AAPR: Average Annual Percentage Rate: summarizes interest payments and fees by stating them all in one rate.
Acceleration Clause: A portion of a mortgage that gives a lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
Agreement: The written contract for the sale and purchase of a property between a seller and a homebuyer.
Amenity: An item in a piece of real estate that may be of benefit to a buyer, but it isn't necessarily needed.
Amortization: Gradual repayment of debt over time.
Annual Fee: Ongoing fee charged each year on mortgage loans, as well as credit cards.
Application: The first step in getting a home loan where information is recorded about the potential borrower.
Appraisal: A document that gives a fair and impartial market estimate of a property.
Appraiser: A qualified professional who gives an estimate on a property.
ARM: Adjustable Mortgage Rate: a mortgage loan susceptible to fluctuating interest rates.
Asking Price: The price the seller initially asks for the property, but which is often higher than the final negotiated price.
Assessed Value: Value placed upon property by a public tax assessor.
Assumable Mortgage: A mortgage transferred from seller to buyer so that the seller is no longer responsible for it.
Balloon Mortgage: Mortgage that offers a low rate for a temporary amount of time, and when the time is up the balance is due or it has to be refinanced.
Bankruptcy: A law where a person's assets can be turned over to a trustee in order to pay off outstanding debt.
Basic or No Frills Loans: A loan which has a lower variable interest rate than the standard variable rate loan, but also has less flexibility and features.
Binder: Agreement (secured by earnest money) where a buyer offers to purchase real estate.
Break Costs: Penalty fees charged when a borrower terminates a fixed-rate loan contract before expiration.
Bridging Loan: A short-term mortgage loan whose proceeds are to be used to purchase a new home.
Cap: A limit on how much monthly payments and interest rates can fluctuate.
Cash Reserves: An amount sometimes required to be held in reserve in addition to down payment and closing costs.
Chattels: Movable and removable items in the home, such as appliances, carpets curtains, etc. These chattels need to be itemized on the agreement if they are to remain on the property.
Clear Title: A title free of legal questions.
Closing: Official transference of property from seller to the buyer; the buyer now takes on the obligation of the loan.
Closing Costs: Costs beyond the sale price of the property paid to cover the cost of transfer of ownership after closing.
Commission: A fee paid by the seller to their real estate agent.
Commitment Letter: A formal document from a lender that officially offers to lend money to a borrower.
Comparison Rate: A graph designed to reflect the total annual cost of the loan, including principal, interest rates, and fees.
Conditional Agreement: A contract that states that the property is not bought or sold until a certain condition(s) detailed in the agreement have been satisfied.
Conventional Loan: Private sector loan not guaranteed by the government.
Convertible ARM: An adjustable rate mortgage that can be converted into a fixed rate mortgage.
Covenant: A clause in a mortgage that restricts the borrower and if violated can result in foreclosure.
Credit History: The history of a person's debt payment used in order to measure their ability to repay a loan.
Credit Report: A document listing all current and previous debts of an individual and the timeliness of repayment.
Credit Bureau Score: A numbered score that suggests a borrower's possibility of default.
Debt-to-Income Ratio: A comparison of a person's income in relation to their housing expenses.
Deed: An official document transferring ownership of a property.
Deed-in-Lieu: A deed is given to the lender to repay the debt in order to avoid the expensive steps of foreclosure. The borrower still has to leave the property though.
Default/Delinquency: Inability to repay on time or to maintain other mortgage terms.
Deposit: A percentage of the purchase price paid by the buyer when the agreement is signed.
Discharge Fee: The fee charged on final payout of loan.
Discount Points: Typically paid at closing, these points are given to reduce the interest rate of the loan.
Down Payment: A percentage of the purchase price paid in cash and is not part of the loan.
Due-on-sale Clause: The part in a mortgage allowing a lender to request repayment in full if borrower sells the property that secures the mortgage.
Earnest Money: Money put down up front to show a buyer's serious intention to buy and will become part of the down payment after purchase.
Easement: An option that gives people other than the owner access to the property.
EEM: Energy Efficient Mortgage: a program that assists buyers in saving money on utility bills by allowing them the cost of adding energy efficient features to a house as part of the purchase.
Equal Credit Opportunity Act (ECOA): A federal law stopping lenders from denying mortgages based on discriminatory actions.
Equity: The amount of cash the buyer puts into the property; in other words, this is the purchase price minus the amount borrowed.
Escrow Account: A separate account that allows a lender to put aside a portion of their monthly payments in order to pay off additional expenses.
