Discount Flat Fee MLS -Discount Realty Solution-Discount Real Estate Broker-Discount Realty-Flat Fee MLS listing Services
buyers information
sellers infomation
Look at our Service and Products
Our Contact informaiton is here
Bookmark and Share
Discount Flat Fee MLS Services

Mortgage Vocabulary

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


Abstract (Of Title) Back to top
A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.
Acceleration Clause Back to top
Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
Adjustable-Rate Mortgage (ARM) Back to top
A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. You may also see ARMs referred to as AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
Adjustment Period Back to top
This is the length of time for which the interest rate is fixed on an adjustable rate mortgage. After that period it will be adjusted. Typically once or twice a year depending on the index.
Agreement of Sale Back to top
Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
Alienation Clause
Provision in a mortgage document stating that the loan must be paid in full if ownership is transferred.
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.
Annual Percentage Rate (APR) Back to top
A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.
Appraisal Back to top
An expert judgment or estimate of the quality or value of real estate as of a given date.
Assessed Value
A figure in dollars determined for tax purposes by an assessor which reflects a property's worth and which, unless exempt, is used to compute a tax dollar obligation by multiplying it by a tax rate.
Assessing Unit Back to top
A city, county, town or village with the authority to value real property for purposes of taxation.
Associability Back to top
When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your home.
Assumption Back to top
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. The lender has to be notified and agree to the assumption. Assuming a loan can usually save a money since the buyer isn't required to pay most of the closing costs.
Assumption of Mortgage Back to top
An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required.
The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments.
An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage.
Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.
Attached Home Back to top
A home that has one or more common walls adjoining another home. Condominiums and row houses are attached homes.

Balloon Mortgage Back to top
A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire amount of the outstanding principal. Usually they have terms of 3, 5, and 7 years.
Binder or "Offer to Purchase"
A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.
Biweekly Mortgage Back to top
A mortgage which requires a payment for half the monthly amount every two weeks. As a result the loan amortizes much faster than a loan with normal monthly payments. For example, a 30 year fixed rate loan will be paid off in approximately 19 years.
Blanket Mortgage Back to top
A mortgage covering at least two pieces of real estate as security for the same mortgage.
Bridge Loan
An interim loan is made to finance a buyers new residence if the buyer is unable to sell his/her current residence but needs money to close the transaction.
Broker Back to top

See real estate broker
Building Line or Setback Back to top
Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.
Buy down Back to top
With a buy down, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for an early period in an ARM. The seller may increase the sales price to cover the cost of the buy down. Buy downs can occur in all types of mortgages, not just ARMs.

