Acceleration Clause – A clause in a deed or mortgage contract, allowing the contract holder the right of collecting the whole principal balance on not receiving one month’s payment.
Acceptance – On agreement of a contract, one party’s accepting to abide by the stipulations of the document.
Additional Principal Payment – A method of diminishing the set principal amount of a loan balance when the borrower makes payment in excess of this amount.
Adjustable-Rate Mortgage (Arm) – A mortgage contract that allows several changes in the interest rate based on a specified schedule.
Adjusted Basis – Initial price of property, in addition to a net worth, such as capital expenditures for property improvements and deductions for depreciation.
Adjustment Date – The date of that an interest rate increases or decreases on an adjustable-rate mortgage.
Adjustment Period – Time between movable interest rates on an adjustable-rate mortgage.
Administrator – An individual who has been given the authority by a court of law to manage the holdings of one who has died without a will.
Affordability Analysis – An assessment of a person’s credit worthiness in buying a home. This assessment includes examination of income, debts, collateral, method of payment, location of the property and closing costs.
Amenity – Characteristics of real property that adds to its value, even when they are not needed for use of the property. These might include such things as land near natural flowing water and scenic views. Improvements such as swimming pools, tennis courts, community buildings and recreational offerings would be considered amenities.
Amortization – The method of payment of a mortgage in monthly increments.
Amortization Schedule – A timely plan, showing a schedule and the amount of payments against interest and principal, and showing the balance incrementally.
Amortization Term – Period of installment payments needed to complete a loan agreement. The loan term is shown in months., such as 360 months for a 30 year loan on a fixed rate.
Amortize – Method of using installment payments to satisfy a mortgage loan debt, including principal and interest.
Annual Mortgagor Statement – An annual report sent to one who has a mortgage, showing the amount paid in taxes and interest for the year and the loan balance at year’s end.
Annual Percentage Rate (Apr) – Amount of a mortgage quoted as a yearly rate, including interest, mortgage insurance and points.
Annuity – A yearly schedule of payments, which can also be paid at other intervals, usually on a guaranteed dollar basis.
Application – Document that records application and other pertinent information about a mortgage applicant, their financial history, and expectations.
Appraisal – A written examination and estimate of property value, which is completed by a qualified appraiser. Home inspection is the opposite of this act.
Appraised Value – An appraiser’s opinion of the value of a property’s fair market value, compiled and reported by that appraiser based on his or her experience and examination of the property.
Appraiser – One who is trained by education and experience to calculate probable sale value of real and personal property.
Appreciation – Value gained in property by changes in the market or other conditions. The opposite of loss in property value.
Assessed Value – A public tax assessor’s estimate of value of a property for tax purposes.
Assessment – Method of setting the value of some property for tax purposes. Can also be a special tax for improvements to property.
Assessment Rolls – Public data showing property that is subject to taxes.
Assessor – A public employee who sets the tax on a property based on its value.
Asset – Personal financial holdings, including real property, personal property, enforceable claims against others, such as bank accounts, stocks and mutual funds.
Assignment – An allotment of a mortgage to one from another.
Assumable Mortgage – A mortgage that is taken by a purchaser at time of sale.
Assumption – A home purchaser’s buying of the owner’s mortgage. Assumable Mortgage
Assumption Clause – A clause in an assumable mortgage providing a buyer to assume the mortgage without paying in full at time of sale or transfer of the property.
Assumption Fee – A charge levied by the lender to the buyer of real property on assuming a mortgage.
Attorney-In-Fact – A person who has the authority to manage documents in behalf of another person, and who has been granted this power.
Balance Sheet – A financial document that records collateral, liabilities and net worth on a certain date.
Balloon Mortgage – A mortgage that has set installments that amortize during a set time, but allows a lump sum payment which is due at the end of a previously set time.
Balloon Payment – Final lump sum payment made at the end of a balloon mortgage.
Bankrupt – A person or organization who is given release from all debts upon giving up all assets to a court-appointed trustee.
Bankruptcy – A federal court action that allows a debtor (whose debts exceed his or her assets) to be released from the debts.
Before-Tax Income – Income that taxes have not been taken out of.
Beneficiary – A named individual who will receive income from a trust, estate or a deed of trust.
