A provision written into your mortgage that gives the lender the ability to demand full payment if even one monthly payment is missed.
Additional Principal Payment: Payment beyond your scheduled principal payment. Made to reduce the balance on the loan sooner than the schedule allowed for.
Adjustable-Rate Mortgage: A mortgage that allows the lender to change the mortgage's interest rate. The rates, then, will move up and down according to the market.
Adjusted Basis: The cost of a property plus the value of improvement expenditures, minus depreciation.
Adjustment Date: The date when interest rates change in an adjustable-rate mortgage.
Adjustment Period: The time from one adjustment date to the next in an adjustable-rate mortgage.
Affordability Analysis: An analysis done in order to figure out how expensive a house you can afford, taking into consideration your income and available funds, your liabilities, the house's closing costs, taxes and location, and the type of mortgage you plan to use.
Amenity: A property's feature that is not essential to the home but increases the home's value. This can be natural features like the view, or man-made features like a swimming pool.
Amortization: The repayment of a loan through installments where payments cover both the principal and the interest so that the principal is paid down over time.
Amortization Schedule: The payment timetable in an amortized loan.
Amortization Term: The length of time it takes to amortize the mortgage loan, usually expressed in months. A 30-year fixed-rate mortgage's amortization term is 360 months.
Annual Mortgage Statement: A report sent to the borrower each year showing how much was paid, as well as the remaining balance.
Annual Percentage Rate (APR) : The cost of a mortgage throughout the year including interest, mortgage insurance, and loan.
Annuity: The amount paid on a loan annually, often a set amount per year.
Appraisal: An analysis of a property's fair market value, prepared by a qualified appraiser.
Appreciation: The increase in a property's value over time. The opposite of depreciation.
Assessed Value: The property value as determined by a public tax assessor for taxation purposes. The process of obtaining this analysis is called an assessment.
Assessment: See assessed value.
Assessor: A public official who determines the assessed value of a home for taxation purposes.
Asset: Anything of monetary value that is owned by a person, ranging from property and personal items to loans, stocks or mutual funds.
Assignment: The transfer of a mortgage from one person to another.
Assumable Mortgage: A mortgage that can be tranferred from the seller to the buyer. Also called Assumption.
Assumption Clause: The provision written into an assumable mortgage that allows for the tranfer of a mortgage from seller to buyer.
Balloon Mortgage: A mortgage that will not pay off the entire loan by the end of the stated loan schedule. Instead, there is a provision in the loan that provides for a lump sum payment due at the end of the loan. For instance, you might pay only pricipal on a monthly schedule, and then pay the interest at the end.
Balloon Payment: The final lump sum payment in a baloon mortgage, made at the maturity of the mortgage.
Bequeath: To transfer personal property through a will.
Bill Of Sale: The written document transferring a title to personal property.
Binder: A signed agreement, and the payment of an earnest money deposit, where a buyer agrees to purchase real estate.
Blanket Insurance: A policy that covers either more than one piece of property or more than one person.
Blanket Mortgage: A mortgage that covers a cooperative project, as opposed to the share loans on individual units within the project.
Bona Fide: In good faith.
Breach: A violation of legal obligation.
Bridge Loan: A loan collateralized by the borrower's present home, which is for sale, in order to allow the proceeds to be used for closing on a new house before their current residence is sold. Also called a swing loan.
Broker: A person who assists in negotiating contracts between parties for a fee.
Buydown Account: An account that holds funds to be applied as part of the monthly mortgage payment.
Buydown Mortgage: A mortgage where lump sum payments are made to reduce the interest rate over the life of a mortgage.
Call Option: A provision in a mortgage allowing the lender to collect the balance of the loan at the end of a specified period for any reason.
Cap: A provision that limits how much the payments or interest rates can change in an adjustable-rate mortgage (ARM).
Capital Expenditure: The cost of any property or home improvement, whether it is to add value or to maintain the property.
Cash-Out Refinance: When the money received from a new loan exceeds the amount needed to repay an existing loan, its closing costs, taxes, and all other related expenditures.
Certificate Of Title: A certificate stating who real estate's title is legally held by.
Chain Of Title: The history of a real estate's titles from the earliest documents until the most recent.
Chattel: Personal property.
Clear Title: A property's title without liens or unresolved questions regarding ownership.
Closing: The meeting when a property's sale is finalized and the buyer signs the mortgage documents and pays closing costs. The ownership is then transferred from seller to buyer.
