Home Loan Mortgage Terms

Acceleration Clause
A clause in a contract by which the time for payment of a debt is advanced, usually making the obligation immediately due and payable, because of the breach of some condition, such as failure to pay an installment when due.

Acceptance
The indication or manifestation by the offeree that the offeree is willing to be bound by the terms of the offer.

ACRE
43,560 square feet of land.

Acknowledgment
A declaration made by a person to a notary public, or other public official authorized to take acknowledgments, that the instrument was executed by the person and that it is a free and voluntary act.

Ad Valorem
Latin meaning "according to value". Normally used to describe a tax based on the assessed value of real property.

Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate changes over time based on an index and a margin.  Rate changes are made at prescribed times and within prescribed limits (caps) as defined in the mortgage contract.

Adjustment Period or Interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

Adverse Possession
The right of an occupant of land to acquire a superior title to the real estate against the record owner, where such possession has been actual, notorious, hostile, visible and continuous for the required statutory period (in Colorado, 18 years).  The purpose behind this concept is to promote the productive use of land and to give title to the one putting the land to use.

Affidavit
A statement or declaration reduced to writing, and sworn to or affirmed before some officer who has authority to administer an oath or affirmation.

Agency
A legal relationship resulting from an agreement or contract, either expressed or implied, written or oral, whereby one person, called the agent, is employed by another, called the principal, to do certain acts in dealing with a third party.

Agent
Any person, partnership, association, or corporation authorized or employed by another, called the principal, to act for, on behalf of, and subject to the control of the latter.

AITD - See All Inclusive Trust Deed

Alienation
The transfer of real property by one person to another.

All Inclusive Trust Deed (AITD) - See Wraparound Mortgage

Amenities
In real estate, amenities refer to such circumstances, in regard to location, outlook, or access to a park, lake, highway, view or the like which enhance the pleasantness or desirability of real estate and which contribute to the pleasure and enjoyment of the occupants.

Amortization
The gradual repayment of a mortgage by installments.  As you pay back the loan, an increasing amount of each payment is applied to principal and a lesser amount is applied to interest. Amortization is also a process of spreading a cost that is incurred upfront over the term of the loan or life of the asset.

Annual Percentage Rate (A.P.R.)
The actual cost of a mortgage loan expressed as a yearly rate.  The APR will be higher than the interest rate stated on the application and note because it includes fees such as: interest, discount points, origination fee, mortgage insurance and other related fees.  The truth in lending act requires lenders to disclose an APR to assist the borrower in measuring the actual cost of a loan.

Application
A form used by mortgage lenders to document necessary information concerning the mortgage loan applicant(s).

Appraisal
In real estate, an estimate of the quality or value of property; the process by which conclusions of the value of property are obtained; also refers to the report setting forth the estimate of value together with the basis for such conclusions.  For VA appraisal - See Certificate of Reasonable Value

Appraised Value
The fair market value an appraiser assigns to a particular property, based on analysis of the property in question, and the market conditions in the area, and recent sales data of comparable homes in the area.

Appreciation
An increase in value due to changes in market conditions or other causes.

Appreciation rate - Appreciation rate is the yearly percentage rate that an asset increases in value. 

Appurtenance
That which belongs to something else; something adapted to the use of the real property to which it is connected or belongs, and which was intended to be a permanent addition to the land, and which passes as an incident to said land, as a house, barn, garage, right of way.

APR - See Annual Percentage Rate

ARM - See Adjustable Rate Mortgage

Assessed Value
The value that a taxing authority, such as a county assessor places on real property as a base for computing property taxes.  Generally assessed at 80% of value.

Assessment
A local tax levied against a property to cover the proportionate cost of an improvement, such as a street or sewer.

Assignee
The party to whom a legal right has been assigned or transferred.

Assignment
A transfer to another of a legal right.

Assignor
The party who assigns or transfers a legal right.

Assumption
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.

Attachment
A type of encumbrance, permitted only under special circumstances, which is placed against the real estate of a defendant in a pending law suit for money damages.

Attorney's Opinion
In real estate, the written opinion of an attorney-at-law regarding the marketability of title to real property based upon an examination of the abstract of title or the records in the county clerk and recorder's office.

Available Cash
The amount of liquid assets (i.e. checking, savings, mutual funds, etc) immediately available to pay closing costs and down payment.

Average Interest Rate
The actual average interest rate for a combination of debts based upon a total weighted interest rate calculation.  Utilizing each loan balance and interest rate, the calculator determines an average interest rate for multiple debts.

B

Balance Sheet
A statement showing a company's financial position at the end of an accounting period by listing an entity's assets, liabilities and owner's equity.

Balloon Mortgage
When credit is advanced by note or contract and payment is required in regular equal installments and the note or contract will mature before the note or contract is paid in full, a payment which may be larger than the regular payment will fall due.

Balloon Payment
The final lump sum payment made at the maturity date of a balloon mortgage called a "balloon payment".

Bargain and Sale Deed
Any deed that recites a consideration and purports to convey the real estate.  A bargain and sale deed with a covenant against the grantor's acts is one in which the grantor warrants that they have done nothing to harm or cloud the title.

Base rate or Base Point
The interest rate that is used as a benchmark to set the interest rate for borrowers.  A base rate is sometimes called an index rate.  For example, if you obtain a one-year adjustable-rate mortgage, your loan rate will be reset once a year to a rate that equals the loan rate plus a margin.  Interest rates on credit cards are frequently tied to a change in the prime rate.

Beneficiary
The person who receives or is to receive the benefits resulting from certain acts; one receiving benefits, profits or advantage; one for whose benefit a trust is created.

Bill of Sale
A written instrument by which one person transfers or conveys right, title or interest in personal property to another.

Binder
A title insurance binder is the written commitment of a title insurance company to insure title to the property subject to the conditions and exclusions shown on the binder.

Blanket Mortgage
A single mortgage which covers more than one piece of property.

Borrower
An individual who receives funds in the form of a loan with an obligation to repay the principal with interest.  Each additional borrower contributes income and credit history to the qualification process of a loan and whose names appear on all closing documents.  Each additional borrower is liable for the debt and condition of the property.

Broker - See Mortgage Broker

Building Code
Regulations established by local governments setting forth the structural requirements of buildings.

Buy-Down
When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan.  While the payments are initially low, they will increase when the subsidy expires.  These are sometimes used to qualify borrowers for a loan amount that they would not otherwise qualify for but will be able to pay in subsequent years as their income increases.

Buyer's Agent
A broker or salesperson who is engaged by and represents the buyer in a real estate transaction. 

C

Cap
A consumer safeguard limiting adjustments to ARM interest rate or mortgage payment's.  

• A periodic cap limits how much the rate can increase at each adjustment period.  
• A lifetime cap limits how much the rate can increase during the term of the loan.  
• A payment cap, limits how much the monthly payment may increase.  See Payment Cap for detailed provisions of this type of cap. 

Carryback Loan
A loan in which a seller agrees to finance a buyer in order to complete a property sale.

Cash Needed
The total dollar amount required for payment of closing costs and down payment.

Cash Out Refinance
A mortgage loan that allows the borrower to pay off an existing debt and obtain excess money from the equity of their home for payment of closing costs and additional funds for personal needs (i.e., college tuition, home improvement, remodel home, purchase automobile and etc).

Cash Reserve
Sufficient cash remaining after closing to make the first two mortgage payments and two months of long-term debts.

Caveat Emptor
"Let the purchaser beware."  The buyer is duty-bound to examine the property he or she is purchasing and he or she assumes conditions which are readily known upon view.  The seller is under no obligation to disclose defects but may not actively conceal a known defect or lie if asked.

CC&R's
Covenants, conditions, and restrictions.  The basic rules establishing the rights and obligations of owners of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.

Certificate of Eligibility (COE)
The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of Eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).  Now verified through email to streamline the process.