Caps Back to top
A limit on how much the interest rate or the monthly payment can change, either at each adjustment or during the life of the mortgage. Most ARMs have an interest rate caps to protect you from enormous increases in monthly payments.
A lifetime cap limits the interest rate increase over the life of the loan. Lifetime caps can vary by lender, but most ARMs have caps of 5% or 6%. A periodic or adjustment cap limits how much your interest rate can rise at one time. Generally, a 6 month ARM will have a cap of 1% while a 1 year ARM will have a 2% cap.
Periodic and lifetime caps are quoted as two numbers as in 2/6 which would mean that periodic cap is 2% and the lifetime cap is 6%. Examples:
1. If the initial interest rate is 4.5%, the index is 7%, and the margin is 3%,
then the new interest rate = 7% + 3% = 10%.
If the lifetime cap is 5% then
the actual new interest rate will be 4.5% + 5% = 9.5%.
2. The initial interest rate is 6%, the index is 5%, and the margin is 3%,
then the new interest rate = 5% + 3% = 8%.
If the periodic cap is 1% then
the actual new interest rate will be 6% + 1% = 7%.
ARMs which have an initial fixed period -- 30/3/1, 30/5/1, 30/7/1 and 30/10/1 -- can alsohave first adjustment cap. It limits the interest rate you will pay the first time your rate is adjusted. These ARMs are quoted as three numbers as in 5/2/5 which would mean that the first adjustment cap is 5%, adjustment cap thereafter is 2%, and the lifetime cap is 5%.
Two-Step loans -- 5/25 and 7/23 -- have only one adjustment after the first five or seven years of its term. They are quoted with a single first adjustment cap.
Capital Gains
Profit earned from the sale of real estate. The new tax code does not tax the profits from the sale of a home if the proceeds are used to buy another house costing at least as much as the sales price of the old one.
Certificate of Eligibility Back to top
The document issued by the U.S. Department of Veterans Affairs. It is required when applying for VA loans.
Certificate of Occupancy
Document issued by a local governmental agency that states a property meets the local building standards for occupancy.
Certificate of Reasonable Value
An appraisal issued by the VA approved appraiser which establishes the property's current market value.
Certificate of Title Back to top
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.
Clear Title Back to top
Is a title that is free of clouds and disputed interests.
Closing Costs Back to top
The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. This is a typical list:
     BUYER'S EXPENSES                     SELLER'S EXPENSES
     Documentary Stamps on Notes          Cost of Abstract
     Recording Deed and Mortgage          Documentary Stamps on Deed
     Escrow Fees                          Real Estate Commission
     Attorney's Fee                       Recording Mortgage
     Title Insurance                      Survey Charge
     Appraisal and Inspection             Escrow Fees
     Survey Charge                        Attorney's Fee
The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs.
Closing Day Back to top
The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.
Cloud (On Title) Back to top
An outstanding claim or encumbrance which adversely affects the marketability of title.
Commission Back to top
Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price--6 to 7 percent on houses, 10 percent on land.
Commitment Back to top
A written agreement between a lender and a borrower to loan money on specific terms or conditions.
Condemnation Back to top
The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.
Condominium Back to top
Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.
Construction loan Back to top
A short term loan to pay for the construction of buildings or homes. These loans usually provide periodic disbursements to the builder as each stage of the building is completed. Generally followed by long term financing called a "take out" loan issued upon completion of construction.
Contingency Back to top
A condition put on an offer to buy a home such as the perspective buyer making an offer contingent on his or her sale of a present home.
Contract of Purchase Back to top
See Agreement of Sale
Contractor Back to top
In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.
Conventional Mortgage Back to top
A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)
Conversion Option Back to top
Some ARMs come with options to convert them to a fixed rate mortgage during a given time period without having to go through a refinancing, which could cost up to 5 percent or 6 percent of the loan amount. For example popular conversion options for 1 year treasury-indexed ARMs include:
1. Option to convert on the third, fourth, or fifth adjustment date, i.e. during the 37th, 49th and 61st months of the loan.
2. Option to convert during the first five years on the adjustment date, i.e. during the 13th, 25th, 37th, 49th and 61st months of the loan.
The interest rate or points may be somewhat higher for a convertible ARM. Also, a convertible ARM may require a small fee at the time of conversion.
Conveyance Back to top
The transfer of title to the property from one party to another.
Cooperative Housing
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 by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.
Credit Report Back to top
A report documenting the history of how you paid back the companies you have borrowed money from, or how you have met other financial obligations.


Deed Back to top
A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also Deed of Trust, General Warranty Deed, Quitclaim Deed, and Special Warranty Deed)
Deed of Trust Back to top
Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.
Default Back to top
Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.

Deferred interest Back to top
When the monthly payments do not cover all of the interest cost, the unpaid interest is deferred by adding it to the loan balance. A typical feature of pay option ARMs.
Deficiency Judgment Back to top
Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the mortgages.
Depreciation Back to top
Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.
Discount Back to top
In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to give you a lower rate and lower payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate will probably go up depending on the index rate.
A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.
Documentary Stamps Back to top
A State tax in the forms of stamps attached to certain documents to show that the tax has been paid. Documentary stamps are required on all deeds or transactions of deeds that money or consideration is involved, including deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.
Down payment Back to top
The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the down payment amount and will acknowledge receipt of the down payment. Down payment is the difference between the sales price and maximum mortgage amount. The down payment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the down payment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the down payment and to pay interest and expenses incurred by the purchaser.
Due-on-Sale Clause Back to top
A clause in the Deed of Trust or Mortgage that states that the entire loan is due upon the sale of the property.


Earnest Money Back to top
The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.
Easement Rights Back to top
A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.
An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.
Encumbrance Back to top
A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.
Equal Credit Opportunity Act Back to top
Prohibits discrimination in any aspect of a credit transaction on the basis of race, religion, age, color, national origin, receipt of public assistance funds, sex, or marital status.
Equity Back to top
The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.
Escrow Back to top
Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments. See also Escrow Account.

