The real estate and finance industries often seem to have their own language. Need help understanding a mortgage term? Just enter a word or phrase below and click the “Search” button. Or click a letter below for an alphabetized listing.
The act of accepting an offer to enter into a contract. Acceptance is binding and legal when both parties agree to the initial terms or after both parties have accepted all counter offers.
additional principal payment
A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
An interest rate that is adjusted periodically on the basis of changes in a specified index.
adjustable rate mortgage (ARM)
A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.
The original cost of a property plus the cost of any improvements less depreciation.
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.
A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.
The gradual repayment of a mortgage loan by installments.
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
To repay a mortgage with regular payments that cover both principal and interest.
annual mortgagor statement
A report sent to the mortgagor (borrower) each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
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annual percentage rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points). Comparing the Annual Percentage Rates of different loans is regarded as a better way to gauge the overall cost of a loan than simply comparing rates because it takes all of these factors into consideration.
An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.
A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.
A fee that may be charged by a lender, mortgage broker or mortgage banker to accept a mortgage loan application.
A written analysis of the estimated value of a property prepared by a qualified appraiser. Contrast with home inspection.
A fee charged to complete an estimate of the value of real property. This fee may be paid to the lender or directly to the appraiser.
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
An individual who is qualified to estimate the value of real and personal property.
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
The value placed on property by a public tax assessor for purposes of taxation.
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The process of placing a value on property for the strict purpose of taxation. May also refer to a levy (tax) against property for a special purpose, such as a sewer assessment.
A public official who establishes the value of a property for taxation purposes.
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
The transfer of a mortgage from one person to another.
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
The transfer of the seller's existing mortgage to the buyer. See assumable mortgage.
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
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A financial statement that shows assets, liabilities, and net worth as of a specific date. This is generally needed to underwrite people who are self-employed.
A mortgage that has level monthly payments of principal and interest that do not fully amortize the loan. The balance is due in a lump sum payment at a specified date, usually at the end of the term.
The final lump sum payment that is made at the maturity date of a balloon mortgage.
A person, firm, or corporation ("debtor") that, through a court proceeding, is relieved from the payment of some or all debts, usually after the surrender of all assets to a court-appointed trustee or the reorganization of the debtor's assets and liabilities. Usually, at least two years must elapse from the discharge of the bankruptcy before lenders will consider making a loan to someone who had declared bankruptcy.
A proceeding in a federal court in which a debtor who owes more than his or her assets can receive debt relief by transferring his or her assets to a trustee or agreeing to reorganization of assets and liabilities. Usually, at least two years must elapse from the discharge of the bankruptcy before lenders will consider making a loan to someone who had declared bankruptcy.
Basis is used to compute the amount of any taxable gain or loss when selling a property. It includes the original cost of the property plus closing costs, selling costs and the cost of any improvements made.
An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.
bill of sale
A written document that transfers title to personal property.
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
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blanket insurance policy
A single policy that covers more than one piece of property (or more than one person).
In good faith, without fraud.
An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
A violation of any legal obligation.
A loan which provides funds for a homebuyer to make a downpayment and pay closing costs on a new home before the present home is sold. Also known as "gap financing."
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. See mortgage broker.
A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.
A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. "Rent" is an example of an expense category. "Salary" is a typical income category.
Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.
An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.
buyer's attorney's fees
Fees paid by a homebuyer for legal services and/or advice in conjunction with purchasing real estate.
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A provision in the mortgage that gives the lender the right to call the mortgage due and payable in full at the end of a specified period.
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. See lifetime payment cap, lifetime rate cap, periodic payment cap, and periodic rate cap.
(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.
The cost of an improvement made to extend the useful life of a property or to add to its value.
capital gains tax
Tax paid on the gain realized upon the sale of an asset.
A permanent improvement to real property that increases its value and useful life.
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
certificate of deposit (CD)
A document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period.
certificate of deposit index
An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. See adjustable-rate mortgage (ARM).
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Certificate of Eligibility
A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.
certificate of title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
chain of title
The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
A title that is free of liens or legal questions as to ownership of the property.
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."
The party who conducts the closing meeting. This role may be filled by an attorney, title company, or real estate agents depending on the state where the property is located.
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or real estate agents often provide estimates of closing costs to prospective homebuyers.