Establishment Fee (Application Fee): A fee that covers basic costs in setting up a loan from initial interview to loan drawdown.
Exit Fee: A fee imposed by some lenders if the borrower has gone with another lender.
Fair Credit Reporting Act: A law that protects consumers by setting up a procedure for correcting mistakes on one's credit record.
Fair Housing Act: A law prohibiting any kind of discrimination during the home buying process.
Fannie Mae: Federal National Mortgage Association (FNMA): a federal association owned by stockholders who buy residential mortgages and convert them into securities to sell to investors.
FHA: Federal Housing Administration: provides mortgage insurance to lenders in order to cover losses that may occur when a borrower defaults, and therefore encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.
Fixed Rate Mortgage: A mortgage with a constant rate of interest throughout the life of the loan.
Floor: An interest rate below which the rate of an ARM cannot be adjusted.
Forbearance: A lender's postponement of foreclosure in order to give a borrower time to catch up on overdue payments.
Foreclosure: When mortgaged property is sold to pay the loan of a defaulting borrower.
Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM): a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers.
Freehold: Absolute ownership of land.
Ginnie Mae: Government National Mortgage Association (GNMA): a government-owned corporation that pools FHA-insured and VA-guaranteed loans to back securities for private investment.
Good Faith Estimate: An estimate of closing fees that must be given to the borrower within three days after submission of a loan application.
Graduated Payment Mortgage: A mortgage that starts with low monthly payments that increases over time.
HELP: Homebuyer Education Learning Program: a program that counsels people about the home buying process.
Home Equity Loan: Gives a revolving line of credit secured by the value of your house.
Home Inspection: An examination to determine a house?s safety and gives awareness to the potential homebuyer of any repairs needed.
Home Warranty: Gives protection for mechanical systems against unexpected repair not covered by homeowner's insurance.
Homeowner's Insurance: An insurance policy protecting against damage to a house and its contents.
Honeymoon Rates: Introductory rates offered to entice borrowers with a rate lower than the standard loan rate.
HUD: U.S. Department of Housing and Urban Development: works to create a decent home and suitable living environment for all Americans.
HUD1 Statement: A "settlement sheet" that itemizes all closing costs and it must be given to the borrower before closing.
Impound Account: Tax and Insurance Reserve (TIR): an account required if the lender is going to pay the property taxes, mortgage insurance, and hazard insurance.
Interest: A fee charged for the use of borrowed money.
Interest Rate: Percentage of interest charged on a monthly loan payment.
Late Charge: A monetary penalty of a borrower for a payment made after the due date.
Leasehold: When an owner rents his/her land and an occupant stays on the land under certain agreements about time and price.
Lease Purchase: Helps buyers in purchasing a home by giving them a lease with an option to buy; therefore the rent is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.
Loan: Money borrowed and then repaid with additional interest.
Loan Fraud: Intentionally giving incorrect information on a loan application in order to better qualify for a loan. Makes you subject to criminal charges.
Loan-in-Process (LIP): Loan proceeds placed into a special account that will be used for improvements to the property.
Loan to Value Ratio (LVR): The maximum amount lenders will approve against the value of any property taken as security for your home loan.
Lock-in: Securing a specific interest rate to guarantee against fluctuation as long as the loan is closed within a specific amount of time.
Loss Mitigation: To avoid foreclosure, a lender helps a borrower in danger of defaulting on their loan.
Low Documentation Loans: Loans structured for the self-employed who do not have the documentation required to get traditional home loans.
Margin: An amount a lender adds to determine the interest rate on an adjustable rate mortgage.
Modification: Changing the terms of an existing loan while not recording a new loan on a particular property.
Mortgage: A claim on a property that secures the promise to repay a loan.
Mortgage Banker: A company that originates loans and resells them to secondary mortgage lenders.
Mortgage Broker: A company that originates loans for several different lenders.
Mortgage Insurance: A policy that protects lenders against losses when a borrower defaults on a mortgage.
Mortgage Insurance Premium (MIP): A monthly payment paid by a borrower for mortgage insurance.
Mortgage Modification: An option that allows a borrower to refinance the terms of a mortgage loan and therefore it reduces monthly payments.
Negative Amortization: A payment plan that states that a borrower's monthly payments won't cover the interest due, therefore the overall loan balance increases.
Offer: An official indication given by a buyer to show their willingness to purchase a home at a specific price.
Offset Account/Mortgage Offset: These accounts allow homeowners to tax bill by offsetting taxable income against interest paid in after tax dollars on mortgage repayments.
