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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
1003 Uniform Application for a Home Loan
A & D LOAN Acquisition and development loans are used to buy raw land that will be used for building.
Abstract Title A written history of the people who have owned a piece of land
Acceleration Clause If you don't pay back your loan on time, the lender can speed up the rate at which it's due or even demand immediate payment of the whole loan balance.
Acknowledgment A statement by a notary that the signer is who they say they are, either through personal knowledge or written proof.
Adjustable Rate Mortgage (ARM) is a type of mortgage where the interest rate changes over time based on an index that was chosen ahead of time. The renegotiable rate mortgage is also sometimes called the variable rate mortgage or the Canadian rollover mortgage. (ARM)
Adjustment Interval On an adjustable-rate mortgage, the time between changes in the interest rate and/or the monthly payment is usually one, three, or five years, depending on the index.
Affidavit A written promise made under oath.
American Land Title Association (ALTA)
(ALTA) is a group of real estate law-focused title companies that has standardized forms and coverage across the country. This is what's called standard coverage.
Amortized / Amortization is the process of paying off a loan by making equal payments over time. The goal is to pay off the debt at the end of a set period, including any interest that has built up on the balance. At the end of the loan term, the whole loan will have been paid off.
Annual Percentage Rate (APR) This is an interest rate that shows how much a mortgage costs over a year. This rate is likely to be higher than the note rate or advertised rate on the mortgage because it takes into account points and other credit costs. With the APR, homebuyers can compare different types of mortgages based on how much each loan will cost them over the course of a year.
Appraisal A professional called a "appraiser" makes a guess about how much a piece of real estate is worth. To find out how much your property is worth, you will need an appraisal.
Assumption The deal between a buyer and a seller in which the buyer takes over the seller's mortgage payments. This must be okayed by the lender and be written into the note that the seller signed.
Back End This is the debt-to-income ratio, which is calculated by dividing the monthly gross income by the sum of the principal, interest, taxes, insurance, and consumer credit obligations. The amount is given as a percentage.
Balloon Usually a short-term loan with a fixed interest rate and small payments for a set amount of time, followed by one large payment for the rest of the principal at a time set in the contract.
Beneficiary Who gives the loan money. This is the person or group that is owed the loan.
BK / Bankruptcy Reorganizing or getting rid of debts. It could also be called Chapter 7, Chapter 11, or Chapter 13.
Broker A person whose business it is to help clients find funding or negotiate contracts, but who doesn't lend the money himself. Most of the time, brokers charge a fee or get a commission for their work.
Buy Down When the lender or the person who built the house helps pay for the mortgage by lowering the interest rate for the first few years. Even though the payments are low at first, they will go up when the subsidy ends.
Cap Cap The highest rate that a mortgage with an adjustable rate can go up to. It can be written as either the actual rate or the amount that can change above the starting rate. For example, if the starting rate was 7.99% and the maximum rate change was 6%, the maximum interest rate would be 13.99%.
Cash Out Any money that goes straight to the borrower.
Certificate of Occupancy A certificate given to a builder by the city government that says the building is in good enough shape to be lived in.
Certified Copy A true copy that the officer who has the original signed to say is true. It should be signed and stamped to show that it is a real copy.
Clear-to-close There are no more conditions that need to be met for the loan to be closed.
Closing The meeting where the property and money legally change hands between the buyer, seller, and lender or their agents. Also known as settling.
Closing Costs Most settlement costs include an origination fee, discount points, an appraisal fee, a title search and insurance, a survey, taxes, a fee for recording the deed, a credit report fee, and other costs. Most of the time, closing costs are between 3 and 6 percent of the total loan amount. Or any fees that are being charged to make the credit request possible.
Commitment A written contract between a lender and a borrower that says the borrower will get money at a certain time in the future as long as certain conditions are met.
Community Property is property that a husband and wife own together and that was not bought as separate property. A type of property that is only found in certain states. In states with "community property," a spouse can own part of an asset even if their name isn't on the title.
Comp. / Comparable A property that has the same basic features as the one whose value you want to find (usually a real estate appraisal.) It should have just been sold and be as similar as possible to what was sold.
Condominium The right to live in certain parts of a building that is owned by a group. The property is run by a board, which is often called a Homeowners Association.
Construction Loan A short-term loan to help pay for the costs of building. As the work goes on, the lender gives the builder money at regular intervals..
Consumer Credit Credit that a person owes that is not backed by real estate.
