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

(A)

Back To Top

7/23 and 5/25 Mortgages - Mortgages with a one time rate adjustment after seven years and five years respectively.

3/1, 5/1, 7/1 and 10/1 ARMs - Adjustable-rate mortgages in which rate is fixed for three-year, five-year, seven-year and 10-year periods, respectively, but may adjust annually after that.

 

Abstract of Title - A complete historical summary of all recorded documents affecting the title of a designated parcel of real estate.

Acceleration - The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.

Acceleration Clause - A clause in contracts of debt which makes the entire amount due upon the debtor's default.

Accrued Interest - Interest earned but not yet paid.

Acknowledgment (with respect to an instrument) - The statement of a competent officer, usually a notary public, that the person who has executed an instrument has appeared before him and sworn to the facts of its execution.

 

Adjusted Basis - The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Adjustable Rate - An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly. See Adjustable Rate Mortgages.

Adjustable Rate Mortgage (ARM) - Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re-negotiable rate mortgage, or the variable rate mortgage.

 

Adjustment Date - The date that the interest rate changes on an adjustable-rate mortgage (ARM).

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

Affordable Housing Programs - These are mortgages for low-to-moderate income borrowers that provide more liberal terms than traditional home financing methods with regard to LTV and borrower qualifications.

Affordability Analysis - An analysis of a buyers ability to afford the purchase of a home. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that are likely.

Agent - A person authorized by another, i.e., the principal, to act for him.

Alternative Documentation - A method of documenting a loan file, often referred to as Alt Doc, that relies on information that the borrower is likely to be able to provide, rather than waiting on verification sent to third party for confirmation of statements made in the mortgage loan application.

Amortization - A repayment method in which the amount you borrow is repaid gradually though regular monthly payments of principal and interest. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.

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

Amortize - To repay a debt through a series of periodic payments.

Annual Membership - An amount that may be charged annually for having a line of credit available. Often charged regardless of whether or not you use the line. Also referred to as a "participation fee."

Annual Percentage Rate (APR) - The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

Application - An initial statement of personal and financial information which is required to approve your loan.

Application Fee - Fees that are paid upon application. An application fee may frequently include charges for property appraisal and a credit report.

Appraisal - The act of preparing a report by a qualified appraiser setting forth an opinion or estimate of value.  An appraisal is usually ordered by the lender or the Mortgage Broker.

Appraisal Fee - A fee charged by an appraiser to render an opinion of market value as of a specific date. Required by most lenders to obtain a loan.

Appraisal Report - A written report by an appraiser containing an opinion as to the value of a property and the reasoning leading to that opinion.

Appraised Value - An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appreciation - An increase in the value of property.

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

Assignment - The transfer of property rights by one person, known as the assignor, to another, known as the assignee.

Assumability - A feature of a loan which permits you to transfer your mortgage and its specified terms to the person(s) purchasing your home. Having an assumable loan could make it easier to sell your home, since assumption of a loan usually involves lower fees and/or qualifying standards for the new borrower than a new loan.

Assumption Fee - The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place.

Assumption - The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.

Attorney-In-Fact - A person who is authorized by power of attorney to act for another.

Audited Financial Statement - A report on the financial position or operations of a company that has been reviewed by an independent auditor.

Average Life - See weighted average life.

(B)
Back To Top

Balance Sheet - The balance sheet shows the financial condition of a company at a specific point in time. The balance sheet is broken down into the major sections: Assets, liabilities and net worth.

Balloon Mortgage - A loan which is amortized for a longer period than the term of the loan. Usually this refers to a thirty-year amortization and a five year term. At the end of the term of the loan, the remaining outstanding principal on the loan is due. This final payment is known as a balloon payment.

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

Bankruptcy - State of insolvency of an individual or organization - in other words, an inability to pay debts. There are two kinds of legal bankruptcy under U.S. law: involuntary, when one or more creditors petition to have a debtor judged insolvent by a court; and voluntary, when a debtor brings the petition. In both cases, the objective is an orderly and equitable settlement of obligations.

