Definition:

These are types of adjustable-rate mortgages in which interest rate is fixed a specified number of years then afterwards the interest rate becomes adjustable. For example, a 2/1 ARM is a program where the first 2 years of the mortgage is fixed, then every year afterwards is adjustable.

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This is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index and time schedule. This is also sometimes known as a renegotiable rate mortgage, variable rate mortgage or Canadian rollover mortgage.

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Means loan payment by equal periodic payment calculated to pay off the entire debt at the end of a fixed period, including accrued interest on the outstanding balance.

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APR is a measurement of the full cost of a loan including interest rate and loan fees expressed as a yearly percentage rate. The annual percentage rate is an interest rate that is different from the note rate. The APR does NOT affect your monthly payments. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a basis for comparing the cost of loans.

Definition:

An appraisal is an estimate of value by a professional appraiser. This is an opinion and is not pure science. An appraisal relies mostly on recent comparable sales in the immediate area. An appraiser will make value adjustments depending on how the home compares to other similar homes in terms of its location, size, upgrades, amenities, surrounding area, etc.

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

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This is when a buyer assumes or take-over the duty to pay the seller existing mortgage loan.

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A type of fixed-rate mortgage with payments for half the usual monthly amount scheduled every two weeks. Because you make the equivalent of 13 months of payments every year, the loan term is shortened from 30 years to 18 or 19 years, and total interest costs are substantially lower.

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

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Also often called "points" or "discount points," a loan discount is a one-time charge imposed by the lender or broker to lower the rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the mortgage amount. For example, if a lender charges two points on an $80,000 loan this amounts to a charge of $1,600.

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Consumer safeguards that limit the amount the interest rate on an adjustable rate mortgage which may change per specific time period and/ or the life of the loan.

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The amount of cash derived over a certain period of time from an income-producing property. Ideally, cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.).

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A loan transaction in which the borrower receives funds at the time of closing.

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The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands, also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 3 percent to 6 percent of the mortgage amount.

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The costs and fees associated with the official change in ownership of the property, which includes those fees to obtain your mortgage that are assessed at the closing or settlement. Closing costs include required certifications, insurance, taxes and other fees.

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These are documents that are signed at closing. These include the Deed of Trust or Mortgage with attachments, Promissory Note, Truth-in-Lending Disclosure, and other documents related to the transaction.

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A disclosure form, sometimes referred to as Settlement Statement or HUD-1 Statement, used at closing that gives an account of the funds received and paid at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance.

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

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Adjustable-rate mortgage with rate that adjusts based on a US-based cost-of-funds index, called the 11th District Cost of Funds Index.

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A binding pledge made by the lender to the borrower to make a loan, usually at a stated interest rate within a given period of time for a given purpose, subject to the compliance of the borrower to stated conditions.

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Any fee paid by a potential borrower to a lender for the lender’s promise to lend money at a specified rate and within a given time period, subject to the compliance of the borrower to stated conditions

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A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

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A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

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Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). These agencies generally purchase traditional fixed rate level payment first mortgages up to loan amounts mandated by Congressional directive. This mortgage is not obtained under a government insured program (such as FHA or VA).

Definition:

A report documenting the credit history and current status of a borrower’s credit standing. The three largest credit bureaus, Trans-Union, Equifax and Experian, receive a record of your payment history based on data received from your creditors such as mortgage lenders, credit card companies, auto lenders, department stores, etc. Each Bureau matches this information and calculates their unique FICO score

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This ratio is expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See housing expenses-to-income ratio.

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In many states, this document is used in place of a mortgage to secure the payment of a loan note.

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A sum of money given by the buyer to bind a sale of real estate.

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A loss of market value in real property due to market conditions, age, and physical deterioration, functional or economic obsolescence.

Definition:

Also often called "points" or "discount points," a loan discount is a one-time charge imposed by the lender or broker to lower the rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the mortgage amount. For example, if a lender charges two points on an $80,000 loan this amounts to a charge of $1,600.

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An amount paid in cash to the seller when a home is purchased. The down payment is the difference between the purchase price and the mortgage amount.

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A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

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A portion of the down payment delivered to the seller or an escrow agency by the purchaser of real estate with a purchase offer as evidence of good faith.

