Mortgage Dictionary: Key terms for homeowners

A 100% loan is a loan with no down payment. Essentially, the loan is equivalent to the purchase price of the property.

The 1003 Form is a common form used during the mortgage loan application process. Sometimes, a 1003 Form is known as the "Uniform Residential Loan Application."

An "A-Credit" score is considered the best credit rating. If a consumer has "A-Credit", they qualify for lower prices from lenders.

An Acceleration Clause is a provision in the mortgage or deed of trust. When a borrower violates one (or more) of the clauses in their contract, an Acceleration Clause gives the lender the right to demand repayment of the entire loan balance. Essentially, the Acceleration Clause helps ensure on-time payments from a borrower to a lender.

A lender may charge an Account Termination Fee if you pay your Home Equity Line of Credit (HELOC) within the first five years and then terminate the account. Despite how it sounds, paying your account balance to $0 is not the same as an account termination. Sometimes, an Account Termination Fee is called a Prepayment Penalty.

Accrued Interest is interest that has accumulated on the principal amount due since the last interest payment.

An acre is a unit of land that equals 4,480 square yards, or 43,560 square feet. An acre is a common measurement used in the United States.

ACH stands for Automatic Clearing House, otherwise known as an ACH System/Network. An automatic clearing house is an electronic system that deducts funds from a bank account, processes it, and then transfers the funds to another bank account.

Acquisition costs are the additional costs of acquiring a property outside of the purchase price. These fees may include, but are not limited to, lender fees, title insurance, and attorney fees.

An Addendum is an agreed-upon addition to a contract that typically outlines additional terms, clauses, and definitions.

An Additional Principal Payment happens when a customer pays more than the scheduled payment amount. Usually, this type of payment is made to reduce the remaining balance on a loan.

An adjustable-rate mortgage, also known as a variable-rate mortgage, generally starts out with an interest rate lower than a fixed-rate mortgage. This saves you money early on. However, your rate is tied to a market index. As the index goes up or down, your interest rate and payments will also change at each scheduled adjustment date. Rate caps limit the amount your interest rate can change, but your payment could increase quite a bit, possibly by hundreds of dollars a month. Make sure you know what your maximum payment could be and whether you can afford it.

An adjustment cap is a limit to how much a variable interest rate can increase or decrease during a single adjustment period.

An adjustment date indicates when the interest rate for an adjustable rate mortgage will change.

An adjustment interval, otherwise known as an adjustment period, is the amount of time between interest rate changes on an adjustable-rate mortgage (ARM), after the initial fixed rate ends.

An adjustment period, otherwise known as an adjustment interval, is the amount of time between interest rate changes on an adjustable-rate mortgage (ARM), after the initial fixed rate ends.

An affiliate is a company related by common ownership.

Affordability is a consumer’s capability to afford a house. Usually, affordability reflects the maximum price a buyer can pay for a house and pay a required mortgage.

An agreement is also known as a purchase contract or offer. The contract is between a buyer and a seller on a property, and the agreement states the terms and price of a home.

An agricultural property is property which generates revenue from crops and livestock.

Alimony payments are made under a divorce decree or a written separation agreements. Alimony is paid to a former spouse.

Alternative Documentation (which is still considered "full documentation") is simplified documentation designed to speed up the home loan approval process.

The American Land Title Association (ATLA) is a national association of title insurance companies, abstractors, and attorneys specializing in real estate property law.

Amortization is the process of paying off a loan over time.

A mortgage payment timetable showing the amount of each payment that's applied to both principal and interest, and the remaining balance after each payment.

An amortization term is the amount of time required to amortize (pay off) the loan, expressed in months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

The Amount Financed is the loan amount and consists of the loan principal and other costs and fees that have been rolled into the loan's monthly payments.

An annual adjustment cap is an included clause in the contract of an Adjustable Rate Mortgage. This cap limits how much the variable interest rate on a loan can increase or decrease each year.

An APR measures both the interest charged as well as any other costs associated with the loan, such as discount points or lender origination fees. Because APR is designed to show you the total cost of a loan, it can be useful when comparing loans from different lenders.

An applicant is a prospective borrower who has completed an application.

A mortgage application is a collection of a buyer's information that is submitted to a lender in order to borrow money for a real estate purchase.

An appraisal is a report created by an independent person (known as an appraiser) which estimates the market value of the property a buyer is interested in. Usually, an appraisal tells a prospective buyer and lender how much the home is actually worth versus the list price.

An appraisal fee is charged by an independent, third-party appraiser for developing the appraisal. See Appraisal.

The appraised value of a property is the value reached at the end of a property appraisal. The appraiser uses data on comparable properties to give a buyer and lender an accurate depiction of how much a /property is actually worth.

An appraiser is an independent third-party qualified to estimate the value of real estate and personal property.

Appreciation is the increase in a property's value over time. Usually, a home appreciates in value based on market conditions, the desirability of a location (where it is and how much homes are selling for) and the condition of the home.

Approval in a real estate transaction occurs when a borrower’s loan application has been underwritten and the lender agrees to make the loan.

The approved term reflects the number of months that it takes a buyer/borrower to pay off their loan. A borrower’s total interest, payment amount, and repayment schedule is all determined by the approved term.

Annual percentage rate, or APR, are your costs over the loan term expressed as a rate. This is not your interest rate.

Because APR is designed to show you the total cost of a loan, it can be useful when comparing loans from different lenders.

An adjustable-rate mortgage, also known as a variable-rate mortgage, generally starts out with an interest rate lower than a fixed-rate mortgage. This saves you money early on. However, your rate is tied to a market index. As the index goes up or down, your interest rate and payments will also change at each scheduled adjustment date. Rate caps limit the amount your interest rate can change, but your payment could increase quite a bit, possibly by hundreds of dollars a month. Make sure you know what your maximum payment could be and whether you can afford it.

