Annual percentage rate.

A historical summary provided by a title insurance company of all records affecting the title to a property.

A clause that allows a lender to declare the entire outstanding balance of a loan immediately due and payable should a borrower violate specific loan provisions or default on the loan.

A variable or flexible rate mortgage.

Features of your home that fit your preferences and can increase the value of your property. Some examples include the number of bedrooms, bathrooms, or vicinity to public transportation.

The liquidation of a debt by regular, usually monthly, installments of principal and interest. An amortization schedule is a table showing the payment amount, interest, principal and unpaid balance for the entire term of the loan.

The actual interest rate, taking into account points and other finance charges, for the projected life of a mortgage. Disclosure of APR is required by the Truth-in-Lending Law and allows borrowers to compare the actual costs of different mortgage loans.

An estimate of a property's value as of a given date, determined by a qualified professional appraiser. The value may be based on replacement cost, the sales of comparable properties or the property's income-producing ability.

A property's increase in value due to inflation or economic factors.

See adjustable rate mortgage.

Charges levied against a property for tax purposes or to pay for municipal or association improvements such as curbs, sewers, or grounds maintenance.

The transfer of a contract or a right to buy property at given rates and terms from a mortgagee to another person.

An agreement between a buyer and a seller, requiring lender approval, where the buyer takes over the payments for a mortgage and accepts the liability. Assuming a loan can be advantageous for a buyer because there are no closing costs and the loan's interest rate may be lower than current market rates. Depending on what is in the mortgage or deed of trust, the lender may raise the interest rate, require the buyer to qualify for the mortgage, or not permit the buyer to assume the loan at all.

Mortgage with a final lump sum payment that is greater than preceding payments and pays the loan in full.

A loan requiring payments of principal and interest at two-week intervals. This type of loan amortizes much faster than monthly payment loans. The payment for a biweekly mortgage is half what a monthly payment would be.

A certificate service as security for payment of a debt.

A loan to "bridge" the gap between the termination of one mortgage and the beginning of another, such as when a borrower purchases a new home before receiving cash proceeds from the sale of a prior home. Also known as a swing loan.

An intermediary between the borrower and the lender. The broker may represent several lending sources and charges a fee or commission for services.

A type of mortgage which requires the buyer to pay additional discount points or make a substantial down payment in return for a below market interest rate. Another form of a buy-down is one in which the seller offers 3-2-1 interest payment plans or pays closing costs such as the origination fee. During times of high interest rates buy-downs may induce buyers to purchase property they might otherwise not have purchased.

A Veterans Administration appraisal that establishes the maximum VA mortgage loan amount for a specified property.

A document rendering an opinion on the status of a property's title based on public records.

A mortgage principal amount that is fixed and cannot be increased during the life of the loan.

Costs payable by both seller and buyer at the time of settlement, when the purchase of a property is finalized. These costs can be up to ten percent of the mortgage amount and usually include but are not limited to the following:

A claim to the title of a property that, if valid, would prevent a purchaser from obtaining a clear title.

Something of value pledged as security for a loan. In mortgage lending the property itself serves as collateral for a mortgage loan.

A fee charged when a) an agreement is reached between a lender and a borrower for a loan at a specific rate and points and b) the lender guarantees to lock in that rate.

An individually owned unit within a multi-unit building where others or the Condominium Owners Association share ownership of common areas such as grounds, parking facilities and tennis courts.

A loan that conforms to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.

A short-term loan financing improvements to real estate, such as the building of a new home. The lender advances funds to the borrower as needed while construction progresses. Upon completion of the construction the borrower must obtain permanent financing or repay the construction loan in full.

A mortgage loan that is not insured, guaranteed or funded by the Veterans Administration (VA), the Federal Housing Administration (FHA) or Rural Economic Community Development (RECD) (formerly Farmers Home Administration).

An adjustable rate mortgage (ARM) that allows a borrower to switch to a fixed-rate mortgage at a specified point in the loan term.

