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Z
A
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 the mortgage's interest rate periodically
on the basis of changes in a specified index. Interest rates may move up or
down, as market conditions change.
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.
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 (the borrower) 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. Lenders use the
information on the loan application to evaluate whether or not they can give
the loan, and if so, the amount of money they can lend.
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). More
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.
assumption
The transfer of the seller’s existing mortgage to
the buyer. See assumable mortgage.
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.
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B
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. The principal and interest on the loan are amortized over a
longer period than the actual term of the mortgage.
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
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.
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C
call
option
A provision in the mortgage that gives the mortgagee (the lender) 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.
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.
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.
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. See adjustable
rate mortgage (ARM).
certificate
of deposit index
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weekly average of secondary market interest
rates on six-month negotiable certificates of deposit. See adjustable-rate mortgage.
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).
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." At this meeting, ownership of the property is transferred from the seller to the buyer.
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
statement
See HUD-1 statement.
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.
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.
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. See endorser.
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.
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
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.
contingency
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.
contract
An oral or written agreement to do or not to do a certain thing.
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).
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
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.
creditor
A person to whom money is owed.
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 reporting agency (or bureau)
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.
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
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D
debt
An amount owed to another. See installment loan and revolving liability.
deed
The legal document conveying title to a property.
deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid
foreclosure. Also called a "voluntary conveyance."
deed
of trust
The document used in some states instead of a mortgage; title is conveyed
to a trustee.
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.
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
See point.
dower
The rights of a widow in the property of her husband at his death.
down
payment
The part of the purchase price of a property that the buyer pays in cash
and does not finance with a mortgage.
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.
Back to Top
E
earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious
about buying the house.
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.
Employer-assisted
housing
A special housing initiative that offers several different ways for employers
to work with local lenders to develop plans to assist their employees in purchasing
homes.
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.
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.
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.
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.
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.
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.
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.
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.
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F
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
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.
Fannie
Mae Properties
Fannie Mae
owns, manages, and has available for sale, single-family detached homes, two-
to four-unit properties, condominiums, and townhouses in a variety of neighborhoods.
The number, type, and sales price may vary substantially. The homes vary in
age and may require repairs. Fannie Mae homes are sold through local real estate
brokers whose contact information is provided in the Fannie Mae Properties for
Sale search results on homepath.com.
Fannie
Mae's Community Home Buyer's ProgramSM
An income-based community lending model, under which mortgage insurers
and Fannie Mae offer flexible underwriting guidelines to increase a low-
or moderate-income family's buying power and to decrease the total amount
of cash needed to purchase a home. Borrowers who participate in this model
are required to attend pre-purchase home-buyer education sessions.
Fannie
97®
A financing option for a fixed-rate mortgage that offers home buyers a
3 percent down payment loan with a term between 15 and 30 years. The mortgage
features a loan-to-value (LTV) percentage of 97 percent, and is designed
to expand homeownership opportunities for people with modest incomes.
Borrowers must take a pre-purchase home-buyer education session to qualify
for a Fannie 97 mortgage.
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 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
mortgage
A mortgage that is insured by the Federal Housing Administration (FHA).
Also known as a government mortgage.
finder's
fee
A fee or commission paid to a mortgage broker for finding a mortgage loan
for a prospective borrower.
firm
commitment
A lender’s agreement to make a loan to a specific borrower on a specific
property.
first
mortgage
A mortgage that is the primary lien against a property.
fixed
installment
The monthly payment due on a mortgage loan. The fixed installment includes
payment of both principal and interest.
fixed-rate
mortgage (FRM)
A mortgage in which the interest rate does not change during the entire
term of the loan.
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.
forfeiture
The loss of money, property, rights, or privileges due to a breach of
legal obligation.
401(k)/403(b)
An employer-sponsored investment plan that allows individuals to set aside
tax-deferred income for retirement or emergency purposes. 401(k) plans
are provided by employers that are private corporations. 403(b) plans
are provided by employers that are not for profit organizations.