Bankruptcy Trustee - The person appointed by a bankruptcy court to oversee either the running of a business in a reorganization proceeding or the sale of assets and distribution of proceeds in a business liquidation.

Bearer - The person in possession of an instrument, document of title or security payable to bearer or endorsed in blank.

Bequest - A gift of personal property by will.

Bill of Exchange - A written order, which may be negotiable or nonnegotiable, directing one party to pay a certain sum of money to the drawer or to a third person.

Bill of Lading - Receipt and contract issued by a common carrier for the shipment of goods.

Bill of Sale - A written instrument by which one transfers his rights or interest in chattels and goods to another.

Biweekly Payment Mortgage - A plan 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 required if the loan were a standard 30-year fixed-rate mortgage. The result for the borrower is a substantial savings in interest.

Blank Endorsement - Endorsement which consists only of the signature of the endorser and does not state in whose favor it is made.

Blanket Mortgage - A mortgage covering at least two pieces of real estate as security for the same mortgage.

Bona Fide - In good faith.

Bona Fide Purchaser - One who buys property without knowledge or notice of any defects in the title of the seller.

Bond - An instrument representing the right to certain payments on the underlying collateral.

Book Entry - An electronic issuance and transfer system for securities transactions, such as that maintained by the Federal Reserve System.

Borrower's Authorization - the written authorization for the Mortgage Broker to verify personal information including but not limited to credit, employment and residential history.

Borrower (Mortgagor) - One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Bridge Loan  - A second trust that is collateralized by the borrower's present home allowing the proceeds to be used to close on a new house before the present home is sold. Also known as "swing loan."

Broker - An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Broker contract - the written contract that employs the Mortgage Broker to obtain a mortgage commitment on behalf of a lender.

Buy-down - When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

(C)
Back To Top

C.O.D. - Cash On Delivery. (Some people use it as Check On Delivery).

C.M.B. - Certified Mortgage Banker. The highest accreditation awarded mortgage professionals by Mortgage Bankers Association of America.

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

Cap - The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

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

Caps (payment) - Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

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

Cash Out - Receiving money back when refinancing your present mortgage.

Cashier's Check - A check whose payment is guaranteed because it is drawn on the bank's account rather than the customer's account. The customer pays in advance or has the funds withdrawn in advance from his or her account. Cashier's checks are also called bank checks.

Ceiling - The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Certificate of Eligibility - The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes.  Certificates of eligibility may be obtained by sending a DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).

Certificate of Occupancy - A document from an official agency stating that the property meets the requirements of local codes, ordinances, and regulations.

Certificate of Reasonable Value (CRV) - An appraisal issued by the Veterans Administration showing the property's current market value.

Certificate of Veteran Status - The document given to veterans or reservists who have served 90 days of continuous active duty (including training time).  It may be obtained by sending a DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

Certified Check - A check drawn on the issuer's account but for funds that have been segregated by the bank, guaranteeing payment.

Change Frequency - The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

Change Frequency - The frequency (in months) of payment and/ or interest rate changes in a adjustable-rate mortgage (ARM).

Chattel - Any type of personal property as distinguished from real property.

Closing - The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement costs, closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually is about three to six percent of the mortgage amount.

Closing Costs - Any fees paid by the borrowers or sellers during the closing of the mortgage loan. This normally includes an origination fee, discount points, attorney's fees, title insurance, survey, and any items which must be prepaid, such as taxes and insurance escrow payments.

COFI  - Adjustable-rate mortgage with rate that adjusts based on a cost-of-funds index, often the 11th District Cost of Funds.

Collateral - Assets that back a mortgage loan or security.

Collateral Security - A separate obligation which is given to secure the performance of the primary obligation in a contract.

Collateralized Mortgage Obligation (CMO) - A multiple-class MBS. The REMIC has replaced the CMO and, today, all CMOs are issued in the form of REMICs; however, the terms are often used interchangeably.