Origination: Preparing, submitting, and evaluating all the facets of a loan application.
Origination Fee: A fee for originating a loan.
Owner Financing: Purchasing a property where the seller provides the financing.
Partial Claim: An option that allows a borrower to get an interest-free loan from HUD in order to bring their mortgage payments up to date.
PITI: Principal, Interest, Taxes, and Insurance: the elements of a monthly mortgage payment.
PMI: Private Mortgage Insurance: companies who offer affordable mortgage insurance programs for qualified borrowers.
Portable Loans/Portability: Allows you to sell your house and move to a new one without having to refinance.
Pre-approve: When a lender commits to lend to a potential borrower.
Pre-approved Home Loan Certificate: A certificate confirming that a homebuyer is able to borrow a certain amount from a bank.
Pre-foreclosure Sale: Allows a defaulting borrower to sell the mortgaged property in order to avoid foreclosure.
Pre-qualify: When a lender informally figures the maximum amount an individual is allowed to borrow.
Premium: An amount regularly paid by a policyholder that upholds insurance coverage.
Prepayment: Payment of the mortgage loan before its scheduled due date.
Principal: The total amount of debt, excluding interest and late charges, remaining on a loan.
Real Estate Agent: Someone licensed to arrange real estate sales.
Realtor: A real estate agent who is a member of the National Association of Realtors.
Redraw Facility: Allows a buyer to make additional repayments on a mortgage, and then have access to these repayments if necessary.
Reducing Loan: A loan where you pay the same amount of principal in each payment, so as the loan decreases, so does the interest you pay, and therefore the size of your payments reduces over time.
Refinance: A way to pay off an existing loan with the proceeds from a new loan.
Rehabilitation Mortgage: A mortgage covering the costs of repairing/improving a property.
Rent with Option to Buy: See Lease Purchase.
RESPA: Real Estate Settlement Procedures Act: a law that protects consumers from abuses during the real estate purchase and loan process by forcing lenders to disclose all settlement costs and practices.
Reverse Mortgage: Loans for retired persons who own their own home but have little cash to live on.
Security Value: The value the bank gives a property, excluding chattels, when assessing the amount of any loan.
Seller Carryback: When the owner of a property provides financing, often in combination with an assumed mortgage.
Servicing: A lender's collection of a monthly payment from a borrower.
Service Fee: A fee charged to cover bank costs of maintaining the loan.
Settlement: See Closing.
Settlement Sheet: A document estimating the costs payable at closing which determines the seller's net proceeds and the buyer's net payment.
Special Forbearance: When a lender arranges a revised repayment plan for the borrower.
Standard Variable Rate: Lenders can apply this rate to their "premium" home loan product.
Sub-prime Lending: Loans for those who can't meet standard income verification and credit history criteria that mainstream lenders often use for ordinary borrowers.
Sweat Equity: Providing labor to improve a property as part of down payment. Switching Fee: A fee a lender can impose where a borrower wishes to change loan types.
Table Loan: A repayment plan where you pay regular amounts subject to interest rate changes and where you tend to pay most of the interest first before paying off the principal.
Three/two (3/2) Option: A plan that enables households whose earnings are no more than 100 percent of the median income in their regional area to make a 3 percent down payment with their own funds, coupled with a 2 percent gift from a relative or grant or unsecured loan from a nonprofit or state or local government program.
Title: A document awarding legal right of ownership to the property.
Title insurance: Insurance protecting a lender and homebuyer against claims about the official ownership of the property.
Title Search: A way to check official title records to guarantee the seller is the legal owner of the property and that there are no other outstanding claims.
Transfer Tax: State or local tax that is payable when the title passes from one owner to another.
Truth-in-Lending: A law obligating a lender to give full written disclosure of all conditions associated with a loan.
Unconditional Agreement:A contract binding both the buyer and the seller to settle on an agreed price that is not subject to any prior conditions being satisfied first.
Underwriting: Analyzing a loan application to determine the amount of risk involved in making the loan.
Unit Title: When a landlord owns living units and has full freehold ownership of the property.
VA: Department of Veterans Affairs: a federal agency guaranteeing loans made to veterans.
Variable (Floating) Rate Mortgage: Loan interest rates that fluctuate periodically as a response to changing market situations; therefore your payments will fluctuate as well.
Valuation (Appraisal): A written report made by an appraiser that gives the estimated value of a property (often required during the loan process).
Valuation Fee/Revaluation Fee: A fee lenders have to pay if they want to value a property for security reasons before giving out a loan.