The assessed value of a property is used to calculate annual property or real estate taxes. Assessed value is determined by your local government assessors, not an independent third-party.

An assessment is a tax or charge on a given property that includes a homeowner’s share of costs for community projects in their area (infrastructure, special projects, etc.)

The method of transferring a right or contract from one person to another.

An assumable loan is a loan that may be taken over by the buyer of a property, usually with no change in terms.  Lender approval may be required.

Assumption occurs when a prospective buyer of a property agrees to become responsible for the repayment of an existing loan on the property. An assumption also needs to be approved by the seller’s lender, otherwise the seller is still responsible for the mortgage.

Attorney fees (in real estate) typically are charged in connection with closing the loan and can include activities like title research and contract review.

Automated Underwriting is the electronic review of a mortgage application for loan approval.

An Automated Underwriting System is a computerized system that helps lenders with automated underwriting.

An automated valuation model (AVM) is a computerized method that helps estimate the value of a property. An AVM can calculate the value of a property by taking into account public data, such as bedrooms, lot size, similar properties in a neighborhood, etc.

A balance (related to a mortgage) is the outstanding amount of the original loan. A balance is calculated by subtracting all prior payments of principal from the total loan amount.

A balance sheet is a financial statement that reflects a person’s net worth, liabilities, and assets.

A balloon payment is a large lump-sum payment due at the end of the loan term to repay the remainder of the principal.

Bankruptcy is a legal proceeding that occurs when a borrower is unable to repay their debts to a lender. When a borrower initiates bankruptcy proceedings (when they owe more than their assets), they may be discharged from repaying their debts. Bankruptcy will affect a borrower’s liability to repay their mortgage debt.

See Index/Index Rate

In a bimonthly mortgage, the borrower pays half of their monthly mortgage payment on the 1st of the month, and the other half on the 15th of the month.

In a biweekly mortgage, the borrower pays half of their monthly mortgage payments every two weeks resulting in one extra monthly payment per year.

The borrower is a person who signs the mortgage note and is responsible for repaying the mortgage loan to the lender.

See PMI

A bridge loan is a short-term solution usually used to help the borrower buy a new property before their current home is sold.

A mortgage broker arranges and negotiates a mortgage loan between a buyer and a lender.  A real estate broker represents buyers or sellers of real estate.

Real estate Broker fees are charged by a real estate broker for negotiating and completing the sale of a property.  The seller is typically responsible for the real estate broker fees. Mortgage broker fees are usually a percentage of the loan amount and may be paid by the borrower or the lender.

A buyer's agent represents the homebuyer throughout the homebuying process. Usually, a buyer's agent helps the prospective homebuyer find a desirable home, negotiate an offer, set up (and attend) home inspections, negotiate the home’s price, communicate with the seller/seller's agent, and finalize paperwork for closing.

See Ceiling Rate

Cash to close is the approximate amount of money you'll need to close on your home. It includes your down payment, as well as all closing costs charged by the lender or third parties.

With a cash-out refinance ("refi"), the borrower extracts home equity at the same time a refinance deal is made. A cash-out refi is typically a homeowner's alternative to a HELOC (home equity line of credit.)

A cash reserve encompasses the funds that a borrower is required to have after the loan. A cash reserve ensures homebuyers have enough funds after closing for expenses and future payments.

The ceiling rate is the maximum interest rate that can be charged on a variable rate loan or adjustable-rate mortgage (ARM).

A certificate of eligibility is a document that certifies a veteran’s eligibility for a VA (Veterans Affairs) loan.  

A certificate of occupancy (CO) is a required written document for new buildings or renovation projects. A CO may also be required for any purchase transactions in certain municipalities. The certificate authorizes that a structure is suitable to be lived in.

A certificate of reasonable value (CRV) is a document given to veterans from the Department of Veterans Affairs that outlines the total value and the loan amount they are eligible for based on a home appraisal.

A certificate of title is a statement/document provided by an abstract company, title company, municipality, or attorney that outlines who owns the property. The certificate of title indicates who is legally responsible for a home/property.

A property's chain of title is an in-depth history of a property that includes all documentation affecting the title to a specific piece of property. The chain of title dates back to the earliest existing document for a piece of property and outlines the past and present owners of the property.

An unexpected event that results in a change in the interest rate, fees or loan terms and requires the lender to provide a new Loan Estimate or Closing Disclosure.

Clear titles are free of liens and encumbrances. With a clear title, there is no question as to legal ownership.

The "close" of a real estate transaction is the date that title to the property is transferred by the seller to the buyer.

The "closing" of a real estate transaction occurs when the property is transferred from the seller to the buyer. Closing requires both parties to finalize/sign all documents associated with closing and the payment of closing costs. Usually, a broker or the buyer's/seller's agents oversees this process to ensure it is done correctly and seamlessly.

A closing agent oversees the signing of documents and disbursement of funds as part of the Closing.

In addition to your down payment, you'll need to pay certain fees and services to close on a new home. These costs could include discount points, appraisal fees, title searches, title insurance, taxes and document-recording fees. They usually range from 2% to 6% of the total loan amount.

A closing disclosure outlines the actual terms and costs of a loan for a homebuyer. This document is provided at least three business days before closing, and includes costs for insurance, escrow deposits, and property taxes.

A closing statement is an in-depth document detailing the transaction between a buyer and a seller.

Collateral (in real estate) is property leveraged to secure a home loan. A lender may be able to take possession of said property if the loan isn’t repaid by the borrower.

