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1. Acceleration Clause
2. Acceptance
3. Additional Principal Payment
4. Adjustable-Rate Mortgage (ARM)
5. Adjusted Basis
6. Adjustment Date
7. Adjustment Period
8. Administrator
9. Affidavits
10. Affordability Analysis
11. Amenity
12. Amortization
13. Amortization Schedule
14. Amortization Term
15. Amortize
16. Annual Mortgagor Statement
17. Annual Percentage Rate (APR)
18. Annuity
19. Application
20. Appraisal
21. Appraised Value
22. Appraiser
23. Appreciation
24. Assessed Value
25. Assessment
26. Assessment Rolls
27. Assessor
28. Asset
29. Assignment
30. Assumable Mortgage
31. Assumption
32. Assumption Clause
33. Assumption Fee
34. Attorney-in-fact
35. Automated Underwriting
B
1. Balance Sheet
2. Balloon Mortgage
3. Balloon Payment
4. Bankrupt
5. Bankruptcy
6. Before-Tax Income
7. Beneficiary
8. Bequeath
9. Betterment
10. Bill of Sale
11. Binder
12. Biweekly Mortgages
13. Biweekly Payment Mortgage
14. Blanket Insurance Policy
15. Blanket Mortgage
16. Bona Fide
17. Bond
18. Breach
19. Bridge Loan
20. Broker
21. Budget
22. Budget Category
23. Building Code
24. Buydown Account
25. Buydown Mortgage
C
1. Call Option
2. Cap
3. Capacity
4. Capital
5. Capital Expenditure
6. Capital Improvement
7. CD-Indexed (Certificate of Deposit) ARMs
8. Certificate of Deposit
9. Certificate of Deposit Index
10. Certificate of Eligibility
11. Certificate of Reasonable Value (CRV)
12. Certificate of Title
13. Chain of Title
14. Change Frequency
15. Change Orders
16. Chattel
17. Clear Title
18. Closing
19. Closing Agent
20. Closing Cost Item
21. Closing Costs
22. Closing Date
23. Co-Maker
24. Coinsurance
25. Coinsurance Clause
26. Collateral
27. Collection
28. Commercial Banks
29. Commission
30. Commitment Letter
31. Common Area Assessments
32. Common Areas
33. Common Law
34. Community Land Trust Mortgage Option
35. Community Property
36. Community Seconds
37. Comparables
38. Compound Interest
39. Condemnation
40. Condition of the Home
41. Condominium
42. Condominium Conversion
43. Condominium Hotel
44. Construction Contract
45. Construction Loan
46. Contingencies for Repairs
47. Contigency
48. Contigency for Clear Title
49. Contigency for Financing
50. Contigency for Personal Property
51. Contigency Reserve
52. Contract
53. Contractor
54. Conventional Mortgage
55. Convertibility Clause
56. Convertible ARM
57. Cooperative (co-op)
58. Cooperative Corporation
59. Cooperative Mortgages
60. Cooperative Project
61. Corporate Relocation
62. Cost of Funds Index (COFI)
63. Costs for Settling Into Your Home
64. Covenant
65. Credit
66. Credit Bureau
67. Credit History
68. Credit Life Insurance
69. Credit Profile
70. Credit Report
71. Credit Report Fee
72. Credit Reporting Agency
73. Credit Repository
74. Credit Scoring
75. Credit Unions
76. Creditor
77. Cash-Out Refinance
78. Cloud on Title
D
1. Debt
2. Deed
3. Deed of Trust
4. Default
5. Delinquency
6. Department of Veternas Affairs (VA)
7. Deposit
8. Depreciation
9. Discount Points
10. Detached Single-Family Home
11. Direct Leveraging Loan Program
12. Down Payment
13. Dower
14. Due-on-sale Provision
15. Due-on-transfer Provision
16. Deed-in-Lieu
E
1. Equal Credit Opportunity Act (ECOA)
2. Earnest Money Deposit
3. Easement
4. Effective Age
5. Effective Gross Income
6. Eminent Domain
7. Encroachment
8. Encumbrance
9. Endorser
10. Equity
11. Errors in Credit Report
12. Escrow
13. Escrow Account
14. Escrow Analysis
15. Escrow Collections
16. Escrow Disbursements
17. Estate
18. Escrow Payment
19. Establishing a Credit Report
20. Eviction
21. Examination of Title
22. Exclusive Listing
23. Executor
F
1. Fair Credit Reporting Act
2. Fair Market Value
3. Fannie Mae (FNMA)
4. Federal Housing Administration (FHA)
5. Fee Simple
6. Fee Simple Estate
7. FHA Coinsured Mortgage
8. FHA Loans
9. FHA Mortgage
10. Final Walk-Through Inspection
11. Firm Commitment
12. Financial Index
13. Finder's Fee
14. First Mortgage
15. First and Second Mortgages
16. Fixed Installment
17. Fixed-Rate Mortgage
18. Fixed-Period Adjustable-Rate Mortgages
19. Fixture
20. Flood Insurance
21. Foreclosure
22. Forfeiture
23. Fully Amortized ARM
G
1. General Contractor
2. Good Faith Estimate
3. Governmnet Mortgage
4. Government National Mortgage Association
5. Grantee
6. Grantor
7. Ground Rent
8. Group Home
9. Growing-Equity Mortgage (GEM)
10. Guarantee Mortgage
11. Guaranteed Loan
H
1. Hazard Insurance
2. Home Equity Conversion Mortgage (HECM)
3. Home Equity Line of Credit
4. Home Inspection
5. Homeowner's Insurance
6. Homeowner's Insurance for Reverse Mortgages
7. Homeowners' Association
8. Homeowner's Warranty (HOW)
9. HomeStyle Construction-to-Permanent Mortgage