401(k)/403(b)
loan
Some administrators of 401(k)/403(b) plans allow for loans against the
monies you have accumulated in these plans -- monies must be repaid to
avoid serious penalty charges.
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.
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G
government
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.
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H
hazard
insurance
Insurance coverage that compensates for 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.
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.
HomeKeeperSM
Fannie Mae's adjustable-rate conventional reverse mortgage, which allows
older homeowners to borrow against the value of their homes and receive
the proceeds according to the payment option they select. The amount available
is based on the number of borrowers and their ages and the adjusted property
value. Anyone 62 years or older who either owns his or her own home free
and clear or has very low mortgage debt is eligible.
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
insurance
An insurance policy that combines personal liability insurance and hazard
insurance coverage for a dwelling and its contents.
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®
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
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).
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."
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I
income
property
Real estate developed or improved to produce income.
index
A number used to compute the interest rate for an adjustable-rate mortgage (ARM).
The index is generally a published number or percentage, such as the average
interest rate or yield on Treasury bills. A margin is added to the index to
determine the interest rate that will be charged on the ARM. This interest rate
is subject to any caps that are associated with the mortgage.
in-file
credit report
An objective account, normally computer-generated, of credit and legal
information obtained from a credit repository.
inflation
An increase in the amount of money or credit available in relation to
the amount of goods or services available, which causes an increase in
the general price level of goods and services. Over time, inflation reduces
the purchasing power of a dollar, making it worth less.
initial
interest rate
The original interest rate of the mortgage at the time of closing. This
rate changes for an adjustable-rate mortgage (ARM). Sometimes known as
"start rate" or "teaser."
installment
The regular periodic payment that a borrower agrees to make to a lender.
installment
loan
Borrowed money that is repaid in equal payments, known as installments.
A furniture loan is often paid for as an installment loan.
insurable
title
A property title that a title insurance company agrees to insure against
defects and disputes.
insurance
A contract that provides compensation for specific losses in exchange
for a periodic payment. An individual contract is known as an insurance
policy, and the periodic payment is known as an insurance premium.
insurance
binder
A document that states that insurance is temporarily in effect. Because
the coverage will expire by a specified date, a permanent policy must
be obtained before the expiration date.
insured
mortgage
A mortgage that is protected by the Federal Housing Administration (FHA)
or by private mortgage insurance (MI). If the borrower defaults on the
loan, the insurer must pay the lender the lesser of the loss incurred
or the insured amount.
interest
The fee charged for borrowing money.
interest
accrual rate
The percentage rate at which interest accrues on the mortgage. In most
cases, it is also the rate used to calculate the monthly payments, although
it is not used for an adjustable-rate mortgage (ARM) with payment change
limitations.
interest
rate
The rate of interest in effect for the monthly payment due.
interest
rate buydown plan
An arrangement wherein the property seller (or any other party) deposits
money to an account so that it can be released each month to reduce the
mortgagor's monthly payments during the early years of a mortgage. During
the specified period, the mortgagor's effective interest rate is "bought
down" below the actual interest rate.
interest
rate ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified
in the mortgage note.
interest
rate floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified
in the mortgage note.
investment
property
A property that is not occupied by the owner.
IRA
(Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred contributions
to a personal retirement fund. Individuals can place IRA funds in bank
accounts or in other forms of investment such as stocks, bonds, or mutual
funds.
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J
joint
tenancy
A form of co-ownership that gives each tenant equal interest and equal
rights in the property, including the right of survivorship.
judgment
A decision made by a court of law. In judgments that require the repayment
of a debt, the court may place a lien against the debtor's real property
as collateral for the judgment's creditor.
judgment
lien
A lien on the property of a debtor resulting from the decree of a court.
judicial
foreclosure
A type of foreclosure proceeding used in some states that is handled as
a civil lawsuit and conducted entirely under the auspices of a court.
jumbo
loan
A loan that exceeds Fannie Mae’s mortgage amount limits.