Certificate of Reasonable Value
Commonly referred to as a "CRV". Veterans Administration's certified appraisal of value of real property.

Certificate of Taxes Due
A written statement or guaranty of the condition of the taxes on a certain property, made by the County Treasurer of the county wherein the property is located.  Any loss resulting to any person from an error in a tax certificate shall be paid by the county which such treasurer represents.

Certificate of Title - See Title Insurance
A written opinion by an attorney setting forth the status of title to the property as shown on the public records.  The certificate does not certify as to matters not of record and affords no protection unless the author was negligent.

Certificate of Veteran Status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time).  It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status).  This document enables veterans to obtain lower down payments on certain FHA insured loans.

Chain of Title
The series of transactions from GRANTOR to GRANTEE as evidenced in the land records.

Chapter 7
Provision of the 1978 Bankruptcy Reform Act that covers liquidations under a court appointed trustee.

Chapter 11
Provision of the 1978 Bankruptcy Reform Act that covers reorganizations where the debtor remains in control of the business and its operations.

Chattel
Any item of property other than real estate, usually referred to as personal property; an item of movable property.

Clear Title
A title that is free of liens or any legal question as to the ownership of the property.

Closing
The final meeting where the sale and transfer of property and/or loan settlement is fully executed.  This meeting generally requires the borrower(s), seller(s), lender (or their agent) to be present.  The closing includes the delivery of a deed, signing of notes, and the collection and disbursement of funds necessary to complete the sale and loan transaction.  Also known as Settlement.

Closing costs
Closing costs are the total expenses that the buyer pays at the time a real estate transaction is completed.  closing costs generally range between 3 and 6 percent of the home purchase price.  With conventional loans, the following closing costs cannot be paid by the Seller for the Buyer: Pre-paid interest, Hazard insurance impounds, or Property tax impounds.

• Loan Origination and/or Discount Points: style='font-size:10.0pt;font-family: Expressed in points, it's a fee which is equal to 1% of the loan amount. The points will vary with the interest rate the lender charges: the lower the interest rate, the higher the points.
• Processing Fee: A fee charged by the lender for processing the loan application.
• Administration or Document Fee: A fee charged by the lender for preparing the loan document.
• Underwriting Fee: A fee charged by the lender for underwriting the loan.
• Appraisal: The fee charged by an appraiser for evaluation of the property.
• Credit Report Fee: A fee charged by a credit reporting agency
• Tax Service Fee: A one-time fee for a service which notifies the lender when the borrowers' taxes are delinquent.
• Flood Certificate Fee: A one-time fee for searching records for required flood zoning and flood insurance.
• Escrow Fee: A charged by the title/escrow company for their services guaranteeing the transfer of funds.
• Title Insurance Premium: A fee charged by the title company for a lender's policy and an owner's policy to protect from possible loss due to defects in title.
• Notary Fees: Fees charged by the title/escrow company for notarizing the legal documents at closing.
• Title Document Fee: Fees charged by the title/escrow company for researching public records, preparation of a preliminary and final title report and providing title insurance.
• Recording Fees: Title/escrow company fee for recording the Deed of Trust with County Recorder's office.
• Express Mail & Courier Fees: Charges incurred by title companies for using express mail & courier services.  All title and escrow documents use special delivery services for promptness and safety.

Cloud on the Title
An outstanding claim or encumbrance which, if valid, would affect or impair the title of the owner of the property.

CLTV - See Loan-to-Value (LTV) 

Co-borrower
Borrower(s) who contribute income and credit history to the qualification process of a loan and whose name(s) appear(s) on all closing documents. The co-borrower is also liable for the debt and condition of property.

COE - See Certificate of Eligibility 

Cognovit Note
Note containing a confession of judgment by the borrower.

Collateral Security
Often called simply "collateral." In banking phraseology, it means some security additional to the personal obligation of the borrower, as a chattel mortgage or trust deed.

Commingling
Mixing money belonging to others with personal or business funds.  Illegal commingling is using the money of one beneficiary for the benefit of another or failing to maintain such money in identified escrow accounts. 

Common Interest Community
Means real estate described in a declaration with respect to which a person, by virtue of such person's ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance or improvement of other real estate described in a declaration.  Ownership of a unit does not include holding a leasehold interest in a unit of less than forty years, including renewal options.  The period of the leasehold interest, including renewal options, is measured from the date the initial term commences.  A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

Common Law
The principles and rules of law, originating from usage and custom, sanctioned by the courts and which are not dependent upon legislative expression or enactment for their authority. Also that body of law, based on custom and usage, developed and formulated by the old English courts.

Community Property
Property, real or personal, which by statute belongs equally to husband and wife; more specifically, property acquired by the husband and wife, or either, during marriage, by their industry and not by gift, said property belonging equally to husband and wife.  Community property laws exist only in nine states: Ariz., Calif., Idaho, La., Nev., N.M., Okla., Tex., and Wash.

Condemnation
In real property law, the process by which property of a private owner is taken for public use, with compensation to the owner, under the right of eminent domain.

Condominium
A structure of two or more units where the interior space is individually owned, and the balance of the land (structure and land) are commonly owned by the owners of each individual unit.

Condominium Ownership
"Condominium" means a common interest community in which portions of the real estate are designated for separate ownership, and the remainder of which is designated for common ownership solely by the owners of the separate ownership portions (pools, tennis court, weight room, etc).  

Conforming loan
Single-family home loans with a maximum loan amount of $359,650 that is typically higher than FHA and VA loans with lower interest rates.

Consideration
One of the essential elements of a contract. A promise or an act of legal value bargained for and received in return for a promise.

Construction Loan
A short term interim loan for financing the cost of construction.  The lender advances funds to the builder at periodic intervals as the work progresses.

Construction Mortgage. A short-term mortgage used to finance the building of a structure.  

Constructive Notice. Often called "legal notice", the conclusive presumption that all persons have knowledge of the contents of a recorded instrument.

Contingency
A condition that must be met before a contract is legally binding.

Contract
An agreement, enforceable at law, between two or more competent persons, having for its object a legal purpose, wherein the parties agree to act in a certain manner.

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

Controller
The chief accounting executive of an organization whose principal functions are (1) financial reporting, (2) tax administration, (3) management audits, (4) planing controls and developing accounting systems and procedures.

Conventional Mortgage
A mortgage securing a loan made by private investors without governmental participation (not F.H.A. insured or V.A. guaranteed).

Conversion
An unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of the owner's rights.

Convertible ARM
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Conveyance
An instrument in writing by which some estate, interest, or title in real estate is transferred from one person to another, such as a deed or mortgage.

Cooperative
A structure of two or more units in which the right to occupy a unit is obtained by the purchase of stock in the corporation that owns the building or units.

Covenant
A written agreement or restriction on the use of land or promising certain acts.  Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities.  However, land could be subject to restrictive covenants even if there is no homeowner's association.

Credit Report
A report obtained from a credit bureau agency or company that discloses a borrower's credit history and current credit status.

CRV - See Certificate of Reasonable Value

Cul-de-Sac
A passage way with one outlet.  Streets in newer subdivisions are sometimes built in cul-de-sac fashion.

Cumulative Loan-to-Value (CLTV) - style='font-size:10.0pt; font-family:See Loan-to-Value (LTV)

Curtesy
A common law estate in land given to the husband upon his wife's death, consisting of a life estate in all the property owned by the wife during the marriage, provided a child was born alive from their marriage.  Abolished in Colorado.

D

DE - See Direct Endorsement

Declaration
Any recorded instrument however denominated that defines boundaries and the general common elements and limited common elements and establishes the basic rights and obligations of the owners.  In addition, it provides for the creation of an owners association including the board of directors that has the authority to collect common expenses and otherwise act for the benefit of all owners.

