Choose a letter of the
alphabet below to see a glossary of mortgage terms beginning with that
letter of the alphabet.
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
acceleration
clause: A provision in a mortgage or note that gives the lender
the right to demand payment of the entire outstanding balance in the
event of the borrower’s default.
adjustable-rate mortgage
(ARM): A mortgage whose interest rate changes over time based on a
preselected index and margin.
amortization: The gradual
repayment of a mortgage by installments.
amortization schedule: A
table showing the amounts of principal and interest due and the
remaining outstanding balance with each payment to be made on a
mortgage.
annual percentage rate (APR):
A term used in the Federal Truth-In-Lending Act which expresses as
a percentage the annual cost of a mortgage including the regular
interest payments to be made with each payment on the mortgage, as
well as certain closing costs paid in association with the mortgage
such as an underwriting fee, tax service contract, mortgage insurance
premium, etc.
appraisal: A report made
by a qualified appraiser which sets forth an opinion or estimate of
the value of a parcel of real estate. This term also refers to the
process by which an appraisal is made.
appreciation: The
increase in the value of a parcel of real estate.
appurtenance: Anything,
concrete or abstract, attached to the land and thus a part of a parcel
of real estate, such as an easement, a garage, a built-in range, etc.
assessed value: The value
that a taxing authority places upon property for the purpose of
taxation.
assignment: The transfer
of the rights and obligations under a contract from one person or
entity to another.
assumable mortgage: A
mortgage whose terms permit it to be taken over ("assumed")
by a party other than the original borrower.
assumption: The taking
over of a seller’s mortgage by the purchaser of a parcel of real
estate.
attorney in fact: One
who holds a Power of Attorney granted by another which authorizes the
holder ("attorney in fact") to execute certain documents on
behalf of the grantor.
balance
sheet: A component of financial statements which sets forth
the assets, liabilities and net worth of an individual or business
entity at a given point in time. Also referred to as a "Statement
of Condition".
balloon mortgage: A mortgage with periodic
installments of principal and interest which do not fully amortize the
loan as of its maturity date. With such mortgages, the outstanding or
unpaid principal balance is due and payable in full as of its maturity
date.
balloon payment: The unpaid principal amount of a
mortgage loan due upon its maturity which must be paid in full at that
time.
basis point: One one-hundredth (1/100) of a percent.
Used to describe the amount of change in the yield of financial
instruments, including mortgages.
bill of sale: A written document that serves to
transfer interest in title to personal property.
buydown: A sum of money paid upon the closing or
settlement of a mortgage loan to reduce the interest rate, either
temporarily or permanently, on the mortgage. See "temporary
buydown".
cap (interest
rate): Refers to the maximum allowable interest rate increase on
an adjustable-rate mortgage. Such "caps" are generally
applied both to the periodic changes, as well as the absolute changes
in the interest rate over the life of the loan.
cash reserve: An amount
of money, usually equal to two or more monthly payments of a mortgage,
which a lender requires a borrower to have after the closing of the
mortgage.
certificate of completion: A
document normally issued by an appraiser which states that a
construction project is completed in accordance with the building
plans and specifications which pertain to the project.
certificate of eligibility: A
document issued by the Veterans Administration certifying a
veteran’s eligibility for a Veterans Administration loan guaranty.
certificate of occupancy: Written
authorization given by a municipality which allows a newly completed
or remodeled structure to be inhabited.
certificate of reasonable
value (CRV): A document issued by the Veterans Administration
establishing the value of a property for purposes of a Veterans
Administration loan guaranty.
change order: A change in
the original plan of construction agreed to by a general contractor
and building owner or purchaser.
clear title: Title to a
parcel of real estate which is not encumbered or "clouded"
with defects or liens.
closing: The occasion on
which and real estate transaction or mortgage is finally settled
("closed") between the parties.