Closing Costs: Expenses beyond the price of the property that are related to transferring a property's ownership including taxes, attorney fees, an origination fee, escrow, title insurance and a survey. Your realtor or lender should be able to estimate closing costs before you consider a purchase.
Co-Maker: A person who signs a promissory note guaranteeing that the loan will be repaid. The borrower and co-maker are then both equally responsible for repayment. Also called endorser.
Collateral: An asset put up as a guarantee on a loan. If the borrower fails to repay the loan, he or she risks losing the asset.
Commission: The fee a broker or agent receives for negotiating a real estate sale or loan. Typically it is a percentage of the property or loan's price.
Commitment Letter: A formal document provided by a lender stating a loan's terms, and agreeing to lend it to a home buyer. Also known as a loan commitment.
Comparables: Comparables are recently sold properties that are similar in size, location, and amenities to a home being appraised. They are used to help determine a property's fair market value.
Cooperative (co-Op) : A multi-unit housing complex where several individuals own shares in a cooperative corporation that owns the property.
Covenant: A clause in a mortgage that specifies certain restrictions that could result in foreclosure if violated.
Deed: The document conveying title to a property.
Default: The actionable failure to make mortgage payments or other requirements of the loan.
Delinquency: Failure to meet a time sensitive mortgage payment.
Depreciation: The decline in a property's value. The opposite of appreciation.
Down Payment: A part of a home's purchase payment made when buying a home. It is not usually financed with a mortgage.
Earnest Money Deposit: A deposit made to show that a potential buyer is serious about buying the house.
Easement: Allows people other than the owner to access a property.
Effective Age: The appraised estimate of a building's physical condition. The effective age is not neccessarily the home's age.
Eminent Domain: The government's right to take private property for public use. The home owner receives fair market value for the property.
Encroachment: Construction or improvements that illegally expands into someone else's property.
Equity: In an owned property it is the difference between the fair market value of the property and the remaining balance of its mortgage.
Escrow: When a buyer's deposit or payment is left with a third party after a sale has been agreed upon but before all conditions of the sale have been met.
Exclusive Listing: A legal contract giving a real estate agent the exclusive right to sell a property for a specified time. However, the owner still has the right to sell the property without paying that agent a commission as long the owner sells it on his or her own.
Fair Market Value: The highest price a typical buyer would pay, and the lowest a seller would accept.
Federal Housing Administrator: The part of the U.S. Department of Housing and Urban Development (HUD) that focuses on insuring residential mortgage loans made by private lenders, and sets standards for construction and underwriting. While a loan with FHA insurance is called a 'government mortgage' sometimes, the FHA does not lend money or construct homes itself.
Fixed Installment: A monthly mortgage payment that includes the payment of both principal and interest.
Fixed-Rate Mortgage (frm) : A mortgage where the interest rate will not change during the life of the loan.
Foreclosure: The legal proceedings that follow a borrower defaulting on a loan. It allows the lender to assume interest in the mortgaged property and is often followed by a forced sale to pay off the debt.
Forfeiture: The loss of property, money, or rights due to a breach of legal obligation.
Fully Amortized Adjustible Rate Mortgage: An adjustable-rate mortgage (ARM) with a monthly payment sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
Government Mortgage: A mortgage that is insured or guaranteed (but not funded by) the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). Also known as a guaranteed loan.
Growing-Equity Mortgage: A fixed-rate mortgage that automatically increases your payments over time in order to pay off the principal more quickly.
Hazard Insurance: Insurance that covers physical damage to a property. It might include flood, wind, fire, vandalism, or other hazards, but varies from plan to plan.
Home Equity Loan: A secondary mortgage loan where the amount of the loan is based on the borrower's current equity in a property.
Home Inspection: When a liscensed home inspector evaluates the structural and mechanical condition of a property.
Homeowner's Insurance: A comprehensive policy that includes both personal liability insurance and hazard insurance coverage.
Income Property: Real estate that has been either developed or improved to produce income.
Initial Interest Rate: The interest rate at the time of closing. Also called a "start rate" or "teaser."
Installment Loan: A loan that is repaid in equal, regularly sceduled installments.
Insured Mortgage: A mortgage protected by either a private mortgage insurance company or by the Federal Housing Administration (FHA).
Interest: The fee a lender charges for borrowing money.
