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ACCELERATION CLAUSE - A provision in a mortgage that gives the lender the right to demand immediate payment of the outstanding loan balance under certain circumstances. Usually when the borrower defaults on the loan.
ADJUSTMENT DATE - The date the interest rate changes on an adjustable rate mortgage.
ADJUSTABLE-RATE MORTGAGE (ARM) - A type of mortgage where the interest rate varies based on a particular index, normally the prime lending rate.
AFFORDABILITY ANALYSIS - A calculation used to determine an individual's likelihood of being able to meet the obligations of a mortgage for a particular property. Takes into account the down payment, closing costs and on-going mortgage payments.
AMORTIZATION - The repayment of a loan through regular periodic payment.
AMORTIZATION SCHEDULE - The breakdown of individual payments throughout the life of an amortized loan, showing both principal contribution and debt service (interest) fees.
AMORTIZATION TERM - The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years.
ANNUAL PERCENTAGE RATE (APR) - The rate of annual interest charged on a loan.
ANNUITY - A sum of money paid at regular intervals, often annually.
APPLICATION - A form used to apply for a mortgage loan that details a potential borrowers income, debt, savings and other information used to determine credit worthiness.
ASSIGNMENT - Transfer of ownership of a mortgage usually when the loan is sold to another company.
ASSUMABLE MORTGAGE - A mortgage that can be taken over by the buyer when a home is sold.
ASSUMPTION - When a buyer takes over, or assumes the sellers mortgage.
BALLOON MORTGAGE - A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment.
BALLOON PAYMENT - The final large payment at the end of a balloon mortgage term.
BIWEEKLY MORTGAGE - A mortgage where you make half payments every two weeks, rather than one payment per month. This results in making the equivalent of 13 monthly payments per year, rather than 12, significantly reducing the time it takes to pay off a thirty year mortgage.
BRIDGE FINANCING - An interim loan made to facilitate the purchase of a new home before the buyer's current residence sells and its equity is available to fund the new purchase.
BUY DOWN - Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage.
CALL OPTION - A clause in a mortgage which allows the lender to demand payment of the outstanding balance at a specific time.
CAP - Associated with Adjustable Rate Mortgages. A limit on how high monthly payments or how much interest rates may change within a certain time period or the life of the mortgage.
CASH-OUT REFINANCE - Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash.
CERTIFICATE OF DEPOSIT - A document showing that the bearer has a certain amount of money, at a particular amount interest, on deposit with a financial institution.
CERTIFICATE OF DEPOSIT INDEX - An index based on the interest rate of six month CDs. Used to set interest rates on some Adjustable Rate Mortgages.
CERTIFICATE OF ELIGIBILITY - A document issued by the Veterans Administration that certifies eligibility for a VA loan.
CERTIFICATE OF REASONABLE VALUE (CRV) - Usually based on an independent appraisal, a CRV for a particular property establishes the maximum amount which can be secured by a VA mortgage.
CO-BORROWER - A second person sharing obligation on the loan and title on the property.
COLLECTION - The process a lender takes to pursue a borrower who is delinquent on his payments in order to bring the mortgage current again. Includes documentation that may be used in foreclosure.
CO-MAKER - A second party who signs a loan, along with the borrower, and becomes liable for the debt should the borrower default.
COMPOUND INTEREST - Interest paid on the principal amount, as well as any accumulated interest.
CONSTRUCTION LOAN - A loan made to a builder or home owner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed.
CONVENTIONAL MORTGAGE - A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.).
CONVERTIBLE ARM - A mortgage that begins as and adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe.
COST OF FUNDS INDEX (COFI) - An index of financial institutions costs used to set interest rates for some Adjustable Rate Mortgages.
COVENANT - A stipulation in any mortgage that, if not met, can be cause for the lender to foreclose.
CREDIT - A loan of money for the purchase of property, real or personal. Credit is either secured by an asset, such as a home, or unsecured.
CREDIT HISTORY - A record of debt payments, past and present. Used by mortgage lenders in determining credit worthiness of individuals.