10. HomeStyle Mortgage Loan
11. Housing Expense Ratio
12. HUD-1 Statement
13. HUD Median Income
I
1. In-File Credit Report
2. Income Property
3. Index
4. Inflation
5. Initial Interest Rate
6. Installment
7. Installment Loan
8. Insurable title
9. Insurance
10. Insurance Binder
11. Insured Mortgage
12. Interest
13. Interest Accrual Rate
14. Interest Rate
15. Interest Rate Buydown Plan
16. Interest Rate Ceiling
17. Interest Rate Floor
18. Interest Rate for HECMs
19. InterestFirstSM Mortgage
20. Investment Property
21. IRA (Individual Retirement Account)
J
1. Joint Tenancy
2. Judgment
3. Judgment Lien
4. Judicial Foreclosure
5. Jumbo Loan
L
1. Late Charge
2. Lease
3. Lease-purchase Mortgage Loan
4. Lease-purchase Option
5. Leasehold Estate
6. Legal Description
7. Liabilities
8. Liability Insurance
9. LIBOR-based ARMs
10. Lien
11. Lifetime Payment Cap
12. Lifetime Rate Cap
13. Line of Credit
14. Liquid Asset
15. Loan
16. Loan Application
17. Loan Commitment
18. Loan Limit
19. Loan Origination
20. Loan Origination Fee
21. Loan Terms and Conditions
22. Loan-To-Value (LTV) Percentage
23. Lock-in
24. Lock-in Period
M
1. Manufactured Housing
2. Margin
3. Market Value
4. Master Association
5. Maturity
6. Maximum Claim Amount
7. Maximum Financing
8. Merged Credit Report
9. Modification
10. Money Market Account
11. Money Market Fund
12. Monthly Fixed Installment
13. Monthly Payment Mortgage
14. Mortgage
15. Mortgage Banker
16. Mortgage Banking Companies
17. Mortgage Broker
18. Mortgage Insurance
19. Mortgage Insurance Premium (MIP)
20. Mortgage Life Insurance
21. Mortgage-Related Closing Costs
22. Mortgagee
23. Mortgagor
24. Multidwelling Units
25. Multifamily Properties
26. Multifamily Mortgage
N
1. Negative Amortization
2. No Cash-Out Refinance
3. Net Cash Flow
4. Note
5. Nonliquid Asset
6. Note Rate
7. Notice of Default
O
1. Occupancy Date
2. Offer
3. Ongoing Costs
4. One-Year Adjustable-Rate Mortgage
5. Original Principal Balance
6. Origination Fee
7. Other Buyer Costs
8. Other Contingencies
9. Other Financial Companies
10. Owner Financing
P
1. Planned Unit Development (PUD)
2. Partial Payment
3. Payment Change Date
4. Periodic Payment Cap
5. Periodic Rate Cap
6. Permits
7. Personal Property
8. PITI
9. PITI Reserves
10. Planned Unit Development (PUD)
11. Point
12. Power of Attorney
13. Pre-Approval
14. Pre-Qualification
15. Prearranged Refinancing Agreement
16. Preforeclosure Sale
17. Prepayment
18. Prepayment Penalty
19. Prime Rate
20. Principal
21. Principal Balance
22. Private Mortgage Insurance (PMI)
23. Promissory Mote
24. Public Auction
25. Purchase and Sale Agreement
26. Purchase Money Transaction
Q
1. Qualifying Ratios
2. Quitclaim Deed
3. Qualifying Guidelines
R
1. Real Estate Settlement Procedures Act (RESPA)
2. Realtor
3. Radon
4. Rate Caps
5. Rate-Improvement Mortgage
6. Rate Lock
7. Ratified Sales Contract
8. Real Estate Agent
9. Real Estate Attrorney
10. Real Property
11. Recorder
12. Recission
13. Recording
14. Refinance Transaction
15. Rehabilitation Escrow Account
16. Rehabilitation Mortgage
17. Remaining Balance
18. Remaining Term
19. Rent Loss Insurance
20. Rent with Option to Buy
21. Repayment Plan
22. Replacement Reserve Fund
23. Reverse Mortgage Counseling
24. Revolving Liability
25. RHS Loans
26. Right of First Refusal
27. Right of Ingress or Engress
28. Right of Survivorship
29. Rural Housing Service (RHS)
S
1. Sale-Leaseback
2. Second Mortgage
3. Secondary Mortgage Market
4. Savings and Loans
5. Secured Loan
6. Security
7. Seller Take-Back
8. Servicer
9. Seller Versus Buyer Closing Costs
10. Servicing
11. Settlement
12. Settlement Sheet
13. Single-Family Properties
14. Six-Month Adjustable-Rate Mortgage
15. Special Deposit Account
16. Standard Payment Calculation
17. Subdivision
18. Step-Rate Mortgage
19. Subordinate Financing
20. Subsidized Second Mortgage
21. Survey
22. Sweat Equity
T
1. Truth-in-Lending
2. Taxes and Insurance
3. Tenancy in Common
4. Tenancy by the Entirety
5. Tenant-Stockholder
6. Termite Inspection
7. Third-Party Origination
8. Thrifts
9. Title
10. Title Search
11. Title Company
12. Title Insurance
13. Total Expense Ratio
14. Transfer of Ownership
15. Townhouse
16. Trade Equity
17. Transfer Tax
18. Treasury Index
19. Trustee
20. Truth-in-Lending
21. Two-Step Mortgage
22. Two-to Four-Family Property
U
1. Underwriting
2. Unsecured Loan
V
1. VA Mortgage
2. Vested
3. Veterans Administration (VA)
W-Z
1. Ways of Obtaining a Loan
2. What-if Analysis
3. Wraparound Mortgage
4. What-if Scenario
Acceleration Clause
A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
Acceptance
An offeree's consent to enter into a contract and be bound by the terms of the offer.
Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
Adjustable-Rate Mortgage (ARM)
A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.
Adjusted Basis
The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
Adjustment Date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
Adjustment Period
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
Administrator
A person appointed by a probate court to administer the estate of a person who died intestate.
Affidavits
As part of the closing process, you're likely to sign numerous affidavits. You may be required, for example, to sign an affidavit of occupancy. It states that you will use the property as a principal residence. Or, you and the seller may have to sign an affidavit stating all of the improvements to the property required in the sales contract were completed before closing.
Your lender can provide additional information regarding any of these documents you will sign.
Affordability Analysis
A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.
Amenity
A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.
Amortization
The gradual repayment of a mortgage loan by installments.
Amortization Schedule
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
Amortization Term
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Amortize
To repay a mortgage with regular payments that cover both principal and interest.
Annual Mortgagor Statement
A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
Annual Percentage Rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
Annuity
An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.
Application
A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.
* Also see "Loan Application" entry
Appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser. Contrast with home inspection.
Appraised Value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
Appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.
Appreciation
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
Assessed Value
The valuation placed on property by a public tax assessor for purposes of taxation.
Assessment
The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
Assessment Rolls
The public record of taxable property.
Assessor
A public official who establishes the value of a property for taxation purposes.
Asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on)
Assignment
The transfer of a mortgage from one person to another.
Assumable Mortgage
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
A provision in an assumable mortgage allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon the sale or transfer of the property.
Assumption
The transfer of the seller's existing mortgage to the buyer.
* See also "Assumable Mortgage" entry
Assumption Clause
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
Assumption Fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Attorney-in-fact
One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
Automated Underwriting
After you complete your loan application with a lender, it is sent to "underwriting" for review. In short, underwriting is the process used to analyze how you have managed credit obligations in the past, whether you have the ability to repay the mortgage loan you are applying for (i.e., your income and assets), and whether the price you are willing to pay for the home is supported by the price of the property.
Balance Sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.
Balloon Mortgage
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
Balloon Payment
The final lump sum payment that is made at the maturity date of a balloon mortgage.
Bankrupt
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
Bankruptcy
A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.
Before-Tax Income
Income before taxes are deducted.
Beneficiary
The person designated to receive the income from a trust, estate, or a deed of trust.
Bequeath
To transfer personal property through a will.
Betterment
An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.
Bill of Sale
A written document that transfers title to personal property.
Binder
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Biweekly Mortgages
Your lender will probably tell you that a biweekly mortgage is structured just like a traditional fixed-rate, level-payment, fully amortizing mortgage. However, you make your payments every 14 days instead of once a month. The monthly payment is split in half, resulting in the same total monthly mortgage, but the resulting 26 and sometimes 27 biweekly payments a year translate into 13 monthly payments, or one extra monthly payment per year.
Borrowers can qualify for a 30-year monthly payment amount, but get a loan that pays off in approximately 22 years at current interest rates. At higher rates, the actual term declines.
If you are looking to build up equity in your home faster without the higher mortgage payments that come with a shorter-term mortgage, you may want to consider the biweekly mortgage. Payments can be deducted from your bank account and scheduled to coincide with your payroll deposits to simplify budgeting. Lenders may charge an initial set-up fee to automatically debit your checking account.
Biweekly Payment Mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
Blanket Insurance Policy
A single policy that covers more than one piece of property (or more than one person).
Blanket Mortgage
The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.
Bona Fide
In good faith, without fraud.
Bond
An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
Breach
A violation of any legal obligation.
Bridge Loan
A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."
Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
Budget
A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.
Budget Category
A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. "Rent" is an example of an expense category. "Salary" is a typical income category.
Building Code
Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards
Buydown Account
An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.
Buydown Mortgage
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.
Call Option
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.
Cap
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. See lifetime payment cap, lifetime rate cap, periodic payment cap, and periodic rate cap.
Capacity
Lenders will want to know if you can repay the mortgage debt you incur -- this is known as your capacity. Lenders will base their evaluation on employment information, how long you've worked, and how much you are paid. Lenders will also review your expenses and any other debt obligations you have. This means they'll want to know how many dependents you have and whether you pay any alimony or child support, for example.
Capital
(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.
Capital Expenditure
The cost of an improvement made to extend the useful life of a property or to add to its value.
Capital Improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
CD-Indexed (Certificate of Deposit) ARMs
The Certificate of Deposit index represents the weekly average of secondary market interest rates on six-month negotiable CDs. The initial interest rate and payments adjust every six months after an initial six-month period.
ARMs with this index typically come with a per-adjustment cap of 1 percent and a lifetime rate cap of 6 percent.
Certificate of Deposit
A document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period.
* Also see "Adjustable-Rate Mortgage" entry
Certificate of Deposit Index
An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit.
* Also see "Adjustable-Rate Mortgage" entry
Certificate of Eligibility
A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
Certificate of Title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
Chain of Title
The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Change Frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
Change Orders
After construction begins, you may discover that you need to make unplanned and necessary changes to the work. The contingency reserve covers unforeseen repairs or deficiencies found during renovation. Unnecessary additions or changes are treated differently.
These change orders are considered discretionary and must first be approved by your lender. You must deposit additional funds to pay for the work in the escrow account before work on the changes begins. These change orders -- as well as any that result from unforeseen repairs -- must be added as amendments to your construction contract.
Chattel
Another name for personal property.
Clear Title
A title that is free of liens or legal questions as to ownership of the property.
Closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."