Conventional Loan A mortgage that is not backed by the FHA, the VA, or the Farmers Home Administration (FMHA)
Conversion Clause Some ARMS (Adjustable Rate Mortgages) have a feature that lets you switch to a fixed-rate loan at some point during the loan term.
Credit Ratio When a borrower's monthly payment on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income, the ratio is given as a percentage (Conventional loans).
Credit Report History of how the buyer's credit has been used in the past.
Credit Score A person's credit score shows whether or not they are a good credit risk. The TRW, Equifax, and Trans Union companies gave these scores.
D.R. / Debt Ratio The customer's monthly expenses divided by their gross monthly income. Also see Back End.
Deed A legal document that shows who owns a piece of property.
Deed of Trust A piece of paper that is used to pledge real property as security for a debt. A deed of trust can sometimes be used instead of a mortgage
Default Not living up to the terms of a contract, in this case, not making the monthly mortgage payments.
Deferred Interest See Negative Amortization for more on deferred interest.
Delinquency Not making payments when they are due. This can lead to losing your home.
Department of Veterans Affairs (VA) A separate part of the federal government that helps veterans get long-term mortgages with low or no down payments
Derog Letter A letter that the borrower writes to explain why they have bad credit.
Derog This is short for "derogatory," which is a term for things that hurt your credit.
Discharge After a bankruptcy case is over, debts that have been "discharged" are no longer owed or collectible. Lenders will want copies of any previous bankruptcy discharge papers.
Discount Points At closing, the lender takes into account any pre-paid interest. Each point costs 1 percent of the loan amount, so two points on a $100,000 mortgage would cost $2,000.
Dismissal A Bankruptcy Dismissal document will be needed to move forward with the loan if the bankruptcy is dropped before it is finished. The debt can be dropped by either the court or the debtor.
Down Payment Money paid to cover the difference between the price of the house and the amount of the mortgage. Conventional loans usually require 10 to 20 percent of the sales price as a down payment, while FHA and VA loans require no money down up to 5 percent.
Due-On-Sale Clause A clause in a mortgage or deed of trust that lets the lender demand immediate payment of the balance of the mortgage if the person with the mortgage sells the home.
Earnest Money Money that a buyer gives to a seller as part of the purchase price to seal a deal or make sure that the seller will get paid.
Easements A right to use or build on property that belongs to someone else, like the right to cross or build next to it.
Encroachment A part of a piece of property that goes onto someone else's land.
Equal Credit Opportunity Act (ECOA) (ECOA) is a federal law that says lenders and other creditors can't treat people differently based on their race, colour, religion, national origin, age, sex, marital status, or whether or not they get money from government programmes.
Equity The owner's interest is the difference between the fair market value and the current amount of debt.
Escrow Instructions for Escrow Instructions to the escrow agent about the terms and conditions of the transaction that both parties have agreed to.
Escrow Waiver Ask a borrower to pay their own insurance and taxes. Escrow waivers are rarely given to people who own less than 25% of the property.
Escrow A neutral third party who follows both the buyer's and seller's instructions to handle all the paperwork for settlement or "closing." Escrow can also mean a bank account that the lender keeps and the buyer puts money into to pay taxes or insurance.
Farmers Home Administration (FMHA) (FMHA) helps farmers and other qualified borrowers who can't get loans elsewhere get the money they need.
Federal Home Loan Mortgage Corporation (FHLMC) (FHLMC), also known as Freddie Mac, is a quasi-government agency that buys conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.
Federal Housing Administration (FHA) A part of the Department of Housing and Urban Development is called the Federal Housing Administration (FHA). Its main job is to back private lenders' home mortgage loans with insurance. FHA also sets rules for how mortgages are underwritten
Federal National Mortgage Association (FNMA) Fannie Mae is another name for the Federal National Mortgage Association (FNMA). A corporation that pays taxes and buys and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. It was set up by Congress. This organisation, which pays for one out of every seven mortgages, makes it easier to get and pay for mortgage money.
Fee Simple The most common type of ownership, in which the person who gets the property owns both the land and the buildings on it.
FHA Loan A loan that is insured by the Federal Housing Administration and can be used by anyone who meets the requirements. FHA loans have size limits, but they are still big enough to cover moderately priced homes almost everywhere in the country.
FHA Mortgage Insurance For an FHA loan to be insured, a small fee (up to 3 percent of the loan amount) must be paid at closing or a portion of this fee must be added to each monthly payment. On a $75,000 30-year FHA loan with a fixed interest rate of 9.5%, this fee would be either $2,250 at closing or an extra $31 a month for the life of the loan. Also, FHA mortgage insurance comes with an annual fee of 0.5% of the loan amount.