Also called a nonconforming loan.
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K
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L
late charge
The penalty a borrower must pay when a payment is made a stated
number of days (usually 15) after the due date.
lease
A written agreement between the property owner and a tenant that
stipulates the conditions under which the tenant may possess the
real estate for a specified period of time and rent.
leasehold
estate
A way of holding title to a property wherein the mortgagor does
not actually own the property but rather has a recorded long-term
lease on it.
lease-purchase
mortgage loan
An alternative financing option that allows low- and moderate-income
home buyers to lease a home from a nonprofit organization with an
option to buy. Each month's rent payment consists of principal,
interest, taxes and insurance (PITI) payments on the first mortgage
plus an extra amount that is earmarked for deposit to a savings
account in which money for a downpayment will accumulate.
legal
description
A property description, recognized by law, that is sufficient to
locate and identify the property without oral testimony.
liabilities
A person's financial obligations. Liabilities include long-term
and short-term debt, as well as any other amounts that are owed
to others.
liability
insurance
Insurance coverage that offers protection against claims alleging
that a property owner's negligence or inappropriate action resulted
in bodily injury or property damage to another party.
lien
A legal claim against a property that must be paid off when the
property is sold.
lifetime
payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that
payments can increase or decrease over the life of the mortgage. See cap.
lifetime
rate cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest
rate can increase or decrease over the life of the loan. See cap, interest rate
ceiling and interest rate floor.
line
of credit
An agreement by a commercial bank or other financial institution
to extend credit up to a certain amount for a certain time to a
specified borrower. See home equity line of credit.
liquid
asset
A cash asset or an asset that is easily converted into cash.
loan
A sum of borrowed money (principal) that is generally repaid with
interest.
loan
commitment
See commitment letter.
loan
origination
The process by which a mortgage lender brings into existence a mortgage
secured by real property.
loan-to-value
(LTV) percentage
The relationship between the principal balance of the mortgage and
the appraised value (or sales price if it is lower) of the property.
For example, a $100,000 home with an $80,000 mortgage has a LTV
percentage of 80 percent.
lock-in
A written agreement in which the lender guarantees a specified interest
rate if a mortgage goes to closing within a set period of time.
The lock-in also usually specifies the number of points to be paid
at closing.
lock-in
period
The time period during which the lender has guaranteed an interest
rate to a borrower. See lock-in.
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M
margin
For an adjustable-rate mortgage (ARM), the amount that is added to the
index to establish the interest rate on each adjustment date, subject
to any limitations on the interest rate change.
master
association
A homeowners' association in a large condominium or planned unit development
(PUD) project that is made up of representatives from associations covering
specific areas within the project. In effect, it is a "second-level"
association that handles matters affecting the entire development, while
the "first-level" associations handle matters affecting their
particular portions of the project.
maturity
The date on which the principal balance of a loan, bond, or other financial
instrument becomes due and payable.
maximum
financing
A mortgage amount that is within 5 percent of the highest loan-to-value
(LTV) percentage allowed for a specific product. Thus, maximum financing
on a fixed-rate mortgage would be 90 percent or higher, because 95 percent
is the maximum allowable LTV percentage for that product.
merged
credit report
A credit report that contains information from three credit repositories.
When the report is created, the information is compared for duplicate
entries. Any duplicates are combined to provide a summary of a your credit.
modification
The act of changing any of the terms of the mortgage.
money
market account
A savings account that provides bank depositors with many of the advantages
of a money market fund. Certain regulatory restrictions apply to the withdrawal
of funds from a money market account.
money
market fund
A mutual fund that allows individuals to participate in managed investments
in short-term debt securities, such as certificates of deposit and Treasury
bills.
monthly
fixed installment
That portion of the total monthly payment that is applied toward principal
and interest. When a mortgage negatively amortizes, the monthly fixed
installment does not include any amount for principal reduction.
monthly
payment mortgage
A mortgage that requires payments to reduce the debt once a month.
mortgage
A legal document that pledges a property to the lender as security for payment
of a debt.