Bequeath – To leave one’s personal property under a will.
Betterment – An addition to property in terms of repairs or replacements that maintains value, or increases property value.
Bill Of Sale – A form legally transferring ownership of personal property.
Binder – A secure offer of an earnest money deposit, in order for a buyer to purchase real estate.
Biweekly Payment Mortgage – A mortgage plan that mandates debt reducing payments every two weeks, instead of the standard monthly payment plan. 26 or 27 biweekly payments equal one half the monthly payment made under a standard 30 year fixed rate mortgage, usually drafted from the borrower’s bank account. The borrower therefore saves a great deal in interest.
Blanket Insurance Policy – One insurance policy covering multiple persons or parcels of property.
Blanket Mortgage – A mortgage procured by a group enterprise rather than the share loans on specific units in the plan.
Bona Fide – With an honest belief.
Bond – A certificate of debt which bears interest and has a maturity date.
Breach – A legal obligation that is broken.
Bridge Loan – Swing loan, a form of second loan when the borrower’s present home, usually for sale, is used as collateral. The proceeds can then be used for the closing on another home before selling the current home.
Broker – An agent who unites and assists parties in negotiating contracts between the two, for a commission. Mortgage Broker
Budget – A detailed set guide for income and expenses over a prescribed time. A budget can mandate guidelines for managing investments and expenses for the future.
Budget Category – A division of income or expense information that can be used to create a budget. One can categorize individual budget divisions and add them to some or all of the budget makeups.
Building Code – Laws in a local community that mandate design, construction and materials in construction — based on safety and health standards.
Buydown Account – Account set aside to pay part of a monthly mortgage payment while the interest rate buydown plan is active.
Buydown Mortgage – A mortgage that has an initial lump sum payment by any party in order to reduce the monthly payments for the first years of a mortgage. A permanent buydown lowers the interest rate for a mortgage’s whole term.
Call Option – A clause in the mortgage contract where the mortgagee is allowed to call the mortgage due and payable at the end of a certain period for any reason.
Cap – A clause in an adjustable rate mortgage (ARM) that sets a limit on the increase or decrease of the mortgage payments. Lifetime Payment Cap, Periodic Payment Cap And Periodic Rate Cap
Capital – (1)Finances used to create income, such as a business investment or an income property. (2) Money or collateral making up wealth held or used by an individual or business enterprise. (3) The wealth amassed by a person or business. (4) The net worth of a business which shown by a formula of assets exceeding liabilities.
Capital Expenditure – Cost of enhancing a property to extend its useful life or to add to value.
Capital Improvement – Any building or complex erected to permanently improve real property, adding value and usefulness.
Cash-Out Refinance – A financial business proceeding in which the monies received from a new loan are greater than the sum needed for repayment of the first mortgage, including closing costs, points and the amount needed to pay any outstanding subordinate mortgage liens. (A refinance process allows a borrower to receive monies that can be used indiscriminately.)
Certificate Of Deposit – A legal plan drawn up by a bank or other financial institution, that gives evidence of a deposit, which the issuer promises to return plus earnings at a certain interest rate within a certain time frame.
Certificate Of Deposit Index – A schedule used to determine changes in the interest rate for some ARM plans, representing the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. Adjustable-Rate Mortgage. (Arm)
Certificate Of Eligibility – A certificate issued by the federal government showing eligibility for a Department of Veteran’s Affairs(VA) mortgage.
Certificate Of Reasonable Value (Crv) – A certificate from the Department of Veterans Affairs (VA) that sets a VA mortgage maximum value and loan amount.
Certificate Of Title – Proof of current ownership of real estate issued by an abstract company, title company, or attorney.
Chain Of Title – All of the legal parcels used in transferring a title to a portion of real property, from the first document and ending with latest.
Change Frequency – The monthly frequency of an adjustable rate mortgage’s payment and/or interest rate variances.
Chattel – Term for personal property.
Clear Title – Title with no liens or legal issues regarding ownership of the property.
Closing – Contract signing by the purchaser of mortgage documents and payment of closing costs, which signifies the sale of property.
Closing Cost Item – Payment of a specific sum at the time of closing by a purchaser for a single service, tax or product. Closing costs are comprised of individual closing cost units like origination fees and attorney’s fees. Most of these items are numerated on a HUD-1 statement.