Fair Housing Act Back to top
Prohibits discrimination in housing sales or loans on the basis of race, religion, color, national origin, sex, familial status, or handicap.
 Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac) Back to top
A stockholder-owned corporation chartered by Congress to create a continuous flow of funds to mortgage lenders in support of home ownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages from lenders and packages them into securities that are sold to investors.
Federal Housing Administration (FHA) Back to top
A part of the U.S. Department of Housing and Urban Development (HUD). FHA assists first-time home buyers and others who might not be able to meet down payment requirements for conventional loans by providing mortgage insurance to private lenders. It also insures loans for home improvements and buying manufactured (mobile) homes. These programs operate through FHA approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved.
Federal National Mortgage Association (FNMA, Fannie Mae) Back to top
A stockholder-owned federally chartered corporation. Fannie Mae purchases residential home loans from mortgage lending institutions, packages the mortgages into securities and sells the securities to investors. The largest source of residential mortgage funds in the United States.
FHA Loan Back to top
A loan insured by the Federal Housing Administration open to all qualified home purchasers. Interest rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans. FHA loans cannot exceed the statutory limit.
Firm Commitment Back to top
A lender’s agreement to make a loan to a specific borrower on a specific property.
First Mortgage Back to top
A mortgage that has priority as a lien over all other mortgages.
Fixed Installment Back to top
The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.
Flood Insurance Back to top
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Foreclosure Back to top
A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.
FSBO Back to top
For sale by owner.


General Warranty Deed Back to top
A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.
Government National Mortgage Association (GNMA, Ginnie Mae) Back to top
A wholly-owned government corporation within the U.S. Dept. of Housing and Urban Development helping to finance government-assisted housing programs. Ginnie Mae guarantees securities backed by pools of mortgages. The mortgages are insured by the Federal Housing Administration (FHA), or guaranteed by the Veterans Administration (VA) or by the Rural Housing Service (RHS). Ginnie Mae securities are bought and sold through financial institutions that trade government securities.
Graduated Payment Mortgage Back to top
A type of a mortgage that has lower payments initially and then payments increase each year until the loan is fully amortized.
Grantee Back to top
That party in the deed who is the buyer or recipient.
Grantor Back to top
That party in the deed who is the seller or giver.


Hazard Insurance Back to top
Protects against damages caused to property by fire, windstorms, and other common hazards.
Homestead Exemption Back to top
The assessed value of a owner-occupied residential property may be reduced by the amount of the exemption for the purposes of calculating property tax. Available in some states.
HUD Back to top
U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.
HUD-1 Settlement Statement Back to top
A standard form that shows all charges imposed on borrowers and sellers in connection with the settlement. RESPA allows the borrower to request to see the HUD-1 Settlement Statement one day before the actual settlement.

Impound Back to top
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
Index Back to top
A published measure of economic conditions usually relative to other financial instruments such as Treasury notes or Treasury bills. The lender uses a particular index to calculate the interest rate on an adjustable rate mortgage (ARM) by adding a fixed margin to the index. The most common indexes are:

  • Constant Maturity Treasury (CMT)
  • Treasury Bill (T-Bill)
  • 12-Month Treasury Average (MTA)
  • 11th District Cost of Funds Index (COFI)
  • London Inter Bank Offering Rates (LIBOR)
  • Certificates of Deposit (CD) Indexes
  • Prime Rate

Interest Back to top
A charge paid for borrowing money. See Mortgage Note


Joint Tenancy Back to top
Joint tenancy is one of the methods available for two or more people to hold title to real estate or personal property. It includes a right of survivorship, meaning that on the death of one joint tenant, his/her interests transfer to the remaining joint tenants.
Jumbo Loan
A loan that is larger than the conforming loan limit established by Fannie Mae or Freddie Mac. It often has interest rates a little higher than conforming loan.


Lien Back to top
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. See also Special Lien
Loan-to-Value Ratio (LTV)
The relationship between the amount of the mortgage loan and the value of the real property expressed as a percentage. For purchase loans the value of the property is the appraised value or the purchase price, whichever is less. For refinance loans the value is the appraised value.
A LTV of 90% means that you can borrow a maximum of 90% of the property value. If a LTV exceeds 80%, a Private Mortgage Insurance (PMI) -- that insures the lender in the event a borrower defaults -- is generally required.
Down payment is the difference between the purchase price and the mortgage amount.
Back to top
A lender's promise to hold a certain interest rate and points for you, for a given number of days, while your loan application is processed. The interest rates quoted to you may stay the same, decrease, or increase from the day you apply for your mortgage. Lock-ins on rates and points might offer you a way to ensure that what you shop for is what you get.
However, a locked-in rate could also prevent you from taking advantage of rate decreases. If you think that rates will remain level or even go down, you may choose to bet on interest rates decreasing by electing to float until you go to closing.
Lock-ins of 30-60 days are common. If your lock-in period expires before you go to closing, you might lose the interest rate and the number of points you had locked-in. You may ask lender for a longer lock-in period. But bear in mind that lenders may charge you a fee for a longer lock-in period. Request information from the lender regarding lock procedures.
A Consumer's Guide To Mortgage Lock-Ins A Federal Reserve Board publication.