The combined loan-to-value ratio (CLTV) reflects the relationship between the unpaid principal amount of a first mortgage and the credit limit of a HELOC or home equity loan, and the appraised value of the property.

A commitment letter documents the terms of a loan between a lender and a borrower.

Comparable sales are prices leveraged by buyer's agents, seller's agents, brokers, lender, and appraisers to determine a home's value. Comparable sales (or comps) reflect the sale prices of other similar properties in a region or neighborhood.

Comparable properties, similar to comparable sales, are recently sold homes in a specific region that have similar qualities as the property being sold. Comparable properties help determine a fair market price for a property compared to its neighbors. Comps are used primarily by selling agents, buying agents, and appraisers to determine if the price of the house is realistic.

Compensating factors are positive characteristics of a borrower that are taken into consideration during the underwriting process.

A concession is an incentive that the seller gives to a prospective buyer to secure an offer. Concessions can include a seller paying fees (rather than the buyer), making repairs (that would otherwise be on the buyer), paying for new appliances/moving expenses, and more.

A construction loan is used to pay for construction of a new home. After the construction is complete, the construction loan is replaced with a conventional home loan.

A contingency is a clause added to a real estate agreement between a buyer and a seller. If the contingency is not satisfied, the contract can be cancelled.

A home loan that is not insured or guaranteed by the federal government. A conventional loan can be for conforming or non-conforming loan amounts.

See Conventional Loan

A Convertible Adjustable Rate Mortgage is an ARM that can be converted into a fixed-rate mortgage (dependent on a lender’s approval and if a homeowner meets qualifications.)

A cooperative (sometimes referred to as a "co-op") is a property owned by a corporation.  Individuals own share in the coop corporation and have the right to occupy a specific unit in the property.

A co-signer is a second person who signs a principal borrower's loan. The co-signed is equally responsible for on-time payments of a loan.

A covenant is an agreement in a mortgage that requires or prevents certain use of the property. If a borrower violates the covenant, a lender may foreclose on the property.

The Credit Bureau is an organization that gathers, records, updates and stores financial and public records of individuals who have been granted credit and provides this information to lenders and other authorized users for a fee.

A credit limit reflects the maximum amount that a borrower is approved to borrow from a lender. Credit limit is based on a number of factors, primarily a borrower's credit history and the value of the property.

A credit report is a record of a person's credit activity and credit history.  It includes the names of companies that have extended credit, the amounts and credit limits.  It also includes information about delinquent payments, bankruptcies, foreclosures and law suits.

Credit reporting is the process in which lenders share a borrower’s credit activity to one (or all) of the three major Credit Bureaus.

See Credit Bureau

Lenders evaluate a borrower's credit risk to determine if they can pay off their loan in a timely manner. Borrowers who pose less of a credit risk are more likely to pay on-time, and may receive a lower interest rate because they pose less risk to the lender.

Your credit score, provided by a credit reporting agency, helps a lender determine how likely you are to repay a new loan. To calculate your score, a credit reporting agency considers factors such as how you pay your bills, your outstanding debt, how long you've had credit, the types of credit you've had and how many times you've applied for credit.

Creditworthiness reflects the ability and willingness of a borrower to repay their debt.

A curtailment is a payment a borrower makes to reduce the principal balance of a loan.

See Closing

Debt is the amount of money a customer, or borrower, owes to their creditors. Debt is one major factor in a borrower's creditworthiness and credit score.

Debt consolidation is typically a single loan that helps a borrower pay off multiple debts. Although some customers may consolidate debt by putting all of their debt on one credit card (with a lower interest rate), others may turn to a loan or home equity line of credit (HELOC.)

A person's debt-to-income ratio (DTI) reflects their total debt due each month against their monthly gross income. Lenders use DTI to help qualify a borrower for a loan.

A deed, is the document that transfers homeownership from a seller to a buyer.

A Deed in Lieu of Foreclosure occurs when the borrower signs over their deed to the lender and the loan is terminated.

A Deed of Reconveyance is used in Deed of Trust states to transfer title to the property from the Trustee back to the borrower when the loan is paid off.

A document that in some states is used in place of a mortgage. A deed of trust may be held by a third party, trustee.

A borrower "defaults" on a loan when they fail to pay their lender on time.

Delinquency refers to a payment that is 30 days or more overdue.

The Department of Housing and Urban Development (HUD) is a government agency in the United States that implements and administers housing and urban development programs.

The Department of Veterans Affairs (VA) is a government agency in the United States that administers benefit programs designed to help veterans, including home financing and VA loans.

Depreciation happens when a home or property decreases in value, which is often caused by property damage, decreasing interest in a region, poor economic conditions, etc.

A disclosure is information a lender is required to provide to a borrower to make sure they understand the mortgage transaction.

Documentation requirements are set by a lender to verify the borrower's income and assets to make sure they can repay the loan.

A down payment is the money you’ll pay up front towards the cost of your new home. It’s paid on or before closing and reduces the amount of money you’ll need to borrow to purchase the home. Depending on the type of loan and amount, a minimum down payment can range from 3 to 20% of the home purchase price. If you qualify, there are programs available that may allow you to put even less money down. If you put down less than 20%, you may be required to pay for Private Mortgage Insurance (PMI).

The process of obtaining an advance against your available home equity line of credit (HELOC).

A draw period is a fixed period of time when a customer can access money from a home equity line of credit (HELOC.)

A due-on-sale clause requires the loan to be repaid in full if the property is transferred without the lender’s consent except in certain circumstances such as death of the borrower.