Combined Loan to Value Ratio (CLTV) - A ratio determined by dividing the sales price (for a purchase) or appraised value (for a refinance) into the total loan amount (first and second mortgage), expressed as a percentage. For example, with a sales price of $100,000 and a first mortgage loan of $80,000 and a second mortgage loan of $10,000, your combined loan to value ratio would be 90%.

Commitment - A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Commitment Letter - A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer.

Community Property - Property acquired by husband and wife during a marriage when not acquired as separate property by either spouse. Each spouse has equal rights, including the rights of survivorship.

Conditional commitment - provides the loan closing and disbursement of funds are contingent upon certain requirements being satisfied.

Conditional Sale - An installment sale in which the goods are delivered to the buyer, but title remains with the seller until payment is made for the goods.

Conditions, Covenants, and Restrictions (CC and R) - The standards that define how a property may be used and the protections the developer makes for the benefit of all owners in a subdivision.

Condominium - A form of property ownership in which the homeowner holds title to an individual dwelling unit plus an interest in common areas of a multi-unit project.

Conforming Loan - Generally, a mortgage with a loan amount under the maximum limits set by FNMA and FHLMC.  Qualifying ratios and underwriting methods are standardized to a large degree.

Consideration - The required element in all contracts by which a legal right or promise is exchanged for the act or promise of another party. The inducement to a contract.

Constant Maturity Treasury (CMT) - An index published by the Federal Reserve Board, calculated from the average yield of a range of Treasury securities, adjusted to constant maturities of various time periods (for example, six months, one year, ten years, etc.).

Constant Prepayment Rate - The pre-payment measure calculated by assuming that a constant portion of the outstanding mortgage loans will pre-pay each month (also see PSA) ..

Construction loan - A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

Consumer Reporting Agency (or Bureau) - An organization that handles the preparation of reports used by lenders to determine a potential borrower's credit history. The agency gets data for these reports from a credit repository and from other sources.

Contingency - A condition that must be met before a contract is legally binding.

Contract of Sale - The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

Conventional Loan - A mortgage not insured by FHA or guaranteed by the VA.

Conventional/fixed rate mortgage - Payments and interest rates are fixed for 15, 20, 25, or 30 year loans with up to 95% financing, 5% down payment and quicker loan approval than with FHA or VA. These are usually not assumable.

Conversion Clause - A provision in an ARM allowing the loan to be converted to a fixed-rate at some point during the term. Usually conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra

Conveyance - The transfer of an interest in realty: a deed. Sometimes includes leases and mortgages.

Cooperative - A form of common property ownership in which the residents of an apartment building do not own their own units, but rather own shares in the corporation that owns the property.

Cost of Funds Index (COFI) - An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.

Coupon rate - The stated annualized percentage of interest paid on an investment.

Covenant - A promise made by one person to another.

Credit Limit - The maximum amount that you can borrow under a home equity plan.

Credit Report - A report documenting the credit history and current status of a borrower's credit standing.

Credit Risk - The possibility that there may be a default by the issuer or other party in its financial obligations to the investor.

Credit Risk Score - A credit risk score is a statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the Fair Isaac or FICO score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is highly relative in the credit underwriting process for a mortgage loan.

Creditor's Committee - The committee appointed by a bankruptcy court to represent the classes of creditors in a Chapter 11 reorganization. The committee primarily is responsible for reviewing the reorganization plan and recommending adoption or rejection.

Current Face Value - The current amount of principal outstanding on a security, which is calculated by multiplying the original face value by the most recent factor.

Current Pay Class - A term used for any REMIC class that is currently paying principal and/or interest.

Current Ratio - Current Assets/Current Debt.

(D)
 Back To Top

Debt Service - The total amount of credit card, auto, mortgage or other debt upon which you must pay.

Debt-to-Income Ratio - The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.

Debt to Net Worth Ratio - Total Debt / Net Worth.

