustable rate mortgage (ARM).
Administrative Fee: A fee charged by a lender to cover the administrative costs of processing your loan request. For our comparison purposes, this fee is typically a lender fee.
Administrator: A person appointed by a probate court to administer the estate of a person who died intestate.
Affordability Analysis: A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home and the closing costs that you might expect to pay.
Agreement of Sale: A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
Alt-A: A mortgage risk categorization that falls between prime and sub-prime, but is closer to prime. Also referred to as "A minus".
Alternative Documentation: Expedited and simpler documentation requirements designed to speed up the loan approval process. Instead of verifying employment with the applicant's employer and bank deposits with the applicant's bank, the lender will accept paycheck stubs, W-2s, and the borrower's original bank statements. Alternative documentation remains "full documentation", as opposed to the other documentation options
Amenity: A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Man-made amenities include swimming pools, tennis courts, community buildings and other recreational facilities.
Amortization: A loan repayment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.
Amortization Schedule: A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principals and shows the remaining balance after each payment is made.
Amortization Term: The amount of time required to amortize the mortgage loan. The amortization is expressed as a number of months. For example, for a 30 year fixed rate mortgage, the amortization term is 360 months.
Amortize: To repay a mortgage with regular payments that cover both principal and interest.
Annual Fee: An annual fee for a line of credit is sometimes required. If an annual fee is shown you will be billed for that amount, annually, until the loan is paid in full.
Annual Mortgagor Statement: A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
Annual Percentage Rate (APR)
Annual Percentage Yield (APY): The rate of interest earned by an account owner in a year, if no withdrawals occur. All financial institutions must calculate the APY in the same way.
Annuity: A specified income paid yearly or at other regular intervals, often on a guaranteed dollar basis.
Application: The process of applying for a mortgage. The term "application" generally refers to a form that is used to collect financial information from a borrower by a lender.
Application Deposit: Funds required by a lender in advance of processing a loan request. Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.
Appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser.
Appraisal Fee: In order to verify that the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender. For our comparison purposes, the appraisal fee is a third party fee.
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.
Appreciation: An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
Approval: Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.
Assessed Value: The valuation placed on 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.
Assessment Rolls: The public record of taxable property.
Assessor: A public official who establishes the value of a property for taxation purposes.
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
Assumption: The transfer of the seller's existing mortgage to the buyer. See assumable mortgage.
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.
Attorney Opinion
Attorney Witness
Attorney-in-fact: One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
Automated Clearing House (ACH): ACH securely and efficiently transfers funds electronically through participating financial institutions.
Backfill: The replacement of excavated dirt into a hole, crevice or against a structure such as a foundation.
Backup Contract: A contract to buy property that becomes effective if a prior contract fails to be agreed upon.
Bad-faith estimate: The practice of low-balling figures for settlement costs on the Good Faith Estimate to make them appear more attractive to mortgage shoppers.
Balance Due at End of Loan Term: Some home equity loans may have a balance due at the end of the loan term. This means that if you make the minimum monthly payment during the life of the loan the entire balance will not be paid in full. A "balloon" payment will be due at that time.
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: A basis point is 1/100th of a percentage point. For example, a fee calculated as 50 basis points of a loan amount of $100,000 would be 0.50% or $500.
Before-tax income: Income before taxes are deducted.
Beige Book: A survey of economic conditions, conducted in the Federal Reserve's 12 regional banks, in preparation for Federal Open Market Committee meetings. Frequency: twice per quarter. Source: Federal Reserve.
Beneficiary: The person designated to receive the income from a trust, estate, or a deed of trust.
Bequeath: To transfer personal property through a will or last testament. Compare with devise.
Betterment: An improvement that increases property value as opposed to repairs or replacements that simply maintain value.
Bill of Sale: A written instrument that transfers title to personal property.
Billing Error: Any mistake in your monthly statement as defined by the Fair Credit Billing Act.
Binder: A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Binder Deposit
Bimonthly mortgage: A mortgage on which the borrower pays half the monthly payment on the first day of the month, and the other half on the 15th.