Earnest money is essentially a down payment that a buyer provides when they make an offer on a home to show that they are serious about purchasing the property.

Encroachment occurs when a homeowner makes an improvement that illegally violates property limits or an owner's right to use their property.

An encumbrance is a claim, lien, easement or other restriction that limits the use or transfer of property.

This applies to home equity lines of credit. It is the point when the borrower can no longer access funds from the line. Depending on the original terms, you may be required to repay the outstanding balance as a single lump-sum payment, or with fully amortized monthly payments that include principal and interest.

The "End of Term" can also be known as the "maturity date" for a home equity line of credit.

The Equal Credit Opportunity Act (ECOA) is a federal law that requires lenders to make credit available without discriminating based on race, gender, age, marital status, religion, and other factors.

Equity is the difference between the appraised value of a borrower's home and the outstanding amount that the borrower owes to a lender.

Escrow is the funds that a lender collects and holds in an account to pay real estate taxes, homeowners insurance,  and mortgage insurance (if applicable), on behalf of a customer.

See Escrow

An escrow agent is an individual or company that holds documents and funds, and facilitates the closing of a mortgage transaction.

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.

See Escrow Account

An escrow payment is the portion of the monthly mortgage payment that is held by a lender to pay property taxes and insurance.

The Fair Credit Reporting Act (FCRA) is a federal law that promotes accuracy, fairness and privacy of consumer information maintained by credit reporting agencies.

The fair market value of a home reflects the price that a piece of property will sell for in the current market. Fair market value is often calculated by looking into comparable sales/properties in the area, as well as conducting an appraisal.

Fee simple is the highest form of property ownership giving the owner and heirs control over the property and its disposition.

A mortgage that has a first-priority lien against the property.

A first-time homebuyer is a borrower who has never owned a home.

A fixed interest rate does not fluctuate throughout the life of a loan, unlike an adjustable rate,

A loan extended by a lender approved by the Federal Housing Administration (FHA) and insured by the FHA, FHA loans may have lower down payment and more liberal credit requirements than conventional loans.

FICO stands for Fair Isaac Corporation. A FICO score is a proprietary formula used to produce credit scores that indicate a borrower's risk.

A fixed-rate mortgage is the most popular type of mortgage. As the name implies, it offers a fixed interest rate for the life of the mortgage, meaning your monthly principal and interest payments never change. If you have an escrow account, your monthly payment could change based on your insurance and tax payments.

A rate lock, plus an option to reduce the rate if market interest rates decline during the lock period.  A float-down may cost the borrower more because it poses market risk to the lender.

A loan rate for which the lender has not "locked" or committed to lend at a particular interest rate. The floating interest rate and any discount points are not guaranteed. Your actual interest rate and discount points will be based on the market price available for your loan product at the time your interest rate is locked.

A flood certification is a document that states whether or not a property is in a flood zone which will determine whether flood insurance is required.

Flood insurance is available in areas located within a flood hazard zone. This insurance protects a borrower/owner against losses due to a flood/emergency.

When a borrower faces financial hardship, a forbearance temporarily suspends or reduces monthly loan payments.

When a borrower defaults on a home loan a lender can initiate legal proceedings to foreclose on the property and sell it to repay the loan.

Forfeiture is the loss of money, property, rights or privileges due to a breach of legal obligation with a lender.

Form 1098 is a legal tax form in the United States that reflects the amount of interest a borrower paid during the previous year.

A fully amortizing payment is a periodic payment which includes principal and interest. If a buyer pays on-time throughout the life of the loan, it will be paid off fully by the end of its term.

Fully Indexed Interest Rate refers to the current index value plus the margin on an adjustable rate mortgage.

The date on which the proceeds from a loan are available to or disbursed for the benefit of the borrowers.

A gift letter is a written explanation stating that money was given to a homebuyer as a gift without any obligation to repay it and must be signed by the individual giving the gift.

See Loan Estimate. 

A government mortgage is one that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or by the Rural Housing Service (RHS). This protects the lender if a borrower defaults on the loan and allows a lender to provide loan options and benefits that are normally not available through conventional financing.

A grace period is the time period after the payment due date during which the borrower can pay and avoid late fees. Grace periods apply only to mortgages on which interest is calculated monthly.

Gross income refers to the total income before any taxes are deducted.

See Homeowner's Insurance

A home loan extended to borrowers with a low credit score.

Home Equity Conversion Mortgage (HECM) is a type of reverse mortgage program which is administered by FHA.

A home equity line of credit is a form of revolving credit for which your home serves as collateral. The amount of the line is determined based on your credit and the available equity in your home. You may access as much or as little of your approved credit as you need at any time during your draw period, providing you with maximum flexibility in using your home equity.

Before a home is purchased, a professional inspector may perform a home inspection, which is a visual examination of the readily accessible areas of a home to provide an accurate evaluation of the home's condition.

A clause added to an offer letter that gives the buyer certain rights pending home inspection. A buyer may ask the seller to repair defects discovered during the home inspection or even request release from the offer to buy in light of a home inspection.

A Home Lending Advisor is a personal contact who represents your mortgage lender. Your Home Lending Advisor can help you create a budget as you search for a home and complete your mortgage application. Your Home Lending Advisor can also help answer questions such as whether or not you should consider paying points and which type of loan may best suit your individual needs. 

See Mortgage.

The person who collects the mortgage application and supporting documents for review.

See Loan Officer.

Home Mortgage Disclosure Act (HMDA) is a federal law that requires lenders to compile and disclose data on where and to whom their mortgage loans are being made.

Home Price Index is a market and financial tool which provides historical data on residential home prices in various regions.