Debtor in Possession - A debtor that has filed for protection from creditors under Chapter 11 of the Bankruptcy Code and that is still running the company during the reorganization.

Deed - The legal document conveying title to a property.

Deed of Trust - Used in many western states, the agreement used to pledge your home or other real estate as security for a loan. Similar to a mortgage.

Default - Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

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

Delinquency - Failure to make payments on time. this can lead to foreclosure. Delivery - With respect to instruments, documents of title, chattel paper or certificate securities, means the voluntary transfer of possession.

Department of Veterans Affairs (VA) - An independent agency of the federal government, which guarantees long-term, low-or no-down payment mortgages to eligible veterans.

Deposit - Cash paid to the seller when a formal sales contract is signed. Depreciation - A decline in the value of property; the opposite of appreciation.

Discharge - The bankruptcy discharge extinguishes the debtor's liability on a debt and acts as an injunction against any further efforts to collect a discharged debt from the debtor or the debtor's assets.

Dischargeable Debt - Debt that can be removed or forgiven in a Chapter 7 liquidation. Discount Points (or Points) - A one-time charge imposed by the lender to lower the rate at which the lender would otherwise offer the loan to you. Each point is equal to one percent (1%) of the mortgage amount. For example, if a lender charges two points on a $80,000 loan this amounts to a charge of $1,600.

Distribution Date - The date on which payments from a security to an investor are made. Dividend - The portion of a company's profit paid out to its shareholders.

Documentation -  W2's, pay stubs, rent checks, etc. that support the information on the loan application.

Document Review - A fee charged by the lender for the review of documents necessary to fund the loan.

Down Payment - The difference between the purchase price and that portion of the purchase price being financed. Most lenders require the down payment to be paid from the buyer's own funds. Gifts from related parties are sometimes acceptable, and must be disclosed to the lender.

Draft - A bill of exchange.

Drawee - The person on whom a bill of exchange or a draft is drawn.

Drawer - The person who draws a bill or draft.

Due on Sale - A clause in a mortgage agreement providing that, if the mortgagor (the borrower) sells, transfers, or, in some instances, encumbers the property, the mortgagee (the lender) has the right to demand the outstanding balance in full.

(E)
Back To Top

Earnest money - Good faith money provided to seller by the potential buyer to show he is serious about purchasing the home. This amount may be applied to the down payment, but if the deal does not go through it may be forfeited, although in some cases it's returned.

Easement - The right-of-way granted to a person or company authorizing access to the owner's land; for example, a utility company may be granted an easement to install pipes or wires. An owner may voluntarily grant an easement or can be ordered to grant one by a local jurisdiction.

Effective Interest Rate - The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.

Effective Yield - The annual return on an investment that is calculated by dividing the coupon interest rate by the amount invested expressed as a percent of par.

Encumbrance - A claim against a property by another party which usually affects the ability to transfer ownership of the property.

Endorsement - The signature of the person transferring a negotiable instrument.

Entitlement - The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

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 fair market value (appraised value) of your home and your outstanding mortgage balance. Equity loan - A loan based on the borrower's equity in his or her home.

Equity of Redemption - The right of a mortgagor to redeem his property after the mortgage is past due.

Escrow - A fee charged by the escrow as a neutral third party to carry out the procedures necessary to transfer ownership of property.

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 part 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.

Escrow Waiver - When a loan value is 80% or less, you may elect not to open an escrow account and pay the hazard insurance and property taxes yourself. There is a one time charge by the Investor of 1/4 of a percent to 3/8 of a percent (0.0025 - 0.0375) of the loan amount.

(F)
 Back To Top

FDIC - Federal Deposit Insurance Corporation is the independent deposit insurance agency created by Congress to maintain stability and public confidence in the nation's banking system.

FHA - The Federal Housing Administration is a government agency with great information on home finance programs, loan limits and other interesting items.

FHA Loan - More appropriately termed "FHA Insured Loan." A loan for which the Federal Housing Administration insures the lender against losses the lender may incur due to your default.