* Also see "Settlement" entry
Closing Agent
As a potential home buyer, you will need a closing (or "settlement") agent to coordinate the various closing activities. These can include but are not limited to preparing and recording the closing documents and disbursing funds.
The types of services provided by a closing agent depend on the person you hire, but typically the closing is conducted by title companies, escrow companies or attorneys. It is usually held at the lender's or real estate sales professional's office.
Closing Cost Item
A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.
Closing Costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors® often provide estimates of closing costs to prospective homebuyers.
Closing Date
After your lender has approved your mortgage and you accept the commitment letter, the next step is to set a closing date. Many times, your real estate sales professional coordinates the setting of this date with you, the seller, the closing agent, and your lender.
You may be able to move up the time frame for your closing by working with a lender who uses Desktop Underwriter® -- our advanced automated underwriting system -- because it can cut the time it takes to process your mortgage.
Remember, you need to ensure that the closing occurs before your lender's commitment letter -- and the rate lock-in, if there is one -- expire. You can now finalize your moving plans.
Co-Maker
A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment.
Coinsurance
A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.
Coinsurance Clause
A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.
Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
Collection
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
Commercial Banks
Commercial banks, like thrifts, originate and service mortgage loans. In some cases, commercial banks may have mortgage banking subsidiaries that perform this function. Banks may choose to hold a loan in their own portfolio or sell the loan to an investor.
Commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.
Commitment Letter
A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."
Common Area Assessments
Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.
Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Common Law
An unwritten body of law based on general custom in England and used to an extent in the United States.
Community Land Trust Mortgage Option
An alternative financing option that enables low- and moderate-income home buyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.
Community Property
In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.
Community Seconds
An alternative financing option for low- and moderate-income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate at all). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.
Comparables
An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
Compound Interest
Interest paid on the original principal balance and on the accrued and unpaid interest.
Condemnation
The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.
Condition of the Home
Potential homeowners should know of major problems in a home before they make an offer. As a potential buyer, you should carefully examine all elements of the home. Ask questions to the seller and the real estate sales professional about any concerns you may have. Both the seller and the real estate agent can be held liable if they do not disclose any defects they know about in the home.
Condominium
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Condominium Hotel
A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.
Construction Contract
The terms and conditions of any major renovation job should be part of a formal, legally binding contract between you and your contractor -- this is called the construction contract. The lender you choose will likely want to review this contract before you sign it.
Construction Loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Contingencies for Repairs
In your purchase offer, you may consider stating that the seller must make sure the electrical systems, heating and cooling, plumbing, and mechanical systems are functioning properly at the closing. You may also state that your purchase is contingent upon the satisfactory completion of a professional home inspection, which will check these systems and other elements more completely. These are both ways to ensure that surprises don't arise when your moving day arrives.
If you do not include this clause in your contract, you are essentially accepting the house "as is."
Contigency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
Contigency for Clear Title
Your purchase contract should include a contingency that the purchase is subject to your receiving clear title to the property. This process includes a title search and title insurance.
Contigency for Financing
When you make a formal offer on a house, your contract should include a financing contingency. It specifies if you don't get the money you need to purchase the house at the terms you want, the offer is void and you will be refunded your deposit.
Don't be surprised if the seller includes a clause in the contract that states you must make a "good-faith effort" to get the mortgage. This is the seller's way to ensure that you explore all options to get a mortgage loan.
Contigency for Personal Property
Your purchase contract should specify appliances, fixtures, and other personal property that must remain in the home. You can avoid any surprises by listing in your contract everything that is to be left behind when the seller moves out.
Contigency Reserve
Most mortgages for purchase-renovation require an additional 10 percent of the total cost of the project to be put aside into a reserve account. This contingency reserve is only used when unforeseen repairs or deficiencies are found during renovation.
Contract
An oral or written agreement to do or not to do a certain thing.
Contractor
A general contractor is a person who oversees a construction project and handles aspects such as scheduling workers and ordering supplies.
Conventional Mortgage
A mortgage that is not insured or guaranteed by the federal government. Contrast with government mortgage.
Convertibility Clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.
Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
Cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Cooperative Corporation
A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.
Cooperative Mortgages
Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.
Cooperative Project
A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.
Corporate Relocation
Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
Cost of Funds Index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).
Costs for Settling Into Your Home
When figuring out how much home you can afford, you need to account for the costs associated with getting into your home.
These can include the cost for repairs that need to be made before you can occupy your residence. There may also be the cost of purchasing appliances, such as a washer and dryer, refrigerator, or stove.
The bottom line is you do not want to spend all your money on purchasing the home and not have any left to pay these types of costs.
Covenant
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
Credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
Credit Bureau
The three main credit reporting agencies, or credit bureaus, are Equifax, Experian, and Trans Union. You can order a copy of your credit report (a nominal fee may apply) via telephone at:
* Equifax: (800) 685-1111
* Trans Union: (800) 916-8800
* Experian: (800) 682-7654
Credit History
A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.
Credit Life Insurance
A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.
Credit Profile
There are several ways to ensure you have a good credit report and credit score. One of the most effective is to manage your existing credit in a positive way.
Ask your lender for suggestions about ways to control the amount of money you owe. Or, you can choose a credit counselor from the list provided on this site. Some lenders may view consumers as a greater risk if they have used most or all of their available credit. Consumers who are considered "overextended" may be viewed this way even if they have made all their debt payments on time.
Missing a payment on a bill should be avoided, as should late payments on any of your credit obligations. Experiencing a mortgage foreclosure, filing for bankruptcy, or having your vehicle repossessed can also affect your credit score and credit report, limiting your ability to get new credit at a reasonable rate.
Credit Report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
Credit Report Fee
The credit report fee covers the lender's cost for ordering your credit report from a credit bureau.