Marketable Title Back to top
A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.
Margin Back to top
The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
Mortgage Back to top
A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government-insured or loan-guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges, and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.
Mortgage Broker Back to top
A person (not an employee of a lender) who brings a borrower and a lender together to obtain a federally-related mortgage loan. A mortgage broker has access to a variety of lenders and often offers the most choice in loan programs. Mortgage brokers are paid a fee by the borrower or the lender when a loan closes.
Mortgage Commitment Back to top
A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.
Mortgage Insurance Premium Back to top
The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.
Mortgage Note Back to top
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.
Mortgage (Open-End) Back to top
A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure.
Mortgagee Back to top
The lender in a mortgage agreement.
Mortgagor Back to top
The borrower in a mortgage agreement.
Multiple Listing Service (MLS) Back to top
A service offered to participating real estate brokers that lists available homes for sale. The listings are published and distributed among the member brokers to assist in sales efforts.


Negative Amortization Back to top
Amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM (an option ARM, for example) has a payment cap that results in monthly payments not high enough to cover the interest due.
Non-conforming loan Back to top
Loans that do not comply with Fannie Mae or Freddie Mac guidelines. These guidelines establish the maximum loan amount, down payment, borrower credit and income requirements, and suitable properties. Loans that does conform to these guidelines may be sold to Fannie Mae or Freddie Mac.


Office of Thrift Supervision (OTS) Back to top
The regulatory and supervisory agency for federally chartered savings institutions.
Open End Mortgage Back to top
see Mortgage (Open-End)
Owner Financing Back to top
A property purchase transaction in which the property seller provides all or part of the financing.

Package Mortgage Back to top
A mortgage covering both real and personal property.
A separately assessed for tax purposes lot or piece of real property.
PITI Back to top
Principal, Interest, Taxes and Insurance. These components are usually included in the monthly mortgage payment.
Planned Unit Development (PUD) Back to top
A project or subdivision that includes common property that is owned and maintained by a homeowner's association for the benefit and use of the individual PUD unit owners.
Plat Back to top
A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.
Points Back to top
Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are charged by a lender to raise the yield on his loan at a time when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited from paying points on HUD or Veterans' Administration guaranteed loans (sellers can pay, however). On a conventional mortgage, points may be paid by either buyer or seller or split between them.
Power of Attorney Back to top
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Prepayment Back to top
Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.
Principal Back to top
The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.
Private Mortgage Insurance (PMI) Back to top
An insurance policy the borrower buys to protect the lender from non-payment of the loan.
Pro rations Back to top
The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing.
Processing, Underwriting and Document Fees
Charges for the lender's services associated with making the loan.
Purchase Agreement
See Agreement of Sale


Quitclaim Deed Back to top
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. See Deed
Qualifying Ratios Back to top
Lenders use certain guidelines to determine a potential borrower's credit-worthiness. The two guidelines used are the housing and debt ratios. They are expressed as two numbers like 28/36 where 28 would be the housing ratio and 36 would be the debt ratio. It means that:
1. Your housing expenses should not exceed 28 percent of your gross monthly income and
2. Housing expenses plus long-term debt should not exceed 36 percent of your gross monthly income.
The housing expenses include monthly mortgage principal, interest payments, property taxes and homeowner’s insurance. There may be other expenses, such as condominium fees, homeowner,s fees, special assessments, etc., that are included. Long-term debt is defined as monthly expenses extending more than 10 months into the future. The qualifying ratios may vary from lender to lender.
Please note that qualifying ratios are only a rough guidelines and underwriters consider many variables in their analysis. Many times, borrowers fall outside the guidelines, but have strong compensating factors that reflect low credit risk. Some compensating factors are history of savings, long-term job stability, a substantial down payment or excellent credit history will influence the decision to approve or deny a particular loan.