A person who is obligated to repay a mortgage loan should the borrower default.

Rules and restrictions governing the use of property.

The borrower's privilege to make payments on a loan's principal before they are due. Paying off a mortgage before it is due may incur a penalty if so specified in the mortgage's prepayment clause.

Money owed to repay someone.

The ratio between a borrower's monthly payment obligations divided by his or her net effective income (FHA or VA loans) or gross monthly income (conventional loans).

The legal document that transfers the ownership of real property from one party to another.

A document, used in many states, in place of a mortgage, held by a trustee pending repayment of the loan.

The U.S. government agency that administers FHA, GNMA and other housing programs.

A percentage of the loan amount paid to the lender to buy down the interest rate. Each point is one percent of the loan amount; for example, two points on a $100,000 mortgage is $2,000.

The difference between the purchase price and mortgage amount. The down payment becomes the property equity. Typically it comes from cash savings, but it can also be a gift that is not to be repaid or a borrowed amount secured by assets.

A clause in a mortgage or deed of trust allowing a lender to require immediate payment of the balance of the loan if the property is sold (subject to the terms of the security instrument).

A dwelling divided into two units. 

A deposit in the form of cash or a note given to a seller by a buyer as good faith assurance that the buyer intends to go through with the purchase of a property.

The right one party has in regard to the property of another, such as the right of a public utility company to lay lines.

A federal law prohibiting lenders and other creditors from discrimination based on race, color, sex, religion, national origin, age, marital status, receipt of public assistance or because an applicant has exercised his or her rights under the Consumer Credit Protection Act.

The value of property beyond any liens against it.

A provision allowing one party or more to cancel all or part of the contract if certain events fail to happen, such as the ability of the buyer to obtain financing within a specified period.

Money placed with a third party for safekeeping either for final closing on a property or for payment of taxes and insurance throughout the year.

The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.

Federal National Mortgage Association. (FNMA)

A quasi-governmental organization that acts as a secondary investor to buy and sell mortgage loans.

An agency within the Department of Housing and Urban Development that sets underwriting standards and insures residential mortgage loans made by private lenders. One of FHA's objectives is to help make affordable mortgages available to homeowners with low or moderate income. FHA loans may be high loan-to-value, and they are limited by loan amount. FHA mortgage insurance requires a fee of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.

The maximum form of ownership, with the right to occupy a property and sell it to a buyer at any time. Upon the death of the owner, the property goes to the owner's designated heirs. Also known as fee absolute.

A loan with a term of 15 years. Although the monthly payment on a 15-year mortgage is higher than that of a 30-year mortgage, the amount of interest paid over the life of the loan is substantially less.

A mortgage whose rate remains constant throughout the life of the mortgage.

A form of insurance that protects the owner of the insured property against losses stemming from flood damage. The Federal Flood Disaster Protection Act of 1973 requires that federally-regulated lenders determine if real estate to be used to secure a loan is located in a Specially Flood Hazard Area (SFHA). If the property is located in a SFHA area, the borrower must obtain and maintain flood insurance on the property. Most insurance agents can assist in obtaining flood insurance.

A sum of money, including amounts from a relative or a grant from the borrower's employer, a municipality, non-profit religious organization, or non-profit community organization that does not have to be repaid.

Nickname for Governmental National Mortgage Association.

The estimate on closing costs and monthly mortgage payments provided by a lender to the homebuyer within 3 days of applying for a loan.

A Governmental organization that participates in the secondary market securitizing pools of FHA, VA and RHS loans.

A fixed-interest loan with lower payments in the early years than in the later years. The amount of the payment gradually increases over a period of time and then levels off at a payment sufficient to pay off the loan over the remaining amortization period.

A form of insurance that protects the owner of the insured property against losses from physical damage such as fire and tornadoes. Mortgage lenders often require a borrower to maintain an amount of hazard insurance on the property that is equal at least to the amount of the mortgage loan.