This report will verify some of the information you provided on your loan application as well as additional information from the credit agency's files and from public records.
When a credit report is received, your lender will check it against your application and look for any discrepancies. You may be asked to explain information in your credit report.
Credit Reporting Agency
An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.
The three main credit reporting agencies, or credit bureaus, are Equifax, Experian, and Trans Union. You can order a copy of your credit report (a nominal fee may apply) via telephone at:
* Equifax: (800) 685-1111
* Trans Union: (800) 916-8800
* Experian: (800) 682-7654
Credit Repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
Credit Scoring
Your credit score is based on all the information in your credit report. This information is converted into a number -- a credit score -- that the lender uses to determine whether you are likely to repay your loan in a timely manner. The scores used in mortgage lending are typically in the 300 to 900 range. A general guide is that the higher your score the better. But you should keep in mind that your credit score is just one of several factors that will be used to evaluate your mortgage loan application.
Credit Unions
A credit union is a financial institution that is owned and run by its members. It is a nonprofit, cooperative institution that offers members a place to save and borrow. A credit union often works by having its members pool their funds so additional loans can be made to other members.
Creditor
A person to whom money is owed.
Cash-Out Refinance
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
Cloud on Title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.
Debt
An amount owed to another. See installment loan and revolving liability.
Deed
The legal document conveying title to a property.
The deed is the document that transfers ownership from the seller to you. Only the seller signs the deed at closing, and you'll receive a copy of it.
The closing agent will record the deed with you listed as the new property owner. Your name and the names of any other buyers appear on the deed, and it will be sent to you after it is recorded.
Deed of Trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.
In some states, a "deed of trust" is used instead of a mortgage. When homeowners sign a deed of trust, they receive title to the property but convey title to a neutral third party -- called a trustee -- until the loan balance is paid in full.
Default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Delinquency
Failure to make mortgage payments when mortgage payments are due.
Department of Veternas Affairs (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
The Veterans Administration is a federal government agency authorized to guarantee loans made to eligible veterans under certain conditions. To obtain more information, you can contact the U.S. Department of Veterans Affairs.
The VA guarantee allows qualified veterans to buy a house costing up to $203,000 with no down payment. Moreover, the qualification guidelines for VA loans are more flexible than those for either the Federal Housing Administration (FHA) or conventional loans.
If you are a qualified veteran, this can be an attractive mortgage program. To determine whether you are eligible, check with your nearest VA regional office.
Deposit
A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan. See earnest money deposit.
Depreciation
A decline in the value of property; the opposite of appreciation.
Discount Points
Discount points are often used to describe a type of fee that lenders charge. Discount points are additional funds you pay the lender at closing to get a lower interest rate on your mortgage.
A point equals 1 percent of the loan amount. So, if you and your lender agree to a mortgage of $100,000, one point would equal $1,000.
Typically, each point you pay for a 30-year loan lowers your interest rate by .125 of a percentage point. If the current interest rate on a 30-year mortgage is 7.75 percent, paying one point would lower the interest rate to 7.625.
Ask your lender if you have the option of paying 1, 2, or 3 discount points -- or you can choose not to pay any discount points. It often makes more sense to pay discount points if you plan to stay in your home for a long time.
Detached Single-Family Home
The most traditional type of single-family home is one that is "detached." This type of home stands separate from any other housing structure and serves as a place of residence for the occupants.
Direct Leveraging Loan Program
The Direct Leveraging Loan Program makes it easier and more economical for rural residents to own a home through lower interest rates and no down payment.
Under this program, the lender offers up to 50 percent of the mortgage amount as a conventional 30-year, fixed-rate first mortgage and the Rural Housing Service (RHS) offers the balance as a second mortgage at an interest rate that is generally below market.
The RHS is part of the U.S. Department of Agriculture.
Down Payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
Saving for a down payment is usually one of the most difficult parts of preparing to buy a home. If you believe you have the needed funds, you are in a better position to seek pre-qualification from a lender to get the mortgage that is right for you.
Most homeowners rely on a mortgage from a financial institution, and most mortgage products require buyers to include a portion of their own funds towards the purchase of the home. This is called the down payment. Lenders feel more secure when buyers include a down payment, indicating they are less likely to walk away from their investment if their finances take a downturn.
Historically, buyers usually made a down payment that totaled 20 percent of the home's purchase price. Under this scenario, a down payment for a $100,000 home is $20,000. But today, new mortgage products allow buyers to put down as little as 3 percent to 5 percent, provided private mortgage insurance is obtained. The down payment for a $100,000 home with 5 percent down payment is just $5,000.
Sources for down payments may come from buyers' savings accounts, checking accounts, stocks and bonds, life insurance policies, and gifts.
Dower
The rights of a widow in the property of her husband at his death.
Due-on-sale Provision
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
Due-on-transfer Provision
This terminology is usually used for second mortgages. See due-on-sale provision.
Deed-in-Lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
Earnest Money Deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
The earnest money deposit is a "good-faith" payment you submit with your offer on a home to show the seller you are serious about proceeding.
The earnest money is deposited in an escrow account and will be applied to your closing costs.
Sometimes, your lender will want you to bring a receipt for the earnest money deposit along with your sales contract to the initial loan application meeting.
Easement
A right of way giving persons other than the owner access to or over a property.
Effective Age
An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective Gross Income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
Eminent Domain
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
Encroachment
An improvement that intrudes illegally on another's property.
Encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
Endorser
A person who signs ownership interest over to another party. Contrast with co-maker.
Equity
A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
A lender determines how much equity you have in your home by taking the appraised value of the home and subtracting any mortgage debt.
For example, if your house is valued at $150,000 and your mortgage balance is $80,000, you have $70,000 equity in the house.