Debt Consolidation Loan
A type of loan that allows the borrower to payoff all or a portion of existing debt (including the existing mortgage loan) from loan proceeds.

Debt ratio or Debt-to-Income Ratio
The ratio, expressed as a percentage, is calculated by dividing the monthly payment of long-term debts by gross monthly income.

Dedication
An appropriation of land to some public use, made by the owner, and accepted for such use by or on behalf of the public, as streets in a platted subdivision.

Deed
A legal instrument in writing, duly executed and delivered, whereby the owner of real property (grantor) conveys to another (grantee) some right, title or interest in or to real estate.

Deed of Trust
An instrument used in many states in place of a mortgage.  The property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and re-conveyed upon payment in full.

Deed Restriction
A provision in a deed controlling or limiting the use of the land.

Default
he non-performance of a duty; the omission or failure to perform a legal duty; failure to meet an obligation when due (payments on a mortgage).

Defeasible Fee
Sometimes called a base fee or qualified fee; a fee interest in land that is capable of being defeated or terminated upon the happening of a specified event.

Deferred Interest
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance.  See Negative Amortization

Deficiency Judgment
The difference between the indebtedness sued upon and the sale price of the mortgaged property at foreclosure, where the sale price is less than the indebtedness.

Delinquency
Failure to make payments on time. This can lead to foreclosure.

Delivery
The final, unconditional and absolute transfer of a Deed to the Grantee so that the Grantor may not revoke it.  A Deed, signed but held by the Grantor, does not pass title.

Department of Housing and Urban Development (HUD)
Regulates Fannie Mae, Freddie Mac, and Ginny Mae.

Department of Veterans Affairs (VA) - See VA Loan
The Department of Veterans Affairs (VA) was established on March 15, 1989, succeeding the Veterans Administration.  It is responsible for providing federal benefits to veterans and their dependents.  Headed by the Secretary of Veterans Affairs, VA is the second largest of the 15 Cabinet departments and operates nationwide programs for health care, financial assistance, and burial benefits, as of March 2003.

Deposit - See Earnest Money

Depreciation
The loss in value due to deterioration through ordinary wear and tear, action of the elements, functional or economic obsolescence.  (opposite of "appreciation")

Devise
A gift of real property by the last will and testament of the donor.

Direct Endorsement (DE)
A HUD program that enables an eligible single-family lender to conduct the processing and closing of FHA single family loan applications without HUD's prior review.

Discount Points - See Points
An amount payable to the lender paid by the borrower or seller to increase the lender's effective yield and reduce the interest rate.  also known as discount fee

Diversion
Illegal or unauthorized use of entrusted funds.

Documentary Fee
A Colorado state law requiring a fee of one cent for each one hundred dollars of consideration paid by the person recording an instrument of conveyance to the county clerk and recorder.

Dower
A spouse's interest in the property of a deceased spouse.

Down Payment
Money deposited towards the purchase of a home paid to make up the difference between the purchase price and the mortgage amount not finance with a mortgage.  The larger the down payment, the less you need to borrow.  Most lenders require the down payment to be paid from the buyer's own funds.  Gifts from related parties are sometimes acceptable, and must be disclosed to the lender.  However, FHA allows gifts from any source.

Dual agent
A broker or salesperson who, with the written informed consent of all parties to a contemplated real estate transaction, is engaged as a limited agent for both the seller and buyer or both the landlord and tenant.

Due-On-Sale Clause
A provision in a mortgage or trust deed which allows the lender to call a promissory note immediately due and payable in full upon the sale or transfer of a secured property. Allows the lender to raise the interest rate or demand other changes in terms upon assumption of the loan.

Duress
Forcing action or inaction against a person's will.

E

Earnest Money
Down payment made by a purchaser of real estate as evidence of good faith.

Easement
A right or interest in the real property of another.  The right to use another's land for a specific purpose, as a right of way.

Economic Life
The period of time over which a property may be profitably used.  It is reduced to a percent in the capitalization process.  Example: 100% divided by 50 years equals 2% anticipated depreciation per year.

Effective interest rate
The effective interest rate is the mortgage cost on a yearly basis expressed as a percentage includes  charges paid when closing the loan including compounded interest. Higher closing costs or more frequent compounding result in a higher effective interest rate.

Effective Interest Rate - see:  Annual Percentage Rate 

Eminent Domain
The right of a government to take private property for public use upon the payment of just compensation.  The legal proceeding by which the government exercises this right is called "condemnation proceedings".

Encroachment
The illegal intrusion of a structure, part of a building, or obstruction over or upon a highway, sidewalk or the property of another.

Encumbrance
A claim, lien, charge, or liability attached to and binding upon real property, such as a judgment, mortgage, mechanics' lien, lien for unpaid taxes, right of way.

Endorsement
Writing one's name, either with or without additional words, on a negotiable instrument or on an attachment thereto.

Equal Credit Opportunity Act (ECOA)
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.

Equifax Credit Services
A credit reporting agency that provides a detailed report itemizing an individual's credit history and current credit status.

Equity
In real estate, the interest or value of the real estate over and above the amount of the indebtedness thereon.

Equity Loan
A loan based on the borrower's equity in his or her home.

Equity of Redemption - See Redemption

Escrow
In real estate, it is the state or condition of a deed which is conditionally held by a third party, called the escrow agent, pending the performance or fulfillment of some act or condition.

Escrow Account
Any identified checking, demand, passbook or statement account insured by an agency of the United States government maintained in a Colorado Depository for money that belongs to others.

Escrow Agreement
A written agreement between two or more parties whereby the grantor, promisor or obligor delivers certain instruments or property into the hands of a third party, the escrow agent, to be held by said third party until the happening of a contingency or performance of a condition, and then to be delivered to the grantee, promisee or obligee.

Escrow Overage or shortage
The difference, determined by escrow analysis, between escrow funds on deposit and escrow funds required, to make a payment when it becomes due.

Estate
In real estate, it refers to the degree, quantity, nature and extent of interest which a person has in real property; such as a fee simple absolute estate, an estate for years.

Estate at Sufferance
An estate in land arising when the tenant wrongfully holds over after the expiration of the tenant's term; the landlord has the choice of evicting the tenant as a trespasser or accepting such tenant for a similar term and under the conditions of the tenant's previous holding; often called a tenancy at sufferance.

Estate at Will
An interest in land terminable at the will of either the tenant or landlord; often called a tenancy at will.

Estate for Years
An interest in land for a fixed period of time, whether for a day or 99 years; often called a tenancy for years.

Estate from Period to Period
An interest in land where there is no definite termination date but the rental period is fixed at a certain sum per week, month or year; often called a periodic tenancy.

Estimated Property Value
The Purchase Price or Current Market value of a specific property.

Et al
Abbreviation for et allus, meaning "and another".

Et ux
Abbreviation for et uxor, meaning "and wife".

Eviction
Dispossession by process of law; the act of depriving a person of the possession of lands, in pursuance of the judgment of a court.

Exclusive Agency Listing
A listing whereby the owner appoints one real estate broker as sole agent for a specified period of time.  The owner may sell the property to a buyer which the owner finds without paying the broker a commission.

Exclusive Right to Sell Listing
A listing whereby the owner appoints one real estate broker as sole and exclusive broker for a specified period of time.  No matter who sells the property, including the owner , personally, the broker is entitled to a commission.

Execution
A writ issued by a court to the sheriff directing him to seize and sell property to satisfy a debt.

Executor
The person named in a will to carry out its provisions.

F

Fair Market Value
The price at which property is transferred between a willing buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.  See Market Value

Fannie Mae
A common term used in real estate finance taken from FNMA (Federal National Mortgage Association).  It provides a market for government secured mortgages held by primary lenders and provides them with a ready market so as to permit a greater turnover of money for loans.

Farmers Home Administration (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere. 