Biweekly payment 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 Insurance Policy: A single policy that covers more than one piece of property (or more than one person).
Blanket mortgage: The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.
Blemished borrowers: Borrowers with one or more of the following risk factors: they can only make a very small or no down payment; they cannot fully document their income and assets; their property is something other than a single-family home; their loan is intended to raise cash or to purchase an investment property; they have low credit scores; their income is low relative to their expected total obligations; and their mortgage carries an adjustable rate that will result in substantially higher payments in a few years.
Bona fide: In good faith without fraud.
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.
Breach of Contract: A violation of the terms of any legal obligation or agreement.
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.
Budget: A detailed plan of income and expenses estimated over a specified period of time. Budgets provide guidelines for managing costs and profits.
Budget Category: A category of income or expense data that you can use in a budget.
Builder-financed construction: Having the builder finance the construction.
Building Code: Regulations established by local governments that control design, construction and materials used in construction. Building codes are usually based on standardized health and safety guidelines.
Business Days: Check with your lending institution to find out what days it considers as business days under the Truth in Lending and Electronic Fund Transfer Acts. Usually excludes weekends and holidays.
Buydown
Buy-down Account: An account in which money is held so that it can be applied to the monthly mortgage payments, as each payment comes due, during the period that an interest rate buy-down plan is in effect.
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.
California Bungalow: A small, one-story, compact, early-twentieth-century house.
California Ranch: A one-story, post-World War II style, ground-hugging house with a low, pitched roof.
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.
Cancellation Clause: A contract provision that gives the right to terminate obligations upon the occurrence of specified events.
Cap: A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.
Capital: 1) The net worth of a business defined by the amount by which its assets exceed its liabilities. 2) Money used to create income. 3) The money or other assets comprising the wealth at the disposal of a person or business enterprise. 4) The accumulated wealth of a business or individual.
Capital Expenditures: The cost of an improvement made to extend the useful life of a property or to add to its value.
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. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
Certificate of Deposit: "Commonly known as a "CD," certificates of deposit bear a maturity date and a specified rate of interest. Penalties may apply for early withdrawal."
Certificate of Deposit index: A rarely used index that is used to determine interest rate changes for certain adjustable-rate mortgages (ARM) plans.
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.
Change Frequency: The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
Chattel: Anything tangible and owned, other than real estate. The same as personal property.
City/County Tax Stamp
Civilian Employment: Economic indicator that reports the number of new civilian jobs created and the percentage of civilians in the job market who are unemployed. One of the most anticipated and closely watched economic indicators. Frequency: monthly. Source: Labor Department.
Clear Title: A title that is free of clouds, liens, disputed interests or legal questions as to ownership of the property.
Close of Escrow
Closing: "A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement.""
Closing Cost Item: A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement. 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 Costs: The total of all the items that must be paid at closing related to your new mortgage.
Closing Statement: Also referred to as the HUD-1 or the settlement 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.
Cloud on Title: Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.
Coinsurance: A sharing of hazard insurance risk between the insurer and the insured, or others. A coinsurance clause states to what extent a loss will be covered based on the percentage of value insured.
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.
Collection: The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
Co-maker: A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
Combination Loan: With this type of loan, you receive a first mortgage for 80% of the loan amount, and a second mortgage at the same time for the remainder of the balance. If avoiding PMI (mortgage insurance) is important to you, consider combination loans.
Combined Loan-to-Value (CLTV): The unpaid principal balances of all the mortgages on a property (first and second usually) divided by the property's appraised value.
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 Letter: A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."
Common Area Assessments: Charges against individual unit owners in a condominium complex, or planned unit development (PUD), for additional funds to repair, maintain, or improve the common areas of the project.
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.
Common Law: The body of law based on general custom in England and used to a certain extent in the United States. Common law sometimes prevails unless superseded by other law.
: An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low or moderate income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
Community Home Improvement Mortgage Loan: An alternative financing option that allows low- and moderate-income home buyers 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 Land Trust Mortgage Loan: An alternative financing option that enables low to moderate income homebuyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.