Fixed-Rate Mortgage A mortgage where the interest rate stays the same for the whole loan period.
Flood Insurance A type of insurance that is required for some homeowners whose homes are built in a flood zone.
Foreclosure A legal process in which the lender sells the borrower's property to pay off the borrower's debt.
Free and Clear This means the property has been paid for in full and there are no liens on it.
Functional Obsolescence A drop in property value because the design or materials aren't as useful as they should be.
GFE stands for "Good Faith Estimate of Buyers Loan Fees."
Government National Mortgage Association (GNMA) (GNMA), also known as Ginnie Mae, provides sources of money for home mortgages that are insured or guaranteed by FHA or VA.
Graduated Payment Mortgage (GPM) (GPM) A type of mortgage with flexible payments where the payments go up for a certain amount of time and then stay the same. This kind of mortgage is set up so that the payments go down instead of up.
Grant Deed Grant Deed Most title transfer deeds look like a "Grant Deed" A Grant Deed has guarantees against previous transfers or liens
Gross Monthly Income Each Month Before any expenses are taken out, this is how much money the borrower makes each month.
Guarantee A promise by one party to pay a debt or fulfil an obligation of another party if the first party doesn't pay the debt or fulfil the obligation.
Hazard Insurance A type of insurance in which the insurance company protects the insured against certain losses, like fire, windstorm, and other similar things. It does not cover damage from earthquakes, riots, or floods.
Homestead The house and land that the head of the family lives on. Some states have laws that protect homestead property from the rights of creditors, usually up to a certain maximum amount. In some states, you can also get a break on your property taxes.
Housing Expenses-to-Income Ratio When a borrower's housing costs are divided by his or her net effective income (FHA/VA loans) or gross monthly income, the result is a percentage called the housing ratio (Conventional loans).
Impound That part of a borrower's monthly payment that is held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other things as they come due. The same thing as reserves
Index A published interest rate that lenders use to measure the difference between the current interest rate on an adjustable rate mortgage and the interest earned by other investments, such as one-, three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans. This difference is then used to adjust the interest rate on an adjustable mortgage up or down
Interest Bearing A way of figuring out interest where the loan's current balance is multiplied by a daily or monthly rate (1/365 or 1/12 of the annual interest rate).
Investor Investors are a lender's source of money.
Joint Tenants A way to own property in which the owners have 100% rights of survivorship unless a will says otherwise.
Jumbo Loan A loan that is bigger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (more than $424,100). Since these two agencies can't pay for jumbo loans, they usually have a higher interest rate.
Land Contract A contract between the seller and the buyer that says the buyer won't get the title until all of the payments have been made.
Leasehold Estate A type of real estate ownership in which the lessor does not own the property but can use it as long as the terms of the lease are followed.
Legal Description A way to find the location of a piece or parcel of land that can be used in court.
LIBOR stands for the London InterBank Offered Rate. LIBOR is the base interest rate that banks in the Eurodollar market pay each other for deposits.
Lien A claim on a piece of property to pay off a debt or fulfil an obligation.
Loan Committee Usually, the Underwriting process is done by the Loan Committee.
Loan Risk The loan's rate category shows how likely it is that the borrower will not pay back the loan and lose money in the future.
Loan-To-Value Ratio (LTV) As a percentage, the relationship between the amount of the mortgage loan and the property's appraised value.
Margin At each adjustment, the number of percentage points added to the index rate by the lender to figure out the ARM interest rate.
Market Value The most a buyer would pay for a property and the least a seller would accept for it. The price a property could be sold for at a certain time may be different from its market value.
Mortgage Escrow Accounts The account that the Lender sets up to pay the Borrower's taxes and insurance on their behalf.
Mortgage Insurance When the down payment is less than 20%, this is the money that is paid to cover the mortgage. Look at Private Mortgage Insurance or FHA Mortgage Insurance.
Mortgagee The lender.
Mortgagor The borrower or owner of the house
Negative Amortization Amortization means that the monthly payments on a mortgage are big enough to cover both the interest and the principal. When the monthly payments don't cover all of the interest cost, this is called negative amortisation. The cost of interest that isn't covered is added to the amount of the loan that hasn't been paid back. This means that a borrower may still owe more at the end of the loan, even if they have made many payments.
Net Effective Income The borrower's gross income minus the tax they pay to the government.