Federal Emergency Management Agency (FEMA)
Federal agency which, among other things, directs the activities of the Federal Insurance Administration and establishes flood insurance rates and terms of coverage, issues policies, processes claims and identifies and maps flood-prone areas.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD).  It insures residential mortgage loans made by private lenders.  FHA also sets standards for underwriting mortgages. 

Federal Home Loan Mortgage Corporation (FHLMC)  
A quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers.  FHLMC buys existing approved mortgage loans and resells them to individual investors or financial institutions. also called Freddie Mac.

Federal National Mortgage Association (FNMA) 
A tax-paying corporation created by Congress to support the secondary market in mortgages on residential properties.  FNMA sells residential mortgages to lenders (Conventional, FHA insured, and VA guaranteed).  FNMA also purchases pools of mortgages from lenders with securities, also know as Fannie Mae, the largest single holder of home mortgages in the United States.

Fee Simple Absolute
Often called a fee or fee simple; the most comprehensive ownership of real property known to the law; the largest bundle of ownership rights possible in real estate.

Fee Tail
An estate or interest in land which cannot be conveyed but which must descend to the heirs of the holder.  Abolished in Colorado.

Fees
Fees include mortgage points and expenses to underwrite and originate a mortgage loan.  See Closing Cost

FEMA - See Federal Emergency Management Agency

FHA - See Federal Housing Administration

F.H.A. Insured Mortgage
A mortgage under which the Federal Housing Administration insures loans made according to its regulations by approved lenders.

FHA Mortgage
A mortgage that is insured by the Federal Housing Administration.  

FHLMC - See Federal Home Loan Mortgage Corporation

FICO 
Is a mathematical model named after its creator, the Fair Isaac Company (FICO).  Credit repositories (Bureaus) have adopted FICO as a tool for lenders in evaluating the risk associated with lending money. 

Fiduciary
Adjective - Confidential, such as a confidential relationship. Fiduciary refers to the relationship of an agent to a principal.

Fiduciary
Noun - A person who is in a position of trust in relation to another party; or a person in a confidential or trust position.

Finance Charge
The total amount of interest, prepaid finance charge and specific insurance premiums (if applicable) that the borrower is expected to pay over the life of the loan.

First Mortgage
A real estate loan with a lien (i.e., mortgage or deed of trust) on the subject property that has priority over any subsequently lien or financial encumbrances.

Fixed Interest Rate
An interest rate that does not change during the entire term or life of the loan.

Fixed Monthly Debt
The amount of monthly payment required to be paid each month.  Sometimes referred to as "minimum monthly payment" for credit card or revolving accounts.

Fixed-Rated Mortgage
A mortgage on which the interest rate is set for the term of the loan.

Fixture
An article of personal property which has been installed in or attached to land or a building thereon, in a permanent manner, so that it is now considered to be a part of the real estate.

FmHA - See Farmers Home Administration

FNMA - See Federal National Mortgage Association 

Forbearance
The act of refraining from taking legal action despite the fact that the mortgage is in arrears.  It is usually granted only when a mortgagor makes satisfactory arrangements to pay the amount owed at a future date.

Foreclosure
A termination of the rights of the mortgagor in the property covered by the mortgage; a court process instituted by a mortgagee or lien creditor to defeat any interest or equity of redemption which the mortgagor or debtor-owner may have in the property.

Freddie Mac - See Federal Home Loan Mortgage Corporation

Funding
Payment of loan money by a lender to a borrower so that he or she can purchase real estate; or, the payment of money by investors to lenders in return for mortgages sold to them by the lender.

G

General Warranty Deed - See Warranty Deed

G.I. Guaranteed Mortgage 
Government guaranteed and insured mortgage available to United States of America Veterans and their spouses, and those currently serving in the military.  Entitlements include low-or no-down payment fixed 15 and 30 year loans by the Veterans Administration through HUD.  also See VA Loan

Gift Funds
Transfer of funds to assist with payment of closing costs and/or down payment. Investors typically require that gift funds may only be received from the borrower's parents and/or grandparents with no intent for repayment.

Ginne Mae - See Government National Mortgage Association 

Good Faith Estimate
A document delivered with Truth-In-Lending Disclosure Statement to borrower as an estimate comprising, closing costs, interest rate, term, loan amount, and monthly payment, within 3 days of receiving borrowers mortgage application per the Real Estate Settlement Procedures Act (RESPA).

Government National Mortgage Association (GNMA) 
Guarantees mortgage-backed securities issued by private financial intermediaries.  Also known as Ginnie Mae, provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA

Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off.

Grace Period
A period of time during which a loan payment may be paid after its due date without incurring a late payment penalty.  15 days for FHA/VA, and 20 days for Conventional (unless otherwise specified.  Late payments reported on credit reports.

Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Grantee
A person to whom real estate is conveyed; the buyer.

Grantor
A person who conveys real estate; the seller.

Gross Monthly Income
The total monthly income earned before taxes and any other deductions.

GSE
Government Sponsored Enterprise such as Fannie Mae or Freddie Mac.

Guaranty
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

H

Hazard Insurance
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, hail damage, etc.

HOA - See Home Owners Association 

Home Equity Line of Credit (HELOC)
A revolving line of credit secured on the equity in the mortgagor's house, usable for any purpose.

Home Equity Loan
A type of loan that allows homeowners to acquire a loan in addition to their original mortgage/lien using a portion or all of the equity in their home (primary residence).  A home equity loan is a generally a second mortgage on the subject property and may be used for any personal needs (i.e., college education, debt consolidation, home improvement, etc). Also See: Home Equity Page for more information.

Home Mortgage
A legal document that pledges the property to the lender as security for payment of a debt.

Home Owners Association (HOA)
A nonprofit organization that manages the common areas and services of a planned unit development or condominium project. In a condominium project it has no ownership interest in the common areas; in a planned unit development it holds title to common areas.

Homeowner's Insurance 
A policy that combines liability coverage and hazard insurance to protect the homeowner from weather-related damage, as well as potential liability from events that occur on the property.  Lenders require homeowners insurance coverage to protect the collateral that secures their loan.  Some homeowners insurance policies do not cover catastrophic events such as tornadoes, hurricanes or floods.  These kinds of events generally require a separate insurance policy.

Homeowners Protection Act
The Homeowners Protection Act of 1999 requires home lenders to cancel a requirement for private mortgage insurance (PMI) if the borrower has equity of at least 22% in their home (This is equal to a loan-to-value ratio of below 78%).  The law allows the borrower to request dropping PMI when equity reaches 20% of home value.  A current appraisal may be required to ascertain the home value.  For more information, see the Web site of the U.S. Dept. of Housing and Urban Development (www.hud.gov.)

Homeowner's Warranty
A type of insurance that covers repairs to specified parts of a house for a specific period of time.

Homestead Exemption
Often called "homestead" or "homestead right"; a right given by statute to a householder or head of a family to designate real estate as their homestead and said homestead is exempt, up to a stated amount, from execution by creditors.

Housing Expense - See PITI

Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income.

HUD - see Department of Housing and Urban Development

HUD I Settlement Statement
A form utilized at loan closing to itemize the costs associated with purchasing the home.  Used universally by mandate of HUD, the Department of Housing and Urban Development.

Hybrid Financing
The joining together of two forms of finance, such as combining a convertible loan with a participation loan, under which the lender has the right at loan maturity to convert the debt to a 50 percent ownership in the property.

I

Impound
Impounds are payments made in advance for homeowner's insurance premiums and real estate taxes.  These payments are made to an escrow account at loan closing, and periodically replenish the escrow account.  An escrow agent pays the local tax authority and insurer from this account.  Analyzers calculate impounds for two months.  Local lending requirements on funding the escrow account vary.

Indemnify
To insure; to secure against loss.

Index
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments, which is then used to adjust the interest rate.