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.
Compound Interest: E-LOAN CDs and Savings accounts compound interest daily. This refers to any interest earned on an account holder's principal balance, as well as any prior interest.
Condemnation: The taking of private property for public purpose by a government under the right of eminent domain. Also, the determination that a building is not fit for use or is dangerous and must be destroyed.
Condominium: A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
Condominium Conversion: Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Condominium Hotel: A condominium complex that has registration desks, short-term occupancy, room service and daily cleaning services. Such properties are often operated as commercial hotels even though the units may be individually owned.
Conforming Loan: The current conforming loan limit is $417,000 and below. Conforming loan limits change annually.
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.
Construction Spending: Economic indicator that measures the total amount of spending in the U.S. on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume. Frequency: monthly. Source: Commerce Department.
Consumer Confidence: A monthly survey of 5,000 households designed to measure Americans' optimism about their current situation and the future. Frequency: monthly. Source: Conference Board.
Consumer Price Index (CPI): Measures the change in the cost of living for most American families. Widely followed as an indicator of inflation of retail purchases. Frequency: monthly. Source: Federal Reserve.
Consumer Reporting Agency (CRA): A company that prepares detailed reports used by lenders to determine a potential borrower's creditworthiness. These agencies obtain data for these reports from a credit repository as well as from other sources. More Commonly referred to as credit bureaus.
Consumer Sentiment: An index designed to measure consumer optimism. Includes a preliminary report at mid-month and final report near month-end. Frequency: semimonthly. Source: University of Michigan.
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.
Contract: An oral or written agreement to do or not to do a certain thing.
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.
Cooperative (co-op): A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Cooperative Corporation: A corporation that holds the title to a cooperative project and grants occupancy rights to shareholders through leases or similar rental agreements.
Cooperative Project: A residential or mixed-use building wherein a corporation holds title to the property, sells shares of stock, representing the value of a single apartment, to individuals who then receive a lease, or similar agreement, as evidence of title.
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.
Cosigner: Another person who signs your loan and assumes equal responsibility for it.
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.
Courier/Mailing Fee
Covenant: A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
Credit: An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
Credit Bureau: An agency that gathers and keeps your credit record.
Credit Grade
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 borrowers, that will pay off the debt if the borrower dies while the policy is in force.
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.
Credit Repository: An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
Credit Scoring System: A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.
Creditor: A person or business that is owed money.
Credit-Related Insurance: Health, life or accident insurance designed to pay the outstanding balance of a debt.
Customer Credit: Economic indicator that measures the level of outstanding consumer installment debt. Can be used in conjunction with real sales to determine whether cash or credit is fueling growth. Frequency: monthly. Source: Federal Reserve.
Damages: The amount recoverable by a person who has been injured in any manner through the act or default of another.
Debenture: An unsecured bond or note.
Debit: In a closing statement or settlement, an item that is charged to a buyer or seller. Compare with credit.
Debit Card (EFT): A plastic card which looks similar to a credit card, that consumers may use to make purchases, withdrawals, or other types of electronic fund transfers.
Debt: An amount owed to another.
Deed
Deed in Lieu: A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Deed of Trust: This document, referred to as a mortgage in some states, pledges a property to a lender or trustee as security for the repayment of a debt.
Deed Stamp
Deed-in-lieu: A process that allows a borrower to transfer the ownership of a property to the lender in order to avoid loss of the property through foreclosure.
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.
Delivery Fee
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
Depreciation: A decline in the value of property; the opposite of appreciation.
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
Discount Rate: The interest rate that the Federal Reserve charges member banks for loans, using government securities or eligible paper as collateral. This provides a floor on interest rates, since banks set their loan rates a notch above the discount rate.
Document Preparation
Documentary Stamp
Dower: The rights of a widow in the property of her husband upon his death.
Down Payment: The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
Draw Period: Generally associated with home equity lines of credit, the draw period is the period of time that you can access funds from the line. After the draw period expires, a repayment period generally follows.