Non-Assumption Clause There are clauses in the mortgage contract that say the mortgage can't be taken over without the lender's permission.
Non-Owner Occupied A property that is owned by someone but is not their main home.
Notary Public A person named by the state who can verify a person's identity when they sign different kinds of documents.
Note Note with a promise to pay. This document spells out the terms of the loan and makes it the borrower's legal responsibility to pay back the debt.
Obligations Any debt or regular payment that the borrower has to make, like a mortgage payment.
Origination Fee The fee a lender charges to prepare loan documents, check credit, inspect, and sometimes value a property. It is usually calculated as a percentage of the loan amount.
Owner Occupied The name given to a property that is used as the owner's home.
Owners Policy A title insurance policy that protects the buyer in case there are problems with the title.return to top
P & I This is a reference to the "principal" and "interest" parts of the mortgage payment that are made every month.
P & L / Profit and Loss A business's gross income, cost of goods, operating costs, and net profit or loss are all listed on the income statement.
P.I.T.I. P.I.T.I. Taxes and insurance are also taken into account. The total monthly cost of getting a loan to buy a home.
P.U.D. stands for P.U.D. Property that is owned by a group, where each person owns the land and building they live on, but also has a share in a common area. The development will be run by a board, which is often called a Homeowners Association.
Piggy Back Loan
To make it easier to close on the first mortgage, a "piggyback loan" was used to get financing that came after the first mortgage. A secondary financing is another name for this.
Points One point is equal to 1% of the loan's principal amount. See also: Discount Points.
Power of Attorney A permission given by one person to another so that the other can act on his or her behalf. Power of attorney can be limited to certain areas or it can be used in a lot of different situations.
Pre-Approval The Buyer has already started the application process, and an underwriter has approved their income, funds, and credit. Be careful if the approval has any conditions.
Prelim. / Preliminary Title Report The report on the title that was made at the start of the application process. It tells the mortgage company what liens are on the property and what needs to be done before the trust deed can be recorded to get a clear title.
Prepaid Interest The part of the interest that is paid at the end of the loan that covers the time between when the loan is funded and when the first 30-day payment period starts. For instance, if the loan was closed on February 15, the first payment due on April 1 would cover interest from March 1 to April 1. The interest paid in advance would cover the time from February 15 to February 28.
Prepaids Costs that have already been paid that are needed to set up an escrow account or make changes to the seller's existing escrow account. Taxes, hazard insurance, private mortgage insurance, and special assessments are some of the things that can be added.
Prepayment Penalty Fees that are charged when a debt is paid off early. Prepayment penalties are allowed in some form in 36 states and the District of Columbia, but they aren't always put in place.
Prepayment A feature of a mortgage that lets the borrower make payments before they are due.
Pre-Qualified A loan expert has talked to the buyer about their finances. No one has tried to check if any of the information about the borrowers is true. PRE-Qualification only tells the buyer what they should be able to get.
Principal The amount of debt left on a loan, without interest.
Private Mortgage Insurance (PMI) If you don't have enough money for a 20% down payment, some lenders will let you put down less, sometimes as little as 5%. When a borrower gets a loan with a smaller down payment, however, they usually have to pay for private mortgage insurance. Private mortgage insurance will require a one-time premium payment of 1% to 5% of your mortgage amount. Depending on how your loan is set up, you may also have to pay a monthly fee. With a 10% down payment on a $75,000 house, this would mean either an initial premium payment of $2,025–$3,375 or an initial premium payment of $675–$1,130 plus a monthly payment of $25–$30.
Purchase Agreement An agreement between the buyer and seller of a property that includes the price of the property and any conditions that might affect the sale.
Quit Claim A deed that acts as a release. It is meant to pass on any title, interest, or claim that the grantor may have in the property, but it doesn't guarantee that the grantor has a valid interest or title.
Taking market risk on an interest rate in the hopes that it will go down before closing.
Rate Lock Choosing to keep a rate the same for a certain amount of time.
Ratios How a buyer's housing costs and debts relate to how much money they make.
Real Estate Settlement Procedures Act (RESPA) RESPA is a federal law that lets people look at information about known or estimated settlement costs once after applying and once before or at settlement. The law says that lenders can only give information after someone has applied.
Realtor A real estate broker or associate who is an active member of a local real estate board that is part of the National Association of Realtors.
Rescission The act of ending a contract. When it comes to mortgage refinancing, the law gives the homeowner three days to back out of a deal after it has been signed if the deal uses the home's equity as security.