Index rate
An index is a widely used published interest rate that lenders use to set the interest rate on loans. 10-year U.S. Treasury securities are often used for 30-year fixed-rate loans. ARM loans are commonly based upon the, one-, three-, and five-year U.S. Treasury security yields; the monthly average interest rate on loans closed by savings and loan institutions; or the monthly average costs-of-funds incurred by savings and loans.  Lenders adjust the interest rate up or down on an adjustable rate mortgage by measuring the difference between a current index rate to the ARM interest rate, and adding a margin.

Initial interest rate
The starting interest rate on an adjustable-rate mortgage loan, which is often below market ARM rates. The intent of a low initial rate is to assist homebuyers that may not otherwise qualify for a mortgage loan.

Installment Land Contract
Often called a land contract or an installment contract; an agreement for the purchase of real estate upon an installment basis, the deed to the property is not given to the purchaser until either all or a certain portion of the purchase price is paid.

Installment Loans
A loan that has a fixed (or closed-end) term (i.e., 36 months) and fixed unchanging monthly payments.  When the loan is paid in full the borrower cannot advance additional money unlike a revolving loan.

Insured Mortgage - See MIP and PMI
A mortgage that is protected by the Federal Housing Administration (FHA) called MIP (mortgage insurance premium), or by private mortgage insurance (PMI).  If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Interest
The fee charged by the lender for borrowing money.

Interest-only payments
Mortgage payments that include only interest.  No loan amortization occurs and, thus, the homeowner does not accrue any equity (unless the home value increases).

Interest Rate
The percentage of an amount of money that is borrowed and is paid for during a specific period specified in the terms of the loan.

Interest rate cap
A limit on the amount the interest rate can increase.  See Cap, adjustment period

Interim Financing
A construction loam made during completion of a building or a project.  A permanent loan usually replaces this loan after completion.

Intestate
When a person dies without leaving a will.

Investment Property
A property designated solely as a "rental" or "leased" property.

Investor
The ultimate owner of a loan.  This can be the institution that originated the loan (then the loan is held in their portfolio), another large lender or Fannie Mae or Freddie Mac.

J

Joint Tenancy
A type of co-ownership of real property, held by two or more persons with all co-owners being equally entitled to the use, enjoyment, control and possession of the land and with the right of survivorship.

Judgment
The final determination of the rights of the parties by a court in an action before it.

Jumbo Loan
A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.  Jumbo loans cannot be funded by these two agencies, and usually carry a higher interest rate.  A loan which is larger than $322,700.


K

L

Land
Real property; the surface of the earth and that which is affixed to it permanently, that which is below it, and the space above it; synonymous with "real property", "realty", and "real estate".  Sometimes used to mean only the unimproved surface of the earth.

Landmark
In land surveys, any known conspicuous object or feature that establishes a precise point of origin. 

Lease
An agreement under which a tenant receives the possession and use of real property for a certain period of time and the landlord receives the payment of rent and/or the performance or other conditions.

Leasehold
An estate or right in real property held under a lease.

Legal Description
A description recognized by law which is sufficient to locate and identify the property without oral testimony.

Lender
The bank, mortgage company or broker assigned to review and process the loan application and makes the home loan.

Lessee
The party who possesses a right or estate in realty, holding under a lease; also commonly referred to as the tenant.

Lessor
The party who conveyed a right or estate in realty to the lessee under a lease; commonly referred to as the landlord.

LIBOR
London Inter-Bank Offer Rate is the interest rate that the largest international banks charge each other for loans.

Lien
A right given by law to a creditor to have a debt or charge satisfied out of the real or personal property belonging to the debtor.

Life Estate
An estate or interest in real property which is held for the duration of the life of some certain person.

Lifetime Cap - see Cap

Limited agent
An agent whose duties and obligations to a principal are only those set forth in Colorado Revised Statutes 12-61-804, 12-61-805, or 12-61-806, with any additional duties and obligations agreed to pursuant to section 12-61-803 (5).

Line of Credit
A loan with a maximum credit limit that allows the borrower(s) to disburse funds up to the maximum credit line as needed. Funds may be disbursed repeatedly as the principal balance is paid down up to the maximum credit limit available.  A line of credit functions similar to a credit card and may be accessed by writing a check or a using a debit card.

Lis Pendens
A public notice, filed against specific lands, that an action at law is pending that may affect the title to the land.

Loan Amount
The total amount requested by the borrower to be financed.  This amount is the basis, of many loan fee calculations.  For refinance loans, the loan amount will include the balance of all loans the borrower requests to be paid off, including the original mortgage, other personal debt and/or cash out amount.

Loan Balance
The outstanding balance of a loan not paid in full, excluding any accrued interest.

Loan Discount Points - See Points

Loan Origination Fees - See Origination Fee and Points

Loan Product
The loan program that dictates the finance type, amortization term and other pertinent loan functions (i.e., fixed or adjustable rate and 360 or 180 months).

Loan Qualification Estimates
Lenders ease their loan-underwriting guides when economic times are good.  This environment leads to more competition among lenders for qualified borrowers.  Thus, lenders become more aggressive in making loans.  When economic times are worse, lenders raise the amounts they are willing to lend. Thus, lenders become more conservative.

Loan Term - See Term

Loan-to-Value (LTV)
LTV ratio, expressed as a percentage, is a qualifying measure in determining finance possibilities and loan options.  To calculate, divide the mortgage base loan amount by the fair market value of the property.  Cumulative Loan-to-Value (CLTV) combines all mortgages (1st and 2nd) into the equaltion by adding all the mortgages together before dividing by the the fair market value to get the ratio.

Lock or Lock-In
A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closes with that buyer within a set period of time.  The lock-in also usually specifies the number of points to be paid at closing as well.

LTV
See Loan-to-Value

M

Manufactured Home
A type of house that is constructed in a factory, delivered to a property location and set on a foundation.   

Margin
For mortgage lending, margin is the amount a lender adds to the base rate of an adjustable-rate mortgage or other variable-rate loan to set the loan rate (see Index).  For example, if a one-year ARM loan has a margin of 200 basis points (2%) over the yield on 1-year Treasury bills and the T-bill yield is 4.5%, the loan rate is set to 6.5%.

Marketable or Merchantable Title
A title which is free from reasonable doubt of defect which can be readily sold or mortgaged to a reasonably prudent purchaser or mortgagee; a title free from material defects or grave doubts and reasonably free from possible litigation.

Market Value
The price, in terms of dollars, which a ready and able buyer, not forced to buy, would pay and which a ready and willing seller, not forced to sell, would accept, assuming further that both parties are fully informed, act reasonably, and have sufficient time to consider the transaction with due care.  see fair market value

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

Maximum Loan Charges - See Points

Maximum Monthly Payment
The maximum payment a borrower may qualify for based on their income and debt.  The maximum payment is calculated by using a debt-to-income ratio.

Mechanic's Lien
A lien created by statute which exists against real property in favor of persons who have performed work or furnished materials for the improvement of the real estate.

Metes and Bounds
A method of describing or locating real property; metes are measures of length and bounds are boundaries.  This description starts with a well-marked point of beginning and follows the boundaries of the land until it returns once more to the point of beginning.

Mill
One-tenth of one cent.  A tax rate of one mill on the dollar is the same as a rate of one-tenth of one percent of the assessed value of the property.

Mobile Home
A type of home that is 100% constructed in a factory, delivered to a property location and set on a lot or foundation.  A mobile home can generally be moved off of the owner's original site. 

Monthly Housing Payment
Typically the total amount of principal, interest, taxes, and insurance (PITI) paid each month on a mortgage loan.  Many lenders and investors limit the monthly housing payment to 28% of the gross monthly income.

Monthly Payment
The amount of principal and interest paid each month on a loan.  The monthly payment on a mortgage loan may also include an escrow payment for taxes and insurance.