Due-on-sale Clause: 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 loan.
Durable Goods Orders: Economic indicator that measures new orders placed with domestic manufacturers for immediate and future delivery of factory hard-goods. Monthly percent changes reflect the rate of change of such orders. Levels of, and changes in, Durable Goods Orders are widely followed as an indicator of factory sector momentum. Frequency: Monthly Source: Commerce Department
Earnest Money Deposit: A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Easement: A right of way giving persons other than the owner access to or over a property.
Easement by Prescription: The continued use of another person's property for a special purpose that can develop into permanent use if certain conditions are met.
Economic Base: The industry within a certain geographic area that provides employment opportunities which are essential to support the community.
Effective Age: An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective Gross Income: Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
Eighty-Ten-Ten Loan: See "combination loan".
Elderly Applicant: As defined in the Equal Credit Opportunity Act, a person 62 or older.
Electronic Funds Transfer (EFT): EFT allows account holders to transfer funds from an account electronically. This method of transfer is not only highly secure, but also extremely efficient and easy to transact.
Eminent Domain: The right of a government to seize private property for public use upon payment of its fair market value. Eminent domain is the legal basis for condemnation proceedings.
Employment Report: Includes the unemployment rate, non-farm payroll, average work week and overtime. The non-farm payroll is probably the most watched number. Increases in these numbers can be an indication of pending "wage inflation".
Encroachment: A property improvement or obstruction that physically intrudes upon the property of another.
Encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
Endorsements
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: A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
Escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
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 Collections: Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.
Escrow Disbursements: The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become 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. Known as "impounds" or "reserves" in some states."
Estate: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
Eviction: The lawful expulsion of an occupant from real property.
Exam Fee
Examination of Title: The report on the title of a property from the public records or an abstract of the title.
Exclusive Listing: A written contract that gives a licensed real estate agent the exclusive right to sell property for a specific time, but reserving the owner's right to sell the property without the payment of a commission.
Executor: A person named in a will to administer an estate. Most Courts will appoint an administrator if no executor is named. (The feminine form is executrix)
Existing Home Sales: Reports the number of existing homes sold, expressed on an annual basis. Can be combined with New Home Sales to determine the total volume of home sales, a strong indicator of future national mortgage origination volume. Frequency: monthly. Source: National Association of Realtors.
: The front outside wall of a building.
Face Interest Rate: The percentage interest rate that is shown on the actual loan note or document.
Factory Orders: Economic indicator that measures the total volume of orders placed with U.S. factories. Also includes inventory and order backlog components, which can offer insight into inflation and growth in the manufacturing sector. Frequency: monthly. Source: Commerce Department.
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.
Fair Market Rent: The amount that a property would command if it were currently available to rent or lease.
Fair Market Value: The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Fannie Mae: A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.
Fannie Mae's Community Home Buyer's Program: An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
FDIC insured: E-LOAN is a subsidiary of Banco Popular North America (BPNA). E-LOAN and BPNA combine account balances for insurance purposes. The Federal Deposit Insurance Corporation (FDIC) insures the total balances up to the maximum allowed by law.
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.
Federal Housing Administration (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
Federal Open Market Committee (FOMC): Policy committee in the Federal Reserve System that sets short-term monetary policy objectives for the Fed. The committee is made up of the seven governors of the Federal Reserve Board, plus five of the 12 presidents of the Federal Reserve Banks.
Fee Simple: 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 Co-insured Mortgage: A mortgage for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the borrower's default.
FHA mortgage: A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
Finance Charge: The total dollar amount credit will cost.
Finder's Fee: A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
Firm Commitment: A lending institution's agreement to give a loan to a specific borrower on a specific property.
First Adjustment: When you can expect the first rate adjustment in your ARM loan.
First Mortgage: A mortgage that is the first loan recorded in the public record and generally the primary loan against a property.
Fixed Installment: The monthly payment due on a mortgage loan which includes both principal and interest.