See HUD-1/closing disclosure
A person who signs a promissory note along with the borrower. Contrast with endorser. See also non-occupant co-borrower.
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A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.
A formal offer by a lender stating the terms under which it agrees to lend money to a homebuyer. Also known as a "loan commitment."
The length of time that the lender's commitment is valid.
An area jointly owned by the owners or tenants of a complex or subdivision, for the common use of residents. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, etc.
common area assessments
Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.
A form of ownership recognized in some states under which property acquired during a marriage is presumed to be owned jointly by husband and wife unless acquired as separate property of either spouse.
An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties similar to the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property. Also called "comps."
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Interest paid on the original principal balance and on the accrued and unpaid interest.
The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.
Tasks that must be completed before your loan can be funded.
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
A mortgage loan which is within the loan amounts and underwriting guidelines that have been established by government sponsored entities for mortgage loans being sold in the secondary market.
items that are paid for or given by a landlord or seller to induce a prospective tenant or buyer to sign a lease or purchase property.
A short-term loan intended to finance the cost of construction, usually of a house. The lender makes payments to the builder at periodic intervals as the work progresses.
consumer reporting agency (or bureau)
An organization that compiles information about a consumers’ credit histories.
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
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An oral or written agreement to do or not to do a certain thing.
conventional mortgage/conventional loan
A real estate mortgage that is not affiliated with the FHA or VA.
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.
Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.
A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.
Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
cost of funds index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).
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A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
Credit Disability Insurance
A type of insurance available to borrowers that pays all or part of a minimum monthly payment for a specified length of time if the borrower becomes disabled.
A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.
credit life insurance
A type of insurance available to borrowers that will pay off the mortgage debt if the borrower dies while the policy is in force.
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. See merged credit report.
credit report fee
Fee charged by a lender to obtain an applicant's credit report for review in conjunction with a mortgage loan application.
A person to whom money is owed.
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An amount owed to another. See installment loan and revolving liability.
The percentage of gross monthly income that goes toward paying all long term debts, such as mortgage loans, car loans, student loans, credit cards, etc. If your monthly gross income is $4,500 and the total of your debt payments is $1,620, your debt-to-income ratio is 36% ($1,620 divided by $4,500).
The legal document transferring or conveying title to a property from one party to another.
deed of trust
The document used in some states instead of a mortgage; title is conveyed to a trustee to be held in trust as security for the lender.
With the lender’s approval, a borrower may transfer the deed to a property to the lender to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Failure to make mortgage payments when mortgage payments are due.
Department of Veterans Affairs (VA)
Money given to bind the sale of real estate or assure payment or an advance of funds in the processing of a loan. See earnest money deposit.
A decline in the value of property; the opposite of appreciation.
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document preparation fees
Fees charged by a lender or closing agent to prepare the documents associated with providing a mortgage loan.
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
This terminology is usually used for second mortgages. See due-on-sale provision.
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earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
A right of way giving persons other than the owner access to or over a property.
An appraiser's estimate of the physical condition of a building. The actual age of a building may be different than its effective age.
effective gross income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
effective percentage rate (EPR)
Similar to the Annual Percentage Rate (APR), the Effective Percentage Rate (EPR) measures the cost of a mortgage stated as a yearly rate and includes such items as interest, mortgage insurance, and loan origination fee (points). The difference between the EPR and the APR is that the APR calculates the cost of a loan over the entire term of the loan (30 year, for example). The EPR calculates the cost of the loan over the time you expect to keep the loan. This changes the relative costs of different loans because it spreads your closing costs over what is usually a shorter time.
Funds left after you have made your down payment and paid all closing costs. Some lenders require enough funds in reserve to pay two monthly mortgage payments.
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
An improvement that intrudes illegally on another's property.
An outstanding lien or claim against real property.
A person who signs ownership interest over to another party. Contrast with co-borrower.
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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.
A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage. For example, if the fair market value of your home is $125,000 and your mortgage balance is $119,000, then your equity equals $6,000.
A deposit of money, valuables or documents with an impartial third party.
The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses. See escrow.
The periodic review of escrow accounts to determine if current monthly deposits are adequate to pay taxes, insurance, and other bills when they are due.
Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
The portion of a borrower's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, and other items as they become due. Known as "impounds" or "reserves" in some states.