A Homeowner's Association is an organization in a planned community or, condo complex that establishes certain rules of ownership. Common responsibilities of a homeowner's association includes collection of neighborhood dues for landscape maintenance or membership in recreation and entertainment facilities.

Also commonly known as hazard insurance, homeowners insurance is a form of insurance that protects your property against loss from theft, liability and most common disasters. Mortgage lenders often require a borrower to maintain an amount of homeowners insurance on the property equal to the amount of the mortgage loan or the insurable value of the improvements.

See Homeowner's Insurance

House flipping is the process of purchasing a property at a reduced market rate, doing renovations or repairs and reselling the property for a profit.

The Housing and Economic Recovery Act (HERA) is federal legislation enacted in 2008 to address the subprime mortgage crisis.

See Department of Housing and Urban Development (HUD).

A housing bubble is a marked increase in house prices fueled partly by expectations that prices will continue to rise.

The sum of mortgage payment, hazard insurance, property taxes, and homeowner association fees.

The ratio comparing housing expenses to before-tax income that's used by lenders to qualify customers for a mortgage

See Closing

Regular income from earnings, commissions, investments, rental payments or other sources.

See Debt-to-Income Ratio (DTI)

Real estate developed or improved to produce income such as rental properties.

An interest rate tied to an index or benchmark such as the prime rate or US Treasury Securities.  The interest rate can change based on changes in the index.

The increase in price of consumer goods, usually expressed as a percentage over a specific period of time.

The first borrowing under a home equity line of credit either at closing or afterward.

See Initial Advance

The starting interest rate on an ARM which may not be tied to an index and margin.

The number of months for which the initial rate holds, ranging from 1 month to 10 years.

A request for a credit report, made by a lender in connection with a borrower’s application for credit.

A loan that is repaid in equal payments, known as installments.

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.

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.

A mortgage that is covered by insurance to protect the lender in case of default.

The amount a borrower owes a lender for the use of borrowed money.  Also a right, share, or title in property.

The period over which the interest due the lender is calculated.

A mortgage on which the monthly payment consists of interest only. The principal balance remains unchanged.

See interest only mortgage.

The interest rate is the cost of borrowing, stated as a percentage, charged by a lender on the principal amount of your mortgage. This is the rate your monthly payment is based on.

The limit on how much an interest rate can increase above the initial interest rate over the life of an adjustable-rate mortgage or variable-rate home equity line of credit

See Interest Rate Cap.

The lowest interest rate that can be charged on an adjustable or variable interest rate loan or line of credit.

The interest accrued between the date a loan closes and the end of the month, which is paid at the time of closing.

An investment property is real estate bought for investment purposes as opposed to the owner’s residence. Often the property will be used for rental purposes.

In real estate, a borrower who owns or purchases a property as an investment rather than as a residence.

A type of property ownership in which two or more people co-own property.

A type of property ownership in which two or more people share.

A jumbo loan is a home loan with an amount greater than $647,200 in most parts of the United States. A higher amount may apply for properties greater than 1 unit or in areas that are considered high cost. The limits are set by government agencies such as the Federal Housing Finance Agency (FHFA).

A loan made for the purpose of purchasing land only. 

The penalty a borrower must pay when a payment is made after its due date or grace period.

A transaction in which a hopeful home buyer leases a home with an option to buy it within a specified period.

Typically included in fees associated with closing costs, sometimes called processing fees; designed to cover the costs incurred by lenders during the loan process.

The bank or finance company that directly awards home loan or mortgage money to a borrower or homebuyer.

A letter of explanation, also referred to as an LOE or LOX, allows you to provide details about potential issues on your mortgage application such as late payments, change in income or recent large deposits. Your lender will let you know if you need to provide a letter of explanation, as well as what items need to be included in the letter.

A person's debts or financial obligations. Liabilities include long-term and short-term debt, as well as potential losses from legal claims.

The lender's right to claim the borrower’s property in the event the borrower defaults. If there is more than one lien, the claim of the lender holding the first lien will be satisfied before the claim of the lender holding the second lien.

An individual or entity that has placed a lien on real property.

See Interest Rate Cap.

An agreement by a lender to extend credit up to a maximum amount for a specified time.  Money can be repaid and borrowed again up to the line amount. In a home equity line of credit, the line of credit is secured by the borrower's home.

The ability to readily convert assets or investments into cash.

Money lent from a financial institution to a creditworthy borrower for a specified period of time and at a particular interest rate.

Loan amount is the principal amount of money you're borrowing and need to repay as part of your mortgage contract.

A formal notification from a lender stating that the borrower's loan has been conditionally approved and specifying the terms under which the lender agrees to make the loan.

The Loan Estimate is provided within three days of submitting an application and contains the terms of the loan, projected monthly payments, total estimated closing costs and the total estimated cash needed to close the loan.

An agreement to revise the terms of a mortgage, often used to help qualified customers bring their mortgage current or reduce their mortgage payment.

Indicates whether the loan is intended for purchasing or refinancing real estate.

See Mortgage Banker

The loan-to-value ratio (LTV) is the comparison of the current loan amount to the value of the property, expressed as a percentage. For example, a loan amount of $150,000 for a home valued at $200,000 would have an LTV ratio of 75%.

An option exercised by the borrower, at the time of the loan application or later, to "lock in" the interest rate and points prevailing in the market at that time. The lender and borrower are committed to those terms, regardless of what happens between that point and the closing date.

A written statement signed by the borrower and the lender verifying that the interest rate, points and other terms of a loan have been locked.

The amount of time for which an interest rate is locked. Lock periods typically range from 30 days to more than 90 days. Generally, the longer the lock period, the more you pay in points or interest.