Fixed Second Mortgage: See home equity loan.
Fixed-Rate Mortgage (FRM): A mortgage in which the interest rate does not change during the entire term of the loan.
Fixtures: Personal property or improvements that become real property when attached to the land or building in a permanent manner.
Float
Float Down Option: "An option to choose a lower rate within 30 days before the closing of your loan and "float down" to a lower rate than the previously locked-in rate. This allows you to pick the best rate within that time period."
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 compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Foreclosure: The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
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) One of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.
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.
Gain: An increase in monetary or property value.
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.
Garden Apartment: An apartment housing complex where the tenants have free access to a lawn or garden area.
Gated Community: A private, fenced-in housing development, sometimes employing security guards.
Good Faith Estimate: An estimate of charges which a borrower is likely to incur in connection with a settlement.
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.
Government National Mortgage Association (GNMA): A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created in 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by FNMA. Commonly called Ginnie Mae.
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.
Gross Domestic Product (GDP): Measures aggregate economic activity available, encompassing every sector of the economy. Quarterly percent changes (at an annualized rate) in GDP reflect the growth rate of total economic output. GDP growth is widely followed as the primary indicator of the strength of economic activity. Frequency: quarterly. Source: Commerce Department.
Ground Rent: The amount of money that is paid for the use of land when title to a property is held as a lease hold estate rather than a fee simple estate.
Group Home: A residential building designed for unrelated, persons with special needs. These homes provide long-term shelter and support services that are residential in nature.
Growing Equity Mortgage (GEM): A fixed-rate mortgage that involves scheduled payment increases over a specified period of time. The increase amount of the monthly payment is applied directly to the remaining principal balance.
Guarantee Mortgage: A home loan 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.
Half Bath: A half bathroom in a home that contains a wash sink and a toilet, but no bathtub or shower stall.
Hangout: The principal balance of a loan remaining when the term of the loan is beyond the term of a lease.
Hazard Insurance: Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
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: a credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is interest only.
Home Equity Loan: a loan secured by a second deed of trust on a house, typically used as a home improvement loan.
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. Compare with appraisal.
: 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
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 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.
Housing Ratio: The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.
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.
HUD: The U.S. Department of Housing and Urban Development.
HUD Median Income: Median family income for a particular county or metropolitan statistical area, as estimated by the Department of Housing and Urban Development (HUD).
HUD-1 Statement: Also referred to as the closing statement or the settlement 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.
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: An impound account is an account established by the lender to pay a borrower's tax and insurance costs. The borrower's monthly mortgage payment is then increased to cover these costs, with the additional amount being held in the impound account and disbursed by the lender when the payments are due. Lenders typically prefer this arrangement because it reduces the possibility of a lapse in tax or insurance payments that could diminish the value of the lender's investment (your house). Therefore, while it is often possible to opt out of an impound account it will result in additional charges.
Impounds
Income Property: Real estate developed and improved to produce steady income.
Index: A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used indices include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).
Index of Leading Indicators: An index of eleven indicators designed to forecast the strength of the economy six to nine months in the future. Frequency: monthly. Source: Commerce Department.
Individual Retirement Account: A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.
Industrial Production: A fixed-weight measure of physical output of the nation's factories, mines and utilities. Monthly percent changes in the index reflect the rate of change in output. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. Frequency: monthly. Source: Federal Reserve.
In-file Credit Report: A computer-generated report containing credit and legal information obtained from one of the main credit bureaus.
Inflation: An increase in the amount of money or credit available relative to the amount of goods or services available. Inflation causes an increase in the general price level of goods and services. Over prolonged periods, inflation can reduce the purchasing power of a dollar, making it worth less.
Initial Interest Rate: The original, starting interest rate of a loan at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes called a teaser rate
Installment: A regularly scheduled 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 (PMI). 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 cost of the use of money.
Interest Accrual Rate: The rate at which interest accrues on a mortgage. Usually, it is also the rate used to calculate the monthly payments.