Closing Costs – Those charges beyond the cost of property incurred by purchasers and sellers when ownership of said property is transferred. These costs usually include an origination fee, attorney’s fee, taxes, an amount placed in escrow and costs for procuring title insurance and a survey. The closing costs percentage varies with the area of the country, lenders or realtors. Realtors usually provide estimates to likely homebuyers.
Closing Statement – Hud-1 Statement
Cloud On Title – Any unclarified issues found after a title search that would adversely affect the title to real estate. Ordinarily, these issues cannot be removed unless done so by a quitclaim deed, release or court action.
Coinsurance – An equal division of insurance risk between the insurer and insured. This division is dependent on the relationship between the amount of a policy and a set percentage of the insured property’s actual value upon a loss.
Coinsurance Clause – Lists the amount of coverage that must be maintained as a percentage of the total property value in order for the insured to receive the total amount of loss.
Collateral – Property such as a car or home that secures the repayment of a loan. The assets will be lost if the loan is not repaid under the contract terms.
Collection – Foreclosure procedure which encompasses bringing a delinquent mortgage current and filing legal notices.
Co-Maker – A co-signer, one who shares equally with the borrower repayment of a loan. Endorser
Commission – A percentage of the price of property or a loan that is collected by a broker or agent for arranging a real estate or loan transaction.
Commitment Letter – A document by a lender which states the particulars of a loan offer to a home buyer.
Common Area Assessments – Monies set for individual owners of a condominium or planned unit development (PUD) project that will defray their organization costs and expenses for repair, replacement, maintenance, improvements and operations of the units.
Common Areas – A building, including land and comforts owned or managed by an organized unit development (PUD) or condominium project’s homeowner’s group (or a cooperative project’s homeowners’ group), or a cooperative project’s corporation, used and shared by all the owners who have a common expense in operation and maintenance. Areas in common are swimming pools, tennis courts and other recreational facilities (As well as halls in the buildings, parking areas and entrances and exits.)
Common Law – A law based on routine practices in the United States and England. This law is not written.
Community Home Improvement Mortgage – A different financing method allowing low and moderate income home purchasers to receive 95 percent financing for buying and improving a home needing modest repairs. As much as 30 percent of the appraised value can be utilized in repair of the home.
Community Land Trust Mortgage Loan – A purchasing option that allows for low and moderate income home buyers to purchase housing improved by a nonprofit Community Land Trust and lease the land.
Community Property – Under the law in several western and southwestern states, a type of ownership that proclaims property gained during a marriage is considered to be jointly owned, except as gained separately by either spouse.
Community Seconds® – Financing program for low and moderate income persons that allows an investor to purchase a first mortgage that has a subsidized second mortgage attached. The second mortgage could be issued by a state, county or local housing agency, foundation or nonprofit organization. Payment on the second mortgage is usually deferred and has a low interest rate, or no interest rate. Portions of the debt may be forgiven, based on the years the buyer lives in the home.
Comparables – A shortened term for comparable properties, used in assessing approximate fair market value when appraising a property. These properties are similar to one another in size, location and amenities.
Compound Interest – Interest payments on the original principal balance and on the accrued and unpaid interest.
Condemnation – (1) To mandate a building unfit for use or claim that it presents a danger and must be razed. (2) To assume private property for a public use by exercising eminent domain.
Condominium – A real estate property where each unit owner has title to their unit and a common interest in the common areas and usually exclusive use of specific limited common areas.
Condominium Conversion – To alter the ownership of a building, which is usually a rental building, to a condominium type of ownership.
Condominium Hotel – A hotel type of building that operates rental type units, usually having a rental desk, food and telephone services, daily cleaning services and offering short term occupancy. It functions as a hotel while units are owned by individual persons.
Construction Loan – A construction loan issued to a builder while work is in progress. This is a short term interim loan.
Consumer Reporting Agency (Or Bureau – Credit reports are compiled by these companies in order to provide lenders a history of a potential borrower’s credit activity. This information is collected from a variety of sources.
Contingency – A stipulation that requires a person meet certain points before a contract is legally set.
Contract – A written or oral legal agreement sealing an action.
Conventional Mortgage – A mortgage that the federal government does not guarantee. Compare to government mortgage.