closing costs: Expenses
(over and above the price of the property) incurred by buyers and
sellers in transferring the ownership of a parcel of real estate. Also
refers to the costs (over and above the amount of the mortgage)
incurred by a borrower upon "closing" of a mortgage. Also
referred to as "settlement costs".
collateral: Property
pledged as security for a debt, such as real estate as security for a
mortgage.
collection: The procedure
followed to bring a delinquent account current.
commission: A real estate
broker’s fee for effecting a real estate transaction, often
expressed as a percentage of the sales price of the property.
commitment: An agreement,
verbal or written, made by a lender to loan money to a borrower
subject to compliance with certain conditions. Also referred to as a
"loan approval" or "notification of loan
approval".
comparables: An
abbreviation for comparable properties used in the real estate
appraisal process to determine the value of the subject property.
condominium: A form of
ownership in real property in which an owner holds title to a
particular unit and proportionate title to certain common areas. Also
used in reference to an individual unit in a condominium project.
construction contract: An
agreement between a general contractor and an owner which sets forth
the terms and conditions under which building shall occur on a parcel
of real estate, and provisions for the owner’s payment to the
general contractor for such building.
construction loan: A
short-term, interim loan for financing the cost of construction in
which the lender advances funds at periodic intervals as the
construction progresses.
construction loan agreement: A
written agreement among a lender and a builder and/or owner in which
the specific terms of a construction loan, including the schedule of
disbursements, are set forth.
construction loan draw: The
partial disbursement of the proceeds of a construction loan based on
the disbursement schedule in a construction loan agreement and the
progress of completion of the project.
contingency: A condition
that must be met before a contract is legally binding upon the
parties.
conventional loan: A
mortgage loan that is not insured by the Federal Housing
Administration (FHA) or guaranteed by the Veterans Administration
(VA).
convertible ARM: An
adjustable-rate mortgage that can be converted to a fixed-rate
mortgage under specified conditions.
cooperative: A form of
common property ownership in which the residents of an apartment
building do not own the individual units they occupy but rather own
shares in a corporation that owns the entire building and grounds.
corporation: A form of
business organization recognized as a separate entity (legal person)
having rights and obligations distinct from its shareholders and/or
officers and directors.
cost estimate: A document
which breaks out the various costs of construction of a structure by
item. Also referred to as "cost breakdown".
cost overrun: The amount
of money expended or required over and above budgeted costs in a
construction project, including for such items as labor, interest,
materials, etc.
cost-plus contract: A
construction contract in which the contract price is equal to the cost
of construction plus a profit allowance to the builder; as opposed to
a fixed bid contract.
covenant: A legally
enforceable promise or restriction in a mortgage or other legal
document and which, if violated, can result in default and
foreclosure.
credit report: A report
prepared by a credit reporting agency for a lender which sets forth
the credit standing of a prospective borrower, and which is used in
the process of determining the borrower’s creditworthiness.
debt:
Borrowed money, the repayment of which may be either
secured or unsecured, with various possible repayment schedules.
debt-to-income ratios:
Calculations that are used in determining whether a borrower can
qualify for a mortgage. They consist of two separate calculations: a
monthly housing expense-to-income ratio and a total
obligations-to-income ratio.
deed-in-lieu: A
deed given by a mortgagor to the mortgagee to satisfy a debt and avoid
foreclosure; also called voluntary conveyance.
due-on-sale provision:
A covenant in a mortgage that allows us to call the mortgage due
and payable if ownership of the mortgaged property is transferred
without our permission.
earnest money
receipt: A document evidencing the deposit of earnest money by a
prospective buyer.
easement: A right to the
limited use or enjoyment of land held by another generally for the
purpose of access to a property for utility lines, roads, etc.
elevation: A scale
architectural drawing showing a particular profile of a structure.
encroachment: The illegal
location of an improvement, such as a road or building, on anther’s
real property.
encumbrance: Anything
that effects or limits title to real property, such as a mortgage,
lien, easement, etc.
endorsement: A writing on
a negotiable instrument, such as a check or a note, which assigns
interest in such instrument to another party. A notation added to an
instrument after execution to change or clarify its contents, such as
an endorsement to a title insurance policy.