Rate Reduction Option Back to top
A mortgage loan with rate reduction option can be adjusted, under the right conditions, to a lower interest rate with a payment of small fee. This allows the borrowers to adjust the interest rate on the loan without having to go through a refinancing, which could cost up to 5 percent or 6 percent of the loan amount. The interest rate or points may be somewhat higher for a loan with rate reduction option.
Real Estate Broker Back to top
A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.
Real Estate Settlement Procedures Act(RESPA) Back to top
A consumer protection statute designed to help consumers be better shoppers in the home buying process. It requires that borrowers receive disclosures at various times. RESPA also prohibits certain practices that increase the cost of settlement services.
Recorder Back to top
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
Refinancing Back to top
The process of the same mortgagor paying off one loan with the proceeds from another loan.
Rescission Back to top
The cancellation of a contract. When you use your home as collateral for a loan, you generally have the right to cancel the credit transaction within three business days. This is called your "right of rescission," and it is guaranteed by the Federal Truth in Lending Act.
Restrictive Covenants Back to top
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)
Reverse Mortgage Back to top
A special type of home loan that lets elderly homeowners convert the equity in their home into cash.
Right of Survivorship Back to top
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.


Sales Agreement Back to top
See Agreement of Sale
Second Home (or Vacation Home)
This home is not rented and is occupied occasionally by the owners.
Second mortgage Back to top
A mortgage in addition to the first mortgage. Home equity loans, credit lines, home improvement loans are second mortgage loans. Second mortgage is subordinate to the first one. Second mortgage loans are non-conforming loans, so, they usually carry a higher interest rate, and they often are for a shorter time.
Secondary (subordinate) financing Back to top
Borrowing additional money toward the down payment. If it is acceptable, usually subject to a maximum combined LTV. Secondary financing is used as an alternative to obtaining Private Mortgage Insurance
Section 1031 Back to top
Under section 1031 of the IRS, owners or real estate held for investment or for use in a trade or business can exchange their property tax-free for "like-kind" real estate.
Servicing means the collection of payments, handling your escrow accounts and management of operational procedures, related to mortgages, that a lender performs.
Set Back Ordinance Back to top
Regulates the distance from the lot line to the point where improvements may be constructed.
Shared Appreciation Mortgage Back to top
A residential loan in which a borrower receives a below-market interest rate in return for which the lender receives a specified share of the future appreciation in the value of the property.
Special Assessments Back to top
A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.
Special Lien Back to top
A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien.)
Special Warranty Deed Back to top
A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.
State Stamps Back to top
See Documentary Stamps
Survey Back to top
A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.


Tax Back to top
As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public.
Taxable Assessed Value Back to top
The assessed value of a parcel against which the tax rate is applied to compute the tax due. In case of a partial exemption, the exempt amount is subtracted from the assessed value in order to determine the taxable assessed value.
Teaser Rate Back to top
A low initial interest rate on a mortgage. A feature of option ARM loans.
Title Back to top
As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.
Title Insurance Back to top
Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.
Title Insurance Binder Back to top
Written commitment of a title insurance company to insure title to the property under the conditions stated in the binder.
Title Search or Examination Back to top
A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.
Trustee Back to top
A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. See Deed of Trust
Truth-In-Lending Act ( TIL, also called Regulation Z) Back to top
Under this act a lender is required to provide you with a disclosure estimating the costs of the loan you have applied for, including your total finance charge and the Annual Percentage Rate (APR) within three business days of your application for a loan.
Two-Step Mortgage
With this type of loan home buyers get a fixed rate loan at a slightly lower interest rate for a fixed period of time (most often for 5, 7, or 10 years) and then the interest rate is adjusted to fit market conditions at that time. After that adjustment, the mortgage maintains a fixed rate for the remaining years.


Underwriting Back to top
A process of deciding whether to make a loan based on your credit reputation, income, debt, appraised value of the house and other factors.


VA Loan Back to top
A mortgage for veterans and service persons guaranteed by the Department of Veterans Affairs (VA), requiring very low or no down payments and with generous requirements for qualification.


Wraparound Mortgage Back to top
A loan arrangement whereby the existing loan is retained and a new loan is added to the property. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

Zoning Back to top
A local government authority's specifications for the use of property in certain areas.
Zoning Ordinances Back to top
The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.