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Rate Zip - Mortgage and loan glossary
Category: Economy and Finance > Mortgages and loans
Date & country: 01/01/2011, USA
Words: 148

Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on the changes in a specified index.

Adjustment date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment period
The time between one rate change and the next, for an adjustable rate mortgage (ARM). Typically the adjustment period is 1, 3, 5 or 7 years.

The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.

Amortization term
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.

Annual percentage rate (APR)
A calculation that expresses the total cost of the mortgage loan as a yearly rate (according to a federally mandated procedure). The APR calculation takes into account monthly interest payments, mortgage insurance, points and certain fees paid at origination. It generally results in a rate slightly higher than the stated interest rate on a loan.

A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective borrower and the proposed security.

A written analysis of the estimated value of a property prepared by a qualified appraiser.

A person qualified by education, training, and experience to estimate the value of real property and personal property.

An increase in the value of a property due to changes in market conditions or other causes.

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, etc.).

The transfer of a mortgage from one person to another.

Assumable mortgage
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.

Assumption clause
A provision that allows a buyer to assume, or take over, the responsibility for the seller's (original borrower's) mortgage. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

Assumption fee
The lender's charge for paperwork involved in processing records for a new buyer assuming an existing mortgage.

Balance sheet
A financial statement that shows assets, liabilities and net worth as of a specific date.

Balloon mortgage
A mortgage that has level monthly payments that are insufficient to fully amortize the principal and interest within the term of the loan. With a balloon mortgage, a lump sum payment ("Balloon Payment") is due at maturity.

Balloon payment
The final lump sum payment that is made at the maturity date of a balloon mortgage.

A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

A proceeding in a federal court in which a debtor, who owes more than his or her assets, can relieve the debts by transferring his or her assets to a trustee.

Before-tax income
Income before taxes are deducted.

The person designated to receive the income from a trust, estate or a deed of trust.

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 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, and they are usually drafted directly from the borrower's bank account. The result for the borrower is a substantial savings in interest.

Blanket mortgage
The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

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.

Bridge loan
A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as a "swing loan."

A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Buydown mortgage
A temporary buydown is a mortgage on which an initial lump sum payment is made 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.

Call option
A provision in the mortgage agreement that gives the lender the right to call, or request, the mortgage due and payable at the end of a specified period, for any reason.

A provision in an adjustable-rate mortgage (ARM) agreement that limits how much the interest rate or mortgage payments may increase.

Capital improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Cash-out refinance
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 Eligibility
A document issued by the Department of Veterans Affairs which states that a veteran is eligible for a long-term, low or no down payment mortgage issued by the federal government.

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 chronological order of the title's transfer from the original owner to the present owner.

Change frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

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

Your closer is your legal contact at a mortgage company. Your closer is responsible for reviewing and clearing your title work and any other legal documentation applicable to your mortgage. Once your title is clear and your underwriter has issued a clear to close, your closer will arrange for a closing.

The meeting between the buyer, seller and lender in which the property and funds legally change hands. Also called "Settlement."

Closing cost item
A fee that a homebuyer must pay at closing for a single service, tax or product (ie. origination fees and attorney's fees). Many closing cost items are included as numbered items on the HUD-1 statement.

Closing costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs consist of individual closing cost items, such as an origination fee, an attorney's fee, taxes, an amount placed in escrow and charges for obtaining title insurance and a survey. Closing costs will vary according to the geographical location of the property and...

Closing statement
Also referred to as the HUD1, it is the final statement of costs incurred to close on a loan or to purchase a home.

Cloud on title
Any conditions found during the title search that adversely affect the title to real estate. Clouds on title usually cannot be removed except by a quitclaim deed or court action.

A person who signs a promissory note (mortgage) along with the borrower. A co-borrower's signature guarantees that the loan will be repaid, because the borrower and the co-borrower are equally responsible for the repayment. Also referred to as a co-maker or co-signor.

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 make a delinquent mortgage current and to file the notices needed to proceed with foreclosure.

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.

Commitment letter
See Mortgage Commitment Letter.

Common areas
Those portions of a building, land and amenities that are owned (or managed) by a planned unit development (PUD)/condominium project's homeowners association (or a cooperative project's cooperative corporation) and used by all of the unit owners who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts and other recreational facilitie...

Community property
In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

An abbreviation for "comparable properties." Comparables are recently sold properties with traits similar to those of the property being purchased, ie. similar size, in a nearby location, with similar amenities. These properties can be used as a base comparison to help the appraiser determine the approximate fair market value of the property being purchased.