CREDITOR - A person to whom money is owed.
CREDIT REPORT - A detailed report of an individuals credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals.
CREDIT REPOSITORY - Large companies that gather and store financial and credit information about individuals who apply for credit.
DEBT - An obligation to repay some amount owed. This may or may not be monetary.
DEBT EQUITY RATIO - The ratio of the amount a mortgagor still owes on a property to the amount of equity they have in the home. Equity is calculated at the fair-market value of the home, less any outstanding mortgage debt.
DEFAULT - The condition in which a borrower has failed to meet the obligations of a loan or mortgage.
DELINQUENCY - The state in which a borrower has failed to meet payment obligations on time.
DISCOUNT POINTS - Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount.
DUE-ON-SALE PROVISION - A clause in a mortgage giving the lender the right to demand payment of the full balance when the borrower sells the property.
DOWN PAYMENT - An amount paid in cash for a property, with the intent to mortgage the remaining amount due.
EARNEST MONEY DEPOSIT - A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.
ESCROW ACCOUNT - An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that goes into the escrow account each month.
FAIR CREDIT REPORTING ACT - A federal law regulating the way credit agencies disclose consumer credit reports and the remedies available to consumers for disputing and correcting mistakes on their credit history.
FANNIE MAE - A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation's largest source of financing for home mortgages.
FHA MORTGAGE - A mortgage that is insured by the Federal Housing Administration (FHA).
FIRST MORTGAGE - The primary loan or mortgage secured by a piece of property.
FIXED-RATE MORTGAGE (FRM) - A mortgage which has a fixed rate of interest over the life of the loan.
FORECLOSURE - The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan.
FORFEITURE - The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.
GENERAL LIEN - A broad-based claim against several properties owned by a defaulting party.
GINNIE MAE - A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers.
GOVERNMENT MORTGAGE - Any mortgage insured by a government agency, such as the FHA or VA.
HOME EQUITY CONVERSION MORTGAGE (HECM) - Also known as a reverse annuity mortgage. It allows home owners (usually older) to convert equity in the home into cash. Normally paid by the lender in monthly payments. HECMs typically dont have to be repaid until the borrower is no longer occupying the home.
HOME EQUITY LINE OF CREDIT - A type of mortgage loan that allows the borrower to draw cash against the equity in his home.
INTEREST RATE - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.
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JUMBO LOAN - A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans.
LATE CHARGE - An extra charge, or penalty added to a regular mortgage payment when the payment is made late by an amount of time specified in the original loan document.
LENDER - The person or entity who loans funds to a buyer. In return, the lender will receive periodic payments, including principal and interest amounts.
LIFE CAP - A limit on how far the interest rate can move for an Adjustable Rate Mortgage.
LINE OF CREDIT - An extension of credit for a certain amount for a specific amount of time. To be used by the borrower at his discretion.
LIQUID ASSET - Any asset which can be quickly converted into cash at little or no cost, or cash itself.
LOAN - Money borrowed, to be repaid with interest, according to the specific terms and conditions of the loan.
LOAN OFFICER - A person that sells loans, representing the lender to the borrower, and the borrower to the lender.
LOAN ORIGINATION - How a lender refers to the process of writing new loans.
LOAN SERVICING - The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.
LOAN-TO-VALUE RATIO (LTV) - The comparison of the amount owed on a mortgaged property to its fair market value.
LOCK-IN - An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time.
LOCK-IN PERIOD - The amount of time the lender has guaranteed an interest rate to a borrower.
MARGIN - The difference between the interest rate and the index on an adjustable rate mortgage.
MATURITY - The date on which the principal balance of a financial instrument becomes due and payable.
MERGED CREDIT REPORT - A credit report derived from data obtained from multiple credit agencies.
MORTGAGE - A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral.
MORTGAGE BANKER - A financial institution that provides primary and secondary mortgages to home buyers.
MORTGAGE BROKER - A person or organization that serves as a middleman to facilitate the mortgage process. Brokers often represent multiple mortgage bankers and offer the most appropriate deal to each buyer.
