Mortgage Glossary

A B C D E F G H I J K L M N O P Q R S T V W X Y Z


 

A

Adjustable Rate Mortgage

A loan agreement in which the lender may adjust the interest rate from time to time to reflect changed conditions in the mortgage money market. These changes can be based on a variety of indexes.


Amortization

A reduction of a debt (the principal) by installment payments.


APR

Annual Percentage Rate. This represents the total finance charge and the amount financed over the term of the loan.


Appraisal

An estimate or opinion of value of a subject property.


Assumption

The buyer assumes the existing debt obligation and primary personal liability to repay the loan.


Assumption Fee

A fee lender's charge for processing new records for a buyer who assumes an existing loan.

 

B

Balloon Payment
The final payment on an amortized loan, which is significantly larger than the regular payments.

 

C

Closing Statement
A written accounting of all funds handled by escrow, which is issued to the buyer and seller at the close escrow.


Commission

An agent's fee for negotiating a loan or real estate transaction.


Condominium

A subdivision containing 5 or more units in a residential, commercial, or industrial property.


Conforming Loan

A loan written to FNMA/FHLMC specifications. The maximum conforming loan limit is currently $275,000.

 

D

Deed of Trust
The deed, which conveys legal title to a trustee to be held as security for a loan on real property.


Discount Fee

To negotiate a lower interest rate.

 

E

Escrow
A bonded neutral depository, which acts as a dual agent for the buyer and seller in a real estate transaction.


Equity

The value an owner has in a property in excess of the debt against it.

 

F

FHA
The Federal Housing Administration.


FHLMC (or Freddie Mac)

The Federal Home Loan Mortgage Corporation. FHLMC has authority to buy and sell conventional, FHA and VA loans


FNMA (or FannieMae)

The Federal National Mortgage Association. FNMA buys existing FHA, VA and Conventional loans.


Finance Charge

The total dollar about that the credit will cost which would include interest, loan fees, assumption fees, finder's fees, premiums for mortgage insurance and points paid by buyer.


Fully Amortized

When the principal is paid off entirely in scheduled installments.

 

G

Grant Deed
Document used in California to transfer title to real property.

 

H

Hazard Insurance
Homeowners insurance which covers the dwelling/property.


HOA (HomeOwners Association)

An organized group of homeowners whose members help to regulate and enforce the rules and standards of their respective communities

 

I

Impounds
A reserve account to accumulate funds to insure payment of insurance and county taxes on the property.


Index
Is a financial indicator used for adjustable rate mortgages.


Installment Loan
A loan providing for payment of the principal in two or more payments at different stated times.


Interest Rate
The percentage of a sum of money charged for its use.

 

J

Joint Tenancy
A type of ownership of property by two or more people with the right of survivorship.

 

L

Legal Description
A formal method of describing a parcel of real estate that is recognized by law.


Loan to Value
The percentage of the market value established in determining the amount of a new mortgage or trust deed loan.


Loan Origination Fee
A "one-time" fee paid by the borrower to cover the costs of setting up the loan file. This is a non-recurring cost.

 

M

Mortgage
A contract that makes a specific property the security for the payment of a debt.

 

N

Non-Conforming (or Jumbo)
This is a term used for loans that exceed the FNMA/FHLMC loan limits established by Congress.

 

P

PITI
Principal, interest, taxes and insurance.


Preliminary Title Insurance
A report, which shows the owner of record and the present condition of title prior to the issuance of the policy of title insurance.


Prepaid Interest
Interest paid to the lender to offset a delay in the start of loan payments.


Prepayment Penalty
When the loan balance is paid prior to loan maturity, a penalty will be charged based on a percentage of the original loan amount.


Prime Rate
A reference rate used to index the cost of money.


Private Mortgage Insurance (PMI)
An insurance policy, which insures the lender against loss caused by default of the borrower.


Purchase Price
The cost of purchasing the property.

 

R

Real Property Tax
Is a specific lien the county charges on each parcel.


Record
To file for record in the office of the county recorder.


Recurring Costs
Expenses that the buyer can expect again, year after year, such as property taxes, fire insurance and interest.


RESPA
The Real Estate Settlement Procedures Act. A federal law to protect and inform homebuyers regarding closing costs. This provides disclosure of settlement costs at the origination of a loan transaction.

 

S

Sales Contract
Contract wherein a seller agrees to give possession and title of real property upon full payment of purchase price.


SFR
Single Family Residence

 

T

Title Insurance
An insurance policy, which protects the insured against claims arising from title imperfections.


Truth-In-Lending
Also known as the Federal Reserve Regulation Z, which requires disclosure of certain loan terms to the borrower.

 

V

VA
U.S. Department of Veteran's Affairs.


VA Loan
A loan guaranteed by the U.S. Veterans Administration


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