Monthly Payment Savings
The total monthly payment reduction a borrower may gain by refinancing their mortgage loan.

Mortgage
A conditional conveyance of property as security for the payment of a debt or the fulfillment of some obligation.  Upon payment of the debt or performance of the obligation the mortgage becomes void.

Mortgage Broker
Any entity, engaged in, assisting, arranging funding, or negotiating mortgage financing, in behalf of a client, in consideration of,  compensation in the form of origination, either by lender or borrower.

Mortgage Insurance
A contract that insures the lender against loss caused by a mortgagor's default on a mortgage.  Mortgage Insurance is generally required on all First Mortgage Loans that have a down payment of less than 20% of the purchase price (or until 20% equity is accumulated in the property).  

Types of Mortgage Insurance:

• Mortgage Insurance Premium (MIP)
  MIP is paid on government-insured FHA loans only 
• Private Mortgage Insurance (PMI)
  PMI is paid on non-government-insured loans (Conventional, non-conventional etc...)
• VA funding fee 
  One time funding fee in lieu of mortgage insurance

Note: not to confused with Hazard Insurance that is a form of insurance in which the insurance company protects the insured (homeowner) from specified losses, such as fire, floods, hail damage, etc.  

Mortgage Insurance Premium (MIP)
MIP is paid on government-insured FHA loans only (VA loans require a funding fee in most cases) and Conventional loans use PMI (Private Mortgage Insurance.  FHA loans also require an upfront premium.  See below.

Mortgage interest deduction
The mortgage interest tax deduction allows you to deduct the mortgage interest expense you pay on mortgage and home equity debt, up to certain limits of debt.  The deduction lowers your tax bill by an amount equal to the amount of interest times your tax rate.  To take the mortgage interest deduction, you must itemize the deduction using Schedule A of IRS Form 1040.

Mortgage points - see Points

Mortgagee
The party to whom the property is conveyed under a mortgage as security for the repayment of a loan or fulfillment of some obligation.

Mortgagor
The party who, by a mortgage, conveys their interest in the property as security for their obligation to repay a loan or fulfill some obligation.

Multi Family
A term generally to distinguish a house designed for use by more than one family (duplex or fourplex).

Mutual Assent
One of the essential elements of a contract, often called Meeting of the Minds; the agreement of the parties to the contract, mutually consenting to be bound by the exact terms thereof.

N

Negative Amortization
Occurs when monthly payments are not large enough to pay all the interest due on the loan.  This unpaid interest is added to the unpaid balance of the loan.  This has the effect of increasing the loan amount.  This phenomenon in home lending occurs when a payment cap restricts the repayment, to an amount less than the payment necessary to reduce the principal balance. 

Negotiable Instrument
A written instrument signed by a maker or drawer, containing an unconditional promise to pay a certain sum of money, which can be passed freely from one person to another.

Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. (The signed obligation to pay a debt, as a mortgage note)

Non Conforming Loan
New Home loans allowing the buyer to borrow over a certain amount set by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.

NOTE
A written agreement and promise from the borrower(s) to pay a definite sum of money at a stated interest rate during a specified date and term. The note contains a description of the collateral and conditions under which the loan is to be repaid.

O

Obsolescence
Impairment of desirability and usefulness of the property resulting from economic, functional, physical, fashion, or other changes.

Offer
A promise to act in a certain manner provided the other party will act in the manner requested.

Offeree
One to whom an offer is made.

Offeror
One who makes an offer.

Original Value
Lesser of the sales price or the appraised value of the property at the time of closing.

Origination Fee
The fee charged by a 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.  Origination fees are paid by the lender or included in the loan as part of the closing costs.  Lender's can also charge an origination fee to the borrower, when funding the mortgage with a table lending mortgage broker.  Origination fees are considered tax deductible points.

Outstanding Debt to Consolidate
The total amount of all debt the borrower desires to payoff and consolidate into one loan and monthly payment.

Owner Financing
A purchase in which the seller provides all or part of the financing.

P

PAM - See Pledged Account Mortgage 

Party Wall
A wall erected on a line between adjoining properties for the use of both properties.

Patent
An instrument of conveyance of land owned by the government to an individual.

Payment Cap - see Cap for typical cap types
A limit on the amount that the monthly payment can increase.  A periodic cap limits the amount of the increase at each adjustment period.  A lifetime cap limits the amount that the monthly payment can increase during the term of the loan.  A potential peril of payment caps is negative amortization.  In the case of an adjustable-rate mortgage with a payment cap, rising interest rates may cause the loan payment to be insufficient to cover even the interest portion of the scheduled payment.  In this case, the unpaid interest may be added to the mortgage loan principal, if the loan agreement permits.

Payment Schedule
A schedule detailing the amount and due date of payments required to be paid over the life of the loan.  The dollar figures represent principal, interest and private mortgage insurance (if applicable).  This schedule does not reflect payment for taxes and insurance.

Periodic Cap - see Cap
The periodic interest rate cap is the maximum amount the loan rate can change on an adjustable-rate mortgage loan on the anniversary date. ARM loan rates are often reset once a year after an initial one, three, or five year period.  A lifetime cap often exists that limits the maximum loan rate that can be charged.

Personal Property
Generally, all things which are not real property; things of a temporary or movable nature.

Piggyback Loan
A loan in which the buyer takes a first mortgage to finance part of the value of the property and a second mortgage to finance another part of the value. For example, a buyer could put 10% down, then take out a first mortgage for 80% of the home's value and second mortgage for the remaining 10% of its value. The two mortgages together are called a piggyback loan.

PITI - See Principal, Interest, Taxes and Insurance.  Also called monthly housing expense.

Planned Unit Development (PUD)
A type of ownership where individuals actually own the building or unit they reside in, but shared areas are owned jointly with the other members of the development or established association.

Pledged Account Mortgage (PAM) style='font-size:10.0pt; font-family:
Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

PMI - See Private Mortgage Insurance

Points
Points are also called discount points, mortgage points, loan discount points, loan origination fees, or maximum loan charges.  Points are prepaid interest assessed at closing by the lender and or the broker.  A point is equal to 1 percent of the loan amount. Lenders consider mortgage points as interest that you pay in advance.  As a result, the more points you pay when you close the loan, the lower your interest rate.  The IRS considers points to be a form of prepaid interest.  Discount fees are totally tax deductible for the year the loan is closed for tax purposes, while origination points are tax deductible over two years (half for the year the loan is closed, and half in the year following).  

Power of Attorney
A legal instrument which authorizes another person to act, either a specific act or generally, in the stead of the person drawing the instrument.

Prepaid interest
Prepaid interest is the interest that you pay the lender in advance for the number of days from closing until the end of the month.  This is the most common usage of prepaid interest.  Analyzers that calculate prepaid interest assume the loan closing date is the midpoint of a 30-day month.  As a result, prepaid interest is calculated for 15 days.  The IRS recognizes points that you pay at loan closing as tax deductible prepaid interest.

Prepayment
A prepayment is an amount paid in advance of its due date.  Money paid in addition to required monthly payment, is applied toward principle balance, which reduces total interest expense and shortens the loan term.

Prepayment Penalty
Money charged for an early repayment of debt.

Primary Borrower
An individual who is listed first on the mortgage loan application and is considered to be the primary borrower.  Some lenders allow a non-occupying co-borrower or co-signor to be on the application. In this case, the borrower occupying the property will need to be the primary borrower.

Primary Home
A property that the owner intends to occupy and will be their primary residence.

Primary Residence
A home which the borrower intends to occupy as the principal residence.

Principal Balance
Principal is the outstanding balance due on a debt, excluding any accrued interest or other fees.. 

Principal and Interest (PI)
A portion of the monthly payment that is applied toward the loan balance and accrued interest. 

Principal, Interest, Taxes and Insurance (PITI)
The monthly payment that is applied toward the loan balance (principle), accrued interest and escrow account (taxes).  