mortgage
banker
A company that originates mortgages exclusively for resale in the secondary
mortgage market.
mortgage
broker
An individual or company that brings borrowers and lenders together for the
purpose of loan origination. Mortgage brokers typically require a fee or a commission
for their services.
mortgagee
The lender in a mortgage agreement.
mortgage
insurance
A contract that insures the lender against loss caused by a mortgagor's
default on a government mortgage or conventional mortgage. Mortgage insurance
can be issued by a private company or by a government agency such as the
Federal Housing Administration (FHA). Depending on the type of mortgage
insurance, the insurance may cover a percentage of or virtually all of
the mortgage loan. See private mortgage insurance.
mortgage
insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government
agency such as the Federal Housing Administration (FHA) or to a private
mortgage insurance (MI) company.
mortgage
life insurance
A type of term life insurance often bought by mortgagors. The amount of
coverage decreases as the principal balance declines. In the event that
the borrower dies while the policy is in force, the debt is automatically
satisfied by insurance proceeds.
mortgagor
The borrower in a mortgage agreement.
multidwelling
units
Properties that provide separate housing units for more than one family,
although they secure only a single mortgage.
multifamily
mortgage
A residential mortgage on a dwelling that is designed to house more than
four families, such as a high-rise apartment complex.
multifamily properties
Fannie Mae provides financing for multifamily (buildings with five or more units) rental properties through a nationwide network of mortgage lenders.
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N
negative amortization
A gradual increase in mortgage debt that occurs when the monthly payment
is not large enough to cover the entire principal and interest due. The
amount of the shortfall is added to the remaining balance to create "negative"
amortization.
net
cash flow
The income that remains for an investment property after the monthly operating
income is reduced by the monthly housing expense, which includes principal,
interest, taxes, and insurance (PITI) for the mortgage, homeowners' association
dues, leasehold payments, and subordinate financing payments.
net
worth
The value of all of a person's assets, including cash, minus all liabilities.
no
cash-out refinance
A refinance transaction in which the new mortgage amount is limited to
the sum of the remaining balance of the existing first mortgage, closing
costs (including prepaid items), points, the amount required to satisfy
any mortgage liens that are more than one year old (if the borrower chooses
to satisfy them), and other funds for the borrower's use (as long as the
amount does not exceed 1 percent of the principal amount of the new mortgage).
nonliquid
asset
An asset that cannot easily be converted into cash.
note
A legal document that obligates a borrower to repay a mortgage loan at a stated
interest rate during a specified period of time.
note
rate
The interest rate stated on a mortgage note.
notice
of default
A formal written notice to a borrower that a default has occurred and
that legal action may be taken.
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O
original
principal balance
The total amount of principal owed on a mortgage before any payments
are made.
origination
fee
A fee paid to a lender for processing a loan application. The origination fee
is stated in the form of points. One point is 1 percent of the mortgage amount.
owner
financing
A property purchase transaction in which the property seller provides
all or part of the financing.
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P
partial
payment
A payment that is not sufficient to cover the scheduled monthly payment
on a mortgage loan.
payment
change date
The date when a new monthly payment amount takes effect on an adjustable-rate
mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM).
Generally, the payment change date occurs in the month immediately
after the adjustment date.
periodic
payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that
payments can increase or decrease during any one adjustment period.
periodic
rate cap
For an adjustable-rate mortgage (ARM), a limit on the amount that
the interest rate can increase or decrease during any one adjustment
period, regardless of how high or low the index might be.
personal
property
Any property that is not real property.
PITI
See principal, interest, taxes and insurance (PITI) below.