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Endorsements alter the terms of a title insurance policy by either correcting inaccurate data or are designed to add to or change the coverage of the policy.

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This is 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.

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The difference between the fair market value and current indebtedness also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property.

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Refers to a neutral third party who carries out the instruction of both the buyer and seller to handle all the paperwork of settlement or closing. Escrow may also refer to an account held by the lender into which the home buyer pays money for tax or insurance payments.

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A Federal law which requires a lender who is rejecting a loan request because of adverse credit information to inform the borrower of the source of such information.

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A corporation authorized by Congress. It purchases residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages. It sells participation certificates whose principal and interests are guaranteed by FHLMC.

Definition:

A corporation authorized by Congress. It purchases residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages. It sells participation certificates whose principal and interests are guaranteed by FHLMC.

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A loan insured by the Federal Housing Administration. FHA mortgages loans may require lower down payments than conventional mortgages, and also feature less stringent income and financial requirements.

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A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution’s purpose is to make mortgage money more available and affordable.

Definition:

This insures that the mortgage loan against some or most losses. This typically requires a small fee (up to 3.8 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent $75,000 30-year fixed rate FHA loan, this fee would amount to either $2,850 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

Definition:

A mortgage with an interest rate that remains constant for the life of the loan. The most common fixed-rate mortgage is repaid over a period of 30 years.

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The process of determining whether a property is located within a known flood zone. Federal Regulations require lenders to have flood insurance if the mortgage loan issued to a borrower is secured on a property located in a flood-prone area.

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If the lender requires flood insurance, it is usually listed here. Flood insurance is typically not covered under standard hazard insurance.

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A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

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A written explanation signed by the individual giving the gift stating, "This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time."

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The total monthly income earned before deductions or monthly expenses

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An examination of the structure and mechanical systems to determine a home's safety,makes the potential homebuyer aware of any repairs that may be needed.

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Offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance, coverage extends over a specific time period and does not cover the home's structure.

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Hazard insurance protects you and the lender against loss due to fire, windstorm, and natural hazards. Lenders often require the borrower to bring to the settlement a paid-up first year's premium at settlement.

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This ratio is typically expressed as a percentage that results when a borrower's housing expenses are divided by his/ her gross monthly income. See debt-to-income ratio.

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That portion of a borrower’s monthly payments held by the lender or service to pay for taxes, hazard insurance, mortgage insurance lease payments, and other items as they become due. Also known as reserves.

Definition:

A published interest rate, which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as 1, 3 and 5 year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

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The percentage of an amount of money which is charged for the use of loan funds for a specified time.

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Real estate owned that is not intended for owner occupancy. Typically, the purpose of such property is to generate income or appreciation.

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This is someone who purchases assets or real estate with the purpose to increase income or wealth. This term may also be a money source for a mortgage lender, usually a wholesale lender, mortgage bank or investor on the secondary market.

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A loan which is larger than the limits set by the FNMA and FHLMC. These loan size limits vary from state to state. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

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The Lenders policy protects the lenders interest in the property as security for the outstanding balance of the buyer or owners mortgage

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This is a standard interest rate index based on the London Interbank Offered Rate.

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A claim or attachment against real property as security for payment of a debt or an obligation.

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A provision of an ARM that limits the total increase in interest rates over the life of the loan.

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An agreement between a home-owner and a licensed real estate broker that authorizes the broker to market the property for sale during a given time period.

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The ratio of the amount of a mortgage loan to the property’s appraised value or its sale price, whichever is lower. Loan-to-value ratio limits vary depending upon the individual lender’s loan programs.

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The additional interest a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

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The highest price which a ready, willing and able buyer would pay and a willing seller will accept, both being fully informed under no pressure to act.

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The due date or termination on which final payment on a loan must be paid in full.

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Usually the amount of PITI (principal, interest, taxes, and insurance) paid each month on a mortgage loan.

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A lien on real estate given by the buyer to secure money borrowed.

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The lender in a mortgage transaction.

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A company that originates, funds, and services mortgages exclusively for resale in the secondary market.

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A qualified individual or company that assists and obtains mortgages for clients by finding lending institutions, insurance companies or private sources to lend money. The mortgage broker may also handle collections and disbursements.