Interest Rate
Interest Rate Buy-down Plan: An arrangement where the property seller, borrower or other party deposits money to an account so that it can be released each month to reduce the borrower's interest rate or monthly payments during a specified period of a loan.
Interest Rate Ceiling: The maximum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.
Interest Rate Floor: The minimum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.
Interest-Only Loan Option: Loan payments have two components, principal and interest. An interest-only loan has no principal component for a specified period of time. These special loans minimize your monthly payments by eliminating the need to pay down your balance during the interest-only period, giving you greater cash flow control and/or increased purchasing power.
Investment Property: A property that is not occupied by the owner.
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.
Judgement Search Fee
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.
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: The current loan limit for a conforming loan is $417,000. Loan amounts of $417,001 and above are considered non-conforming or jumbo mortgages and are usually subject to higher pricing.
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.
Kiosk: An independent stand from which merchandise is sold.
Laches: Undue delay or negligence in asserting one's legal rights.
Land: Any part of the surface of the earth.
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.
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.
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.
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
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: LIBOR stands for London Inter-Bank Offered Rate. This is a favorable interest rate offered for U.S. dollar deposits between a group of London banks. There are several different LIBOR rates, defined by the maturity of their deposit. The LIBOR is an international index that follows world economic conditions. LIBOR-indexed ARMs offer borrowers aggressive initial rates and have proven to be competitive with popular ARM indexes like the Treasury bill.
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 judgement.
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.
Line of Credit: An agreement by a financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
Liquid Asset: An asset that is easily converted into cash.
Loan: Borrowed money that is usually repaid with interest.
Loan Commitment
Loan Origination: The process by which a mortgage lender creates a mortgage secured by real property.
Loan Term
Loan to Value Ratio (LTV)
Lock: Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.
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. The lock-in may also specify the number of discount points to be paid at closing.
Lot Drawing
MACRS: Modified Accelerated Cost Recovery System.
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.
Mansion Tax
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 Date: A pre-set date informing account owners when they can withdraw principal funds without incurring a penalty. (Please note that you may withdraw any generated interest before reaching an account's maturity date at E-LOAN.)
Maximum Financing: Usually, a loan amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product.
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.
Monetary Policy: Actions by the Federal Reserve System to influence the cost and availability of credit, with the goals of promoting economic growth, full employment, price stability and balanced trade with other countries.
Money Market Account: A type of savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions may apply to the withdrawal of funds.
Money Market Fund: A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and United States Treasury bills.
Mortgage: A legal document that pledges a property to the lender as security for payment of a debt
Mortgage Banker: A company that originates mortgages for resale in the secondary mortgage market.
Mortgage Disability Insurance: A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.
Mortgage Insurance (MI): Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default. Usually required for loans with an LTV of 80.01% or higher.
Mortgage Insurance Premium (MIP): Amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company
Mortgage Life Insurance: A type of term life insurance often bought by mortgagors. In the event that the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds. Not to be confused with mortgage insurance.
Mortgage Registration Fee
Mortgage Tax
Mortgagee: The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.
Mortgagor: The mortgage borrower who gives the mortgage as a pledge to repay.
Multifamily Mortgage: A residential mortgage on a dwelling that is designed to house more than four families, such as an apartment complex.
Name Search
National Association of Purchasing Management Survey (NAPM): This prices-paid index gives insight into inflation in the manufacturing sector. A reading above 50% generally indicates that the manufacturing sector is expanding, and below 50% signifies contraction. Frequency: monthly. Source: National Association of Purchasing Management.

National tenant: A lessee with a presence and established reputation in most of the United States. These tenants are typically well-known and usually have better credit than local tenants
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. Frequency: monthly. Source: Commerce Department.
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.
No Income Verification: See "stated income".
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
Notary Fee: A fee for a licensed notary public to certify your signature on the loan documents.
Note
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.
Number of Application Questions
NY Tax & Title Search
Obligee: A person or company whose favor an obligation is entered into.
Obligor: A person or company who has engaged to perform some obligation
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.
