Amortization
Payment of a debt in regular, periodic installments of principal and interest as opposed to interest only payments.
Annual Percentage Rate (APR)
A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan. The APR reflects the cost of your mortgage loan as a yearly rate. It will be higher than the interest rate stated on the note because it includes, in addition to the interest rate, loan discount points, fees and mortgage insurance.
Application
A printed form used by a mortgage lender to record necessary information concerning a prospective mortgage.
Application Fee
A sum of money paid towards estimated initial mortgage processing expenses such as appraisal and credit report.
Appraisal
A report made by a qualified person setting forth an opinion or estimate of property value. The term also refers to the process by which this estimate is obtained.
As Separate Property
Ownership in real property which is to be specifically excluded from community property.
Assessed Valuation
The value that a taxing authority places on real or personal property for the purpose of taxation.
Assessment
A charge against a property for purpose of taxation. This may take the form of a levy for a special purpose or a tax in which the property owner pays a share of the cost of community improvements according to the valuation of his or her
property.
Borrower
A person (also known as mortgagor) who receives funds in the form of a loan with an obligation to repay principal with interest.
Buydown
Money advanced by an individual (builder, seller, etc.) to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years.
Cash to Close
Liquid assets that are readily available to be used to pay the closing costs involved in a closing of a mortgage transaction.
Closing
The consummation of a real estate transaction. The closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to complete the sale and loan transaction.
Closing Costs
Money paid by the borrower in connection with the closing of a mortgage loan. This generally involves an origination fee, discount points, appraisal, credit report, title insurance, attorney's fees, survey, and prepaid items such as tax and insurance escrow payments.
Closing Statement
A form 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.
Co-Borrower
Additional borrower(s) whose income contributes to qualifying for a loan and whose name(s) appears on documents with equal legal obligations.
Collateral
Property pledged as security for a debt, such as the real estate pledged as security for a mortgage.
Commitment (Loan)
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.
Commitment Fee (Loan)
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.
Commitment Letter
A formal offer by a lender stating the terms under which it agrees to loan money to a home buyer.
Conforming Loan
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 first mortgages up to loan amounts mandated by Congressional directive.
Conventional Mortgage
A mortgage not obtained under a government insured program (such as FHA or VA).
Credit Report
A report detailing an individual's credit history.
Deed of Trust
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and reconveyed upon payment in full.
Default
The failure to perform an obligation as agreed in a contract.
Delinquency
A loan payment that is overdue but within the period allowed before actual default is declared.
DeMinimus PUD
A PUD in which the common property has less than a 2% influence upon the value of the premises. The 2% rule of thumb is calculated by dividing the dollar amount of amenities by the total number of units. Also see PUD.
Deposit
A sum of money given to bind a sale of real estate. Also known as earnest money.
Depreciation
A loss of value in real property brought about by age, physical deterioration, functional or economic obsolescence.
Discount Point
Amount payable to the lender institution by the borrower or seller to increase the lender's effective yield. One point is equal to one percent on the loan amount.
Discounted Loan
When the note rate on a loan is less than the market rate, the lender requires additional points to raise the yield on the loan to the market rate.
Earnest Money
A portion of the down payment delivered with a purchase offer by the purchaser of real estate to the seller or an escrow agency by the purchaser of real estate with a purchase offer as evidence of good faith. Also known as a deposit.
Equal Credit Opportunity Act (ECOA)
A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs or past exercising of rights under the Consumer Credit Protection Act.
Equity
The ownership interest; i.e. portion of a property's value over and above the liens against it.
Escrow
A procedure whereby a disinterested third party handles legal documents and funds on behalf of a seller and buyer.
Fair Credit Reporting Act (FCRA)
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. This law also requires consumer reporting agencies to exercise
fairness, confidentiality and accuracy in preparing and disclosing credit information.
Federal Home Loan Mortgage Corporation - FHLMC (FREDDIE MAC)
A quasi-governmental agency that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association bonds to raise funds to finance the purchase of mortgages. Popularly know as Freddie Mac.
Federal National Mortgage Association - FNMA (FANNIE MAE)
A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.
First Mortgage
A real estate loan that has priority over any subsequently recorded mortgages.
Fixed Interest Rate
An interest rate which does not change during the loan term.
Foreclosure
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.
Gift Letter
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."