Principal Note
The promissory note which is secured by the mortgage or trust deed.

Private Mortgage Insurance (PMI) 
In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 3 percent in some cases.  With down payments below 20%, borrowers are usually required to carry private mortgage insurance depending on your loan's structure.  Private Mortgage Insurance, is paid on all non-government-insured loans and whose equity is less than 20%.  When you have accumulated 20% in equity, your lender may waive PMI at your request.  FHA and VA loans have different insurance and guidelines; see Mortgage Insurance Premium for FHA loans. 

Proceeds from Sale of Current Home
The total funds remaining from the sale and transfer of a current home.  The proceeds are calculated by subtracting all settlement fees and lien payoffs from the sales price (purchase price).  Many borrowers use the proceeds from the sale of the current home as down payment and/or payment of closing costs for the purchase of a new home.

Product Type
The loan type typically details the purpose of the loan (i.e., purchase new home, refinance existing home, home equity, debt consolidation and second mortgage).  Many loan programs may contain specific criteria allowing only certain loan types.

Property
The rights of ownership; the right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights.  Property is generally classified into two groups; personal property and real property.

Property Class
A description of the structure of the property determining whether it is uses as a Single (one) Family Home, Mulit Family Home (2-4), Condominium, Town Home, Manufactured or Mobile Home and Cooperative Housing.

Property Taxes
Property taxes are also called real-estate taxes are paid to the local taxing authority or municipality.  The amount you pay can generally be deducted from your federal income taxes.  Property taxes are often levied as a percentage of your home's assessed value.

Property Type
A description of the property that determines whether the property will be used as a Primary Residence Home, Investment Property or Second Home.

Property Use
A description of the property that determines whether the property will be used as a Primary Residence Home, Investment Property or Second Home.

Public Trustee
The public official in each country, whose office has been created by statute, to whom title to real property is conveyed by Trust Deed for the use and benefit of the beneficiary, who usually is the lender.

PUD - See Planned Unit Development

Purchase Money Mortgage
A mortgage given by the purchaser to secure a loan for part or all of the purchase price.  Such a mortgage becomes a lien on the property simultaneously with the passing of title, and if immediately recorded becomes prior to any lien against the purchaser.

Purchase Price
The amount of money paid for a specific property and is based upon a written agreement (purchase agreement) between the seller and buyer.  also known as sales price.

Q

Qualify
A process of preparing a borrower for a mortgage loan by analyzing their financial data and comparing to loan program criteria to determine the best-fit program based upon loan-to-value ratio, debt-to-income ratio and credit score.

Qualifying Ratios
Guidelines applied by lenders to determine how large a loan can be granted to the home buyer.  The debt-to-income ratio is your current monthly debt on loans and credit cards divided by your gross income.  The housing-to-income ratio is your new housing payments divided by your gross income.

Quality Control
Practices, Policies, and Procedures maintained to assure accuracy in production, selling, and servicing, of mortgage loans.

Quiet Title Suit
An action in court to remove a defect, cloud or suspicion regarding the legal rights of the owner to the parcel of real estate.

Quitclaim Deed
A deed in which the grantor warrants nothing.  It conveys only the grantor's present interest in the real estate, if any.

R

RAM - See Reverse Annuity Mortgage

Real Estate
Real property, realty, land. See Land and Real Property

Real Estate Settlement Procedures Act (RESPA)
Short for the Real Estate Settlement Procedures Act.  RESPA is a federal law that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement.  The law requires lenders to furnish the information after application only.

Real- estate Taxes - See Property Taxes

Real Property
Land; the surface of the earth and whatever is erected, growing upon, or affixed to the land; including that which is below it and the space above it. Synonymous with "land", "realty", and "real estate".

Realty
Real property, land, real estate. See Land and Real Property

Receiver
A court appointed custodian who holds property for the Court, pending final disposition of the matter before the Court.

Recording
The act of writing or entering an instrument in a book of public record, usually in the office of the county clerk and recorder. Such recording constitutes notice to all persons of the rights or claims contained in the instrument.  This type of notice is called "constructive notice" or "legal notice".

Redemption
The right of an owner to redeem or reclaim the real estate by paying the debt or charge (such as mortgage or tax lien) after default, together with interest and costs.  More correctly, equity of redemption refers to the right to redeem the property after default but before foreclosure.  The statutory right of redemption refers to the right to redeem the property after foreclosure, or other enforcement action, during a certain period of time specified by statute.  For example, in Colorado, the mortgagor has the statutory right to redeem property any time within six months for agricultural property (75 days for platted residential dwellings) after a mortgage foreclosure or three years after a sale for delinquent property taxes.

Recording Fees
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

Reference to Plat
A method of describing or locating real property by means of referring to a map of a subdivision, usually recorded in the office of the county clerk and recorder.

Release
The relinquishment or surrender of a right, claim, or interest.

Release of Lien
The discharge or release of specific property from the charge or lien of a judgment, mortgage or other claim.

Refinancing
The process of paying off one loan with the proceeds from a new loan secured by the same property.  The main reasons for  refinancing is to better the borrower with a lower interest rates, loan term reduction, switch to or from a fixed or ARM loan, receive cash out, debt consolidation, or to eliminate a balloon payment.

RESPA - See Real Estate Settlement Procedures Act
Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement.  The law requires lenders to furnish the information after application only.

Rescission Right  (3-Day Right of  Rescission)
The authority for borrowers to rescind or turn down the mortgage loan without any legal obligation.  This is a 3 day time period that starts at midnight the day after escrow signoff or loan close, and ends on midnight 3 days thereafter.

Restrictive Covenant
A clause in a deed limiting the use to which the property may be put.

Reverse Annuity Mortgage (RAM)
A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as Satisfaction of Mortgage: The document issued by the mortgagee when the mortgage loan is paid in full.  Also called a "release of mortgage."

Revolving Loan
A loan with a maximum credit limit that provides the borrower with the ability to disburse funds up to the maximum credit line as needed.  The line of credit can be accessed repeatedly as the balance is paid down.  A revolving loan functions similar to a credit card and may be accessed by writing a check or a using a debit card.

RHS - See Rural Housing Service

Rider
An addendum or amendment to a contract.

Right of Survivorship
A characteristic of a joint tenancy; upon the death of one of the tenants, their rights in the property pass automatically to the surviving tenant or tenants.

Right of Way
An easement or right of passage over another's land; the strip of land used as roadbed by a railroad or used for a public purpose by other public utilities.

Rural Housing Service (RHS)
An agency within the Department of Agriculture, which operates principally under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949.  This agency provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere.  Funds are borrowed from the U.S. Treasury.

S

Sales Price
The amount of money paid for a specific property, the sales price is based upon a written agreement between the seller and buyer (also known as purchase price).

SAM - See Shared Appreciation Mortgage

Second Home
A property designated as a second residence or vacation home and is livable year round.  The property owner generally resides at different property referred to as "Primary Home."

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

Secondary Mortgage Market
The buying and selling of existing mortgages.

Security
Real estate property pledged as collateral to secure the payment of a debt, most commonly used in mortgage loan transactions.

Seizin
Possession of real estate by one entitled to it.

Servicer
The entity responsible for administering your loan, usually the lender.  This includes sending payment coupons / invoices, collecting payments, escrow administration, collections and foreclosures.

Settlement - See closing

Shared Appreciation Mortgage (SAM)
A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property.  May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation. 

Single Family
A term generally to distinguish a house designed for use by one family.

Simple Interest 
Interest which is computed only on the principle balance. 

Special Finance
A lending phrase used to express that a customer can not use conventional lending banks.

Special Warranty Deed
A deed in which the grantor warrants or guarantees the title only against defects arising during the grantors ownership of the property and not against defects existing before the time of their ownership.