An insurance policy provision for payment of a claim to someone, other than the insured, who holds an insurable interest in the insured property.

Factory-built or prefabricated housing, including mobile homes and modular homes.

The set percentage the lender adds to the index rate (such as the prime rate) to determine the interest rate of an adjustable-rate mortgage or variable-rate home equity line of credit.

Estimated average interest rate that lenders charge for conventional loans.

The most probable price that a ready, willing, and able buyer would pay, and a willing seller would accept, assuming each is fully informed and under no pressure to act.

See Maturity Date.

The date when the outstanding balance of a loan must be paid in full.

The highest interest rate allowed if the homeowner's adjustable interest rate increases at the scheduled adjustment dates.

The largest loan size permitted on a particular loan program.

The minimum down payment required by the lender, usually expressed as a percentage. If the minimum is 10% and the price of the property is $100,000, a down payment of $10,000 would be required.

A factory-assembled residence consisting of one or more modules, built on a chassis and wheels, connected to utilities, designed without a permanent foundation, and intended for year-round living.

A factory-assembled residence built in sections in a factory and then transported to a permanent site where it is constructed on a foundation. Excludes mobile homes.

These are fees you must pay to any Homeowners Association (HOA) your property might belong to. The HOA uses this money to maintain and improve properties under its care.

The amount of principal and interest paid each month on a home loan. If the mortgage has an escrow account, the monthly payment will include real estate taxes, homeowners insurance, and, if applicable, mortgage insurance.

A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term "mortgage" or "mortgage loan" is used loosely to refer both to the lien and the loan. In most cases, they are defined in two separate documents: a mortgage and a note.

A fixed-income security which derives its cash flow from payments on a pool of underlying residential or commercial mortgages.

Online tools that allow potential borrowers to estimate the mortgage amount they may be able to afford.

An agreement between lender and borrower detailing the terms of a mortgage loan, such as interest rate, loan type, term, and amount.

Another name for Mortgage Lender.

See PMI.

A Mortgage Insurance Premium (MIP) is an insurance payment paid that protects the lender or others if the borrower doesn't make the required payments. If a home loan has mortgage insurance it may be collected as part of the monthly payment.

The party who disburses funds to the borrower at the closing table. The lender receives the note evidencing the borrower's indebtedness and obligation to repay, and the mortgage which is the lien on the subject property.

See Home Lending Advisor

A document signed by a borrower that is an acknowledgement and agreement to repay a sum of money at a stated interest rate for a specific term.

The monthly payment of interest and principal made by the borrower.

Generally, there are three basic mortgage programs: Federal Housing Administration (FHA) loans, Department of Veterans Affairs (VA) loans and conventional mortgage loans. VA loans are only offered to qualifying veterans and surviving spouses, while FHA loans are available to all qualifying borrowers. Both VA and FHA loans are guaranteed/insured by the federal government.

The lender in a mortgage transaction.

The borrower in a mortgage transaction. The mortgagor pledges property as security for the debt.

See Home Lending Advisor

A residential property with 2 to 4 individual housing units (duplex, triplex or quadplex).

The Nationwide Multistate Licensing System is the system of record for non-depository, financial services licensing or registration in participating state agencies.​

A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal balance.

A number or other identifier that permanently identifies a registered residential loan originator. The Unique Identifier is assigned by protocols established by the Nationwide Mortgage Licensing System and Registry (NMLSR) and other agencies.

A no closing cost loan is a loan in which the closing costs are paid by the lender, not the borrower.  However, the interest rate on the loan may be higher.

See subprime mortgage.

Properties in which the owner or purchaser does not live.  See Investment Property

See Mortgage Note

The note rate is the interest rate stated in a mortgage note.

A notice of default is a formal written notice to a borrower that a default (failure to repay a loan) has occurred and that legal action may be taken.

A Notice of Incomplete Application (NOIA) is a form sent to the buyer that indicates missing or incomplete loan application information. The buyer must provide all required information for the lender to complete the mortgage application process.

A Notice of Value (NOV) is a document given to veterans from their lender that outlines the total value and conditional requirements based on a home appraisal.

A written offer to purchase a property for a certain dollar amount made from a buyer to a seller.

A type of adjustable-rate mortgage (ARM) that offers the borrower a choice of four monthly payment options to provide more financial flexibility to manage mortgage payments in rising rate markets and take advantage of falling interest rates.

The date on which a loan is funded or disbursed.

The origination fee is usually calculated as a percentage of the principal amount of the loan.

Owner financing is a property purchase transaction in which the seller provides all or part of the financing.

Owner occupied means the property is used as a full-time residence by the property owner.

A payment larger than the scheduled monthly payment but less than the full amount due on the loan.  Making partial prepayments is a way of paying off the loan sooner.

The payment change date is the date in which a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM). Typically, the payment change date occurs in the month after the interest rate adjustment date.  IN most cases the borrower is notified at least 60 but not more than 120 days before the new payment takes effect.

Payoff is the total amount required to pay off a loan in full.

 A statement from the lender of the amount of principal and interest required to pay a loan in full.

The payoff month is the month in which the loan balance is paid down to zero.

Per Diem interest is the amount of interest that accrues daily on a loan. This is calculated by multiplying the outstanding loan balance by the annual rate of interest, then dividing the result by 360.

Personal property is property that is movable, as opposed to real property such as land.

A piggyback loan is a second mortgage that is "piggybacked" onto a first mortgage to enable the borrower to make a low down payment without paying private mortgage insurance.

An acronym for principal, interest, taxes, insurance, and any additional assessments. Also referred to as the monthly housing expense.