MORTGAGEE - The entity that lends money in a real estate transaction.
MORTGAGE INSURANCE - A policy that fulfills that obligations of a mortgage when the policy holder defaults or is no longer able to make payments.
MORTGAGE INSURANCE PREMIUM (MIP) - An fee that is often included in mortgage payments that pays for mortgage insurance coverage.
MORTGAGE LIFE INSURANCE - A policy that fulfills the obligations of a mortgage when the policy holder dies.
MORTGAGOR - The entity that borrows money in a real estate transaction.
NEGATIVE AMORTIZATION - When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest.
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.
NO-POINT LOAN - A loan with no points. The interest rate on such a loan will be higher than a loan with points paid. Also sometimes refers to a refinance loan where closing costs are included in the loan.
NONLIQUID ASSET - Any asset which can not be quickly converted into cash at little or no cost.
NOTE - A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
NOTE RATE - The interest rate stated on a mortgage note.
NOTICE OF DEFAULT - Formal written notice from a lender to a borrower that default has occurred.
ORIGINAL PRINCIPAL BALANCE - The total amount of principal owed on a mortgage loan at the time of closing.
ORIGINATION FEE - Refers to the total number of points paid by a borrower at closing.
OWNER FINANCING - A transaction where the property owner provides all or part of the financing.
PARTIAL PAYMENT - A payment of less than the regular monthly amount. Usually, a lender will not accept partial payments.
PERIODIC PAYMENT CAP - The limit on how much regular monthly payments on an Adjustable Rate Mortgage can change during one adjustment period.
PERIODIC RATE CAP - The limit on how much the interest rate on an Adjustable Rate Mortgage can change during any one adjustment period.
POINT - A percentage of a mortgage amount (one point = 1 percent).
PRE-APPROVAL - The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers.
PREPAYMENT PENALTY - A fee that may be charged to a borrower who pays off a loan before it is due.
PRE-QUALIFICATION - Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan.
PRIME RATE - The interest rate that banks and other lending institutions charge other banks or preferred customers.
PRINCIPAL - The amount owed on a mortgage which does not include interest or other fees.
PRINCIPAL BALANCE - The outstanding balance of principal on a mortgage. Does not included interest due.
PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI) - The most common constituents of a monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI) - A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%.
QUALIFYING RATIOS - Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrowers monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income.
RATE LOCK - A guarantee from a lender of a specific interest rate for a period of time.
REFINANCE TRANSACTION - A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash.
REMAINING BALANCE - The amount of principal, interest and other costs that has not yet been repaid.
REMAINING TERM - The amount of time remaining on the original amortization schedule.
REPAYMENT PLAN - A plan to repay delinquent payments, agreed upon between a lender and borrower, in an effort to avoid foreclosure.
REPLACEMENT RESERVE FUND - An account, or fund, setup for the replacement of short life items , such as carpeting, in the common areas of a cooperative property.
REVOLVING DEBT - A type of credit that allows the borrower/customer to make charges against a predetermined line of credit. The customer then pays monthly installments on the amount borrowed, plus interest.
SECOND MORTGAGE A loan secured by the equity in a home, when a primary mortgage already exists.
ONDARY MORTGAGE MARKET - An economic marketplace where mortgage bankers buy and sell existing mortgages.
SECURED LOAN - A loan that is backed by collateral. In the case of a mortgage loan, the collateral is the house.
SECURITY - The property used as collateral for a loan.
SERVICING - The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.
THIRD PARTY ORIGINATION - When a lender uses a third party to originate and package loans for sale to the secondary market (Fannie Mae, Freddie Mac).
TRUTH IN LENDING - A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage.
VA MORTGAGE - A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
VESTED - Having the right to use a portion of a fund such as an IRA. Typically vesting occurs over time. If you are 100% vested, you have a right to 100% of the fund.
VETERANS AFFAIRS, DEPARTMENT OF (VA) - The successor to the Veteran's Administration, this government agency is responsible for ensuring the rights and welfare of our nation's veterans and their dependents. Among other duties, the VA insures home loans made to veterans.
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