PITI
reserves
A cash amount that a borrower must have on hand after making a down
payment and paying all closing costs for the purchase of a home. The
principal, interest, taxes, and insurance (PITI) reserves must equal
the amount that the borrower would have to pay for PITI for a predefined
number of months.
planned
unit development
See PUD below.
point
A one-time charge by the lender for originating a loan. A point is
1 percent of the amount of the mortgage.
power
of attorney
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.
prearranged
refinancing agreement
A formal or informal arrangement between a lender and a borrower wherein
the lender agrees to offer special terms (such as a reduction in the
costs) for a future refinancing of a mortgage being originated as
an inducement for the borrower to enter into the original mortgage
transaction.
preforeclosure
sale
A procedure in which the investor allows a mortgagor to avoid foreclosure
by selling the property for less than the amount that is owed to the
investor.
prepayment
Any amount paid to reduce the principal balance of a loan before the
due date. Payment in full on a mortgage that may result from a sale
of the property, the owner's decision to pay off the loan in full,
or a foreclosure. In each case, prepayment means payment occurs before
the loan has been fully amortized.
prepayment
penalty
A fee that may be charged to a borrower who pays off a loan before it is due.
pre-qualification
The process of determining how much money a prospective home buyer
will be eligible to borrow before he or she applies for a loan.
prime
rate
The interest rate that banks charge to their preferred customers.
Changes in the prime rate influence changes in other rates, including
mortgage interest rates.
principal
The amount borrowed or remaining unpaid. The part of the monthly payment that
reduces the remaining balance of a mortgage. More
principal
balance
The outstanding balance of principal on a mortgage. The principal balance does
not include interest or any other charges. See remaining balance.
principal,
interest, taxes, and insurance (PITI)
The four components of a monthly mortgage payment. Principal refers
to the part of the monthly payment that reduces the remaining balance
of the mortgage. Interest is the fee charged for borrowing money.
Taxes and insurance refer to the amounts that are paid into an escrow
account each month for property taxes and mortgage and hazard insurance.
private
mortgage insurance (MI)
Mortgage insurance that is provided by a private mortgage insurance
company to protect lenders against loss if a borrower defaults. Most
lenders generally require MI for a loan with a loan-to-value (LTV)
percentage in excess of 80 percent.
promissory
note
A written promise to repay a specified amount over a specified period
of time.
public
auction
A meeting in an announced public location to sell property to repay
a mortgage that is in default.
PUD
(Planned Unit Development)
A project or subdivision that includes common property that is owned and maintained
by a homeowners' association for the benefit and use of the individual PUD unit
owners.
purchase
and sale agreement
A written contract signed by the buyer and seller stating the terms and conditions
under which a property will be sold.
purchase
money transaction
The acquisition of property through the payment of money or its equivalent.
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Q
qualifying
ratios
Calculations that are used in determining whether a borrower can qualify
for a mortgage. They consist of two separate calculations: a housing
expense as a percent of income ratio and total debt obligations as a
percent of income ratio.
quitclaim
deed
A deed that transfers without warranty whatever interest or title
a grantor may have at the time the conveyance is made.
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R
radon
A radioactive gas found in some homes that in sufficient concentrations
can cause health problems.
rate-improvement
mortgage
A fixed-rate mortgage that includes a provision that gives the borrower
a one-time option to reduce the interest rate (without refinancing)
during the early years of the mortgage term.
rate
lock
A commitment issued by a lender to a borrower or other mortgage originator
guaranteeing a specified interest rate for a specified period of time.
See lock-in.
real
estate agent
A person licensed to negotiate and transact the sale of real estate
on behalf of the property owner.
Real
Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers
advance notice of closing costs.
real
property
Land and appurtenances, including anything of a permanent nature such
as structures, trees, minerals, and the interest, benefits, and inherent
rights thereof.