The ownership interest a person has in real property. Also, the total value of all the real property and personal property owned by an individual at the time of their death.
The legal process to remove an occupant from real property.
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examination of title
Reviewing a property's chain of title from the public records or an abstract of the title.
A written contract that gives a licensed real estate agent the exclusive right to sell a property and collect a commission for a specified time, but reserving the owner’s right to sell the property alone without paying a commission.
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Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
fair market value
The price at which a property will sell from a willing buyer to a willing seller, each of whom has a reasonable knowledge of all the pertinent facts and neither being under any obligation to buy or sell.
A congressionally chartered, shareholder-owned company that supports the secondary market in mortgages on residential property with mortgage purchase and securitization programs.
Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
Ownership of real property that is believed to be unrestricted subject to eminent domain, police powers or other restrictions for public benefit.
fee simple estate
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
FHA coinsured mortgage
A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor's default.
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
A mortgage that is the primary lien against a property.
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The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.
fixed-rate mortgage (FRM)
A mortgage loan in which the payments and interest rate do not change during the term of the loan.
Personal property that becomes real property when attached in a permanent manner to real estate.
During the time between loan application and closing, the interest rate for the loan is not locked. It can change based on changes in the financial markets.
Insurance that reimburses the policyholder for physical property damage resulting from flooding. It is required for properties located in federally-designated flood areas.
The legal action allowing a lender to sell a borrower's property in an attempt to satisfy the debt.
The loss or surrender of money, property, rights, or privileges due to a breach of legal obligation.
An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not-for-profit organizations.
Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Monies must be repaid to avoid serious penalty charges.
A congressionally chartered, shareholder-owned company that supports the secondary market in mortgages on residential and multifamily property with mortgage purchase and securitization programs.
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.
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good faith estimate (GFE)/loan estimate (LE)
A written estimate provided by a mortgage lender of the closing costs, loan terms, and projected payments. a borrower can expect to pay at or before settlement. This estimate must be mailed or delivered to all loan applicants within three business days after a loan application is received. As of October 3, 2015, the Initial TIL disclosure and Good Faith Estimate have been combined to create the Loan Estimate.
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortgage.
Government National Mortgage Association (GNMA)
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD) that guarantees securities backed by mortgages that are insured or guaranteed by other government agencies. Also known as Ginnie Mae.
The person who is the recipient of an interest in real property.
The person who transfers an interest in real property to another person.
Total income before any taxes or expenses are deducted.
Any loan guaranteed by a government agency, such as the FHA or VA, or other interested party.
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
A program for all new Genworth Mortgage Insurance customers that offers thousands of dollars of savings through partner retailers that sell products and services for the home.
Home Equity Conversion Mortgage (HECM)
A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.
home equity line of credit
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.
Homeowner Assistance program
A Genworth Mortgage Insurance program that helps delinquent homeowners find ways to avoid foreclosure and stay in their homes.
homeowners' association (HOA)
A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
homeowners' association dues
A monthly or quarterly fee paid to a homeowners' association.
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
homeowner's warranty (HOW)
A type of insurance that covers repairs to specified parts of a house for a specific period of time. It may be provided by the builder or property seller as a condition of the sale.
housing expense ratio
The percentage of gross monthly income that goes toward paying housing expenses. If you earn $4,500 (gross) and your house expense is $1,500, you have a 33% housing ratio (1,500 is one third of 4,500).
HUD median income
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
HUD-1/Closing Disclosure (CD)
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, loan terms, projected payment amounts, and initial escrow amounts. Samples of the Closing Disclosure can be found on the CFPB's website. As of October 3, 2015, the final TIL disclosure + HUD-1 Settlement Statement have been combined to create the Closing Disclosure. The HUD-1/Closing Disclosure is also known as the "closing statement" or "settlement sheet".
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See escrow account.
Any property developed or improved to produce income.
A published rate, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on an adjustable-rate mortgage (ARM).
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.
initial interest rate
The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser."
Fees paid by a homebuyer for professional inspections of the property being purchased. The most common inspections are structural/mechanical inspection, termite inspection, and radon test. Others may be necessary depending on the property.
The regular periodic payment that a borrower agrees to make to a lender.
Borrowed money that is repaid in equal payments, known as installments. A car loan is often paid for as an installment loan.
A property title that a title insurance company agrees to insure against defects and disputes.