Convertibility Clause – A clause in adjustable rate mortgage contracts (ARMS) that states a borrower may change the ARM to a fixed rate mortgage at certain times after the loan is obtained.
Convertible Arm – Adjustable rate mortgage (ARM) that can be transferred to a fixed rate mortgage under certain conditions.
Cooperative (Co-Op) – Ownership of a unit in a housing complex which is shared by others. Each resident owns shares in a corporation which owns the property.
Cooperative Corporation – A business trust company that has title to a cooperative project and gives the right to occupy apartments or units to those who hold shares in this cooperative. Ownership is through proprietary leases or other arrangements.
Cooperative Mortgages – Mortgages covering a multifamily cooperative project or the share loans of the individual units thereof.
Cooperative Project – A multi-use or residential building that a corporation or trust has title to and sells stock shares that represent the value of a single unit to those who in turn receive a proprietary lease as evidence of title.
Corporate Relocation – A corporate method under which a company moves an employee to another area, part of the employer’s normal course of business, or transfers most or all of the company’s operations and employees as part of relocating headquarters or expansion of office capacity.
Cost Of Funds Index (Cofi) – A listing used to calculate interest rate changes in certain adjustable rate mortgage plans. This index shows the weighted average cost of savings, loans and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. Adjustable Rate Mortgage (Arm)
Covenant – An obligation or restriction in a mortgage clause that can result in foreclosure if violated.
Credit – A contract between a borrower and lender that states the borrower will receive something of value, and the lender will be repaid at a later time.
Credit History – Data of a person’s financial history, of repaid debts. This report shows a lender whether or not the credit applicant has paid debts successfully.
Credit Life Insurance – Insurance policy that will pay the mortgage in full upon death of the mortgagor. This type of policy is often bought by mortgagors.
Creditor – One who is owed money.
Credit Report – Index showing progressive credit history of an individual which is kept by a credit bureau, and used by a lender to decide if an individual is credit worthy. Merged Credit Report
Credit Repository – A company that gathers, records, updates and stores financial and public records data regarding the record of payment for credit applicants.
Debt – Monies owed by one to another. Installment Loan And Revolving Liability
Deed – Legal form giving title to a property.
Deed-In-Lieu – Voluntary conveyance – a deed issued by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Deed Of Trust – In lieu of a mortgage, a deed of trust is used in some states and the title is conveyed to a trustee.
Default – Default on mortgage payments in a timely manner, or failure to comply in another manner with a mortgage contract.
Delinquency – Act of being late on mortgage payments when due.
Deposit – Earnest money – payment of monies to cement the sale of real estate, to ensure payment, or an advance in funds in processing of a loan.
Depreciation – Decrease in property value, opposite of appreciation of value.
Discount Points – Point
Dower – Inheritance rights of a widow after her husband’s death.
Down Payment – That portion of the price of a property that is paid in cash and is not financed with a mortgage.
Due-On-Sale Provision – A mortgage contract clause stating that the lender can demand repayment in full if the mortgagee sells the property that is security for the mortgage.
Due-On-Transfer Provision – Terminology used for second mortgages. Due-On-Sale Provision
Earnest Money Deposit – Monies paid by the purchaser to show serious intent of purchasing a home.
Easement – A public right of way on private property, allowing persons other than the homeowner’s ability to use it.
Effective Age – Estimate of the physical condition of a building, done by an appraiser. The physical age may not be the same as the actual age.
401(K)/403(B) – An investment plan provided by an employer to employees, allowing them to set aside tax deferred income for retirement or emergency reasons. 401(k) plans are provided by private corporations and 403(b) plans are provided by not for profit companies.
401(K)/403(B) Loan – Several management 401(k) or 403(b) plans permit loans against funds accumulated in these plans. Loans must be repaid to avoid serious monetary penalties.
Fully Amortized Arm – An adjustable rate mortgage (ARM) that carries a monthly payment that covers the remaining balance, at the interest accrual rate, over the amortizing term.
Government Mortgage – A mortgage insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Compare with a conventional mortgage plan.
Government National Mortgage Association – Ginnie Mae, a government owned corporation, is a division of the U.S. Department of Housing and Urban Development (HUD). Put into effect by Congress on September 1, 1968.