A mortgage on the borrower's principal residence, usually for the purpose of making home improvements or debt consolidation.

A thorough review of the physical aspects and condition of a home by a professional home inspector. This inspection should be completed prior to closing so that any repairs or changes can be completed before the transfer of the home is completed.

A form of insurance that protects the owner of the insured property against loss from theft, liability and most common disasters.

An index that indicates what proportion of homebuyers can afford to buy an average-priced home in specified areas. The most well known housing affordability index is published by the National Association of Realtors.

The U.S. government agency that administers FHA, GNMA and other housing programs.

Department of Housing and Urban Development.

A method used by real estate appraisers to predict a property's anticipated future income. Income property includes shopping centers, hotels, motels, restaurants, apartment buildings, office space, etc.

See debt to income ratio.

A published interest rate compiled from other indicators such as U.S. Treasury bills or the monthly average interest rate on loans closed by savings and loan organizations. Mortgage lenders use the index figure to establish rates on adjustable rate mortgages (ARMs).

As a part of PITI, the amount of the monthly mortgage payment that does not include the principal, interest, and taxes.

The amount of the entire mortgage loan which does not include the principal.  Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the principal, taxes, and insurance.

The simple interest rate, stated as a percentage, charged by a lender on the principal amount of borrowed money.

A nonconforming loan that is larger than the limits set by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.

Real estate deemed highly valuable because of its location.

A claim against a property for the payment of a debt. A mortgage is a lien; other types of liens a property might have include a tax lien for overdue taxes or a mechanic's lien for unpaid debt to a subcontractor.

See cap.

The ease with which an asset can be converted into cash.

See points.

See origination fee.

The relationship, expressed as a percentage, between the amount of the proposed loan and a property's appraised value. For example, a $75,000 loan on a property appraised at $100,000 is a 75% loan-to-value ratio.

The guaranty of a specific interest rate and/or points for a specific period of time. Some lenders will charge a fee for locking in an interest rate. 

The cost of the upkeep of the house. These costs may be minor in cost and nature (replacing washers in the faucets) or major in cost and nature (new heating system or a new roof) and can apply to either the interior or exterior of the house.

The amount a lender adds to the index of an adjustable rate mortgage to establish an adjusted interest rate. For example, a margin of 1.50 added to a 7 percent index establishes an adjusted interest rate of 8.50 percent.

The price a property can realistically sell for, based upon comparable selling prices of other properties in the same geographical area.

A change in the terms of the mortgage note, such as a reduction in the interest rate or a change in maturity date.

A legal instrument in which property serves as security for the the repayment of a loan.

A lender that originates, closes, services and sells mortgage loans to the secondary market.

An intermediary between a borrower and a lender. A mortgage broker's expertise lies in helping borrowers find financing that they might not otherwise find themselves.

Money paid to insure the lender against loss due to foreclosure or loan default. Mortgage insurance is required on conventional loans with less than a 20 percent down payment. FHA mortgage insurance requires a payment of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.

The interest rate charge for borrowing the money for the mortgage. It is used to calculate the interest payment on the mortgage each month.

The length of time that a mortgage is scheduled to exist. Example: a 30-year mortgage term is for 30 years.

The lender.

The borrower.

A situation in which a borrower is paying less interest than what is actually being charged for a mortgage loan. The unpaid interest is added to the loan's principal. The borrower may end up owing more than the original amount of the mortgage.

In a mortgage contract, a statement that prohibits a new buyer from assuming a mortgage loan without the approval of the lender.

A loan that does not conform to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. Jumbo loans are nonconforming.

A signed document that acknowledges a debt and shows the borrower is obligated to pay it.

The amount charged by a lender to originate and close a mortgage loan. (Usually expressed in points.)

Abbreviation for principal and interest.

null

Abbreviation for principal, interest, taxes and insurance.

Abbreviation for principal, interest, taxes, insurance and other monthly non-housing costs.