FHLBB - Federal Home Loan Bank Board is the former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision.

FHLMC - Federal Home Loan Mortgage Corporation, also called "Freddie Mac", is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

FIFO Inventory - The valuation of inventory on a first-in, first-out basis, which assumes that the earlier, cheaper inventory is sold first, and the later, more expensive inventory is left in stock.

FmHA - Farmers Home Administration provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

FNMA - The Federal National Mortgage Association is a major secondary market investor that purchases mortgage loans from mortgage bankers and other financial institutions. Also known as "Fannie Mae."

Face value - The principal amount of a bond. Factor - The decimal value, calculated monthly, that represents the proportion of the original principal amount outstanding at a given time.

Fair Credit Reporting Act - A consumer protection law that sets up a procedure for correcting mistakes on one's credit record.

Family Debt Arbitration and Counseling Services, Inc. - A very good consumer oriented web site. It is a non-profit debt management agency helping people create a positive financial home environment.

Fannie Mae  - see Federal National Mortgage Association.
 
Farmers Home Administration (FmHA) - Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Bank Board (FHLBB) - The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision

Federal Home Loan Mortgage Corporation(FHLMC) also called "Freddie Mac" - Is a quasi-governmental agency that purchases conventional mortgage from insured  depository institutions and HUD-approved mortgage bankers.

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

Federal National Mortgage Association (FNMA) also know as "Fannie Mae"  - A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

Federal Reserve - The Federal Reserve is the central bank of the United States and a major regulator agency for many commercial banks.
 
Fee Simple - Absolute ownership of real property.

FHA loan  - A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($155,250 as of 1/1/96), they are generous enough to handle moderately-priced homes almost anywhere in the country.

FHA mortgage insurance  - Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FHLMC - The Federal Home Loan Mortgage Corporation provides a secondary market for savings and loans by purchasing their conventional loans. Also known as "Freddie Mac."

Final Distribution Date or Maturity Date - The latest possible date on which a REMIC class will receive payment. The actual final payment of any class will likely occur earlier, and could occur much earlier, than the final distribution date or maturity. A projected final maturity is calculated based on an assumed pre-payment rate to determine the final maturity of each class.
 
Firm Commitment - A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.
 
First Mortgage - A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).

Fixed Installment - The monthly payment due on a mortgage loan including payment of both principal and interest.

Fixed Rate - An interest rate which is fixed for the term of the loan. Payments are also fixed at one amount.

Fixed Rate Mortgage - The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.

Flood Insurance - A form of hazard insurance that may be required by the lender as a condition of making the loan. May not cover personal property.

Floor - The minimum rate of interest payable on an adjustable-rate class or mortgage.

Forbearance - The lender's postponement of foreclosure to give the borrower time to catch up on overdue payments.

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.
 
FNMA - The Federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as "Fannie Mae."

Foreclosure - The legal act by which the owner of a mortgage cuts off the rights or interest of the mortgagor in the mortgage property.

Freddie Mac - see Federal Home Loan Mortgage Corporation

(G)
Back To Top

Garnishment - The legal process by which property due to a debtor and in the hands of a third person is attached.

Ginnie Mae - see Government National Mortgage Association.

GNMA - GNMA is a government owned secondary market investor that purchases FHA and VA mortgage loans from mortgage bankers and other financial institutions. Also known as "Ginnie Mae."

Good Faith Estimate - A written estimate of closing costs which a lender must provide you within three days of submitting an application.

Government National Mortgage Association (GNMA) - Also known as "Ginnie Mae," provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Grace Period - A period of time during which a loan payment may be paid after its due date but not incur a late penalty. Such late payments may be reported on your credit report.

Graduated Payment Mortgage (GPM) - A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Gross - Before taxes

Gross Income - For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

Gross Profit Sales - Cost of Goods Sold (COGS).