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
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A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.
The fee charged for borrowing money. Also, a right, title, or share in property.
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, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.
The cost to borrow money expressed as a percentage per year.
interest rate buydown plan
An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specified period, the mortgagor's effective interest rate is "bought down" below the actual interest rate.
interest rate ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
interest rate floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
An amount you will pay when your loan is funded. It's the interest due on your loan to cover the number of days from the day you get your money to the beginning of the next month. For example, if your loan is funded on September 15, you would pay 15 days of interest when the loan closes to cover the period between September 15th and the 30th. Your first payment in this scenario would be due on October 1. You may hear interim interest also referred to as "odd days interest."
A property that is not occupied by the owner.
Involuntary Unemployment Insurance
An additional coverage offered to Genworth Mortgage Insurance customers at no additional cost. Benefit pays mortgage payments for up to six months for qualified lenders who involuntarily lose their job. (see also Job Loss Protection)
IRA (Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.
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A form of co-ownership that gives each tenant an equal undivided ownership in the property, including the right of survivorship.
A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.
A lien on debtor's property resulting from the decree of a court.
A type of foreclosure proceeding that is handled as a civil lawsuit and conducted entirely under the supervision of a court. Used only in certain states.
A mortgage loan that exceeds the legislated purchase limits of Fannie Mae and Freddie Mac. Also called a non-conforming loan.
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
lease-purchase mortgage loan
An alternative financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which money for a downpayment will accumulate.
A property description, acceptable by real estate law, that is sufficient to locate and identify the property without oral testimony.
lender's attorney's fees
Fees paid by a lender for legal services and/or advice in conjunction with providing a mortgage loan. These fees may be charged to the borrower.
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.
A legal claim against a property that must be paid off when the property is sold.
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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. See cap.
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.
line of credit
An agreement by a bank or financial institution to extend credit up to a specific amount for a certain period of time to a specified borrower. See home equity line of credit.
A cash asset or an asset that is easily converted into cash.
The real estate agent employed by the seller to find a buyer.
A sum of borrowed money (principal) that is generally repaid with interest.
This document, completed by the applicant, contains information about the type of mortgage being applied for and personal financial situation of the applicant.
loan application fee
A fee charged by a lender, mortgage broker or mortgage banker to an applicant when a loan application is submitted.
See commitment letter.
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Inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced. See also Predatory Lending.
The process by which a mortgage lender brings into existence a mortgage secured by real property.
A description of the loan features including whether the interest rate changes and how long the loan will last.
loan-to-value (LTV) percentage
The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage of 80 percent.
A written agreement in which the lender guarantees a specified interest rate if a mortgage closes within a set period of time. The lock-in also usually specifies the number of points to be paid at closing. See rate lock.
The time period during which the lender has guaranteed an interest rate to a borrower. See lock-in.
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For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.
A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
merged credit report
A credit report that contains information from the three major, nationwide credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of your credit.
The act of changing any of the terms of the mortgage.
monthly fixed installment
That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.
monthly payment mortgage
A mortgage that requires payments to reduce the debt once a month.
A legal document that pledges a property to the lender as security for payment of a debt.
An individual or company that originates mortgages exclusively for resale in the secondary mortgage market.
An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services. See broker.
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The lender in a mortgage agreement.
mortgage insurance (MI)
A contract that insures the lender against loss caused by a borrower's default on a government mortgage or conventional mortgage. Most lenders generally require MI for a loan with a loan-to-value (LTV) greater than 80%. Mortgage insurance can be issued by a private company(such as Genworth) or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually the entire mortgage loan.
mortgage insurance premium (MIP)
The amount paid by a borrower for mortgage insurance, either to a private mortgage insurance (MI) company, such as Genworth or to a government agency such as the Federal Housing Administration (FHA).
mortgage life insurance
A type of term life insurance paid by borrowers. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.
A loan secured by real property.
mortgage origination fee
See origination fee.
The monthly payment of principal and interest required by a mortgage loan.
The borrower in a mortgage agreement.
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
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A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the full amount of interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.
net cash flow
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.
The value of all of a person's assets, including cash, minus all liabilities.
An asset that cannot easily be converted into cash.