Online Approval
Online Rate Locks
Online Status
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
Other Fees
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.
Package Mortgage: A mortgage agreement in which the principal amount loaned is increased because personal property as well as real property serve as security.
Pad Site: A single freestanding retail site, often adjacent to a mall or larger shopping center.
Paper: Credit given, evidenced by a written obligation with property as collateral.
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. Frequency: monthly. Source: Commerce Department.
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.
Plat Drawing & Conservation Fee
Plat Registration
Points
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-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.
Prepaids
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.
Pre-qualification: Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.
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
Principal & Interest
Principal Balance: The outstanding balance of principal on a loan. Principal does not include interest or fees.
Private Mortgage Insurance
Processing/Administration Fee
Producer Price Index (PPI): Measures the average level of prices of a fixed basket of goods received in primary markets by producers. Monthly percent changes reflect the rate of change in such prices. Changes in the PPI are widely followed as an indicator of commodity inflation. Frequency: monthly. Source: Labor Department.
Productivity: An economic indicator that measures the output per hour of work for non-farm business production. Can be used in conjunction with the rate of change in GAP to determine whether economic growth is likely to be inflationary. A separate component measures unit labor costs, an important indicator of future inflation. Frequency: quarterly. Source: Labor Department.
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 judgements 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.
Purchasing Managers Association of Chicago Survey (PMAC): The PMAC Survey is a composite diffusion index of manufacturing conditions in the Chicago area. Readings above 50% indicate an expanding factory sector.
Quadrangle: A square-shaped land area, 24 miles on each side. Frequently used in the government rectangular survey method of land description.
Qualified Veteran: To officially determine if you are a qualified veteran, you or TowneBank Mortgage 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.homeloans.va.gov).
Qualifying Rratios: The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.
Qualifying Thrift Lender: A lender who specializes in home mortgage finance under the rules established by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
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.
Radon: A naturally appearing radioactive gas found in some buildings, that, in sufficient concentrations, may cause health problems.
RAM: Reverse annuity mortgage.
Ranch House: Once described a low, one-story house typical of the western United States. The term is now used to describe just about any one-story home.
Rate
Rate Change Cap
Rate Improvement Mortgage: A fixed-rate mortgage (FRM) that includes a clause allowing the borrower the option to reduce the interest rate one time (without refinancing) during the first few years of the loan term.
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.
: 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.
Rebate: Compensation received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower. Loans with rebates often carry higher interest rates than loans with "points".
Reconveyance Fee
Recordation Exam: A fee charged by the title company in some states to review documents, to assure they meet the state standards prior to being recorded. For our comparison purposes, a recordation exam is considered to be a third party fee and may be included in the title insurance fee by some lenders.
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
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.
Residential Mortgage Credit Report (RMCR): A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.
RESPA: See Real Estate Settlement Procedures Act.
Retail Sales: Measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Frequency: monthly. Source: Commerce Department.
Retirement Plan 401(k) & 403(b): Employer-sponsored investment plans that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by private corporations. 403(b) plans are provided by non-profit organizations.
Retirement Plan 401(k) & 403(b) Loans: Some administrators of 401(k) and 403(b) plans allow for loans against the funds you have accumulated in these plans.
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.
S&L: Savings and Loan Association.
Safe Harbor: A set of rules and regulations that will guarantee compliance with the law, if followed.
Safe Rate: An interest rate provided by low-risk investments such as high grade bonds or secured first mortgages.
Sale-leaseback: A technique in which a seller deeds property to a buyer, who simultaneously leases the property back to the seller.
Sales Contract
Sales Disclosure: A state specific form that may need to be filed, disclosing everything about the sale of the home.
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
Search and Survey
Search Fee
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
Security Interest: The lender's right to take property that has been offered as security.
Seller take-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.
Simple Interest: An amount earned on an account holder's principal, according to a specified rate. This does not include any compounding interest.
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 Tax Stamps
State/Local Tax Fees
Stated/Documented Income: "Some loan products require only that applicants "state" the source of their income without providing supporting documentation such as tax returns."