Errors in Credit Report
Your credit report may contain inaccuracies. The best way to ensure there are no errors in your credit report is to request copies and review the information.
Since each of the main credit bureaus keeps its own records, you may want to request copies from all three: Trans Union, Equifax, and Experian.
If you have been turned down for credit because of the information in your credit report, you are entitled to receive a free copy of your report within 60 days of the denial. If you haven't been denied credit, you can still request a copy of your credit report, usually for a nominal fee.
If you find errors in your report, follow the directions in the credit report and contact the agencies to have the errors corrected. They will investigate the targeted items and remove incorrect information.
You don't have to delay applying for a mortgage while errors in your report are being corrected. Explain the discrepancies in the report to your lender and state that the credit agency is correcting them.
Escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
Escrow Account
The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses.
An escrow account is money that is deposited with a third party -- outside the buyer and the seller -- to be used to pay various fees. A borrower typically provides funds that will pay taxes, mortgage insurance, lease payments, hazard insurance premiums, and other payments when they are due.
An escrow payment by the holder of a mortgage is also known as "impounds" or "reserves" in some states.
When escrow funds are used to pay taxes, hazard insurance, and other fees, it is called an escrow disbursement. Periodically, an escrow analysis will be performed to determine if current monthly deposits provide sufficient funds to pay bills when they are due.
Escrow Analysis
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.
Escrow Collections
Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.
Escrow Disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
Estate
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
Escrow Payment
The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.
Establishing a Credit Report
It is possible to establish a credit history even if you do not have a traditional credit record that shows credit card payments or payments on a student or car loan.
You can build a nontraditional credit history, for example, by documenting your monthly payments to previous and current landlords; to utility companies for your gas, water and telephone services; and to insurance companies for medical, life, and automobile coverage.
Your lender can provide further details on how you can effectively establish a credit record.
Eviction
The lawful expulsion of an occupant from real property.
Examination of Title
The report on the title of a property from the public records or an abstract of the title.
Exclusive Listing
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property alone without the payment of a commission.
Executor
A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Fair Market Value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Fannie Mae (FNMA)
A New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages.
Over the past 31 years, Fannie Mae has provided nearly $2.8 trillion of mortgage financing for over 34 million families.
Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
Fee Simple
The greatest possible interest a person can have in real estate.
Fee simple ownership provides the owner with unrestricted powers to dispose of the owned property as the owner sees fit. Of all types of ownership a person can have in real estate, fee simple provides the greatest amount of personal control.
Fee Simple Estate
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
FHA Coinsured Mortgage
A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor's default.
FHA Loans
With FHA insurance, you can purchase a home with a low down payment from 3 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower.
FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. In general, the loan limit is less than what is available with a conventional mortgage through a lender.
FHA Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
With FHA insurance, you can purchase a home with a low down payment from 3 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower.
FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. In general, the loan limit is less than what is available with a mortgage through a lender.
Final Walk-Through Inspection
Your sales contract should include a clause that allows you to examine the property you want to purchase within the 24 hours before closing.
This walk-through, during which you will be accompanied by the real estate sales professional, is your chance to ensure that the seller has vacated the house and left behind whatever property was agreed upon.
Make sure to check that all lights, appliances, and plumbing fixtures are in working order.
You will also want to make sure that all conditions of the sales contract have been met. If they aren't, or you observe major problems, you have the right to delay the closing until the problems are corrected.
One other option is to make sure money to correct the problems is placed in an escrow account at closing to cover the cost of repairs.
Firm Commitment
A lender's agreement to make a loan to a specific borrower on a specific property.
Financial Index
An index is a number to which the interest rate on an adjustable rate mortgage (ARM) is tied. It is generally a published number expressed as a percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on ARMs. This interest rate is subject to any caps associated with the mortgage.
The interest rate changes on an ARM are tied to some type of financial index. Some of the most common type of indexed ARMs are:
-- Treasury-Indexed ARMs
-- CD-Indexed ARMs (Certificate of Deposit)
-- Cost of Funds-Indexed ARMs (COFI)
-- LIBOR-Based ARMs
When comparing ARMs, look at how the index to which it is tied has performed recently. Your lender can provide information on how to track the index and a history of the index they use.
Finder's Fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
First Mortgage
A mortgage that is the primary lien against a property.
A "first mortgage" is the primary lien against a property. The term is usually coined "first mortgage" only when a "second mortgage" is obtained on a property. A "second mortgage" is a lien that is subordinate to the first mortgage. Usually, the interest rates on second mortgages are slightly higher than the interest rates on a first mortgage. The amount of a second mortgage you can take out will depend on the equity you have built up in your home, the appraised value of your property, your credit history, and any other liens you may have against your property, such as a home equity line of credit.
Borrowers will typically get a second mortgage to tap into the equity they've built in their home -- and use that for home improvements, debt consolidation, medical bills, or other purposes. You apply for a second mortgage with the same process you follow for a first mortgage. However, some of your closing costs may be less.
When you have a first and second mortgage, you theoretically have two loans, both requiring interest and principal payments.
First and Second Mortgages
A "first mortgage" is the primary lien against a property. The term is usually coined "first mortgage" only when a "second mortgage" is obtained on a property. A "second mortgage" is a lien that is subordinate to the first mortgage. Usually, the interest rates on second mortgages are slightly higher than the interest rates on a first mortgage. The amount of a second mortgage you can take out will depend on the equity you have built up in your home, the appraised value of your property, your credit history, and any other liens you may have against your property, such as a home equity line of credit.
Borrowers will typically get a second mortgage to tap into the equity they've built in their home -- and use that for home improvements, debt consolidation, medical bills, or other purposes. You apply for a second mortgage with the same process you follow for a first mortgage. However, some of your closing costs may be less.