Equal Credit Opportunity Act
(ECOA): A federal law which prohibits lenders from denying credit
to applicants on the basis of a borrower’s race, color, religion,
national origin, age, sex, marital status, or receipt of income from
public assistance programs.
equity: Net ownership;
the difference between market value and current indebtedness, usually
referred to as the owner’s interest.
equity loan: A loan made,
generally as a second mortgage, based on and secured by an owner’s
equity in real property.
escrow: The holding of
documents and/or funds by a disinterested third party such as a title
insurance company, attorney or depository institution pending the
settlement of a real estate transaction or mortgage loan, or pending
the payment of real estate taxes and/or homeowner’s’ insurance on
a parcel of real property.
escrow company: An
organization established to perform as an escrow
("settlement") agent.
escrow impounds: A sum of
money deposited at settlement and with each monthly payment on a loan
by a borrower for the purpose of paying future real estate taxes and
homeowner’s’ and other insurance premiums.
extended lock: An
interest rate lock agreement having a term that is longer than the
generally provided 30 or 45-day term, and which typically requires an
up-front fee from the borrower.
Fair Credit
Reporting Act: A consumer protection law which establishes the
procedure for correcting errors on individuals’ credit reports.
Fannie Mae (FNMA): The
Federal National Mortgage Association; a tax paying corporation
chartered by Congress to facilitate capital formation for residential
mortgage loans. It purchases, sells and guarantees conventional, VA
and FHA mortgages.
Federal Truth-In-Lending (TIL)
Act: A federal law which requires lenders to disclose various
settlement costs associated with a loan, including an annual
percentage rate.
fee simple: The greatest
possible interest one can have in a parcel of real estate, including
the right to dispose of the property or pass it on to one’s heirs.
FHA: Federal Housing
Authority. A federal department of the Department of Housing and Urban
Development (HUD) established to insure loans ("FHA loans")
for low and moderate income borrowers.
FICO Score: An acronym
referring to "Fair Isaac Credit" ratings, which grade
consumers’ credit ratings with a numeric score.
first mortgage: A real
estate loan which creates a primary (first) lien against a parcel of
real property.
fixed-rate mortgage: A
mortgage in which the interest rate does not change during its entire
term.
fixture: Personal
property which, by virtue of being attached to real property, becomes
a part of the real property.
floating interest rate: The
interest rate on a mortgage loan prior to its being "locked"
or guaranteed by the lender.
flood insurance: Insurance
required by lenders for properties located in federally designated
flood zones.
flood zone: An area
designated by the federal government to be subject to flooding.
floor plan: Scale
architectural drawing(s) showing details of a building’s floor
design and layout.
forbearance: The act on
the part of a lender (mortgagee) of refraining from taking legal
action despite a mortgage being in a state of default.
foreclosure: A legal
procedure in which property mortgaged as security for a loan is seized
by the mortgagee (lender) in response to a borrower’s
(mortgagor’s) default on the loan.
Freddie Mac (FHLMC): The
Federal Home Loan Mortgage Corporation; a quasi-governmental agency
chartered to purchase residential loans from federally insured
depository institutions and approved mortgage lenders.
functional depreciation: The
loss of value to real estate due to improvements not providing the
same level of usefulness as comparable properties.
hard costs: Refers
to the actual out-of-pocket costs in a real estate project as
distinguished from "sweat" and other equity.
hazard insurance: Casualty
(fire and other damage) insurance placed on improvements (structures)
on a parcel of real property. Also referred to as "homeowners’
insurance".
holdback: A portion of
funds held in escrow for the completion or repair of some aspect of
improvements on a parcel of real estate. Generally, a holdback will be
required by a lender at an amount equal to one and one-half times the
cost of the item in question.
homeowners association: An
organization of homeowners residing within a particular residential
real estate development whose major purpose is to maintain and provide
common areas and facilities in the development.
homeowners’ insurance: Casualty
(fire and other damage) insurance placed on improvements (structures)
on a parcel of real property. Also referred to as "hazard
insurance".