Definition:

A policy that provides protection for the lender in case of default and or which guarantees repayment of the loan if the borrower becomes disabled or dies. The borrower usually pays to insure the mortgage when the down payment or equity is less than 20%. See private mortgage insurance, FHA mortgage insurance.

Definition:

It is insurance from FHA to the lender against incurring a loss on account of the borrower's default.

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A written promise to pay a sum of money at a stated interest rate during a specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.

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The borrower or homeowner. A person who receives funds in the form of a loan with an obligation to repay principal with interest.

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A listing of real estate for sale taken by a member of an organization of real estate agent and brokers, whereby all members have an opportunity to find a buyer.

Definition:

The largest real estate trade association in the country. The association’s purpose is to enhance the ability and opportunity of its members to conduct business successfully and ethically, and to promote the preservation of the right to own, transfer and use real property. “Realtors” are designated members of NAR. Real estate agents and brokers must join NAR to call themselves “Realtor”.

Definition:

Pursuant to the California Natural Hazard Disclosure Law, a Natural Hazard Disclosure report is required. This written report lists six geologic hazard zones verifying whether or not the subject property lies within one of the zones.

Definition:

The increase in the balance of a loan caused by interest payments being larger than the re-payments made on the loan. On adjustable-rate mortgages, if the monthly payments are not enough to cover both the interest and principal payments on the loan, the shortage is added to the principal. This situation occurs when the mortgage payments reach the maximum (as defined by the loan agreement) while the interest rate on the loan is increasing. In some cases, the interest shortage is added back to the loan and payable at maturity. For example, amortized payments for the first six months of a 30-year mortgage loan would be based on a 6% rate, but interest would be charged against equity at 8%; this rate charge would fluctuate every six-month period.

Definition:

Conventional home mortgages not eligible for sale and delivery to either FNMA or FHLMC because of various reasons, including loan amount, loan characteristics or underwriting guidelines.

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This is someone who is authorized by federal or local government to attest to the authentic signatures and administrator oaths.

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The use of a property as a full-time primary residence, either by the title holder (owner-occupancy/ primary) or by another party through a formal agreement (non-owner occupies/ rental).

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This fee is usually known as a loan origination fee but sometimes is called a "point" or "points".The fee charged by a mortgage consultant or lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property,usually computed as a percentage of the face value of the loan.

Definition:

The Owners policy protects the buyers investment in the property up to the face amount of the policy You pay a one time premium at closing for your Owners Policy and it remains in effect as long as you own the property

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This means that the property is the owner's primary residence.

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If other parties and other mortgage lenders need to be paid, a payoff statement or demand is required to calculate the amount owed including interest and any penalties.

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This is a time period when the interest rate will adjust or recast (usually, annually or every 6 months).

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The four components that are most commonly included in the monthly mortgage payment. Principal and Interest are the portions of the payment assigned to repay the mortgage itself,taxes and insurance are paid by your lender into a special escrow account to pay for homeowners insurance and property taxes.

Definition:

A planned combination of diverse land uses, such as housing, recreation, and shopping in one contained development or subdivision. A major feature of a PUD includes areas of common land for use by the housing unit owners,the association of unit owners generally owns, pays fees, and maintains the common areas.

Definition:

Prepaid interest assessed at closing by the lender or mortgage consultant. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

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A legal document authorizing one person to act on behalf of another.

Definition:

Loan Pre-qualification is where a mortgage consultant interviews to assess a potential borrower for a specific mortgage loan amount. The borrower will usually receive a formal letter from the mortgage consultant to document the loan pre-qualification. This will also help buyers understand what are their monthly expenses and how much to cash is required for a down-payment and closing costs. Additionally, when a seller reviews your purchase offer, having a pre-approved mortgage letter will the offer stronger.

Definition:

The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.

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Necessary to create an escrow account or to adjust the seller's existing escrow account. This may include taxes, hazard insurance, private mortgage insurance and special assessments.

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Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in many states.

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A residence which a borrower intends to occupy as the principal residence (owner-occupied).

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The amount of debt, not including interest, left on a loan,also the face amount of the mortgage.

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Private mortgage insurance or mortgage insurance policy (PMI or MIP) protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on you loan's structure.

