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

A

acceleration clause
A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender. 
Adjustable-rate mortgage (ARM)
A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

amortization schedule
A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.

appraised value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price. 

assessor
A public official who establishes the value of a property for taxation purposes.

assignment
When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment.

B

balloon mortgage
A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty-year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

bankruptcy
By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy, which relieves the borrower of most types of debts. A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

 broker
Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. (See the Home Loan Library that discusses the different types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

C

chain of title
An analysis of the transfers of title to a piece of property over the years.

clear title
A title that is free of liens or legal questions as to ownership of the property. 

closing
This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands.

 cloud on title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action. 

 collection
When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

 community property
In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area. 

D-E-F

D

deed
The legal document conveying title to a property. 

deed-in-lieu
Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.

deed of trust
Some states, like California, do not record mortgages. Instead, they record a deed of trust which is essentially the same thing.

default
Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.

delinquency
Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

due-on-sale provision
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.

E

earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.

encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions. 

equity
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 and other liens.

escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.

escrow account
Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner´s insurance when they come due. The lender pays them with your money instead of you paying them yourself. 

eviction
The lawful expulsion of an occupant from real property.

F

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 highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept. 

first mortgage
The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions.

fixed-rate mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.

foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt. 

401(k)/403(b)
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. 

401(k)/403(b) loan
Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans.

G-H-I

G

government loan (mortgage)
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). Mortgages that are not government loans are classified as conventional loans.

grantee
The person to whom an interest in real property is conveyed.

grantor
The person conveying an interest in real property. 

H

hazard insurance
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards. 

home equity line of credit
A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.

home inspection
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. 

homeowners' association
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.
 

I

Indemnity
An agreement whereby one party agrees to secure another against an anticipated loss or damage.

Interest
Charge paid for borrowing money, calculated as a percentage of the remaining balance of the amount borrowed.

Interest Rate
The annual rate of interest on the loan, expressed as a percentage of 100.

J-K-L

J

joint tenancy
A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.

judgment
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. Alternative spelling is "judgement."

judicial foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.

L

lease
A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

 lease option 
An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price. 

legal description
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

lender
A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."

liabilities
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others. 

lien
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien. 

loan servicing
After you obtain a loan, the company you make the payments to is "servicing" your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.

loan-to-value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).

lock-in period
The time period during which the lender has guaranteed an interest rate to a borrower.

M-N-O

M

margin
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down. 

maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

modification
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.

mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.

mortgage broker
A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships. 

mortgagee
The lender in a mortgage agreement.

mortgage insurance (MI)
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company. 

mortgagor
The borrower in a mortgage agreement.

N

negative amortization
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.

no cash-out refinance
A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."

no-cost loan
Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken. 

O

original principal balance
The total amount of principal owed on a mortgage before any payments are made.

origination fee
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.

owner financing
A property purchase transaction in which the property seller provides all or part of the financing.  

P-Q-R

P

partial payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department. 

payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

personal property
Any property that is not real property. 

PITI
This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio. 

PITI reserves
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. 

point
A point is 1 percent of the amount of the mortgage. 

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. 

pre-approval
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification. 

prepayment penalty
A fee that may be charged to a borrower who pays off a loan before it is due. 

principal balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance. 

public auction
A meeting in an announced public location to sell property to repay a mortgage that is in default. 

 purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. 

Q

qualifying ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The "top" or "front" ratio is a calculation of the borrower´s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner´s association fees) as a percentage of monthly income. The "back" or "bottom" ratio includes housing costs as will as all other monthly debt. 

quitclaim deed
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made. 

R

real estate agent
A person licensed to negotiate and transact the sale of real estate. 

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

 Realtor®
A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors. 

recording
The noting in the registrar´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. 

remaining balance
The amount of principal that has not yet been repaid. See principal balance. 

right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant. 

S-T-U

S

sale-leaseback
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.

second mortgage
A mortgage that has a lien position subordinate to the first mortgage. 

seller carry-back
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. 

servicer
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. 
 

T

tenancy in common
As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death. 

third-party origination
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. 

title
A legal document evidencing a person's right to or ownership of a property. 

title insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property. 

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. 

Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges. 

trustee
A fiduciary who holds or controls property for the benefit of another.  

V-W-X-Y-Z

V

vested
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. 

Veterans Administration (VA)
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.

W

Warranty Deed
A deed that provides that the person granting the deed agrees to defend the title from claims of others. In general, the seller is representing that they fully own the property and will stand behind this promise. 

Z

Zoning Ordinance
Local law establishing building codes and usage regulations for properties in a specified area.