Step Mortgage: A type of adjustable-rate mortgage (ARM) that allows for the interest rate to increase according to a specified schedule. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan. Sometimes called a step-rate mortgage.
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.
Subordination: "If you are refinancing your first mortgage and have an existing second or home equity line, one option is to "subordinate" the second mortgage: request that your second mortgage holder go back into the second lien position when you replace your existing first mortgage with the new refinance loan."
Survey: A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography.
Survey Affidavit
Sweat Equity: Contribution to the construction of a property in the form of labor or services, instead of cash.
Swing Loan: Sometimes called a bridge loan, a swing loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.
Tacking: Adding on to a certain period of time.
Takeout Financing: A firm commitment to provide permanent long-term financing after a construction project is completed.
Taking: The acquisition of a piece of land, usually through condemnation.
Tangible Property: Real estate and other property of value which can be seen and touched.
Tax Base: The total value of property, income, or other taxable assets subject to taxation.
Tax Certificate: 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.
Tax Service Fee
Taxes and Other Unavoidable Fees
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 loan term is 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."
Third Party 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 Examination
Title Insurance
Title Opinion
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 the items that must be paid at closing related to your new mortgage. Since the exact charges for some of these items cannot be obtained until the time of closing, the figure may only be an estimate.
Total Debt Ratio
Trade Equity: Equity that results from a buyer giving an existing property as trade for all, or part of, the down payment on the subject property.
Transfer of Ownership: Any legal method by which the ownership of property changes hands.
Transfer Tax: 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. May also be referred to as an Intangible Tax.
Treasury Bills: An index used to establish interest rates for adjustable rate mortgages. It is based on the interest rate paid to private investors by the US Government to obtain funding for the national debt and other expenses. Sometimes called T-bills, they are available in denominations of 3-months, 6-months and 1-year. The 3-month and 6-month Treasury bills are auctioned every Monday, and the 1-year Treasury bills are auctioned on Tuesday. The resulting figures are released to the public the next day. This index can have either a weekly or a monthly value.
Treasury Bond: Negotiable, long-term U.S. Government debt obligation with a maturity of ten years or longer, issued in minimum denominations of $1,000.
Treasury Index: An index that is used to determine interest rate changes for some adjustable-rate mortgage (ARM) programs. It is often based on the U.S. Treasury's daily yield curve.
Treasury Note: An intermediate U.S. Government security with a maturity of 1 to 10 years. Denominations range from $1,000 to $1 million or more. The notes are sold by cash subscription, in exchange for outstanding or maturing government issues, or at auction.
Treasury Securities: An index used to establish interest rates for adjustable rate mortgages. It is based on the yields of actively traded 1-year, 3-year, or 5-year Treasury Securities adjusted to constant maturities. The Treasury Security indices are calculated by the U.S. Treasury and reported by the Federal Reserve Board. These indices have either a weekly or a monthly value. The weekly indices are released on Monday afternoon for the previous week. Monthly values for these indices are generally available on the first Monday of the following month.
Trustee: A fiduciary who holds property in trust for another to secure performance of an obligation or act
Truth in Lending Act
Two-step Mortgage: A type of adjustable-rate mortgage (ARM) that has one interest rate for the first few years (typically 5 or 7), and a different rate for the remainder of the amortization term.
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
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 home used by the owners only occasionally or seasonally, primarily for recreational purposes.
Valid: A document or contract that has legally binding force.
Variablerate: An interest rate that may change once an account opens.
Vested: Having the right or privilege to use a portion of a fund, such as an individual retirement account (IRA).
Veterans Administration (VA): A government agency guaranteeing mortgage loans with no down payment to qualified veterans.
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.
Water Table: Usually defined as the upper-most level at which underground water is normally encountered in a particular area.
Wire Transfer Fee
Wraparound Loan: A loan that includes the remaining balance on an underlying first loan. Instead of having separate first and second mortgages, a wraparound loan has both.
Yield: The amount generated in interest on an account
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.