Realtor®
A real estate broker or an associate who holds active membership in
a local real estate board that is affiliated with the National Association
of Realtors.
recission
The cancellation or annulment of a transaction or contract by the
operation of a law or by mutual consent. Borrowers usually have the
option to cancel a refinance transaction within three business days
after it has closed.
recorder
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."
recording
The noting in the registrar’s office of the details of a properly
executed legal document, such as a deed, a mortgage note, a satisfaction
of mortgage, or an extension of mortgage, thereby making it a part
of the public record.
refinance
transaction
The process of paying off one loan with the proceeds from a new loan
using the same property as security.
rehabilitation
mortgage
A mortgage created to cover the costs of repairing, improving, and
sometimes acquiring an existing property.
remaining
balance
The amount of principal that has not yet been repaid. See principal
balance.
remaining
term
The original amortization term minus the number of payments that have
been applied.
rent
loss insurance
Insurance that protects a landlord against loss of rent or rental
value due to fire or other casualty that renders the leased premises
unavailable for use and as a result of which the tenant is excused
from paying rent.
rent
with option to buy
See lease-purchase mortgage loan.
repayment
plan
An arrangement made to repay delinquent installments or advances.
Lenders' formal repayment plans are called "relief provisions."
replacement
reserve fund
A fund set aside for replacement of common property in a condominium,
PUD, or cooperative project -- particularly that which has a short
life expectancy, such as carpeting, furniture, etc.
revolving
liability
A credit arrangement, such as a credit card, that allows a customer
to borrow against a preapproved line of credit when purchasing goods
and services. The borrower is billed for the amount that is actually
borrowed plus any interest due.
right
of first refusal
A provision in an agreement that requires the owner of a property
to give another party the first opportunity to purchase or lease the
property before he or she offers it for sale or lease to others.
right
of ingress or egress
The right to enter or leave designated premises.
right
of survivorship
In joint tenancy, the right of survivors to acquire the interest of
a deceased joint tenant.
Rural
Housing Service (RHS)
An agency within the Department of Agriculture, which operates principally
under the Consolidated Farm and Rural Development Act of 1921 and
Title V of the Housing Act of 1949. This agency provides financing
to farmers and other qualified borrowers buying property in rural
areas who are unable to obtain loans elsewhere. Funds are borrowed
from the U.S. Treasury.
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S
sale-leaseback
A technique in which a seller deeds property to a buyer for a consideration,
and the buyer simultaneously leases the property back to the seller.
second
mortgage
A mortgage that has a lien position subordinate to the first mortgage.
secondary
mortgage market
The buying and selling of existing mortgages.
secured
loan
A loan that is backed by collateral.
security
The property that will be pledged as collateral for a loan.
seller
take-back
An agreement in which the owner of a property provides financing,
often in combination with an assumable mortgage. See owner financing.
servicer
An organization that collects principal and interest payments from
borrowers and manages borrowers’ escrow accounts. The servicer
often services mortgages that have been purchased by an investor in
the secondary mortgage market.
servicing
The collection of mortgage payments from borrowers and related responsibilities
of a loan servicer.
settlement
See closing.
settlement
sheet
See HUD-1 statement.
single-family properties
One- to four-unit properties including detached homes, townhomes, condominiums, and cooperatives.
special
deposit account
An account that is established for rehabilitation mortgages to hold
the funds needed for the rehabilitation work so they can be disbursed
from time to time as particular portions of the work are completed.
standard
payment calculation
The method used to determine the monthly payment required to repay
the remaining balance of a mortgage in substantially equal installments
over the remaining term of the mortgage at the current interest rate.
step-rate
mortgage
A mortgage that allows for the interest rate to increase according
to a specified schedule (i.e., seven years), resulting in increased
payments as well. At the end of the specified period, the rate and
payments will remain constant for the remainder of the loan.
subdivision
A housing development that is created by dividing a tract of land
into individual lots for sale or lease.
subordinate
financing
Any mortgage or other lien that has a priority that is lower than
that of the first mortgage.
subsidized
second mortgage
An alternative financing option known as the Community Seconds®
mortgage for low- and moderate-income households. 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 corporation. Payment on the second
mortgage is often deferred and carries a very low interest rate (or
no interest rate). Part of the debt may be forgiven incrementally
for each year the buyer remains in the home.
survey
A drawing or map showing the precise legal boundaries of a property, the location
of improvements, easements, rights of way, encroachments, and other physical
features.
sweat
equity
Contribution to the construction or rehabilitation of a property in
the form of labor or services rather than cash.