A non-occupant co-borrower is someone who applies to get a loan with another person but they don't intend on living in the property. An example of this is a young couple buying a home who need their parents as co-signers in order to qualify. The parents, since they're not going to live in the home, are non-occupant co-borrowers.
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
The interest rate stated on a mortgage note.
notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
offer to purchase
A written document submitted by the buyer to the seller containing the price and conditions under which the property will be bought.
original principal balance
The total amount of principal owed on a mortgage before any payments are made.
A fee paid to a lender for processing a loan application. The origination fee may be stated in the form of points. One point is 1% of the mortgage amount.
See origination fee.
A property purchase transaction in which the property seller provides all or part of the financing.
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.
payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.
periodic payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period. See cap.
periodic rate cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be. See cap.
Principal, interest, taxes, and insurance (PITI).
Any property that is not classified as real estate.
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
planned unit development (PUD)
A thorough development plan for a large area of land. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. Also, a subdivision’s common areas are reserved for the use of some or all of the owners of the separately owned lots.
See mortgage insurance.
A "point" represents a fee collected by lenders to lower the interest rate you pay on your loan. One point equals one percent of the loan amount. That means if you borrow $150,000 and pay one point, the point equals $1,500. Points are, in effect, pre-paid interest. As a general rule, if you pay more points, the interest rate will be lower.
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power of attorney
A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
A process that lets you get approved for your loan before you find a house to buy.
prearranged refinancing agreement
A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.
Making unaffordable loans based on the assets of the borrower rather than the borrowers ability to repay. Inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping"). Engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.
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Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense ratio and total expense ratio.
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
An invisible, odorless gas found in some homes that in sufficient concentrations may cause health problems.
A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term.
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time. A rate lock guarantees the rate you choose will not change between the time you tell the lender you want to lock the rate and when the loan closes. See lock-in.
real estate agent/broker
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
Land and improvements, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
The noting in the recorder's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
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The process of paying off one loan with the proceeds from a new loan using the same property as security. Also known as a rate/term refinance. (See also Loan Flipping)
A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.
A fee charged by a lienholder to discharge a secured property from a lien.
The amount of principal that has not yet been repaid. See principal balance.
The original amortization term minus the number of payments that have been applied.
rent with option to buy
See lease-purchase mortgage loan.
An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."
replacement reserve fund
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.
Money accumulated and set aside to cover recurring, periodic expenses, such as property repairs or taxes. Also, funds set aside to be used to make monthly mortgage payments in the case of financial difficulty.
A special type of mortgage that enables home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a home equity conversion mortgage. This product is usually attractive to older homeowners who have accumulated substantial equity in their homes.
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A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
right of first refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
right of ingress or egress
The right to enter or leave designated premises.
right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
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A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
A mortgage that has a lien position subordinate to the first mortgage.
secondary mortgage market
The buying and selling of existing mortgages.
A loan that is backed by collateral.
The property that will be pledged as collateral for a loan.
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See owner financing.
The real estate agent who represents the seller of a property. Unless otherwise stated by a written agreement, all real estate agents are required to represent the interests of the seller.
An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
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See closing agent.
See closing costs.
See HUD-1/closing disclosure.
special deposit account
An account that is established for rehabilitation mortgages to hold the funds needed for the rehabilitation work so they can be disbursed from time to time as particular portions of the work are completed.
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Expenses which may be deducted from your income before taxes are computed. Mortgage interest is one such expense.
tenancy by the entirety
A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.
tenancy in common
A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenacy.
The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy agreement.
The length of time a loan will last if all scheduled payments are made when due.
The key features of a mortgage loan, including: the interest rate and whether is it fixed or adjustable, the length of time to repay the loan, and any fees associated with obtaining the loan.
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market. See mortgage broker.
A legal document evidencing a person's right to own or ownership of a property.
A company that specializes in examining and insuring titles to real estate.
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
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See title search.
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
total expense ratio
Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.
Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.
transfer of ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
State or local tax payable when title passes from one owner to another. Sometimes referred to as "tax stamps."
An index that is used to determine interest rate changes for certain adjustable rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. See adjustable-rate mortgage (ARM).
An individual who holds legal title to a property in trust for the benefit of another.
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
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The individual(s) who evaluate a loan application to determine the risk involved for the lender.
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
A loan that is not backed by collateral.
A mortgage loan that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
VA (Department of Veterans Affairs )
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.