Homeowners Warranty (HOW)
Program: A program operated by a wholly-owned subsidiary of the
National Association of Home Builders through which participating
builders provide home buyers with a warranty on the workmanship and
materials of a home.
HUD: The U.S. Department
of Housing and Urban Development. It is responsible for the
implementation and administration of federal housing and urban
development programs.
hypothecate: To pledge
property as security for a loan without giving up title or possession.
leasehold
estate: 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.
LIBOR index: An
index that is used to determine interest rate changes for certain ARM
plans. It represents the average rate for 6-month U.S.
dollar-denominated deposits in the London market based on quotations
of major banks. LIBOR is an acronym for "London Interbank Offered
Rate."
loan-to-value
percentage: The relationship between the unpaid principal
balance of the mortgage and the property's appraised value (or sales
price if it is lower).
margin:
The amount that is added to an index value to create the mortgage
interest rate for an ARM/GPARM; an amount (expressed as a
percentage) that is used in the calculation of the purchase price for
an "As Soon As Pooled" MBS transaction.
MI: Any one of
the private or state mortgage insurance companies that insure us
against loss in the event of a mortgagor's default under a
conventional mortgage.
mortgage:
Collectively, the security instrument, the note, the title evidence,
and all other documents and papers that evidence the debt.
mortgage interest rate:
The rate of interest in effect for the monthly installment due. For
fixed--rate mortgages or for adjustable-rate mortgages that have an
initial fixed-rate period, it is the rate in effect during that
period. For adjustable-rate mortgages after any initial fixed-rate
period, it is the sum of the applicable index and the mortgage margin
(rounded as appropriate and subject to any per adjustment or lifetime
interest rate ceilings).
mortgage margin:
The amount that is added to the index value to establish the mortgage
interest rate on each interest rate change date (subject to any
limitations on the interest rate change) for an ARM.
mortgage note:
The note or other evidence of indebtedness for a mortgage loan.
origination
fees: The fee(s) charged by a lender to prepare loan
documents, make credit checks, inspect, and sometimes appraise a
property. The fee(s) are usually computed as a percentage of the face
value of the mortgage.
prepayment
penalty: A charge that a mortgagor may be required to pay
during the early years of a mortgage if he or she pays it in full or
pays large sums to reduce the unpaid balance.
PUD: Planned
Unit Development. A real estate project in which each unit owner has
title to a residential lot and building and a nonexclusive easement on
the common areas of the project. The owner may have an exclusive
easement over some parts of the common areas (for example, a parking
space). We do not purchase or securitize mortgages secured by PUD
projects; we do purchase or securitize mortgages on individual units
in the project.
second
mortgage: A mortgage that has a lien position subordinate to
the first mortgage.
streamlined refinancing
documentation: An alternative documentation procedure that
is specifically designed for "no cash-out" refinance
transactions that allows lenders to use substitute documentation to
verify the borrower's employment and income. It also relies on the
lender's warranty of the property value instead of requiring a new
appraisal report under certain circumstances.
subordinate financing:
Any mortgage or other lien that has priority lower than that of the
first mortgage.
sweat equity:
Contribution to the construction or rehabilitation of a property in
the form of labor or services rather than cash.
title
insurance: A type of insurance that insures against defects
in title that were not listed in the title paper or report or
abstract.
treasury index:
An index that is used to determine interest rate changes for certain
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 and actively traded treasury securities
in the over-the-counter market.
VA:
Department of Veterans Affairs.
VA mortgage: A
mortgage that is guaranteed by the Department of Veterans Affairs; may
be referred to as a "government" mortgage.
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Housing Lender. © 1997, 1998, 1999 2000 Aspen
Mortgage, Inc.