Recon / Reconveyance The trustee files a release of lien with the county recorder.
Recording Fees Money paid to the lender so that a home sale can be recorded with the local government and become part of the public record.
REFI is a slang term for a "refinance," which is a new mortgage on the same property with the same owner.
Request for Reconveyance The beneficiary confirms to the trustee that the terms of the lien have been met and asks that the lien be removed.
Reverse Annuity Mortgage (RAM) A type of mortgage in which the lender makes regular payments to the borrower, using the borrower's equity in the home as security.
S.I. / Statement of Information The form that the customer fills out for the title company to learn more about who they are. This lets the title company get rid of debts and liens that belong to people with the same name.
Second Mortgage A second mortgage is one that comes after the first one. Called a second because it comes after the first mortgage on the list of liens. Check out Secondary Financing as well.
Secondary Financing Getting financing that comes after the first mortgage to help close the first mortgage. A "piggyback" loan is another name for it.
Servicing All the things a lender does to keep a loan in good standing, like collecting payments, paying taxes and insurance, inspecting the property, and so on.
Settlement Costs See Closing Costs for more on settlement costs.
Settlement Settlement? Check out Closing.
Shared Appreciation Mortgage (SAM) A mortgage in which the borrower pays an interest rate that is lower than the market rate. In exchange, the lender (or another investor, like a family member or business partner) gets a share of the property's future value growth. May also be used for mortgages where the borrower shares the monthly principal and interest payments with another party in exchange for a share of the appreciation.
Submission This is a full loan application package that is sent to the underwriting department for approval.
Subordination Agreement The agreement, which was filed with the county recorder, says what will happen if subordination happens. If a lien holder agrees to let a lien come after one that was recorded later.
Substitution of Trustee A document that changes the trustee on a trust deed. It is filed by the beneficiary.
Surety Bond A bond that protects a party (usually the lender or owner) from harm caused by a lien that is still on the property. Usually, this is done when the original deed has been lost or the beneficiary cannot be found.
Survey A map of land made by a registered land surveyor that shows where the land is in relation to known points, how big it is, and where and how big any buildings are.
Suspended The underwriter can't say yes or no to the loan yet. We need more information.
Tenants in Common A share of ownership in a property held by two or more people who do not have the right to the property if one of them dies.
Term Mortgage See Balloon Payment Mortgage.
Title Insurance The insurance policy that guarantees the lender and/or buyer that the liens on the property are the same as what is written in the title report. The title insurance company will pay for any claim that comes from a lien that wasn't listed.
Title Search A look at the city's records to find out who the legal owner of a piece of property is. Most of the time, a title company does this.
Title A piece of paper that proves someone owns a piece of property.
Trust Deed The Trust Deed puts the note on the property as a lien. This is the paper that says you have the right to get money from the sale of the property.
Truth-in-Lending A federal law that says homebuyers must be told the Annual Percentage Rate soon after they apply for a loan. Also called a TIL.
Two-Step Mortgage A mortgage in which the borrower gets an interest rate that is lower than the market rate for a certain number of years, usually seven or ten, and then gets a new interest rate that is adjusted (within certain limits) to the market at that time. At the end of seven or ten years, the lender sometimes has the right to call back the loan with 30 days' notice. This type of mortgage is also called "Super Seven" or "Premier."
Underwriting Underwriting The process of deciding whether or not to give a loan to a potential home-buyer based on their credit, job, assets, and other factors, and then matching this risk to the right rate, term, or loan amount.
VA Loan A loan with a long term and a low or no down payment that the Department of Veterans Affairs backs. Limited to people who have earned it through military service or other means.
VA Mortgage Funding Fee A fee paid on a VA-backed loan that can be up to 2% of the loan amount, depending on how much the down payment is. On a $75,000, 30-year fixed-rate mortgage with no down payment, this would add up to $1,406, which could be paid at closing or added to the amount being financed.
Variable Rate Mortgage (VRM) See Adjustable Rate Mortgage.
Verification of Deposit (VOD) A signed document from the borrower's bank that confirms the status and balance of his or her accounts.
Verification of Employment (VOE) A signed document from the borrower's employer that confirms his or her job and salary.
Wraparound When a new loan is added to an existing loan that can be taken over, the interest rate is somewhere between the old rate and the current market rate. The payments are sent to a second lender or the previous homeowner, who sends them to the first lender after taking the extra amount off the top.
Zoning The division of a city or county into areas (called "zones") with rules about what can be done with real estate in each zone.