When you have a first and second mortgage, you theoretically have two loans, both requiring interest and principal payments.
Fixed Installment
The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.
Fixed-Rate Mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
Fixed-rate mortgages, the most popular type of mortgage, offer the peace of mind that your interest rate will remain the same for as long as you have your loan. If you expect to live in your home for many years, having the same interest rate may be your key concern. If you decide that you like the stable, predictable payments of a fixed-rate loan, you have the option of choosing from a variety of repayment terms: 15, 20, and 30 years are the most common. Typically, the longer the term of the mortgage, the more interest you pay over the life of your loan. However, stretching out your repayment term means your monthly mortgage payments will be less than they would be with a comparable shorter-term mortgage. Lenders offer a wide array of fixed-rate mortgages:
* Balloon Mortgages
* Biweekly Mortgages
Fixed-Period Adjustable-Rate Mortgages
This type of adjustable-rate mortgage (ARM) maintains the same initial interest rate for the first three, five, seven, or 10 years of your loan, depending on the term you choose. Your interest rate then adjusts annually, and can move up or down as market conditions change. Be sure to ask your lender about the interest rate caps for both the annual adjustments and for the life of the loan.
Advantages:
-- Your initial interest rate will be lower than a fixed-rate mortgage, so you may be able to afford more home.
-- You are protected against interest rate increases for the first three, five, seven, or 10 years of the loan, depending on which type of fixed-period ARM you choose.
-- You may have the option to convert your ARM to a fixed-rate mortgage at the first, second, or third interest rate adjustment dates.
-- You have time to improve your financial position (i.e., salary increases) or accumulate additional assets before the interest rate adjusts at the end of the fixed period.
Details:
-- The lifetime interest rate cap for fixed-period ARMs is typically 5 to 6 percentage points above your initial rate. Your annual cap during the adjustable period is typically 1 to 2 percentage points above or below over the current rate.
-- Can be used to buy one- to four-family residences including second homes and condos, co-ops and planned unit developments. Manufactured homes are also eligible. (Manufactured housing units must be built on a permanent chassis at a factory and then transported to a permanent site and attached to a foundation.)
Fixture
Personal property that becomes real property when attached in a permanent manner to real estate.
Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
If you repeatedly do not make your mortgage payments on time, your lender could sell your home and evict you from it in a legal procedure called foreclosure. A foreclosure on your property can result in the loss of your home and your good credit rating. Foreclosure is most often a last resort effort that lenders will take if you repeatedly don't make your mortgage payments. Before going to foreclosure, lenders will work with you if you are facing financial hardships to come up with repayment plans that will let you get back on track and remain in your home.
Forfeiture
The loss of money, property, rights, or privileges due to a breach of legal obligation.
Fully Amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
General Contractor
A general contractor is someone whom you may work closely with during your home improvement project. The general contractor is the person who oversees the construction project and handles various aspects such as scheduling workers and ordering supplies.
If you are borrowing mortgage funds to renovate a home, your lender may need to review whether your contractor meets all federal, state, and local registration, licensing and certification standards.
Good Faith Estimate
The good-faith estimate is a report from your lender that outlines the costs you will incur to get your mortgage. It is based on the lender's typical loan origination costs for the area where your home is located. The estimate usually changes between application and closing, so you'll want to review your settlement form before the closing meeting.
The settlement form will list the actual amount of money you'll need to bring to closing. You'll need to pay your closing costs in the form of a certified or cashier's check because personal checks usually are not accepted.
Governmnet Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortage.
Government National Mortgage Association
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.
Grantee
The person to whom an interest in real property is conveyed.
Grantor
The person conveying an interest in real property.
Ground Rent
The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.
Group Home
A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.
Growing-Equity Mortgage (GEM)
A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.
Guarantee Mortgage
A mortgage that is guaranteed by a third party.
Guaranteed Loan
Also known as a government mortgage.
Hazard Insurance
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
Home Equity Conversion Mortgage (HECM)
A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.
A Home Equity Conversion Mortgage (HECM) is a type of home loan that lets homeowners aged 62 or over with little or no remaining balance on their mortgage convert their equity into cash. The equity can be paid to the homeowner in a lump sum, in a stream of payments, draws from a line of credit, or a combination of monthly payments and line of credit.
Whatever payment plan you select, you do not have to repay any part of this reverse mortgage until you sell the home or vacate it for another reason. At that time, you pay the loan balance, plus any accrued interest. Any proceeds above that amount go to you or to your estate.
Developed by the Federal Housing Administration (FHA), the HECM mortgage provides a cash growth feature not found with some other reverse mortgages -- check with your Fannie Mae approved lender to see how this works based on your personal needs and your payment plan.
Advantages:
-- The funds are yours to spend in any way you choose.
-- There are no monthly payments with a HECM.
-- Your loan funds do not affect Social Security or Medicare benefits. (If you receive Supplemental Social Security or Medicaid, these benefits may be affected.)
-- You do not have to pay back the loan until you sell your home or no longer use it for your primary residence. Then, you or your estate will repay the cash you received from the HECM, plus interest and other finance charges to the lender. This means that the remaining equity in your home can be passed on to your heirs through the sale of the property.
-- You will never owe more than the value of the home at the time of repayment, even if the loan balance exceeds the value of your property. This means no debt will ever be passed along to the estate or your heirs.
Details:
-- You and any co-borrowers must be at least 62 years old.
-- You must own your home outright -- or carry a small mortgage balance.
-- Eligible properties include a single-family home, a two- to four-unit dwelling, a condominium or a manufactured home. All housing types must meet Federal Housing Administration (FHA) guidelines. (Ask your lender if your property qualifies.)
-- Your home must be your principal residence, which means you must live in it more than half the year.