Grantee – The person who receives an interest in real property.
Grantor – Person who grants an interest in real property.
Ground Rent – In title to property that is held as a leasehold estate, the monies paid for the land use. This is done in lieu of a fee simple estate.
Group Home – A single home in a residential area that is set up or adapted to be occupied by non-related developmentally disabled people. This plan encompasses long–term housing and support services for residential living.
Growing-Equity Mortgage (Gem) – A fixed rate mortgage plan which reduces the remaining balance of the mortgage by setting scheduled payment increases over a set time, with the increased amount applying toward the balance.
Guarantee Mortgage – A third party who guarantees the mortgage.
Guaranteed Loan – A loan guaranteed by the government.
Hazard Insurance – Acts such as fire, wind, vandalism or other hazards to property are covered under hazard insurance.
Home Equity Conversion Mortgage (He – A reverse mortgage- when an older homeowner converts the equity in their home into cash, utilizing several payment options that will meet their financial needs. This mortgage is not like a traditional home equity loan in that the borrower qualifies on the value of the home, instead of on the basis of income, and repayment is not due until the borrower is no longer in the home.
Home Equity Line Of Credit – A mortgage loan, usually in a subordinate position, that a borrower can obtain in order to get several advances of the loan proceeds, controlled by the borrower. These advances can be used up to a specified percentage of the equity in the property.
Home Inspection – An in depth inspection evaluating the structural and mechanical state of a property. A satisfactory home inspection is usually included as a contingency by the purchaser. Contrast with appraisal.
Homekeepersm – A Fannie Mae adjustable rate conventional reverse mortgage plan, in which older homeowners can borrow against the value of their homes, receiving the proceeds according to the payment plan they select. The available amount is based on the number of borrowers and their ages, and the adjusted property value. The program is open to persons 62 years of age with no mortgage or very low mortgage debt.
Homeowners’ Association – A not for profit organization that administers the common areas of a planned unit development (PUD) or condominium. It has no ownership interest in the common elements in a condominium. In a PUD, it holds title to common elements.
Homeowner’s Insurance – A homeowner’s insurance policy covering personal liability and hazard insurance for a property and its contents.
Homeowner’s Warranty (How) – As a condition of a home sale, a builder can provide insurance that covers repairs to certain parts of a home for a specific time.
Homestyle® Mortgage Loan – Mortgage that allows eligible borrowers to get financing to remodel, repair and upgrade their homes or homes that they want to purchase. This financing is a conventional second mortgage or a Federal Housing Administration (FHA) Section 203 (k) first mortgage.
Housing Expense Ratio – That portion of gross monthly income used for household expenses.
Hud Median Income – The Department of Housing and Urban Development’s (HUD) estimate of the median family income for a specific county or metropolitan statistical area (MSA).
Hud-1 Statement – An itemized listing of the payments due at closing, including real estate commission, loan fees, points and initial escrow amounts. Each of these items is represented by a number within a standard numbering system. The seller’s proceeds and the buyer’s net payment at closing are shown as totals at the bottom of the HUD-1 statement. This form is published by the Department of Housing and Urban Development (HUD).
Income Property – Real estate developed or improved in order to provide income.
Index – A method of calculating the interest rate of an adjustable rate mortgage (ARM).
In-File Credit Report – A computer generated objective credit report showing credit and legal information.
Inflation – An increase in the monies or available credit in relation to the number of available goods or services, causing an increase in the prices of those goods and service. Over a period of time inflation reduces the buying power of a dollar, decreasing it’s worth.
Initial Interest Rate – The mortgage rate of interest at the time of closing. This rate varies for an adjustable rate mortgage (ARM).
Installment – Periodic regular payments that a purchaser is obligated to make to a lender.
Installment Loan – Monies repaid in a regular, timely manner, known as installments. Furniture is usually paid for in installments.
Insurable Title – A property title insuring against defects and disputes, issued by a title insurance company.
Insurance – An agreement between the insurer and insured that guarantees payment for loss for a periodic payment.
Insurance Binder – Proof that insurance is temporarily in effect. The coverage will expire by a certain date, so permanent coverage must be obtained before the temporary coverage expires.