Planned unit development (PUD) is a comprehensive development plan for a large land area. This may include residences, roads, schools, recreational facilities, and commercial, office and industrial areas. A PUD may also be a subdivision with lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots.

Plans and specifications are architectural and engineering drawings and specifications for construction of a project or building. They include a description of materials to be used and the manner in which they are to be applied.

PMI stands for private mortgage insurance. PMI is written by a private company protecting the mortgage lender against loss resulting from a mortgage default. PMI is needed for certain loan types and is required when the homebuyer pays less than a required 20% down payment.

Mortgage points are one way to reduce your interest rate by "paying for points" during the closing of your loan. One point costs 1% of your mortgage amount and can reduce your interest rate by about .25%, meaning a lower monthly payment over the life of the loan. Once you apply, you'll work with a Home Lending Advisor to explore all the mortgage options available to you.

Power of attorney is a legal document that grants an individual the right to act on behalf of another in certain circumstances. For example, if a borrower is unable to attend the closing, the person named in the Power of Attorney can sign documents on the borrower's behalf.

A pre-approval is a fully underwritten commitment to lend on specific terms, subject to identifying an acceptable property.

A preliminary title report shows the results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.

Prepaids are funds collected at closing to set up escrow accounts to cover taxes and insurance.

Prepaid interest is collected at closing of a first mortgage, covering the period from the date of disbursement to the start of the next payment period.

Prepayment is an amount paid to reduce the principal balance of a loan before the principal is due.

On some loans, prepayment fee or penalty is a fee that may be charged if the borrower pays off the loan earlier than originally agreed in the lending contract.

A prequalification tells you how much financing you’re likely to qualify for before you start your home search. We can help you prequalify or get conditionally approved for the loan that best fits your needs. Please note that a prequalification isn't a loan approval or commitment

Property that is occupied or intended to be occupied as an owner's main residence.

Prime rate is the interest rate that often serves as the benchmark for setting interest rates on home equity lines of credit and other variable rate loans.

The principal is the amount of money you're borrowing and need to repay as part of your mortgage contract. The interest is what you'll pay as a cost for  borrowing. Both are part of your monthly payment. As you pay down your loan, more of your monthly payment goes toward principal and less toward interest—until the balance on your mortgage is zero.

The principal balance is the outstanding amount of your mortgage loan, not including interest—or the amount on the note minus any principal payments you have made.

Principal payment is the portion of a monthly payment that goes toward reducing the principal balance on a loan.

If your down payment on a conventional loan is less than 20%, then PMI is required. PMI protects the lender by covering a portion of the losses if you stop paying and default on your loan. The yearly cost of PMI is about 1% of your original loan amount and is added to your monthly mortgage payment. After your loan closes and you reach certain milestones, you may be able to remove PMI.

Processing is the preparation of a mortgage loan application and any necessary supporting documentation for consideration by a lender.

Processing fees are charged to cover the costs of processing the documentation related to a mortgage application.

See Mortgage Note.

This is the physical street address of a home or property and is required for a mortgage application.

See Appraisal

Property taxes are local taxes calculated based on the value of a property and used to pay for municipal services such as police and schools.

Common property types are single-family homes, condos, co-ops, townhouses and multi-family homes, which typically have 2 to 4 units. Some properties share walls and are considered "attached," while others are freestanding or "detached."

See Property appraisal.

The purchase contract (also known as a sales contract) is the agreement between a buyer and seller of real property that states the price and terms of the sale.

Qualifying ratios are guidelines used by lenders when determining how much a homebuyer can borrow. Qualifying ratios include the income/expense ratio, housing expense ratio, and debt-to-income ratio.

Qualification requirements are standards imposed by lenders as conditions for granting loans to borrowers, including maximum ratios of housing expense and total expense to income, maximum loan amounts, maximum loan-to-value ratios, etc.

A quitclaim deed is a document that transfers one person’s interest in property to another without any warranties or promises about the quality of title.

The rate is the interest on a loan, expressed as a percentage.

See Ceiling Rate.

A rate lock is a written agreement that guarantees a specific interest rate on your mortgage loan as long as there are no major changes in your loan application and the loan closes within the agreed-upon timeframe. This timeframe is generally 30-60 days and is referred to as the "Rate Lock Period."

Rate lock expiration date is the date on which the interest rate lock-in period ends, allowing the interest rate to fluctuate with the market.

A rate lock period is a set number of days during which the interest rate is locked-in and not subject to market fluctuation.

Rate sheets are tables of interest rates, points and other factors that affect the interest rate a borrower will pay that lenders distribute daily to their loan officer employees.

Rate/point options are all the combinations of interest rates and points that are offered on a particular loan program by the lender.

The Real Estate Settlement Procedures Act (RESPA) is a federal law passed to prevent kickbacks, referral fees and other practices that raised the cost to borrowers of a mortgage loan.

See Property Taxes

 A property owned by a lender as a result of foreclosure.

Real property refers to land and anything attached to it, like a home, that's not movable.

Recording fee is a charged by a public official (typically a Registrar of Deeds or County Clerk) for including a document affecting the title to real property in the public record.

A method used by lenders to streamline the mortgage process by requiring borrowers to present less documentation to verify their income and assets.

Refinance is the process by which a borrower may replace their current mortgage with a new one to reduce the interest rate or borrow more money.

A reissue or refinance rate is a reduced rate for title insurance that a homeowner may be eligible for a refinance.

Remaining balance of a loan is the current balance owed on a home loan to a lender.

The remaining term of a loan specifies the amount of time remaining until the loan is scheduled to be paid off.

The repayment period for a standard home equity line of credit is the period of time during which no more funds can be borrowed and the borrower must make regular payments to pay off the loan.

