Mortgage Glossary of Terms

A written history of the property title from the original source of title to the present.

The amount of interest due since interest was last paid.

A mortgage in which the interest rate is adjusted periodically according to a pre-selected index.

A written document by which a buyer agrees to buy and seller agrees to sell real property.

Repayment of a debt in equal installments resulting in retirement of the debt—rather than interest only payments.

A schedule of each payment due on a mortgage loan showing the amount applied to principal, the amount applied to interest, and the remaining principal balance due.

A figure expressed as a percentage on the Truth-in-Lending Disclosure form. It is a rate which represents the relationship of the total finance charge (interest, loan fees, points) to the amount of the loan. Since the service fees are included, the resulting APR will show as being slightly higher than the contract rate on the application, which is what monthly payments are based on.

The form used and the process of applying for a mortgage loan.

A sum of money paid toward estimated mortgage processing expenses, such as the appraisal and credit report.

A report by a qualified person setting forth an opinion of value.

An increase in value of real estate.

The value that a taxing authority places on real or personal property for the purpose of taxation.

A charge against a property for taxation. This may be a levy for a special purpose, or a tax in which the property owner pays a share of the cost of community improvements.

A statement of assets, liabilities, and net worth.

A mortgage with monthly payments due for a certain period of time, at the end of which the remaining balance is due.

A person (also known as mortgagor) who receives a loan with an obligation to repay principal with interest.

Money advanced by an individual (such as the builder or seller) to reduce the monthly payments for a home mortgage for all or part of the term of the loan.

Liquid assets that are readily available to be used to pay the closing costs involved in a closing of a mortgage loan.

A limitation on the interest rate increase for a specified period and over the life of the loan.

The consummation of a real estate transaction. The closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to complete the sale and loan transaction.

The cost associated with the sale of real estate.

A form used at closing that provides a detailed account of the funds paid and received at the closing. Sometimes called a Settlement Statement or HUD-1.

Additional borrower(s) whose income contributes to qualifying for a loan, whose name(s) appear on documents, and who has equal legal obligations.

Property pledged as security for a debt.

A fee paid by a potential borrower to a lender for the lender's promise to lend money.

A formal offer by a lender stating the terms under which it agrees to loan money to a prospective borrower.

A form of real estate ownership. The owner receives title to specific real estate and interest in common areas.

Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC).

A mortgage not obtained under a government-insured program (such as VA or FHA).

A report by a credit reporting agency used by lenders to determine the credit-worthiness of an applicant.

The common law interest a husband has in real estate at the time of his wife's death (governed by state law).

In some states, it is the instrument used in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary), and reconveyed upon payment in full.

The failure to repay an obligation as agreed.

A loan payment that is overdue.

A PUD in which the common property has less than a 2% influence upon the value of the premises. The 2% rule of thumb is calculated by dividing the dollar amount of the amenities by the total number of units.

A loss of value in real estate.

In a real estate transaction, it is the amount withheld from the loan proceeds by the lender. This amount is used to adjust the interest rate of the loan to the required yield.

The right of a widow to a life estate in her husband's property at the time of his death (governed by law).

Cash portion of the amount of the purchase of real estate.

Also known as down payment or down money, this is money deposited by a buyer under terms of a contract.

A Federal law requiring lenders to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs or past exercising of rights under the Consumer Credit Protection Act.

In real estate, it is the difference between the value of the property and the amount owed on the property.

Money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.

Federal National Mortgage Association is a taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells both conventional and government home mortgages.

A mortgage having priority over all other liens.

An interest rate that does not change during the loan term.

A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting debt.

The Federal Home Loan Mortgage Corporation is a quasi-governmental agency that purchases conventional mortgages in the secondary market from banks and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans. The federal government through FHLMC guarantees the principal and interest on these loans. It also sells Government National Mortgage Association (GNMA) bonds to raise funds for the purchase of mortgages.

A written explanation signed by the individual giving the gift that states that the recipient has no obligation, under any circumstances, to repay the loan.

Total monthly income before taxes and other deductions.

An insurance policy whereby, for a premium, an insurer agrees to insure property against loss.

The fees paid to a condominium or homeowner's association for maintenance of common areas.

An insurance policy that covers property and contents.

Owner-occupied property is protected by law (up to a certain amount) from attachment and sale for creditor claims (governed by state law).

Escrow or reserve payment for items such as taxes and insurance.

The percentage of an amount of money that is paid for the use of that money over a period of time.

Real estate owned for income generation that is not owner occupied.

A judgment by the court, and placed as a lien against real estate.

A legal claim against property as security for an obligation.

The ratio between the amount of the mortgage loan and the lower of the sales price or appraised value.

The clause in an insurance policy indicating who is to be paid in the event of a claim.

The percentage a lender adds to the index rate to determine the new interest rate.

The due date of a note.

The amount of principal, interest, taxes, and insurance (PITI) paid monthly on a mortgage loan.

A conditional transfer or pledge of real property as security for the payment of a debt.

The packaging of mortgage loans to be sold to a permanent investor. The mortgage banker then retains the servicing of the loan.

The lender in a mortgage loan transaction.

Insures the lender against loss caused by the borrower's failure to make the payments.

A written promise to repay a stated amount of money at a stated interest rate over a stated period of time.

The borrower in a mortgage transaction.

Conventional home mortgages not eligible for sale and delivery to either FNMA or FHLMC due to several factors, including but not limited to credit quality and loan amount.

A fee charged by a Lender to cover the cost of the process of making a mortgage loan.

Principal, interest, taxes, and insurance included in your monthly mortgage payment.

One percent (1%) of the mortgage loan amount.

Property that the borrower intends to occupy as his/her principal residence.

The remaining balance due on a debt, exclusive of interest.

The process of compiling information on a mortgage loan application, and then verifying said information with all supporting documentation.

A planned combination of diverse land uses, such as housing, recreation, and shopping in one contained development. PUDs generally include common areas, and an association of unit owners who pay association fees to maintain those common areas.

An agreement guaranteeing a specified interest rate on a loan provided that the loan is closed by a specified date.

A federal law requiring lenders to provide home mortgage borrowers with information on the known or estimated costs associated with a loan closing.

The repayment of a debt from proceeds of a new loan using the same property as security.

The recordable instrument provided by a lender that verifies that a mortgage has been paid in full.

A residence other than the primary residence that will be occupied by the borrower for a portion of each year. A second home must be suitable for year round occupancy.

The market where mortgages are bought and sold.

The collateral given by the borrower to secure a debt.

The measurement and description of land as provided by a registered surveyor.

The time limit within which a loan must be repaid.

The legal evidence of ownership to real property.

A policy provided by a title insurance company in which the insured is protected against losses caused by defects of title on real estate. The mortgagee must be named as insured.

An examination of public records that reveals the history and other facts of ownership of a piece of real estate.

A federal law that requires full disclosure of credit terms using a standard format.

Analysis of the risk, and the determination of the appropriate rate and terms on a given loan.

An option that allows the borrower to pay a slightly higher rate in lieu of paying loan origination points.