Interest Rate Buydown Plan: This plan allows you to deposit money into an account. The account releases payments each month to reduce monthly mortgage payments during the first few years of payments.
Interest Rate Ceiling: The maximum interest rate an adjustable-rate mortgage (ARM) can rise to, as specified by the mortgage agreement.
Interest Rate Floor: The minimum interest rate an adjustable-rate mortgage (ARM) can lower to, as specified by the mortgage agreement.
Joint Tenancy: A form of co-ownership. It gives both parties equal interest and equal rights in the property.
Judicial Foreclosure: Some states use foreclosure proceeding that are handled as a civil lawsuit, conducted entirely under the direction of a court.
Lease-Purchase Mortgage Loan: A financing option offered by some nonprofit organizations that allows lower income home buyers to lease a home with an option to buy. Monthly rent includes principal, interest, taxes and insurance payments, which is applied to the mortgage, plus an amount that is automatically deposited into a savings account for a downpayment.
Leasehold Estate: A long-term lease where the mortgagor holds the title to a property but does not actually own it.
Liabilities: This includes all financial obligations, including long- and short-term debt.
Liability Insurance: Insurance that protects against claims alleging that negligence or inappropriate action resulted in bodily injury or property damage to another party.
Lien: A legal claim against a property. It must be paid off before a property can be sold.
Payment Cap: The limit placed on the amount that payments can increase or decrease during the life of an adjustable-rate mortgage (ARM).This can be set as a Lifetime or Periodic Cap.
Rate Cap: The limit placed on the amount that the interest rate can increase or decrease in an adjustable-rate mortgage (ARM). This can be set as a Lifetime or Periodic Cap.
Line Of Credit: When a financial institution or bank extends credit. It is always for a specific amount and a limited time.
Liquid Asset: An asset that is easily converted into cash.
Loan: Borrowed money, also called principal.
Lock-In: A guarantee by a lender that a specified interest rate will not go up as long as the property closes within a set period of time. Also called a rate lock.
Maturity: The date the remaining principal balance of a loan becomes due.
Mortgage: A legal document that offers a property to the lender as security for a loan's repayment.
Mortgage Broker: A company or individual who, for a fee or commission, brings borrowers and lenders together.
Mortgage Insurance: Insurance for the lender against the mortgagor's default covering some or all of the loan. This insurance is issued by either private company or a government agency like the Federal Housing Administration (FHA).
Mortgagee: The mortgage lender.
Mortgagor: The mortgage borrower.
Multifamily Mortgage: A residential mortgage where the dwelling has more than four families (such as an apartment complex.) These dwellings are often called multifamily properties.
Negative Amortization: When monthly mortgage payments are not large enough to cover the entire principal and interest due. The shortfall is added to the balance of the loan.
Net Worth: A person's assets minus all liabilities.
No Cash-Out Refinance: A refinance transaction where the new mortgage only includes the remaining balance of the existing mortgage, closing costs, points, any mortgage liens more than one year old (but only if the borrower chooses to pay them off), but no cash beyond 1 percent of the new mortgage.
Note: A legal document that states the terms of a mortgage.
Note Rate: The interest rate as stated.
Notice Of Default: A formal written notice that a loan is in default and legal action might be taken.
Origination Fee: A fee, stated in points (1 point is 1 percent of a mortgage), that is paid to a lender for processing a loan application.
Owner Financing: This is when the property seller provides all or part of the financing.
PITI - Principal, Interest, Taxes, And Insurance: The main components of a monthly mortgage payment. Principal is the actual mortgage loan balance. Interest is the fee charged for borrowing. And taxes and insurance refer to the payments made for taxes and insurance each month.
PITI Reserves: A predetermined amount of cash, determined by the lender and expressed in a number of months, that insures that a home buyer can pay PITI costs during those coming months.
Point: See origination fee. 1 point equals 1 percent of the mortgage.
Power Of Attorney: Authorizes one person to act on another's behalf. This can be limited to certain times and circumstances or be all-inclusive.
Preforeclosure Sale: When an investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount still owed.
Prepayment Penalty: Some lenders charge a fee when a borrower pays off a loan before it is due.
Prime Rate: The lowest interest rate a bank can offer. It is offered to their preffered clients only but sets the standard for others.
Principal: The outstanding balance of a loan. Also refers to the part of a monthly payment that goes directly to that balance (rather than interest, taxes or insurance.)