See Amortization Schedule. 

See Cash Available for Closing.

A 3 day period after Closing during which a borrower can cancel a refinance mortgage or HELOC. 

Reserves refers to the amount of savings, separate from the down payment that a borrower sets aside in case of unforeseen events or emergencies. During the loan approval process, many lenders require reserves to be verified.

A reverse mortgage is a type of home loan where borrowers over 62 years of age can draw on their home's equity without the need to make a monthly mortgage payment.

A revolving line of credit gives the customer access to available funds during the specified draw period. As the customer repays the principal during the draw period, the funds (up to the credit limit) would become available to draw again.

Right of first refusal is 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.

See Purchase Contract

A satisfaction of mortgage is the document issued by the lender verifying full payment of a mortgage debt.

See Mortgage Payment

A second home is a residence other than the borrower's primary residence (e.g. vacation home) where the borrower plans to live for a portion of each year.

A second mortgage is one that has rights that are subordinate to the rights of the first mortgage holder. Also called a home equity loan.

Secured loans are loans in which the borrower gives the lender a lien on property such as an automobile, boat, other personal property or real estate that will serve as collateral for the loan.

Security is collateral or property given, pledged, or deposited to secure the repayment of a loan.

Security interest is the legal right granted by a borrower to a lender on the borrower's property to be used as collateral if the borrower defaults on a loan.

A seller's agent is a real estate agent that works on behalf of the home seller.

Seller contributions are payments by the seller of some or all of the buyer's closing costs in a real estate transaction.

See Owner Financing.

Settlement refers to the completion of a property’s sale or purchase, or the completion of all steps necessary to receive the proceeds of (and create an obligation to repay) a loan.

A settlement agent is a person (or entity) that conducts the settlement to transfer title of the property and to close on the mortgage loan. A settlement agent may be an attorney, a title agent, a title insurer, or an escrow agent.

Settlement costs refers to the fees and charges associated with the closing of a mortgage loan, including origination fees, discount points, or payments for title insurance, surveys, attorney services, and taxes.

Short sales can be a useful tool for lenders and homeowners alike when foreclosure could be a worst-case scenario. In a short-sale lenders give homeowners permission to discount the home value to effect a quick sale to avoid foreclosure.

Single-family residence is a detached individual housing unit in which the property shares no common ground with neighboring properties and shares no wall or roof, but can be part of a planned unit development.

Site value is the value of land without improvements.

Start rate is the initial interest rate for an adjustable-rate mortgage (ARM).

A subdivision is an improved or unimproved tract of land divided into parcels for sale, lease, financing, or development.

Sub-prime loans are higher-risk loans that make it possible for homebuyers with a less than perfect credit history to qualify for a mortgage.

This is a map of property that shows boundary lines, location of improvements, easements and rights of way, as well as any encroachments from adjoining properties.

A tax lien is a claim for unpaid taxes against a property.

A form of ownership where two or more people have an ownership interest, each has the right to occupy the property, and any owner can sell their interest independently of the others.

Term refers to the time frame in which a loan or home equity line of credit must be repaid.

Third-party fees are the fees charged for services rendered by parties other than the lender. These may include appraisal, credit report, title and flood certifications.

See Deed.

A title company typically handles all tasks associated with the property title, including insurance and search.

Title insurance protects the property owner and lender against defects in title that existed, but were not disclosed, when the property was acquired or mortgaged.   

Title search is research on a property to determine if there exist any outstanding liens against the property prior to a sales transaction.

A method of registering title to real estate with a government official whose records are conclusive evidence of ownership

Transaction fees are fees that may be charged by the lender each time the borrower draws on their line of credit.

State or local transfer tax is payable when the ownership of property passes from one owner to another.

The treasury index is an index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. This is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities. The treasury index may also be 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.

A trustee is a fiduciary that holds or controls property for the benefit of another.

TILA is a Federal law requiring full disclosure of credit terms using a standard format. TILA is intended to facilitate comparison of between lending terms offered by different financial institutions.

An underwriter evaluates a borrower's creditworthiness to determine if they qualify for a loan.

Underwriting is the process of evaluating a borrower's credit worthiness to determine if they qualify for a loan. 

Underwriting requirements are the standards imposed by lenders when determining whether a borrower qualifies for a loan.

See 1003 Form. 

Upfront costs are the costs a borrower is required to pay when applying for a loan such as application fees.

An upfront mortgage insurance premium (UFMIP) is required for all FHA loans, and it is usually financed into the mortgage loan amount or paid by the borrower in cash at closing.

Veterans Administration (VA) mortgages are mortgages which provide flexible qualifying guidelines for eligible veterans and other eligible borrowers.

A vacation home is a single-family property which the borrower occupies in addition to his/her primary residence. The property cannot be considered income-producing and must not be part of a mandatory rental pool, but occasionally may be rented to friends and relatives. When a property is classified as a second home, rental income may not be used to qualify the applicant.

Variable rate is an interest rate that may fluctuate periodically often in relation to an index such as the prime rate causing payments to increase or decrease accordingly.

W-2's are a wage and tax statement provided by an employer annually and details your income and various local and federal taxes withheld from income.

A final walk-through inspection shortly before settlement to ensure the property is in the same condition that it was at the time of contract.

The warranty deed guarantees that the owner has the right to sell the property and will convey clear title.

Windstorm insurance is coverage that is typically required in coastal areas and pays for property damage resulting from a windstorm.

Wire transfer is a transfer of money from one bank to another bank account, either domestically or internationally.

A year-end statement is a report prepared by the lender.  It shows how much was paid in interest and taxes during the year, as well as the remaining mortgage loan balance.