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 the exclusive use of certain limited common areas.

Condominium conversion
The changing of a rental property (two or more units) to the condominium form of ownership. Physical changes, as well as paperwork, may be necessary to conform to building and safety codes.

Conforming mortgage loan
Any loan that meets the criteria and limits set forth by the largest buyers of loans,

Construction loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

A condition that must be met before a contract is legally binding. For example, homebuyers often include a contingency that specifies that the contract is not binding until they obtain a satisfactory home inspection report from a qualified home inspector.

An agreement between two or more people, or entities, that creates or modifies a legal commitment.

Conventional mortgage
A mortgage that is not insured or guaranteed by the federal government agency.

Convertibility clause
A provision in some adjustable-rate mortgage (ARM) agreements that allows the borrower to change the ARM to a fixed-rate mortgage at specified time frames after loan origination. The borrower will likely pay a higher rate or more points to have this option.

Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative (co-op)
An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation, which entitles him to occupy a unit in the building or property owned b...

Corporate relocation
Arrangements under which an employer moves an employee to another location 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.

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.

Credit bureau
An agency that keeps your credit record on file. See also

Credit history
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 Officer
A credit officer has the authority to approve or decline a loan on the behalf of the lender. The credit officer is "behind-the-scenes" and you will not directly speak with him or her. Instead, the credit officer uses the documentation that your underwriter collects from you and decides whether or not your loan is approved.

Credit report
A report of an individual's credit history prepared by a credit bureau, reporting agency or repository and used by a lender in determining a loan applicant's credit worthiness.

Credit reporting agency
Company that collects information from several credit repositories, merges all the information and reports it in one form - merged credit report.

Credit Repository
An organization that gathers, records, updates and stores financial information on an individual's credit history and reports it in one form - in-file credit report.

An amount owed to another.

The legal document conveying title to a property.

Deed of trust
The document used in some states, instead of a mortgage, to secure the repayment of money borrowed.

A deed given by a borrower to the lender to avoid foreclosure proceedings.

Failure to repay a loan on a timely basis or otherwise meet the terms of a commitment or agreement.

Failure to make payments on time. This can lead to foreclosure.

Departmentof Veteran's Affairs
An independent agency of the federal government that guarantees long-term, low or no down payment mortgages to eligible veterans.

Money given in advance to show intention to complete the purchase of a property. Search Deposit Rates.

A decline in the value of property due to wear and tear, adverse changes in a neighborhood, or any other reason.

Information that must be given to consumers about their financial dealings.

A list of documents that you will be required to provide when submitting a loan application. See our Required Documents page.

Down payment
The part of the purchase price of a property that the buyer pays, usually in cash, and is not included in the loan amount. The difference between the cost of the property and the loan amount.

Due-on-sale clause
A provision in a mortgage, or deed of trust, that allows the lender to demand immediate repayment of the mortgage balance if the borrower sells the property.

Earnest Money Deposit
See Good Faith Deposit.

Refers to a third neutral party who carries out the instructions of both the buyer and the seller to handle all closing paperwork. May also refer to an account held by the lender into which the homebuyer makes tax and/or insurance payments.

FHA Loan
A loan insured by the Federal Housing Administration that is open to all qualified home purchasers. Although there are limits to the size of FHA loans, they are generous enough to handle moderate-priced homes almost anywhere in the country.

FHA Mortgage Insurance
Requires a small fee (up to 3 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount.

Fixed Rate Loan
A loan with the same interest rate and monthly payment over the life of the loan.

Float Period
The float period refers to the time between when you accept a loan and when you lock in your rate. During this time the interest rate and points on your loan will fluctuate with the market until you lock.

A legal proceeding in which the default borrower is extinguished of all rights, title and interest on the underlying property.

Good Faith Deposit
A sum of money given to demonstrate intention to complete the purchase. With regard to mortgages, it is the sum of money given to demonstrate intention to complete the loan, a show of good faith.

Good Faith Estimate
An estimate of charges that a borrower is likely to incur in connection with a settlement.

Home Equity Loan
Sometimes referred to as a second mortgage or borrowing against your home. The loan allows you to tap into your home's built-up equity, which is the difference between the amount your home could be sold for, and the amount that you still owe. Homeowners often use a home-equity loan for home improvements, to pay for a new car, or to finance their child's college education. A home-equity loan is a...

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable-rate mortgage and that earned by other investments (such as U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the ...

A charge paid for borrowing money. Interest is usually expressed as a percentage of the amount borrowed, or interest rate.

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