Promissory Note: A written promise to repay a loan within the specified time period and conditions.
Purchase And Sale Agreement: A written contract stating the terms and conditions of a sale. Signed by owner and buyer.
Qualifying Ratios: Includes two calculations used to determine whether a borrower can qualify for a loan: housing expense as a percent of income, and total debt as a percent of income.
Rate-Improvement Mortgage: A fixed-rate mortgage that gives the borrower a one-time option to reduce the interest rate during the early years of the mortgage term without refinancing.
Real Estate Agent: A licensed professional trained to negotiate and transact a real estate sale.
Real Estate Settlement Procedures Act: The law requiring lenders to give borrowers notice of closing costs before a sale is made.
Realtor: A real estate broker or associate affiliated with the National Association of Realtors.
Recission: The cancellation of a contract by law or mutual consent. Borrowers often have the legal ability to cancel a refinancing within three business days of closing.
Refinance: Paying off one loan with the proceeds of a new loan on the same property.
Rehabilitation Mortgage: A mortgage obtained for renovation or home improvement.
Rent Loss Insurance: A form of insurance that protects a landlord against loss of rent, fire, or other hazard that might create a situation where tenant is excused from paying rent.
Repayment Plan: A plan arranged between lender and borrower to repay a defaulted loan. Also called relief provisions.
Replacement Reserve Fund: A commonly used fund set aside in for short term work--common room furniture, roofing, etc.
Revolving Liability: The most common revolving liability is a credit card. This is an arrangement that allows a person to borrow against a preapproved line of credit for short term purposes.
Right Of First Refusal: An agreement requiring the property owner to give another party the first opportunity to purchase or lease the property before offering it to others.
Right Of Egress: The right to enter or leave a premises.
Sale-Leaseback: This is when a property is sold but the buyer simultaneously leases the property back to the seller.
Second Mortgage: A mortgage that has a second, subordinate lien.
Secured Loan: A collateral-backed loan.
Servicer: An organization collects mortgage payments and manages escrow accounts.
Single-Family Properties: Properties with only 1 to 4 units.
Step-Rate Mortgage: A mortgage where the interest rate increases according to a predetermined schedule, resulting in increased payments until all scheduled increases have been met.
Subdivision: A a tract of land that has been divided into individual lots for lease or sale.
Subordinate Financing: Any lien that is subordinate to the first mortgage.
Subsidized Second Mortgage: A second mortgage issued to lower income households by a state, county, or local housing agency, foundation, or nonprofit corporation, at the same time a first mortgage is being purchased. The second mortgage's payments are often deferred and have little or no interest rate.
Survey: A map showing the legal boundaries of a property as well as manmade or natural physical features.
Tenant-Stockholder: A stockholder and tenant in a cooperative corporation that is under a proprietary lease or occupancy agreement.
Third-Party Origination: When a lender uses a third party to originate, process, underwrite, close, fund, or package a second mortgage. Also see mortgage broker.
Title: The legal document stating a person's ownership or right to a property.
Title Company: A company that specializes in insuring and examining real estate titles.
Title Insurance: Insurance that protects against disputes over a property's ownership. Can be isued to lender or borrower.
Title Search: A records search to ensure that the property is owned by the seller and to see what liens or outstanding other claims there are on the property.
Total Expense Ratio: Total obligations as a percentage of gross monthly income, including housing expenses and other debts.
Transfer Tax: State and other taxes owed when a title is passed on to a new owner.
Treasury Index: An index based on the fair market value of U.S. Treasury bills. The index is used to determine interest rate changes.
Trustee: A person who legally controls someone else's property for their benefit.
Truth-In-Lending: A federal law requiring lenders to disclose the full terms and conditions of a mortgage, and all charges included, in writing.
Two-Step Mortgage: An adjustable-rate mortgage (ARM) that offers one interest rate for the first five or seven years, and a different one for the remainder of the loan's term.
Underwriting: The analysis of a borrower's credit, and the property's fair market value, to determine the risk involved for the lender.
Unsecured Loan: A loan that is not backed by collateral.
VA Mortgage: A mortgage guaranteed by the Department of Veterans Affairs (VA). Also see government mortgage.
Wraparound Mortgage: A mortgage that includes two mortgages: the remaining balance of an existing first mortgage, and an additional amount. The homeowner pays for both mortgages in one payment, to the Wraparound Mortgage, and the money owed to the first mortgage is distributed from there.