Definition:

Loan consultants and their loan processors work with borrowers to obtain the necessary documentation and information required by lenders. Documentation includes appraisal, credit report, employment, financial information and any other information that may be required by a lender's underwriting department. Once the required documentation is arranged,loan package is delivered to the lenders underwriting department for loan approval. Afterwards, processing will include the arrangement of signing the documents and satisfying loan conditions to close the transaction.

Definition:

An agreement between a buyer and seller of real property, setting forth the price and terms of a sale. Also known as a Sales Contract.

Definition:

Guidelines applied by lenders to determine how large a loan to grant a home buyer based on your Debt-to-Income ratios.

Definition:

Provides a written report that summarizes the finding of a thorough physical property inspection for radon gas. Radon is a colourless, odourless, tasteless gas that seeps into a house from the surrounding earth as a natural by product of the natural decay of uranium present in the earth.

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An agreement guaranteeing the borrower a specified interest rate provided the loan.

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Real estate or real property owned by an individual or business

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A licensed person who works under the direction of a real estate broker to sell and lease real property.

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Property that is in the possession of a lender as a result of foreclosure or forfeiture.

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Land which is permanently affixed to it.

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A Realtor is a real estate professional who is a member of the National Association of Realtors and subscribes to its strict Code of Ethics. This professional is committed to protecting and promoting private ownership of real property, establishing and maintaining high professional standards of practice, and creating unity in the National Association of Realtors organization and respect for the real estate profession.

Definition:

To re-design an existing loan balance into a new loan for the same period or longer, to reduce payments and help a distressed borrower. For some loan programs such as Negative Amortization loans, recasting is built into the terms. Should your negative balance reach a predetermined amount (typically 110 to 115)

Definition:

When the transaction is ready to close and all required funds are available, the title insurance company will record any deeds and then transfer funds to the appropriate parties. These are fees paid to the title insurance company for recording a home sale or refinance with the local authorities, thereby making it part of the public records.

Definition:

Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on a property. There are 3 main reasons to refinance your existing mortgage loan: a) obtain a better rate & term, b) cash out, c) combination.

Definition:

A federal law requiring disclosure of the APR (Annual Percentage Rate) to home buyers shortly after apply for the loan. Also known as Truth-In-Lending (TIL).

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The cancellation of a contract with respect to mortgage refinancing. The law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Definition:

A federal law that allows consumers to review information on known or estimates settlement costs once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only. Typically, a mortgage consultant is required to provide a Good Faith Estimate within three days of submitting a mortgage application.

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A residence other than the borrower's primary residence that the borrower intends to occupy for a portion of each year. (i.e. vacation home)

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A mortgage made subsequent to another mortgage and subordinate to the first one.

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A situation where there are more buyers than sellers. Thus, buyers are at an advantage to the seller.

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All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections.

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Interest which is computed only on the principle balance.

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This is the rate that is applied to the owners policy when it is issued at the same time as the lenders policy

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The end of a NEGAM mortgage program payment schedule.

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A survey is a drawing that measures the precise legal boundaries of a property, along with the location of improvements, rights of way, easements, encroachments, and other physical features.

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The increase in equity created by a home owner performing physical work on a property.

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Ownership of real property. Title is transferred from one party to another through a document called a deed.

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Protection for lenders and homeowners against financial loss resulting from legal defects in or other claims against the property title. The cost of the policy is usually a function of the value of the property and is often borne by the purchaser and so seller.

Definition:

This is an agreement by the title company to insure the title to a specific property, which resembles a title insurance policy in that it sets forth similar information. Binders/ commitments are based on the current title search and reflects the title as of the date of that search.

Definition:

An examination of the public record to determine that the seller is the legal owner and there are no encumbrances (such as claims or liens) effecting the property.

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A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

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In many states, this document is used in place of a mortgage to secure the payment of a loan note.

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A federal law requiring disclosure of the APR (Annual Percentage Rate) to home buyers shortly after apply for the loan. Also known as Regulation Z.

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The process of analyzing a loan application to determine the amount of risk involved in making the loan, it includes a review of the potential borrower's credit history and a judgement of the property value.

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Interest charged in excess of the legal rate established by law.

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A document signed by the borrower's financial institution verifying the status and balance of their financial or asset accounts.

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A document signed by the borrower's employer verifying their position and salary.

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Funds are electronically wired through the Federal Reserve System and done through commercial banks that are members of the Federal Reserve Bank.