Growing Equity Mortgage (Rapid Payoff Mortgage) (GEM) - A fixed-rate, fixed-schedule loan that starts with the same payments as a level payment loan.  The payments rise annually, with the entire increase being used to reduce the outstanding balance. No negative amortization occurs, and the increase in payments may enable the borrower to pay off a 30-year loan in 15 to 20 years, or less.

Guarantee - To assume the liability for such debts of another in the event of his default.

Guarantee Mortgage  - A mortgage that is guaranteed by a third party.

Guaranty - A contract wherein one party assumes liability for the debt of another person in the event of his default.

Guaranty Fees - A sum of money required by FNMA, FHLMC, and GNMA, a credit guarantee to mortgage-backed security.

(H)
Back To Top

HUD - Housing and Urban Development is a federal agency that oversees the Federal Housing Administration.

HUD-I Settlement Statement - A form utilized at loan closing to itemize the costs associated with purchasing the home. Used universally by mandate of HUD, the Department of Housing and Urban Development.

Hazard Insurance - A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium.

Holder in Due Course - A bona fide holder who takes an instrument for value without notice of it being overdue or of possible defenses.

Home Equity Line of Credit - A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Simple interest (interest-only payments on the outstanding balance) is usually tax-deductible. Often used for home improvements, major purchases or expenses, and debt consolidation.

Home Equity Loan - A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax-deductible. Often used for home improvement or freeing of equity for other real estate or investments. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

Home Inspection - A home inspection is performed by a qualified home inspector to determine the structural soundness and condition of the home, at the request of a purchaser, seller or lender. The inspector will provide a report outlining the condition of the home and what repairs, if any, are necessary before the loan may be closed.

Homeowners Warranty - A type of insurance that covers repairs to specified parts of a house for a specific period of time.

Housing Expenses-to-Income Ratio - The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. See debt-to-income ratio.

(I)
Back To Top

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

Impound Account - A savings account for accumulating that portion of a borrower's monthly payments designated for future payments of taxes and/or insurance. Required by certain lenders or with certain types of financing.

Index - A number, usually a percentage, upon which future interest rates for adjustable rate mortgages are based. Common indexes include the Cost of Funds for the Eleventh Federal District of Banks or the average rate of a one year Government Treasury Security.

Indexed rate - The sum of the published index plus the margin. For example if the index were 9% and the margin 2.75%, the indexed rate would be 11.75%. Often, lenders charge less than the indexed rate the first year of an adjustable-rate mortgage.

Initial Interest Rate  - This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). It's also known as "start rate" or "teaser."

Insolvency - Condition of a person who is unable to pay his debts as they fall due.

Installment  - The regular periodic payment that a borrower agrees to make to a lender.

Installment Debt - Debts with more than ten months left to repay.

Insurance - The first annual premium, plus 2 months, for fire and extended coverage insurance to cover loss of the property. Usually called Homeowners Insurance. In the event of a condominium property, coverage for personal property (contents) may also be needed.

Interest Adjustment or Prepaid Interest - An estimated amount of interest due at closing, usually from the date of closing to the end of the month.

Insured Mortgage  - A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).

Interest  - The fee charged for borrowing money.
Interest Accrual Rate  - The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments

Interest Rate - The periodic charge, expressed as a percentage, for use of credit.

Interest Rate Buydown Plan - An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.

Interest Rate Ceiling  - For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest Rate Cap - A safeguard built into a variable rate loan to protect the consumer in the rate of interest movements at time of adjustment.

Interest Rate Floor - For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Interim Financing - A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

Intestate - A person who dies without a will.

Investment Instrument - Legal document in which some contractual relationship is given formal expression or by which some right is granted - for example, notes, contracts, agreements.

Investor - A money source for a lender.

Issue date - The date as of which a security is originally formed.

(J)
 Back To Top

Joint Liability - Liability imposed upon two or more persons. Joint Tenancy - The ownership of property by two or more persons with the survivor taking the interest of the deceased. Joint Venture - A legal entity consisting of several persons jointly undertaking a commercial enterprise for profit.

Jumbo Loan - Mortgage loans over the  conforming loan limit. Terms and underwriting requirements may vary from conforming loans.