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T
tenancy by the entirety
A type of joint tenancy of property that provides right of survivorship
and is available only to a husband and wife. Contrast with tenancy in
common.
tenancy
in common
A type of joint tenancy in a property without right of survivorship. Contrast
with tenancy by the entirety and with joint tenancy.
tenant-stockholder
The obligee for a cooperative share loan, who is both a stockholder
in a cooperative corporation and a tenant of the unit under a proprietary
lease or occupancy agreement.
third-party
origination
A rocess by which a lender uses another party to completely or partially originate,
process, underwrite, close, fund, or package the mortgages it plans to deliver
to the secondary mortgage market. See mortgage broker.
title
A legal document evidencing a person's right to or ownership of a
property.
title
company
A company that specializes in examining and insuring titles to real
estate.
title
insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy)
against loss arising from disputes over ownership of a property.
title
search
A check of the title records to ensure that the seller is the legal owner of
the property and that there are no liens or other claims outstanding.
total
expense ratio
Total obligations as a percentage of gross monthly income. The total expense
ratio includes monthly housing expenses plus other monthly debts.
trade
equity
Equity that results from a property purchaser giving his or her existing
property (or an asset other than real estate) as trade as all or part
of the down payment for the property that is being purchased.
transfer
of ownership
Any means by which the ownership of a property changes hands. Lenders
consider all of the following situations to be a transfer of ownership:
the purchase of a property "subject to" the mortgage, the
assumption of the mortgage debt by the property purchaser, and any
exchange of possession of the property under a land sales contract
or any other land trust device. In cases in which an inter vivos revocable
trust is the borrower, lenders also consider any transfer of a beneficial
interest in the trust to be a transfer of ownership.
transfer
tax
State or local tax payable when title passes from one owner to another.
Treasury
index
An index that is used to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury
holds for its Treasury bills and securities or is derived from the U.S. Treasury's
daily yield curve, which is based on the closing market bid yields on actively
traded Treasury securities in the over-the-counter market. See adjustable-rate
mortgage (ARM).
Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms
and conditions of a mortgage, including the annual percentage rate (APR) and
other charges.
two-step
mortgage
An adjustable-rate mortgage (ARM) that has one interest rate for the
first five or seven years of its mortgage term and a different interest
rate for the remainder of the amortization term.
two-
to four-family property
A property that consists of a structure that provides living space
(dwelling units) for two to four families, although ownership of the
structure is evidenced by a single deed.
trustee
A fiduciary who holds or controls property for the benefit of another.
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U
underwriting
The process of evaluating a loan application to determine the risk involved
for the lender. Underwriting involves an analysis of the borrower's
creditworthiness and the quality of the property itself.
unsecured
loan
A loan that is not backed by collateral.
V
VA
mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs
(VA). Also known as a government mortgage.
vested
Having the right to use a portion of a fund such as an individual
retirement fund. For example, individuals who are 100 percent vested
can withdraw all of the funds that are set aside for them in a retirement
fund. However, taxes may be due on any funds that are actually withdrawn.
Department
of Veterans 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.
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W
what-if
analysis
An affordability analysis that is based on a what-if scenario.
A what-if analysis is useful if you do not have complete data or if
you want to explore the effect of various changes to your income, liabilities,
or available funds or to the qualifying ratios or down payment expenses
that are used in the analysis.
what-if
scenario
A change in the amounts that is used as the basis of an affordability
analysis. A what-if scenario can include changes to monthly income,
debts, or down payment funds or to the qualifying ratios or down payment
expenses that are used in the analysis. You can use a what-if scenario
to explore different ways to improve your ability to afford a house.
wraparound
mortgage
A mortgage that includes the remaining balance on an existing first
mortgage plus an additional amount requested by the mortgagor. Full
payments on both mortgages are made to the wraparound mortgagee, who
then forwards the payments on the first mortgage to the first mortgagee.
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