Insured Mortgage – Mortgage that is protected by the Federal Housing Administration (FHA) or private mortgage insurance (MI). In case of default by the insured, the insurer must pay the lender a value that is the lesser of an incurred loss incurred or insured amount.
Interest – Charges attached to a loan for borrowing.
Interest Accrual Rate – Percentage rate that accrues on a mortgage, and usually calculated to set monthly payments, but not used to set the adjustable rate mortgage (ARM).
Interest Rate – Rate of interest set for the current monthly payment.
Interest Rate Buydown Plan – An agreement that allows a property seller or any other party to hold an account that can release monthly payments for reducing mortgage payments during the early years of a mortgage loan.
Interest Rate Ceiling – The maximum interest rate for an adjustable rate mortgage (ARM), as stated in a mortgage contract.
Interest Rate Floor – The minimum interest rate for an adjustable rate mortgage (ARM), as stated in a mortgage contract.
Investment Property – Any property that the owner does not live in.
Ira (Individual Retirement Account) – A retirement account that permits depositing tax deferred contributions to a personal retirement fund. IRA funds can be placed in bank accounts, stocks, bonds, mutual funds, etc..
Joint Tenancy – A method of co-ownership giving each tenant equal interest and rights in a property, including survivorship rights.
Judgment – A disposition of a court of law. If a judgment demands the repayment of a debt, a lien may be placed against a debtors property as a guarantee for the judgment’s creditor.
Judgment Lien – As a decision of the court, a lien on the property of a debtor.
Judicial Foreclosure – In several states, a kind of foreclosure action that is under the auspices of the court and handled as a civil lawsuit.
Jumbo Loan – Nonconforming loan- a loan in excess of Fannie Mae’s legal mortgage amount limits.
Negative Amortization – A gradual increase in mortgage amount owed, which happens when the monthly payment does not cover the principal and due interest. The shortage is added to the balance, called negative amortization.
Net Cash Flow – After monthly operating income for an investing property is reduced by monthly expenses, the resulting income. Monthly housing expenses include principal, interest, taxes and insurance (PITI), lease payments and subordinate financing payments.
Net Worth – A persons total assets, including cash, with deduction of all liabilities.
No Cash-Out Refinance – A financial process that limits a new mortgage amount to the sum of the balance of an existing first mortgage.
Nonliquid Asset – Items that are not readily transferred into cash.
Note – A contract mandating a borrower to repay a mortgage loan at a specified interest rate for a specified period.
Note Rate – Interest rate mandates on a mortgage loan.
Notice Of Default – Notification to a borrower that he or she is in default on a loan and that legal action is possible.
Original Principal Balance – Principal total owed before payments.
Origination Fee – Monies paid to a lender for processing a loan. The origination fee is set by points, one point being one percent of a mortgage amount.
Owner Financing – Financing provided by the seller (partial or total), during a purchase of a property.
Qualifying Ratios – Method of calculating a borrower’s qualifying for a mortgage. Two separate calculations are used: a housing expense (as percentage of income ratio) and total debt obligations (as percentage of income ratio).
Quitclaim Deed – A deed transferring without warranty any interest or title the grantor has at the time the title is given.
Underwriting – Method of calculating the risk in lending to an applicant. Underwriting analyzes the credit history of the borrower and the property’s quality.
Unsecured Loan – A loan requiring no guarantee.
Va Mortgage – Mortgage loan with a guarantee by the Department of Veterans Affairs(VA).
Vested – Having rights to a part of a fund such as an individual retirement fund so that persons who are 100 percent vested can draw available funds. Taxes are due on these funds if withdrawn.
Department Of Veterans Affairs (Va) – The agency of the federal government that backs residential mortgages for eligible military veterans. This guarantee covers the lender against loss and encourages lenders to lend to veterans.
What-If Analysis – An affordability analysis based on a what-if scenario. A what-if analysis is handy when complete data is not available, or if comparison of various changes to income or liabilities is needed.
What-If Scenario – A change in monies used in an affordability analysis. Includes monthly income changes to monthly income, debts, down payments, qualifying ratios or down payments. Used to examine variables in improving affordability for a home.
Wraparound Mortgage – Mortgage that includes the balance of a first mortgage and additional monies requested by a mortgagor. Payment is made to a wraparound mortgagee who sends the monies to the first mortgagee.