Stated Income 
It is a limited documentation approach to underwriting a mortgage loan, as against "Standard Doc" & "No Doc". It belongs to the best pricing level of the Easy Doc loans like "Stated Income", "No Income Verification", "No Income / No Asset (NINA)", "No Ratio", etc, with usually 0.25 point markup only. "Stated Income" is mostly for self-employed borrowers and in very rare case applicable to salaried borrowers.

State Lease
An agreement between the State of Colorado and other parties for the use of lands under the jurisdiction of the State Board of Land Commissioners for grazing, agriculture and other lawful purposes.

Student Loans
A government affirmed loan obtained to finance the cost of tuition for approved colleges and universities (interest is now tax deductible).  Must not show delinquent on borrower credit report.  For most loans, child support debt cannot be included in consolidation and must be paid in full with a  letter from Social Services stating it as paid in full.

Subordination Clause
A clause in a mortgage or lease stating that the rights of the holder shall be secondary or subordinate to a subsequent encumbrance or right of another person.

Survey
Precise land measurement of parcel legal boundaries, documented by a registered surveyor, mapping location and dimensions with reference to landmarks, easements, rights of way, encroachments, water and mineral rights, and other physical features, including location and dimensions of any improvements. 

T

Table Funding
Table funding occurs when a mortgage broker prepares loan documents in the broker's own name, then receives funding from an outside wholesaler to actually fund the loan.

T-Bill - See Treasury Bill

Tenancy in Common
A type of co-ownership of real property; a holding of an estate in land by two or more persons, each being entitled to possession of the property according to their proportionate share; distinct from a joint tenancy in that there is no right of survivorship in a tenancy in common.

Term
A period of time and total number of payments (usually months) required to pay the loan in full. (360 months for a 30 year term, 180 months for a 15 year term).  also known as amortization term.

Third-Party-Origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Time Share
An interval interest in real estate whereby ownership or occupancy rights circulate among the various interval owners. Ownership may be either fee simple (deeded) or "right-to-use" (contractual or membership).

Title
A document declaring evidence of property ownership that is issued at closing.  A new Title is issued after refinancing, as proof of the loan transaction.  The Title includes the loan number(s), loan details, legal property description, liens, encumbrances, and other information related to the property.  A Title may be acquired through purchase, inheritance, devise, gift or through foreclosure of a mortgage.

Title Insurance 
A policy, usually issued by a title insurance company, provides an indemnity for the home buyer and lender's interests against errors in the title search.  The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller.  see Title Insurance for full details

Title Search
An examination performed by a title company of the public records, including court decisions, to disclose facts concerning the ownership of real estate.  The title examiner prepares an Abstract and the title agent prepares a Binder but decisions regarding the legal sufficiency of title or questions requiring legal interpretation must be resolved by a licensed attorney at law. 

Torrens System
A system by which the Registrar of Torrens keeps and maintains title records pertaining to real property located in the county.

Transaction-broker
A broker or salesperson who assists one or more parties throughout a contemplated real estate transaction with communication, interposition, advisement, negotiation, contract terms, and the closing of such real estate transaction without being an agent or advocate for the interests of any party to such transaction.  Upon agreement in writing pursuant to Colorado law 12-61-803 (2) (a) or a written disclosure pursuant to section 12-61-808 (2) (d), a transaction-broker may become a single agent, subagent, or dual agent.

Transfer of Ownership 
The means by which the ownership of a property changes hands.  Examples of such include the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchases, and any exchange of possession of the property under a land sales contract or any other land trust device.

Transfer Tax
State or local tax payable when title passes from one owner to another.

Treasurer's Deed
A deed for property sold at public sale by the county for nonpayment of taxes by the owner.

Treasury bill (T-bills)
U.S. Treasury bills are short-term debt obligations of the U.S. Treasury.  T-bills are usually issued to mature in three or six months.  Prices for T-bills are stated as a discount to the par value.  For example, a T-bill with a price of 99.65 is selling for 99.65% of its par value.  T-bills are auctioned weekly and used to pay operations of the federal government.  T-bills are considered to be among the safest and most liquid investments.

Trust Deed
A form of mortgage by which a borrower or debtor conveys title to their property to a Trustee, usually a Public Trustee, who holds the title for the protection of a lender or creditor as a pledge or as security for the repayment of the loan or debt described in the instrument.

Truth-in-Lending Act (TILA)  Also known as Regulation Z.
The federal Truth-in-Lending Act (PL 90-321; 15 USC 1601 et seq.).  Part of the Consumer Credit Protection Act, a federal law that requires lenders to provide full written disclosure of credit terms and conditions, the finance charge, the annual percentage rate and other charges incurred in a loan contract to borrowers.  The Truth-in-Lending Disclosure Statement is presented and delivered to the buyer with the Good-Faith-Estimate.

Two-Step Mortgage
A mortgage in which the borrower receives a below-market interest rate for a specified number of years (commonly seven or 10 years).  At the end of the 10 years for example, the interest rate is adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. also called "Super Seven" or "Premier" mortgage.

Type of Property - See Property Type

U

UCC - See Uniform Commercial Code

Underwriter
The mortgage lender is often referred to as the loan underwriter who is the final authority in disposition of the loan.

Underwriting
Underwriting involves an analysis of the borrower's creditworthiness (debts and assets, employment history, property evaluation, and other factors to determine an appropriate rate, term & loan amount.

Unencumbered Property
A property that is free and clear of debts or liens.

Uniform Commercial Code (UCC)
A comprehensive code of laws regulating important legal aspects of business and financial transactions.  The Code has been accepted by every state except Louisiana.

Uniform Residential Appraisal Report (URAR) (FNMA Form 1004/FHLMC 65)
Standard form used by appraisers to detail facts supporting the value of single-family properties.

Unimproved Land
Raw land.

URAR - See Uniform Residential Appraisal Report

Urban Renewal
The redevelopment or rehabilitation of property in an urban area.

Usury
The act of charging borrowers a rate of interest greater than that permitted by law.

V

VA Loan (Veterans Affairs) - See Department of Veterans Affairs
These loans are made by a lender, such as a mortgage company, savings and loan or bank.  VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms.  The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously.  With the current maximum guaranty, a veteran who hasn't previously used the benefit may be able to obtain a VA loan up to $240,000 depending on the borrower's income level and the appraised value of the property.  The local VA office can provide more details on guaranty and entitlement amounts.  Formerly referred to as G.I. guaranteed mortgage

V.A. Mortgage Funding Fee
A premium assed to the VA borrower in lieu of mortgage insurance.  First time VA borrowers have a 3% funding fee included in their loan.  When the VA borrower sells their home and uses their VA rights on a new home, the funding fee is 2%.  VA borrowers refinancing their home, have a half percent funding fee in their mortgage.   Disabled Veterans are not burdened with the funding fee.

Variable Rate Mortgage (VRM)
See adjustable rate mortgage

Verification of Deposit (VOD)
A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment (VOE)
A document signed by the borrower's employer verifying his/her employment, position, and salary.

Veterans Affairs - See Department of Veterans Affairs

W

Waiver
Abandonment of some claim or right.

Warranty Deed
Often called a general warranty deed; a deed in which the grantor warrants or guarantees the title to real property against defects existing before the grantor acquired title or arising during the grantor's ownership.

Wraparound Mortgage
Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate.  The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.


X


Y

Yield
Yield is used to measure the investment performance of a security over a given period of time.  For example, if a 10-year corporate bond earns a yield of 6.25% and a 10-year U.S. Treasury bond yields 5.75%, the yield spread is 50 basis points.

X-mark signature
The signature made by a person who is unable to sign their name.  This type of signature is only legally valid when witnessed by at least two other persons.

Z

Zero lot line
The positioning of a structure on a lot so that one side rests directly on the lot's boundary line.

Zoning
The creation of districts by local governments in which specific types of property uses are authorized.