(K)
 Back To Top

(L)
 Back To Top

LIBOR (London Interbank Offered Rate) - The interest rate charged among banks for short-term Eurodollar loans. A common index for adjustable-rate mortgages and securities.

Late charge - The penalty a borrower must pay when a payment is made after the due date.

Lease-Purchase Mortgage Loan - An alternative financing option that allows low- and moderate-income homebuyers to lease a home from a nonprofit organization with an option to buy.  Each month's rent payments consists of PITI (principal, interest, taxes, insurance) payments on the first mortgage, plus an extra amount that is earmarked for a savings account in which money for a down payment accumulates.

Lenders - investors such as mortgage bankers, savings and loans, banks or investment bankers that offer acceptance into specific programs, terms or conditions of any loan.

Letter of Credit - A promise by a debtor's bank to pay the creditor upon presentation of specified documents.

Liabilities - A person's financial obligations. Liabilities include long-term and short-term debt.

Lien - The right to satisfy a debt out of certain property owned by the debtor.

Lifetime Payment Cap - For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage

Lifetime Rate Cap - For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.

Liquidity - The capability of ready conversion of an asset or investment to cash.

Loan - A sum of money provided by a lender to be repaid with or without interest.

Loan Administration - The collection of mortgage payments from borrowers and related responsibilities of a loan servicer. Also known as Loan Servicer.

Loan application - provides the lender with information regarding the prospective borrower's qualification and capability to comply with the terms of the loan.

Loan Application Fee - A lender's fee, usually ranging from $75 to $300, which the buyer must pay when applying for a mortgage.

Loan Officer -  Takes loan application and processes the necessary paperwork.  Loan Officers do not fund the loan with their own money, but work on behalf of several investors, such as mortgage bankers, Savings and Loan's, banks, or investment bankers.  They usually charge a fee or receive a commission for their services.

Loan package - the documentation used to support the information on the loan application.  (i.e. pay stubs, W-2s, bank statements, etc...)

Loan Origination Fee - A fee charged by the lender for processing a mortgage.

Loan Servicing - See Loan Administration.

Loan to Value Ratio (LTV) - A ratio determined by dividing the sales price or appraised value into the loan amount, expressed as a percentage. For example, with a sales price of $100,000 and a mortgage loan of $80,000, your loan to value ratio would be 80%. Loans with an LTV over 80% may require Private Mortgage Insurance, defined below.

Lock or Lock In - A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period. Provides protection should interest rates rise between the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds you have borrowed.

(M)
 Back To Top

MBS - Mortgage Backed Security is an investment instrument that represents ownership of an undivided interest in a group of mortgages. Principal and interest from the individual mortgages are used to pay principal and interest on the MBS.

MGIC - Mortgage Guaranty Insurance Company is a provider of private mortgage insurance and an excellent national real estate economic resource center.

MIP - Mortgage Insurance purchased by the borrower to insure the lender or the government against loss should you default. MIP, or Mortgage Insurance Premium, is paid on government-insured loans (FHA or VA loans) regardless of your LTV (loan-to-value). Should you pay off a government-insured loan in advance of maturity, you may be entitled to a small refund of MIP. PMI, or Private Mortgage Insurance, is paid on those loans which are not government-insured and whose LTV is greater than 80%. When you have accumulated 20% of your home's value as equity, your lender may waive PMI at your request. Please note that such insurance does not constitute a form of life insurance which pays off the loan in case of death.

Margin - An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages. Market Price - The current price of the security will change over time.

Market Rate - The average rate charged by lenders for conventional, fixed-rate loans. Market Risk - The possibility that the price of the security will change over time.

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

Maturity  - The date on which the principal balance of a loan becomes due and payable.

Minimum Payment - The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit. In some plans, the minimum payment may be "interest only," (simple interest). In other plans, the minimum payment may include principal and interest (amortized).

Minor - A person who has not reached legal maturity; an infant