-- You must attend pre-application mortgage counseling before you apply for the loan.
-- You must keep applicable taxes current, as well as maintain insurance coverage on your home.
-- The amount you can borrow with a HECM depends on the age of the youngest borrower(s), the interest rate, how much your house is worth, and the maximum claim amount. In general, you can get between one-third and one-half of your equity as a line of credit or as a lump sum payment.
-- The balance of funds advanced against the equity in your home is due and payable when you relinquish your home as a primary residence, or if the borrower(s) pass away. You may have to pay off the debt if you fail to pay property taxes or insurance or if you do not maintain your property.
Home Equity Line of Credit
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.
Home Inspection
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.
The home inspection reviews the structural and mechanical condition of the property. This is not an evaluation of the market value of the home or a determination of whether the home complies with applicable building and safety codes. The inspection does not include a recommendation on whether you should or should not buy the house.
The inspector bases the findings on observable structural elements of the home. Potential home buyers are urged to be present during the inspection -- this will allow you to ask questions and be in a better position to learn more about any problems that arise.
You should expect to see an evaluation of:
-- roof and siding,
-- windows and doors,
-- foundation,
-- insulation,
-- ventilation,
-- heating and cooling systems,
-- plumbing and electrical systems,
-- walls, floors, and ceilings,
-- and any common areas if you are purchasing a condominium or cooperative.
You should view the home inspection report as a way to identify problems before you buy the home, to help negotiate adjustments in the purchase price if problems exist, and to help get the buyer to make any needed improvements before you buy the home.
Lastly -- and for some buyers most importantly -- the home inspection report is a way to make you feel confident that the home you are buying includes systems that are in good working condition.
Homeowner's Insurance
Homeowner's insurance -- also called "hazard insurance" -- should be equal to at least the replacement cost of the property you want to purchase. Replacement cost coverage ensures that your home will be fully rebuilt in case of a total loss.
Most home buyers purchase a homeowner's insurance policy that includes personal liability insurance in case someone is injured on their property; personal property coverage for loss and damage to personal property due to theft or other events; and dwelling coverage to protect the house against fire, theft, weather damage, and other hazards.
If the home you want to buy is located near water, you may be able to get flood insurance as part of your homeowner's protection. In fact, it may be required in some areas, so check with your real estate professional or an approved lender for further information.
Seek out and compare rates from several insurance companies before making your final decision.
Lenders often want the first year's premium to be paid at or before closing. Your lender may add the insurance cost to your monthly mortgage payments and keep this portion of your payments in an escrow account. The lender then pays your insurance bill out of escrow when it receives premium notices from your insurance company.
Homeowner's Insurance for Reverse Mortgages
Homeowner's insurance (also called "hazard insurance") is required and should be equal to at least the replacement cost of the home you want to purchase. Replacement cost coverage ensures that your home will be fully rebuilt in case of a total loss.
Most home buyers purchase a homeowner's insurance policy that includes personal liability insurance (though this personal liability insurance is not required) in case someone is injured on their property; personal property coverage for loss and damage to property due to theft or other events; and dwelling coverage to protect the house against fire, theft, weather damage, and other hazards.
If the home is near water, you may be able to get flood insurance as part of your homeowner's protection. In fact, it may be required in some areas, so check with your real estate professional or an approved lender for further information.
Seek out and compare rates from several insurance companies before making your final decision.
Homeowners' Association
A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
Homeowner's Warranty (HOW)
A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.
HomeStyle Construction-to-Permanent Mortgage
This mortgage gives you the financial power to build your own home -- you can borrow money to build a home from the ground up or to finish building a home that's currently under construction. This loan provides financing from the construction through the purchase phases of your new home.
Advantages:
-- You enjoy peace of mind by locking in fixed interest rates on both the construction and permanent mortgage financing phases of your home purchase in one convenient loan.
-- You can borrow a minimum of 95 percent of the construction cost or the as-completed value of the property (which means your down payment can be as low as 5 percent).
-- You can use this mortgage to purchase land upon which you build your home.
-- You save money because there is one set of closing costs, compared to those associated with separate loans for construction and occupancy.
-- You pay interest only on the funds disbursed during construction.
-- This mortgage can be used for construction that's already under way.
Details:
-- A minimum down payment of 5 percent for a one-unit home and 10 percent for two-unit homes.
-- Construction phases of six, nine, or 12 months, with extensions available up to six months, are allowed.
-- This loan is available for one- and two-unit owner-occupied homes, one-unit second homes, and one-unit investor homes.
-- You can choose a 15- or 30-year fixed-rate mortgage. You can also include the construction phase in these terms, or not, depending on your preference.
-- You can also finance with fixed-period ARMs.
HomeStyle Mortgage Loan
A mortgage that enables eligible borrowers to obtain financing to remodel, repair, and upgrade their existing homes or homes that they are purchasing. See also HomeStyle Standard Mortgage, HomeStyle Remodeler, HomeStyle Community Mortgage and HomeStyle Consumer Energy Loan
Housing Expense Ratio
The percentage of gross monthly income that goes toward paying housing expenses.
HUD-1 Statement
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet."
The HUD-1 Settlement Statement itemizes the amounts to be paid by the buyer and the seller at closing. The (blank) form is published by the U.S. Department of Housing and Urban Development (HUD).
Items on the statement include:
-- real estate commissions,
-- loan fees,
-- points, and
-- escrow amounts.
The form is filled out by your closing agent and must be signed by the buyer and the seller. The buyer should be allowed to review the HUD-1 Settlement Statement on the business day before the closing meeting to know the closing costs in advance.
The HUD-1 Settlement Statement is also known as the "closing statement" or "settlement sheet."
HUD Median Income
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
In-File Credit Report
An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.
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