Charges levied by the lender based on the loan amount. Each point equals one percent of the loan amount; for example, two points on a $100,000 mortgage equals $2,000. Discount points are used to buy down the interest rate. Points can also include a loan origination fee, which is usually one point.

Tentative establishment of a borrower's qualification for a mortgage loan amount of a specific range, based on the borrower's assets, debts, income, employment status and credit history.

The interest rate commercial banks charge their most creditworthy customers.

The amount of the entire mortgage loan, not counting interest.  Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the interest, insurance, and taxes.

See mortgage insurance.

See appraisal.

The amount which the state and/or locality assesses as a tax on a piece of property.

To proportionally divide amounts owed by the buyer and the seller at closing.

As determined by a lender, the ability of the borrower to repay a mortgage loan based on the borrower's credit history, employment status, assets, debts and income.

Abbreviation for the Real Estate Settlement Procedures Act. This act allows consumers to review settlement costs at application and once again prior to closing.

A type of mortgage loan in which the lender makes periodic payments to the borrower. The borrower's equity in the home is used as security for the loan.

Rural Housing and Community Service

The right to purchase a property under conditions and terms made by another buyer and accepted by the seller.

The right to back out of a transaction, given automatically by law to the borrower in a real estate purchase transaction. When a borrower's principal dwelling is going to secure a loan, the borrower has three business days following signing of the loan documents to rescind or cancel the transaction. Any and all money paid by the borrower must be refunded upon rescission. The right to rescind does not apply to loans to purchase real estate or to refinance a loan under the same terms and conditions where no additional funds will be added to the existing loan.

The process by which a construction loan becomes a mortgage. At the end of the construction loan period, the borrower's file is delivered to Bank One Mortgage Loan Servicing Dept. Prior to delivery, CLD contacts the borrower and obtains funds for the tax and insurance escrows, a final title policy and homeowner's policy. This process is called a rollover.

A federal agency that administers mortgage loans for buyers in rural areas.

A loan that is junior to a primary or first mortgage and often has a higher interest rate and a shorter term.

A market comprising investors like GNMA, FHLMC and FNMA, who buy large numbers of mortgages from the primary lenders and resell them to other investors.

The responsibility of collecting monthly mortgage payments and properly crediting them to the principal, taxes and insurance, as well as keeping the borrower informed of any changes in the status of the loan.

See closing costs.

A physical measurement of property done by a registered professional showing the dimensions and location of any buildings as well as easements, rights of way, roads, etc.

A written document conveying title to property repossessed by the government due to default on tax payments.

The deduction a taxpayer can take on their tax form for interest paid on a home mortgage. The amount of money that the homeowner is not required to pay the government in taxes because he or she owns a home.

As a part of PITI, the amount of the monthly mortgage payment which does not include the principal, interest, and insurance.

A formal document establishing ownership of property.

A policy issued by a title insurance company insuring the purchaser against any losses resulting from errors in the title search. The cost of title insurance may be paid for by the buyer, the seller or both.

The Truth In Lending Act requires lenders to disclose the Annual Percentage Rate and other associated costs to homebuyers within three working days of the loan application.

A professional who approves or denies a loan to a potential homebuyer based on the homebuyer's credit history, employment status, assets, debts and other factors such as loan guidelines.

A standard document prescribed by the Real Estate Settlement Procedures Act containing information for closing which must be supplied to both buyer and seller.

Periodic housing costs for water, electricity, natural gas, heating oil, etc.

See Veteran's Administration.

See adjustable rate mortgage.

The federal agency responsible for the VA loan guaranty program as well as other services for eligible veterans. In general, qualified veterans can apply for home loans with no down payment and a funding fee of 1 percent of the loan amount.

An inspection of a property by the prospective buyer prior to closing on a mortgage.

A document protecting a homebuyer against any and all claims to the property.

The rate of earnings from an investment.

The ability of local governments to specify the use of private property in order to control development within designated areas of land. For example, some areas of a neighborhood may be designated only for residential use and others for commercial use such as stores, gas stations, etc